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 September 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 November 9, 1998: 3,750,000 shares.


<PAGE>


                              PMCC FINANCIAL CORP.

                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                        Page No

Part I - Financial Information

Item 1.  Financial Statements:

         Condensed Consolidated Statements of Operations (Unaudited)
                   Three Months Ended Sept. 30, 1998 and 1997                 3
                   Nine Months Ended Sept. 30, 1998 and 1997                  4

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

         Condensed Consolidated Statements of Cash Flows (Unaudited)
                  Nine Months Ended Sept. 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                                           10

Part II -  Other Information                                                 18

Signatures                                                                   19


<PAGE>


                         Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements
<TABLE>
<CAPTION>

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

                                                                      Three Months Ended Sept. 30,
                                                                      ----------------------------
                                                                          1998              1997
                                                                          ----              ----                    
<S>                                                                    <C>              <C>
Revenues:
Sales of residential rehabilitation properties                         $8,805,765       $8,712,170
Gains on sale of mortgage loans, net                                    5,408,552        3,631,841
Interest earned                                                         1,633,472          985,787
                                                                       ----------       ----------
                                                                       15,847,789       13,329,798
                                                                       ----------       ----------
Expenses:
Costs of sales, residential rehabilitation properties                   8,084,440        8,268,063
Compensation and benefits                                               3,217,256        2,112,988
Interest expense                                                        1,743,598          865,813
Other general and administrative                                        1,192,740          535,681
                                                                       ----------       ----------
                                                                       14,238,034       11,782,545
                                                                       ----------       ----------


Income before income tax expense                                        1,609,755        1,547,253
Income tax expense                                                        660,000            8,692
                                                                        ---------       ----------
         Net  Income                                                     $949,755       $1,538,561
                                                                        =========       ==========

Pro forma information:
Historical income before income tax                                                     $1,547,253
Adjustment to compensation expense for contractual
         Increase in officers' salary                                                     (14,000)
                                                                                        ----------
Pro forma income before income tax expense                                               1,533,253
Provision for pro forma income taxes                                                     (629,000)
                                                                                        ----------
Pro forma net income                                                                      $904,253
                                                                                          ========

Net income/pro forma net income per share of common                         $0.25            $0.36
                                                                            =====            =====
stock-basic

Net income/pro forma net income per share of common                         $0.25            $0.36
                                                                            =====            =====
stock-diluted

Weighted average number of shares and
  share equivalents outstanding-basic                                   3,747,307        2,500,000
                                                                        =========        =========


Weighted average number of shares and
  share equivalents outstanding-diluted                                 3,781,797        2,500,000
                                                                        =========        =========


See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>

<PAGE>




<TABLE>
<CAPTION>

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


                                                                      Nine Months Ended Sept. 30,
                                                                      ---------------------------
                                                                         1998              1997
                                                                         ----              ----
<S>                                                                   <C>              <C>
Revenues:
Sales of residential rehabilitation properties                        $25,564,935      $17,519,462
Gains on sale of mortgage loans, net                                   12,170,359        7,972,318
Interest earned                                                         3,942,966        1,412,083
                                                                      -----------      -----------
                                                                       41,678,260       26,903,863
                                                                      -----------      -----------
Expenses:
Costs of sales, residential rehabilitation properties                  23,503,098       16,522,515
Compensation and benefits                                               7,687,956        4,790,405
Interest expense                                                        4,117,172        1,573,591
Other general and administrative                                        2,861,285        1,503,088
                                                                       ----------       ----------
                                                                       38,169,511       24,389,599
                                                                       ----------       ----------


Income before income tax expense                                        3,508,749        2,514,264
Income tax expense (1)                                                  2,255,000           25,198
                                                                       ----------       ----------
         Net  Income                                                   $1,253,749       $2,489,066
                                                                       ==========       ==========

Pro forma information:
Historical income before income tax                                     3,508,749       $2,514,264
Adjustment to compensation expense for contractual
         Increase in officers' salary                                          --         (91,000)
                                                                      -----------      -----------
Pro forma income before income tax expense                              3,508,749        2,423,264
Provision for pro forma income taxes                                  (1,439,000)      (1,000,000)
                                                                      -----------      -----------
Pro forma net income                                                   $2,069,749       $1,423,264
                                                                       ==========       ==========

Pro forma net income per share of common stock-basic
                                                                            $0.59            $0.57
                                                                            =====            =====

Pro forma net income per share of common stock-diluted
                                                                            $0.58            $0.57
                                                                            =====            =====

Weighted average number of shares and
  share equivalents outstanding-basic                                   3,530,220        2,500,000
                                                                        =========        =========


Weighted average number of shares and
  share equivalents outstanding-diluted                                 3,583,633        2,500,000
                                                                        =========        =========



See accompanying notes to unaudited condensed consolidated financial statements.

(1)  Income tax expense for the nine months ended  September 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.
</TABLE>
<PAGE>



<TABLE>
<CAPTION>


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

 
                                                                        Sept. 30,      December 31,
                                                                          1998           1997
                                                                          ----           ----
<S>                                                                     <C>             <C>
Assets
Cash and cash equivalents                                               $3,331,425      $1,713,405
Receivable from sales of loans                                          14,989,898      35,130,857
Mortgage loans held for sale, net                                       64,342,194      18,609,569
Accrued interest receivable                                                292,408         312,772
Other receivables, net                                                   1,356,427         398,444
Residential rehabilitation properties                                   15,810,550      11,584,273
Furniture & equipment, net                                                 739,975         286,713
Prepaid expenses and other assets                                          464,473         391,299
                                                                        ----------      ----------                   

Total assets                                                          $101,327,350     $68,427,332
                                                                      ============     ===========


Liabilities and shareholders' equity Liabilities:
 Notes payable-principally warehouse lines of credit                   $82,043,788     $59,116,509
 Notes payable-shareholder                                                      --         293,163
 Due to affiliates                                                       2,203,219       3,084,503
 Accrued expenses and other liabilities                                  2,355,038       1,123,948
 Distribution payable                                                      537,019              --
 Taxes payable                                                           1,703,360              --
                                                                       -----------      ----------
Total liabilities                                                       88,842,424      63,618,123
                                                                       -----------      ----------

Shareholders' equity
Common stock                                                                37,500           6,250
Additional paid-in capital                                              10,846,043         711,775
Retained earnings                                                        1,690,750       4,091,184
Less: Treasury stock                                                      (89,367)              --
                                                                        ----------       ---------

Total  shareholders' equity                                             12,484,926       4,809,209
                                                                        ----------       ---------

Total liabilities and shareholders' equity                            $101,327,350     $68,427,332
                                                                      ============     ===========



See accompanying notes to unaudited condensed consolidated financial statements

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                      PMCC FINANCIAL CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                                                Nine Months ended Sept. 30,
                                                                                ---------------------------   
                                                                                  1998             1997
                                                                                  ----             ----
<S>                                                                           <C>                <C>
Cash flows from operating activities:
Net income                                                                    $1,253,749         $2,489,066
    Adjustments to reconcile net income to net cash used in operating
    activities:
         Residential  rehabilitation properties (exclusive of cash paid
         directly to/by independent contractors):
           Contractual fees received                                         (2,061,837)          (996,947)
           Proceeds from sales of properties                                  25,564,935         17,519,462
           Costs of properties acquired                                     (27,729,375)       (25,684,261)
         Depreciation and amortization                                            77,194             44,183
         Decrease (increase) in accrued interest receivable                       20,364          (116,997)
         Net increase in mortgage loans held for sale                       (45,732,625)       (16,934,213)
         Decrease (increase) in receivable from sales of loans                20,140,959       (21,265,895)
         Increase in other receivables                                         (957,983)          (262,530)
         Increase in prepaid expenses and other assets                          (73,174)            (8,233)
         Increase in taxes payable                                             1,703,360                 --
         (Decrease) increase in due to affiliates                              (881,284)          2,273,664
         Increase in accrued expenses and other liabilities                    1,231,090            472,714
                                                                             -----------       ------------   

         Net cash used in operating activities                              (27,444,627)       (42,469,987)
                                                                            ------------       ------------

Cash flows from investing activities:
         Purchase of furniture and equipment                                   (530,456)           (85,756)
         Principal repayments of mortgage loans held for investment                   --            138,052
                                                                               ---------           --------
                                                                                      

Net cash (used in) provided by investing activities                            (530,456)             52,296
                                                                               ---------             ------

Cash flows from financing activities:
         Distributions to S corporation shareholders, net of
         distribution payable                                                (2,134,971)          (364,502)
         Net proceeds from sale of common stock                                9,183,325                 --
         Net (decrease) increase in notes payable-shareholder                  (293,163)             18,163
               Net borrowing installment loan                                    243,476                 --
               Treasury stock purchases                                         (89,367)                 --
         Net increase in notes payable-warehouse lines of credit              22,683,803         42,721,049
                                                                              ----------         ----------

Net cash provided by financing activities                                     29,593,103         42,374,710
                                                                              ----------         ----------

Net increase (decrease) in cash and cash equivalents                           1,618,020           (42,981)

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

Cash and cash equivalents at end of period                                    $3,331,425           $366,807
                                                                              ==========           ========

Supplemental  disclosures  of cash flow  information:
  Cash paid during the year for:
           Interest                                                           $3,895,446         $1,604,930
                                                                              ==========         ==========
           Income taxes                                                         $551,640            $18,761
                                                                                ========            =======

See accompanying notes to unaudited condensed consolidated financial statements

</TABLE>
<PAGE>



                      PMCC FINANCIAL CORP. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 Sept. 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 three and nine months ended Sept. 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  share  exchange,  the  Company  agreed  to make a cash
distribution  to  existing  shareholders  of $2.7  million  which was equal to a
substantial  portion of the  Company's  undistributed  subchapter S  corporation
earnings.  As a result,  at the time of the offering,  shareholders'  equity was
$1.7 million. 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 quarterly  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  had
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 nine months
ended  Sept.  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 nine months ended
Sept.  30, 1998 and the nine and three months  ended Sept.  30, 1997 include pro
forma  income  taxes  as if  the  Company  had  been  taxed  as a C  corporation
throughout the periods.

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  31,797shares
and 0 shares,  respectively,  for the three months ended Sept. 30, 1998 and 1997
and 53,413 and 0 shares, respectively,  for the nine months ended Sept. 30, 1998
and 1997.

     Actual  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 period  February 18, 1998 to Sept.  30, 1998 has
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>

                                                                      Nine Months Ended Sept. 30,
                                                                      ---------------------------
                                                                           1998           1997
                                                                           ----           ----
         <S>                                                              <C>           <C>
         Revenues:
            Residential rehabilitation properties                         $25,565       $17,519
            Mortgage banking                                               16,113         9,385 
                                                                          -------       -------
                                                                          $41,678       $26,904
                                                                          =======       =======
         Less: (1)
            Expenses allocable to residential rehabil-
              itation properties (cost of sales, interest
              expense and compensation and benefits)                      $24,638       $16,930
            Expenses allocable to mortgage banking
               (all other)                                                 13,531         7,460           
                                                                          -------       -------
                                                                          $38,170       $24,390
                                                                          =======       =======

         Operating Profit:
              Residential rehabilitation properties                           927           589
              Mortgage banking                                              2,582         1,925      
                                                                           ------        ------
                                                                           $3,509        $2,514     
                                                                           ======        ======

         Identifiable Assets (at Sept. 30, 1998 and
            December 31, 1997, respectively):
              Residential rehabilitation properties                       $15,811       $11,584
              Mortgage banking                                             85,516        56,843
                                                                         --------       -------
                                                                         $101,327       $68,427
                                                                         ========       =======

     (1) In managing  its  business,  the Company  does not  allocate  corporate
expenses  other than  interest  and  compensation  and  benefits  to its various
activities.
</TABLE>

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 at Sept.  30, 1998.  The Company holds 14,600 shares of treasury stock at
Sept. 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

     Three Months Ended Sept.  30, 1998 Compared to Three Months Ended Sept. 30,
1997

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

                                                                   Three Months Ended  Sept. 30,
                                                                   -----------------------------            
                                                                    1998                    1997
                                                                    ----                    ----

<S>                                                            <C>                     <C>       
Sales of residential rehabilitation properties                 $8,805,765              $8,712,170
Gains on sales of mortgage loans, net                           5,408,552               3,631,841
Interest earned                                                 1,633,472                 985,787
                                                              -------------            ----------
Total Revenue                                                 $15,847,789             $13,329,798
                                                              =============           ===========

</TABLE>

     Revenues from the sale of residential  rehabilitation  properties increased
$94,000,  or 1%, to $8.8 million for the three months ended Sept.  30, 1998 from
$8.7  million  for the  three  months  ended  Sept.  30,  1997.  The  number  of
residential  rehabilitation properties sold decreased to 57 for the three months
ended Sept. 30, 1998 from 58 for the three months ended Sept. 30, 1997.

     Gains on sales of mortgage loans  increased  $1.8 million,  or 49%, to $5.4
million  for the three  months  ended Sept.  30, 1998 from $3.6  million for the
three  months ended Sept.  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 $170  million and $98.3  million for the three  months  ended
Sept. 30, 1998 and 1997, respectively.  For the three months ended September 30,
1998, approximately 65% of the Company's mortgage originations were derived from
its  retail  mortgage  operations  and  approximately  35%  from  its  wholesale
operations.  The following table summarizes the Company's mortgage  originations
(in thousands):

                                              Three Months Ended Sept. 30,
                                              ----------------------------
                                              1998                    1997
                                              ----                    ---- 

            Conventional                    $107,131                $55,700
            FHA/VA                            41,283                 23,800
            BCD                               21,980                 18,800
                                            --------                -------
            Total                           $170,394                $98,300
                                            ========                =======

     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  $648,000,  or 66%, to $1.6 million for the three
months ended Sept.  30, 1998 from $986,000 for the three months ended Sept.  30,
1997. This increase was primarily due to increased mortgage originations for the
three  months  ended Sept.  30, 1998 as compared to the three months ended Sept.
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>
                                                               Three Months Ended Sept. 30,
                                                               ----------------------------    
                                                                 1998                1997
                                                                 ----                ----

<S>                                                           <C>                <C>       
Cost of sales - residential rehabilitation properties         $8,084,440         $8,268,063
Compensation and benefits                                      3,217,256          2,112,988
Interest expense                                               1,743,598            865,813
Other general and administrative                               1,192,740            535,681
                                                             -----------        -----------
Total expenses                                               $14,238,034        $11,782,545
                                                             ===========        ===========
</TABLE>

     Cost of sales - residential  rehabilitation  properties decreased $184,000,
or 2%, to $8.1  million  for the three  months  ended  Sept.  30, 1998 from $8.3
million for the three months ended Sept.  30, 1997.  This decrease was primarily
due to the decrease in the number of properties sold.

     Compensation and benefits  increased $1.1 million,  or 52%, to $3.2 million
for the three months ended Sept. 30, 1998 from $2.1 million for the three months
ended Sept.  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 154 employees at Sept. 30, 1998 from
83 at Sept. 30, 1997.

     Interest expense increased $878,000, or 101%, to $1.7 million for the three
months ended Sept.  30, 1998 from $866,000 for the three months ended Sept.  30,
1997.  This  increase  was  primarily  attributable  to the increase in mortgage
originations funded through the Company's warehouse facility offset, in part, by
a small  decrease  attributable  to the  funding of  residential  rehabilitation
properties.

     Other general and administrative  expense increased  $657,000,  or 123%, to
$1.2  million for the three months  ended Sept.  30, 1998 from  $536,000 for the
three months ended Sept. 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  $63,000,  or 4%, to $1.6 million for
the three  months  ended Sept.  30, 1998 from $1.5  million for the three months
ended Sept.  30, 1997. Net income  decreased  $589,000 to $950,000 for the three
months ended Sept. 30, 1998 from $1,539,000 for the three months ended Sept. 30,
1997 as a result of a provision for income tax expense of $660,000 for the three
months ended Sept.  30, 1998 compared to $9,000 for the three months ended Sept.
30,  1997  reflecting  the  change in tax  status to a C  corporation  from an S
corporation.  Accordingly,  net income for the three months ended Sept. 30, 1998
increased  $46,000,  or 5%, to  950,000  compared  to pro  forma  net  income of
$904,000 for the three months ended Sept. 30, 1997.

     Nine Months Ended Sept.  30, 1998  Compared to Nine Months Ended Sept.  30,
1997

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

                                                                   Nine Months Ended  Sept. 30,
                                                                   ----------------------------            
                                                                    1998                  1997
                                                                    ----                  ---- 

<S>                                                           <C>                     <C>        
Sales of residential rehabilitation properties                $25,564,935             $17,519,462
Gains on sales of mortgage loans, net                          12,170,359               7,972,318
Interest earned                                                 3,942,966               1,412,083 
                                                              -----------             -----------
Total Revenue                                                 $41,678,260             $26,903,863
                                                              ===========             ===========

</TABLE>

     Revenues from the sale of residential  rehabilitation  properties increased
$8.0 million,  or 46%, to $25.6 million for the nine months ended Sept. 30, 1998
from $17.5 million for the nine months ended Sept.  30, 1997.  This increase was
primarily the result of the increase in the number of residential rehabilitation
properties sold to 167 for the nine months ended Sept. 30, 1998 from 118 for the
nine months ended Sept. 30, 1997.


     Gains on sales of mortgage loans  increased $4.2 million,  or 53%, to $12.2
million for the nine months ended Sept.  30, 1998 from $8.0 million for the nine
months ended Sept.  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 $410.5
million and $208.0  million for the nine months  ended Sept.  30, 1998 and 1997,
respectively. For the nine months ended Sept. 30, 1998, approximately 56% of the
Company's mortgage originations were derived from its retail mortgage operations
and  approximately  44% from  its  wholesale  operations.  The  following  table
summarizes the Company's mortgage originations (in thousands):

<TABLE>
<CAPTION>
                                                                Nine Months Ended Sept. 30,
                                                                ---------------------------
                                                                    1998           1997
                                                                    ----           ----

                           <S>                                  <C>            <C>     
                           Conventional                         $262,634       $122,400
                           FHA/VA                                 89,686         52,300
                           BCD                                    58,181         33,300
                                                                --------       --------
                           Total                                $410,501       $208,000
                                                               =========       ========
</TABLE>

     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 $2.5 million,  or 179%, to $3.9 million for the
nine months  ended Sept.  30, 1998 from $1.4  million for the nine months  ended
Sept.  30,  1997.  This  increase  was  primarily  due  to  increased   mortgage
originations  for the nine months  ended Sept.  30, 1998 as compared to the nine
months  ended Sept.  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>

                                                              Nine Months Ended Sept. 30,
                                                              ---------------------------    
                                                                 1998               1997
                                                                 ----               ----

<S>                                                           <C>               <C>        
Cost of sales - residential rehabilitation properties         $23,503,098       $16,522,515
Compensation and benefits                                       7,687,956         4,790,405
Interest expense                                                4,117,172         1,573,591
Other general and administrative                                2,861,285         1,503,088
                                                              -----------       -----------
Total expenses                                                $38,169,511       $24,389,599

</TABLE>

     Cost of  sales  -  residential  rehabilitation  properties  increased  $7.0
million,  or 42%, to $23.5 million for the nine months ended Sept. 30, 1998 from
$16.5  million for the nine months  ended Sept.  30,  1997.  This  increase  was
primarily  due  to  the  increase  in  the  number  of   properties   purchased,
rehabilitated and sold.

     Compensation and benefits  increased $2.9 million,  or 60%, to $7.7 million
for the nine months  ended Sept.  30, 1998 from $4.8 million for the nine months
ended Sept.  30, 1997.  This  increase  was  primarily  due to  increased  sales
salaries  and  commission,  which  are  based  substantially  on  mortgage  loan
originations.

     Interest expense  increased $2.5 million,  or 162%, to $4.1 million for the
nine months  ended Sept.  30, 1998 from $1.6  million for the nine months  ended
Sept. 30, 1997.  Approximately $309,000 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 $1.4 million, or 90%, to
$2.9 million for the nine months ended Sept.  30, 1998 from $1.5 million for the
nine months ended Sept.  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  $646,000,  or 45%, to $2.1 million for the
nine months  ended Sept.  30, 1998 from $1.4  million for the nine months  ended
Sept. 30, 1997.  Net income  decreased $1.2 million to $1.3 million for the nine
months  ended Sept.  30, 1998 from $2.5  million for the nine months ended Sept.
30, 1997. The nine months ended Sept. 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.



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 Sept. 30, 1998 was
$81.8 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 November  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 Sept.  30, 1998,  borrowings  from these  affiliates  totaled  $2.2  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 nine months ended Sept.  30, 1998 was
$27.4  million.  The Company used cash to fund the $45.7 million net increase in
mortgage  loans held for sale and the $4.2 million net  increase in  residential
rehabilitation  properties  off set, in part, by the $20.1  million  decrease in
receivable  from sales of loans.  The increases in these assets were financed by
increased  borrowings  under the Warehouse  Facility,  and the proceeds from the
initial public offering. The Company also repurchased 14,600 shares at a cost of
$89,367  pursuant to the 100,000 share  repurchase  program  announced in August
1998.

Year 2000 Compliance

     The Company is  currently  in the  process of  evaluating  its  information
technology  infrastructure for the Year 2000 ("Y2000")  compliance.  The Company
has contacted the vendors of its information  systems and has been informed that
these systems are Y2000  compliant.  The  Company's  existing  workstations  and
fileservers are  substantially  Y2000 compliant and those  workstations that are
not Y2000 compliant will be replaced. The Company does not believe that the cost
to modify  its  information  technology  infrastructure  to be  material  to its
financial condition or results of operations nor does the Company anticipate any
material disruption of its operations as a result of a failure by the Company to
be compliant.  However, there can be no assurance that there will not be a delay
in, or increased costs  associated  with, the need to address Y2000 issues.  The
Company also relies, directly and indirectly,  on other businesses such as third
party service  providers,  creditors,  financial  institutions  and governmental
entities.  Even if the Company's  computer systems are not materially  adversely
affected by the Y2000 issue,  the  Company's  business and  operations  could be
materially adversely affected by disruptions in the operations of other entities
with which the Company interacts.

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.

     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.

     In  October  1998,   the  FASB  issued  SFAS  No.  134,   "Accounting   for
Mortgage-Backed  Securities  Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise".  This statement changes the way
mortgage  banking firms account for certain  securities and other interests they
retain after securitizing  mortgage loans that were held for sale. Under current
practice, a firm that securitizes has a choice in how it classifies any retained
securities  based on its intent and  ability to hold or sell those  investments.
SFAS No. 134 gives  mortgage  banking  firms the  opportunity  to apply the same
intent-based  accounting  that is  applied by other  companies.  SFAS No. 134 is
effective for the fiscal quarter  beginning after December 15, 1998.  Management
of the Company anticipates that the implementation of SFAS No. 134 will not have
a material impact on the Company's financial condition or results of operations.


<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

          27   Financial Data Schedule

     (b)  Reports on Form 8-K

     None.




<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:  November 12, 1998