Firstplus Financial Group Inc – ‘10-K’ for 9/30/97

As of:  Tuesday, 12/9/97   ·   For:  9/30/97   ·   Accession #:  1047469-97-7121   ·   File #:  0-27550

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Annual Report   —   Form 10-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         71    477K 
 2: EX-11       Statement re: Computation of Earnings Per Share        1      8K 
 3: EX-23.1     Consent of Experts or Counsel                          1      6K 
 4: EX-27       Financial Data Schedule (Pre-XBRL)                     2      6K 

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

FORM 10-K 

                                                                [Download Table]

(MARK ONE)                                                                 
                                                                           
                    /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)      
                          OF THE SECURITIES EXCHANGE ACT OF 1934           

                       FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997        

                                            OR                             
               / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                             SECURITIES EXCHANGE ACT OF 1934               
                            FOR THE TRANSITION PERIOD FROM TO              

                              COMMISSION FILE NUMBER 0-27550               

------------------------

FIRSTPLUS FINANCIAL GROUP, INC. 

(Exact name of registrant as specified in its charter)

                                                                [Download Table]
                                           
        NEVADA                75-2561085   
    (State or other        (I.R.S. Employer
   jurisdiction of)         Identification 
   incorporation or              No.)      
     organization)                         

1600 VICEROY, 8TH FLOOR          75235     
     DALLAS, TEXAS            (Zip Code)   
 (Address of principal                     
  executive offices)                       

Registrant's telephone number, including area code: (214) 599-6400
------------------------

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: 

COMMON STOCK, $.01 PAR VALUE

(Title of Class)

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 ____                       

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy statements incorporated by  
reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / 

The aggregate market value of common stock held by nonaffiliates of the 
registrant, based on the closing price of the common stock as reported by the   
Nasdaq National Market on November 28, 1997 was $1.4 billion. For purposes of   
this computation, all officers, directors and 10% beneficial owners of the      
registrant are deemed to be affiliates. Such determination should not be deemed 
an admission that such officers, directors or 10% beneficial owners are, in     
fact, affiliates of the registrant. As of November 28, 1997, 37,391,232 shares  
of common stock were outstanding.                                               

DOCUMENTS INCORPORATED BY REFERENCE 

The Company's definitive proxy statement in connection with the Annual  
Meeting of Shareholders to be held March 4, 1998, to be filed with the          
Commission not later than 120 days after September 30, 1997, is incorporated by 
reference into Part III of this report.                                         

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TABLE OF CONTENTS 
PART I

                                                        [Enlarge/Download Table]

                                                                                                            PAGE   
                                                                                                            -----  
                                                                                                                   
Item 1.  Business..........................................................................................       1
Item 2.  Property..........................................................................................      19
Item 3.  Legal Proceedings.................................................................................      20
Item 4.  Submission of matters to a vote of security holders...............................................      20

                                                        PART II                                                    

Item 5.  Market for registrant's common equity and related stockholder matters.............................      20
Item 6.  Selected Financial Data...........................................................................      21
Item 7.  Management's discussion and analysis of financial condition and results of operations.............      23
Item 8.  Financial statements and supplementary data.......................................................      34
Item 9.  Changes in and disagreements with accountants on accounting and financial disclosure..............      34

                                                        PART III                                                   

Item 10.  Directors and Executive Officers of the Registrant...............................................      34
Item 11.  Executive Compensation...........................................................................      34
Item 12.  Security ownership of certain beneficial owners and management...................................      34
Item 13.  Certain relationships and related transactions...................................................      35
Item 14.  Exhibits Financial Statement Schedules, and Reports on Form 8-K..................................      35

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PART I

ITEM 1.  BUSINESS                                                               

FIRSTPLUS Financial Group, Inc. (together with its subsidiaries, the    
"Company") is a specialized consumer finance company that originates, purchases,
services and sells consumer finance receivables. The Company's principal loan   
product is a debt consolidation or home improvement loan secured by a second    
lien on real property ("High LTV Loans"). The Company sells substantially all of
its High LTV Loans through its securitization program and retains rights to     
service these loans.                                                            

 The Company originated or purchased $1.1 billion of High LTV Loans during
fiscal 1996, which increased to $3.7 billion in fiscal 1997. During the current 
fiscal year and in prior fiscal years, the Company has utilized securitized loan
sales as a fundamental part of its business and financing strategy. Securitized 
loan sales require companies to recognize revenue on the date of sale based on  
the present value of estimated future cash flow streams (i.e., gain-on-sale     
accounting: see "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Certain Accounting Considerations"). During fiscal 1997,  
the Company increased its non-securitization revenues (primarily, the sum of    
interest income, interest only strips interest income, servicing income,        
origination income and net gains on other loan sales), thereby decreasing the   
percentage of revenues resulting from the gain on securitized loan sales such   
that non-securitization related revenue for fiscal 1996 represented 37.1% of    
total revenues, compared to 51.3% for fiscal 1997. The Company is continuing to 
explore ways to increase its non-securitization related revenues, and to reduce 
or eliminate its use of gain-on-sale accounting.                                

   The Company had total revenue of $149.7 million for fiscal 1996 compared to
total revenue of $591.4 million for fiscal 1997, along with net income of $34.2 
million or $1.31 per fully diluted share for fiscal 1996, compared to net income
of $139.2 million or $3.52 per fully diluted share for fiscal 1997. The         
Company's serviced loan portfolio as of September 30, 1996 and 1997 was $1.3    
billion and $4.7 billion, respectively, and stockholders' equity was $94.6      
million and $430.1 million, respectively.                                       

   The Company relies principally on the creditworthiness of its borrowers for
repayment of High LTV Loans. The Company focuses on credit-worthy borrowers who,
as a result of insufficient home equity values, have limited access to secured  
consumer financing. Consequently, the Company makes loans to borrowers who will 
have aggregate mortgage indebtedness in excess of the appraised value of the    
mortgaged properties. The Company uses its own credit evaluation criteria to    
classify its applicants as "A+" through "D." These criteria include, as a       
significant component, a credit evaluation scoring methodology developed by     
Fair, Issac and Company, a consulting firm specializing in creating default-    
predictive models through scoring mechanisms ("FICO"). The Company currently    
makes High LTV Loans to borrowers it classifies as C+ or better. The Company    
believes that the credit quality of its borrowers has improved over the last    
several years, evidenced by several factors. For fiscal 1997, 89.1% of the      
Company's originations were classified by the Company as B or better, compared  
to 83.2% in fiscal 1996. Also, in the Company's most recent securitization      
(1997-3), the weighted average FICO score was 684, compared to a weighted       
average FICO score of 636 in the Company's first securitization (1994-1).       

The Company's principal origination channel is its network of regional  
independent correspondent lenders ("Correspondents"), numbering approximately   
614. Correspondents are typically finance companies, commercial banks, or       
thrifts that do not have the infrastructure to hold and service portfolios of   
High LTV Loans. The Company's Correspondents originate loans ("Correspondent    
Loans") using the Company's underwriting criteria and sell these loans to the   
Company. During fiscal 1996 and fiscal 1997, FIRSTPLUS purchased $1.1 billion   
and $2.9 billion, or 96.0% and 79.2%, respectively, of its total High LTV Loan  
originations through the Correspondent origination channel.                     

   The Company continues to expand its origination channels through the use of
telemarketing, direct mail, national advertising and a nationwide retail branch 
operation to originate loans directly to qualified borrowers ("Direct to        
Consumer Loans"). The Company is pursuing this strategy to continue to increase 

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its Direct to Consumer originations because the Company believes that this      
origination channel should prove to be more profitable and allow the Company to 
have better control over the quality of the Company's production. To achieve    
this goal, the Company is building national recognition of the FIRSTPLUS brand  
name through increased national advertising, the use of celebrity spokespersons,
such as Dan Marino, a professional football player with the Miami Dolphins, and 
the sponsorship of sporting events, such as the FIRSTPLUS NASCAR Racing Team.   
The Company employs innovative direct mail marketing techniques and currently   
mails approximately 500,000 pieces of mail per day. The Company processes Direct
to Consumer originations through its two telemarketing centers, 45 retail       
branches and its centralized processing centers. The Company's two telemarketing
centers currently receive approximately 5,700 inbound calls per day. The        
Company's outbound telemarketing center makes approximately 39,500 calls        
(approximately 4.0% are connected to potential customers) a day, which are      
follow-up calls from direct mailings sent to potential customers and calls to   
potential customers listed on purchased phone lists. During fiscal 1996 and     
1997, the Company originated $45.1 million and $765.3 million, respectively, of 
High LTV Loans through the Direct to Consumer origination channel, or 4.0% and  
20.8% of total High LTV Loan production, respectively.                          

   The High LTV Loans originated by the Company in fiscal 1996 and 1997 had an
average principal amount of approximately $27,671 and $30,936, respectively, a  
weighted average interest rate of 15.1% and 13.9% per annum, respectively, and a
weighted average FICO score of 662 and 678, respectively. A portion of the High 
LTV Loans that the Company originates are Title I loans that are insured,       
subject to certain exceptions, for 90% of the principal balance and certain     
interest costs under the Title I Credit Insurance program (the "Title I         
Program") administered by the Federal Housing Administration ("FHA"). In fiscal 
1996 and fiscal 1997, the Company purchased or originated $120.6 million and    
$87.8 million of Title I loans or 11.1% and 2.4%, of total High LTV             
originations, respectively.                                                     

  The Company sells substantially all of the High LTV Loans it originates or
purchases through its securitization program and generally retains rights to    
service such loans. During fiscal 1996 and fiscal 1997, the Company sold through
securitization transactions approximately $723.1 million and $2.4 billion of    
High LTV Loans or 64% and 67% of total production, respectively. The Company    
also maintains an inventory of loans held for sale that generates interest      
income for the Company. The Company earns servicing fees on a monthly basis,    
primarily at a rate of 0.75% for the securitized loans it services. At September
30, 1997, the principal amount of the High LTV Loans serviced by the Company    
(the "Serviced Loan Portfolio") was $4.7 billion, which includes $1.3 billion of
loans held for sale, on which servicing is not earned.                          

  The Company also originates non-conforming home equity loans ("Home Equity
Loans"), conforming first lien loans and personal consumer loans. Home Equity   
Loans are first or second lien loans to credit-impaired borrowers with          
significant equity in their homes, but whose borrowing needs are not being met  
by traditional financial institutions. Home Equity Loans are originated through 
FIRSTPLUS Freedom (a wholly owned subsidiary that was acquired on August 29,    
1997), either through brokers or the FIRSTPLUS telemarketing centers. The       
Company sells, on a whole-loan basis, Home Equity Loans servicing released.     
Conforming first lien loans are first lien loans that conform to the Federal    
National Mortgage Association ("FNMA" or "Fannie Mae") guidelines. Conforming   
first lien loans are also originated through FIRSTPLUS Freedom. The Company     
sells conforming first lien loans to FNMA for cash, servicing released. The     
Company also originates personal consumer loans, which are retained in its loan 
portfolio. Personal consumer loans are typically secured by personal property   
and other consumer products, evidenced by UCC filings for amounts generally     
ranging between $600 and $2,000 per loan and for terms of approximately nine to 
18 months. Weighted interest rates range from 24% to 39% on direct loans and 18%
to 24% on sales finance contracts. The average interest rates for all accounts  
is approximately 34%. To expand the consumer finance product, the Company       
acquired National Loans, Inc. ("National"), The Modern Finance Company          
("Modern") and Southern Management Corporation                                  

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("SMC"), all of which have consumer finance branches and originate personal     
consumer loans. The total number of consumer finance branches as of September   
30, 1997 was 117.                                                               

LOAN PRODUCTS                                                                   

The Company originates or purchases High LTV Loans, Home Equity Loans,  
conforming first lien loans, and personal consumer loans. Each of those         
products, except for personal consumer loans, is typically secured by a first or
second mortgage lien. The Company lends to borrowers in various credit          
categories.                                                                     

    HIGH LTV LOANS.  A High LTV Loan is a debt consolidation or home improvement
loan secured primarily by a second lien. Home improvements generally encompass a
wide variety of projects, such as exterior/interior finishing, structural       
additions, roofing, plumbing, heating and insulation. The Company relies        
principally on the creditworthiness of the borrower, and to a lesser extent on  
the underlying collateral, for repayment of High LTV Loans. The average size of 
a High LTV Loan made by the Company during fiscal 1996 and fiscal 1997 was      
approximately $26,034 and $30,936, respectively.                                

Under the Company's High LTV Loan program, the entire loan amount can be
used for any combination of debt consolidation, home improvements, closing costs
and cash out, subject to a cash out maximum per grade. The loan proceeds may be 
used to purchase assets other than real property. The loan terms under the      
program range from one to 25 years.                                             

The following table sets forth certain information with respect to the  
Company's High LTV Loan program:                                                

HIGH LTV LOAN PROGRAM(3)

                                                                [Download Table]

 CREDIT      FICO      MAXIMUM LOAN      MAXIMUM      MAXIMUM  
  GRADE      SCORE       AMOUNT(1)       LTV(2)      CASH OUT  
---------  ---------  ---------------  -----------  -----------
                                                               

   A+      700+         $   100,000        125.0%    $  35,000 

    A      680-699      $    75,000        125.0%    $  25,000 

   B+      660-679      $    65,000        125.0%    $  15,000 

    B      640-659      $    45,000        125.0%    $   5,000 

   C+      620-639      $    30,000        125.0%    $   1,000 

   C/D     not available for this program                      

------------------------                                                        

(1) The maximum loan amount includes all closing costs and is limited to $35,000
    for condos and 2-4 units, with A+ and A credit grades and $25,000 for B+ and
B credit grades.                                                        

(2) LTV is determined by adding all debt secured by the property and dividing   
the result by the value of the property. The Maximum LTV does not give  
    effect to any increased value from the home improvement portion of the loan.

(3) One of the Company's loan products, Buster Plus, requires that 40% of the   
loan proceeds be used for home improvements.                            

  TITLE I LOANS.  The Company makes loans under the Title I Program. Several
types of loans may be made under the Title I Program, including property        
improvement loans to finance the alteration, repair or improvement of existing  
single family, multifamily and non-residential structures. Under the Title I    
Program, loan processing and credit determination procedures are carried out by 
the lending institution. Under the Title I Program, FHA does not review         
individual loans at the time of approval, except when the amount of a Title I   
Program loan would result in any borrower having a total unpaid principal       
obligation on all Title I loans in excess of $25,000. No equity is required in  
the property subject to improvement for loans of $25,000 or less. Title I loans 
are fully amortizing with maximum terms to maturity of 20 years. All            

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borrowers are required to possess a one-half vested interest or more in the     
property subject to improvement and are qualified based upon their ability to   
make monthly payments rather than on the LTV ratio on the underlying real estate
collateral.                                                                     

The Title I Program is an insurance program. A lender under the Title I 
Program assumes the risk of losing up to 10% of the principal balance on every  
loan, plus certain expenses submitted to FHA for an insurance claim, plus a     
portion of the interest on such loans. FHA insures the remaining 90% of the     
principal balance of each loan and certain interest costs, provided that the    
lender has not depleted its loss reserve account established with HUD and the   
loan was originated within HUD guidelines. The HUD loss reserve account balance 
is adjusted by HUD as claims are paid and new Title I loans are acquired. If at 
any time claims exceed the loss reserve balance, the remaining Title I loans    
will be uninsured until the reserve account balance is increased by new loan    
originations or purchases. When Title I loans are securitized, all loss reserves
related to the securitized loans are transferred to the securitization trust. As
a result, the Company's loss reserve account is significantly reduced after each
of the Company's securitization transactions that involve the sale of Title I   
loans until new originations or purchases replenish the Company's HUD loss      
reserve account. The borrower generally pays HUD an insurance charge equal to   
0.5% of the loan amount, multiplied by the number of years of the loan term.    

    The average size of a Title I loan originated by the Company for fiscal 1996
and fiscal 1997 was approximately $17,414 and $21,343, respectively. During     
fiscal 1996 and fiscal 1997, originations of Title I loans accounted for        
approximately 10.7% and 2.4%, respectively, of the Company's total High LTV     
Loans originated and purchased.                                                 

HOME EQUITY LOANS.  Home Equity Loans are first or second lien loans to 
credit-impaired borrowers with significant equity in their homes, but whose     
borrowing needs are not being met by traditional financial institutions. The    
Company considers the equity in the property as the major source of repayment on
the loan. The Company originated $20.9 million of such loans during fiscal 1997 
and originated an immaterial amount of Home Equity Loans during fiscal 1996.    
Home Equity Loans are originated through FIRSTPLUS Freedom.                     

  CONFORMING FIRST LIEN LOANS.  "Conforming First Lien Loans" are first lien
loans that conform to Fannie Mae guidelines. Conforming First Lien Loans are    
originated through FIRSTPLUS Freedom. The Company sells Conforming First Lien   
Loans servicing released to FNMA for cash servicing released. The Company       
originated $127.5 million of such loans during fiscal 1997 and originated an    
immaterial amount of Conforming First Lien Loans during fiscal 1996.            

  PERSONAL CONSUMER LOANS.  Personal consumer loans are typically secured by
personal property and other consumer products, evidenced by UCC filings, for    
amounts generally ranging between $1,500 and $2,000 per loan and for a term of  
approximately 18 months, although many of the loans are repaid prior to         
maturity. The Company makes its credit decisions primarily based on its         
assessment of a customer's ability to repay the obligation. In making a credit  
decision, in addition to the size of the obligation, the Company generally      
considers a customer's income level, type and length of employment, stability of
residence, personal references and prior credit history. Interest rates during  
fiscal 1997 ranged from 24% to 39% on direct loans and 18% to 24% on sales      
finance contracts. The average interest rate for all accounts was approximately 
34% during fiscal 1997.                                                         

LOAN ORIGINATION CHANNELS                                                       

 The Company purchases Correspondent Loans through its network of regional
Correspondents and originates Direct to Consumer Loans through direct mail,     
telemarketing, national advertising and a nationwide retail branch operation.   

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The table below presents the loan production for each quarter since the 
beginning of fiscal 1996:                                                       

                                                        [Enlarge/Download Table]

                                                                           THREE MONTHS ENDED                              
                                               --------------------------------------------------------------------------- 
                                                DECEMBER 31, 1995         MARCH 31,              JUNE 30,        SEPTEMBER 
                                                                             1996                  1996          30, 1996  
                                               --------------------  --------------------  --------------------  --------- 
                                                DOLLARS     UNITS     DOLLARS     UNITS     DOLLARS     UNITS     DOLLARS  
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                                                                                                           
                                                                         (DOLLARS IN THOUSANDS)                            
Direct to Consumer                                                                                                         
  High LTV.................................... $     684         29  $   5,130        186  $   8,533        349  $  30,768 
  Home Equity.................................    --         --         --         --         --         --         --     
  Conforming First Lien.......................    --         --         --         --         --         --         --     
  Personal Consumer...........................    --         --         --         --         --         --         --     
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
    Total.....................................       684         29      5,130        186      8,533        349     30,768 
Correspondent                                                                                                              
  High LTV....................................   162,885      7,786    124,974      5,151    256,648      9,369    536,157 
  Home Equity.................................    --         --         --         --         --         --         --     
  Conforming First Lien.......................    --         --         --         --         --         --         --     
  Other.......................................    61,424      1,153    141,129      1,948    118,325      1,760     61,293 
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
    Total.....................................   224,309      8,939    266,103      7,099    374,973     11,129    597,450 
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
  Total Production............................ $ 224,993      8,968  $ 271,233      7,285  $ 383,506     11,478  $ 628,218 
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 



                                                                           THREE MONTHS ENDED                              
                                               --------------------------------------------------------------------------- 
                                                DECEMBER 31, 1996         MARCH 31,              JUNE 30,        SEPTEMBER 
                                                                             1997                  1997          30, 1997  
                                               --------------------  --------------------  --------------------  --------- 
                                                DOLLARS     UNITS     DOLLARS     UNITS     DOLLARS     UNITS     DOLLARS  
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                                                         (DOLLARS IN THOUSANDS)                            
                                                                                                                           
Direct to Consumer                                                                                                         
  High LTV.................................... $  64,106      2,360  $ 160,890      5,522  $ 230,414      7,777  $ 309,933 
  Home Equity.................................    --         --         --         --         --         --          2,634 
  Conforming First Lien.......................    --         --         --         --         --         --         83,943 
  Personal Consumer...........................    --         --         --         --         15,200      7,852     38,700 
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
    Total.....................................    64,106      2,360    160,890      5,522    245,614     15,629    435,210 
Correspondent                                                                                                              
  High LTV....................................   583,168     20,200    704,161     22,663    763,127     24,082    858,341 
  Home Equity.................................    --         --         --         --         --         --         18,300 
  Conforming First Lien.......................    --         --         --         --         --         --         43,512 
  Other.......................................    37,158        728     14,089        146     --         --            146 
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
    Total Correspondent.......................   620,326     20,928    718,250     22,809    763,127     24,082    920,299 
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
Total Production.............................. $ 684,432     23,288  $ 879,140     28,331  $1,008,741    39,711  $1,355,509
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 
                                               ---------  ---------  ---------  ---------  ---------  ---------  --------- 



                                                 UNITS                                                                     
                                               ---------                                                                   
                                                                                                                           

Direct to Consumer                                                                                                         
  High LTV....................................     1,200                                                                   
  Home Equity.................................    --                                                                       
  Conforming First Lien.......................    --                                                                       
  Personal Consumer...........................    --                                                                       
                                               ---------                                                                   
    Total.....................................     1,200                                                                   
Correspondent                                                                                                              
  High LTV....................................    19,173                                                                   
  Home Equity.................................    --                                                                       
  Conforming First Lien.......................    --                                                                       
  Other.......................................     1,163                                                                   
                                               ---------                                                                   
    Total.....................................    20,336                                                                   
                                               ---------                                                                   
  Total Production............................    21,536                                                                   
                                               ---------                                                                   
                                               ---------                                                                   

                                                 UNITS                                                                     
                                               ---------                                                                   

                                                                                                                           
Direct to Consumer                                                                                                         
  High LTV....................................    10,145                                                                   
  Home Equity.................................        29                                                                   
  Conforming First Lien.......................       750                                                                   
  Personal Consumer...........................    72,327                                                                   
                                               ---------                                                                   
    Total.....................................    83,251                                                                   
Correspondent                                                                                                              
  High LTV....................................    26,011                                                                   
  Home Equity.................................       203                                                                   
  Conforming First Lien.......................       368                                                                   
  Other.......................................         3                                                                   
                                               ---------                                                                   
    Total Correspondent.......................    26,585                                                                   
                                               ---------                                                                   
Total Production..............................   109,836                                                                   
                                               ---------                                                                   
                                               ---------                                                                   

CORRESPONDENT LOANS.  Correspondent Loans are originated and closed by  
independent Correspondents in accordance with the Company's own underwriting    
standards and are subsequently purchased by the Company. During fiscal 1996 and 
fiscal 1997, the Company purchased approximately $1.1 billion and $2.9 billion  
of High LTV Correspondent Loans, respectively. The Company typically purchases  
Correspondent Loans at or above the par value of such loans. The average        
principal amount of High LTV Correspondent Loans originated during fiscal 1996  
and fiscal 1997 was $26,053 and $31,291, respectively. The Company anticipates  
that its correspondent operations will continue to expand in the future, but at 
a slower rate than experienced to date. Correspondent Loans will continue to    
represent the majority of the overall production over the next 12 to 18 months. 

  The Company's Correspondent Loan program involves the purchase of High LTV
Loans, Home Equity Loans and Conforming First Lien Loans from Correspondents    
with whom the Company maintains ongoing relationships. These lenders are usually
situated in local markets where they are able to contact borrowers directly.    
Correspondents tend to be commercial banks or finance companies that lack the   
infrastructure to hold and service portfolios of loans. Instead, these entities 
concentrate on originating loans and then selling their production at a premium.

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The Correspondent Loan program benefits the Company by providing a      
cost-effective means for the Company to market to borrowers who are not easily  
accessible by the Company. Furthermore, the correspondent agreements require    
that the selling institution warrant the validity and enforceability of the     
loan, thereby reducing the risk of fraud or improper documentation. In the event
such warranty is breached, the Company may require the Correspondent to         
repurchase such loan. The Correspondent Loan market is very competitive, and    
loans sold by Correspondents are generally priced at a premium of between 2% to 
7% over par value, as compared to purchase prices at par or slightly below par  
for loans originated by the Company through direct channels.                    

   The Company currently has the ability to purchase Correspondent Loans in 46
states and has purchased loans from approximately 614 Correspondents. During    
fiscal 1996 and fiscal 1997, approximately 48.6% and 26.2%, respectively (by    
dollar volume), of the Company's Correspondent Loans were originated from 10    
Correspondents. The Company allows Correspondents to participate in the         
Company's correspondent operations only after a review of their reputation,     
consumer finance lending experience and financial condition, including a review 
of references, credit history and financial statements. The development of new  
Correspondent relationships is directed by marketing managers.                  

 Generally, the Correspondent prepares the loan application, assembles the
supporting documentation and processes the loan. Once the loan package is       
complete, it is submitted to the Company's Correspondent Loan underwriting      
personnel, who review each loan package and, in some cases, perform independent 
employment and credit verification and arrange for a review of the appraisal, if
any, submitted with the loan package. Each Correspondent Loan is separately     
underwritten by the Company in accordance with the Company's own underwriting   
standards. See "--Underwriting." If the loan package meets the Company's        
underwriting criteria, the Correspondent Loan is closed by the originating      
lender and then purchased by the Company. The Company typically approves the    
loan within two business days of a complete loan package's submission by the    
Correspondent.                                                                  

DIRECT TO CONSUMER LOANS.  The Company originated approximately $45.1   
million and $765.3 million of High LTV Direct to Consumer Loans in fiscal 1996  
and fiscal 1997, respectively. Direct to Consumer Loans are typically originated
through direct mailings, telemarketing, and national advertising and nationwide 
retail branches. The Direct to Consumer Loan origination channel is the         
Company's fastest growing origination channel and is designed to decrease the   
costs and increase the volume, size and quality of its loan originations. The   
Company will target its marketing efforts at credit-worthy homeowners who       
qualify as candidates for debt consolidation or have home improvement projects  
needs, but have little equity in their homes. Direct to Consumer Loan borrowers 
typically pay origination fees that range between 3% to 8.5% of the loan amount 
at closing. Management believes that this program will distinguish the Company  
from other major home lenders as its FIRSTPLUS name recognition increases.      

Direct to Consumer Loan applications are processed and underwritten by  
Company personnel and are funded directly by the Company. For High LTV Direct to
Consumer Loans originated during fiscal 1996 and fiscal 1997, the average       
principal amount was $25,575 and $29,658, respectively, the weighted average    
term to maturity was 214 months and 211 months, respectively, and the weighted  
average interest rate was 16.2% and 13.9%, respectively.                        

MARKETING                                                                       

   The Company's marketing program is designed to develop national recognition
of the FIRSTPLUS brand name. To achieve this objective, the Company employs a   
strategy that includes a combination of national television, local radio, direct
mail and telemarketing. The television campaign utilizes the Company's          
spokesperson, star quarterback Dan Marino. The national television advertising  
is reinforced through direct mailings and radio advertisements to targeted      
borrowers in local markets. Customer applications are taken by the Company      
through the use of its 1-800-510-PLUS phone number and its telemarketing        
operation.                                                                      

The Company also is pursuing an affinity marketing strategy. The Company
currently sponsors the FIRSTPLUS NASCAR racing team and celebrity golf          
tournaments in Texas, Florida and Puerto Rico.                                  

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During the 1997 NASCAR racing season, more than 148 million people watched      
NASCAR races on television and another 5.6 million watched the races in person. 
The Company has representatives at such events to gather information from       
prospective customers and also to provide loan applications. Additionally, the  
Company is developing alliances with home improvement retailers to further the  
distribution of its home improvement loan products, whereby customers will be   
able to apply for loans at kiosks located in home improvement stores throughout 
the country.                                                                    

UNDERWRITING                                                                    

The Company's underwriting group primarily operates out of the Company's
Dallas, Texas headquarters. The Company receives loan applications from its     
network of Correspondents via facsimile machines. In addition, individuals      
respond to the Company's direct marketing program by United States mail or      
through direct telephone contact with Company representatives. Loan applications
are monitored by the Company's tracking department to ensure prompt turnaround, 
efficient underwriting procedures and accurate credit verification. The loan    
processing staff prepares an application file by obtaining credit bureau        
reports, highlighting any significant credit events and prioritizing            
applications that need immediate attention before submitting the application to 
the appropriate loan underwriter. The Company applies the same underwriting     
criteria to Correspondent Loans. The Company's underwriters have an average of  
seven years of banking, finance and consumer loan experience. The Company has   
put in place a credit policy that provides a number of guidelines to assist     
underwriters in the credit decision process.                                    

  Loans are classified by the Company into seven gradations of quality, from
"A+" to "D" credits. However, the Company currently makes loans only to         
borrowers it classifies as "C+" or better for High LTV Loans and "C" or better  
for Title I Loans. The Company's methodology for determining loan quality       
considers primary credit characteristics and a series of parameters based on    
property types. Primary characteristics include the borrower's FICO score,      
debt-to-income ratio, mortgage credit history, consumer credit history,         
bankruptcies, foreclosures, notice of defaults, deeds in lieu of foreclosure and
repossessions. The Company believes that the most important credit              
characteristics are the borrower's FICO score and debt-to-income ratio, the     
latter of which may not exceed 50% of the applicant's gross income (45% of the  
applicant's gross income for B+ or lower credits with strong disposable income).
The Company has developed an algorithm based on the consumer credit file, which 
when coupled with the FICO score (a dominant factor used in assessing the       
consumer credit file), provides a means to assess the applicant's probability of
default. The algorithm utilized by the Company includes such edit checks as     
present delinquency review, minimum satisfactory rated accounts, maximum        
derogatory counters, segmentation for special borrower classes and stringent    
policies for credit bureau selection. The Company's algorithm acts as a cutoff, 
segregating likely deficit candidates from the entire pool of applicants in an  
automated fashion. The parameters limit the size of the loan and the borrower   
classes and property types that may be allowed. Generally, there are no LTV     
restrictions for Title I loans. The maximum lien position for Title I loans is  
third lien.                                                                     

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  The following table summarizes the underlying borrower characteristics for
each classification used by the Company.                                        

                                                        [Enlarge/Download Table]

                                               CONSUMER                                                            
                                                HISTORY                                           DEBT SERVICE-TO- 
CLASSIFICATION(1)      EXISTING MORTGAGE      FICO SCORE            BANKRUPTCY FILINGS             INCOME RATIO(2) 
---------------  ---------------------------  -----------  -------------------------------------  -----------------

                                                                                                                   
"A+" Credit      Maximum of one 30-day late      700+      Must have been discharged for at       Generally 50% or 
                 payment in last 12 months                 least three years with re- established less             
                 and no 60-day late payment                credit prior to closing                                 
                 ever                                                                                              

"A" Credit       Maximum of one 30-day late     680-699    Must have been discharged for at       Generally 50% or 
                 payment in last 12 months                 least three years with re- established less             
                 and no 60-day late payment                credit prior to closing                                 
                 ever                                                                                              

"B+" Credit      Maximum of one 30-day late     660-679    Must have been discharged for at       Generally 45% or 
                 payment in last 12 months                 least three years with re- established less             
                 and no 60-day late payments               credit prior to closing                                 
                 ever                                                                                              

"B" Credit       Maximum of one 30-day late     640-659    Must have been discharged for at       Generally 45% or 
                 payment in last 12 months                 least five years with reestablished    less             
                 and no 60-day late payment                credit prior to closing                                 
                 ever                                                                                              

"C+" Credit      Maximum of one 30-day late     620-639    Must have been discharged for at       Generally 40% or 
                 payment in last 12 months                 least five years with reestablished    less             
                 and no 60-day late payment                credit prior to closing                                 
                 ever                                                                                              

------------------------                                                        

(1) The Company does not originate High LTV Loans to borrowers it classifies as 
"C" or "D" credits or Title I loans to borrowers it classifies as "D"   
credits.                                                                

(2) Calculated by dividing the borrower's debt obligations (after any debt      
  consolidation) by their monthly gross earnings. Installment debt with less
than six payments remaining may be excluded.                            

SERVICING OPERATIONS                                                            

 GENERAL.  The Company services all of the High LTV Loans it originates or
purchases at its headquarters in Dallas, Texas, except for a small portion of   
High LTV Loans that are serviced at Citizens Thrift & Loan Association          
("FIRSTPLUS Bank"), a subsidiary of the Company. Subsequent to year end the High
LTV Loans at FIRSTPLUS Freedom were moved to the Dallas Servicing Operations.   
The Company's Serviced Loan Portfolio consists entirely of High LTV Loans. The  
Company's servicing includes collecting and remitting loan payments, accounting 
for principal and interest, contacting delinquent borrowers, handling borrower  
defaults, recording mortgages and assignments, investor and securitization      
reporting and management portfolio reporting. It is the Company's strategy to   
grow and build its Serviced Loan Portfolio.                                     

    The Company receives a servicing fee based on a stipulated percentage of the
declining principal balance of each loan serviced. Servicing fees are collected 
by the Company out of the borrower's monthly loan payments. In addition, the    
Company, as servicer, receives most late and assumption charges paid by the     
borrower, as well as other miscellaneous fees for performing various loan       
servicing functions.                                                            

The Serviced Loan Portfolio is subject to reduction by normal monthly   
payments, prepayments, foreclosures and charge-offs. In general, revenues from  
the Serviced Loan Portfolio may be adversely affected as interest rates decline 
and loan prepayments increase. In some states in which the Company currently    
operates, prepayment fees may be limited or prohibited by applicable state law. 
In addition, the Company's ability to collect prepayment fees under certain     
circumstances will be restricted in future                                      

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periods under recently enacted laws. Prepayment fees are prohibited on all Title
I loans. See "--Regulation."                                                    

   The following table sets forth the dollar amount and average loan amount of
High LTV Loans, subdivided into Non-Title I loans ("Conventional") and Title I  
loans, included in the Serviced Loan Portfolio as of September 30, 1997:        

HIGH LTV LOANS-SERVICED LOAN PORTFOLIO
AS OF SEPTEMBER 30, 1997

                                                                [Download Table]
                                                                            
Conventional:                                                               
  Total dollar amount(1)........................................  $4,370,989
  Average loan amount...........................................  $  29,961 
Title I:                                                                    
  Total dollar amount(1)........................................  $ 286,680 
  Average loan amount...........................................  $  14,099 
Total:                                                                      
  Total dollar amount(1)........................................  $4,657,669
  Average loan amount...........................................  $  28,020 

------------------------                                                        

(1) Amounts in thousands                                                        

  The following table summarizes the loans in the Serviced Loan Portfolio by
geographic concentration as of September 30, 1997:                              

GEOGRAPHIC CONCENTRATION OF SERVICED LOAN PORTFOLIO 
AS OF SEPTEMBER 30, 1997

                                                        [Enlarge/Download Table]

                                                                           AMOUNT       PERCENT  
                                                                        ------------  -----------
                                                                        (DOLLARS IN THOUSANDS)   
                                                                                                 
STATE:                                                                                           
  California........................................................... $  1,917,872        41.2%
  Florida..............................................................      349,450         7.5 
  Arizona..............................................................      191,203         4.1 
  Colorado.............................................................      185,108         4.0 
  Georgia..............................................................      171,644         3.7 
  All others...........................................................    1,842,392        39.5 
                                                                        ------------       ----- 
    Total.............................................................. $  4,657,669       100.0%
                                                                        ------------       ----- 
                                                                        ------------       ----- 

  LOANS HELD FOR SALE.  Loans held for sale are carried at the lower of cost
or market. These loans represent investments the Company has made in loans that 
it currently expects to sell within a 180-day period. The Company may elect to  
hold the loans on its balance sheet for periods in excess of 180 days in the    
future in order to maximize the interest income resulting from holding such     
loans on the balance sheet, as well as to reduce the costs related to           
securitization transactions. To implement such a strategy, it will be necessary 
for the Company to obtain alternative sources of funds to finance this longer   
warehouse period.                                                               

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The components of loans held for sale are as follows:                   

                                                        [Enlarge/Download Table]

                                                                          SEPTEMBER 30,       
                                                                     ------------------------ 
                                                                                              
                                                                        1996         1997     
                                                                     ----------  ------------ 
                                                                          (IN THOUSANDS)      
High LTV............................................................ $  421,646  $  1,310,576 
Personal consumer...................................................     --            93,172 
Conforming First Lien...............................................     --            16,488 
Home Equity.........................................................     --             1,653 
Other...............................................................      3,541        12,928 
                                                                     ----------  ------------ 
  Subtotal..........................................................    425,187     1,434,817 
Allowance for possible credit losses................................     (6,495)      (31,539)
Deferred finance charges............................................     --           (16,568)
Net purchase premiums...............................................     12,120        13,736 
                                                                     ----------  ------------ 
  Total............................................................. $  430,812  $  1,400,446 
                                                                     ----------  ------------ 
                                                                     ----------  ------------ 

    DELINQUENCIES AND FORECLOSURES.  The Company's collection operations include
customer complaint monitoring, resolution of inspection discrepancies, daily    
delinquency maintenance, legal remedies and HUD claims. Loans originated or     
purchased by the Company are generally secured by mortgages, deeds of trust,    
security deeds or deeds to secure debt, depending upon the prevailing practice  
in the state in which the collateral is located. Depending on local law,        
foreclosure is effected by judicial action or nonjudicial sale, and is subject  
to various notice and filing requirements. In general, the borrower, or any     
person having a junior encumbrance on the real estate, may cure a monetary      
default by paying the entire amount in arrears plus other designated costs and  
expenses incurred in enforcing the obligation during a statutorily prescribed   
reinstatement period. Generally, state law controls the amount of foreclosure   
expenses and costs, including attorneys' fees, that may be recovered by a       
lender. After the reinstatement period has expired without the default having   
been cured, the borrower or junior lienholder no longer has the right to        
reinstate the loan and must pay the loan in full to prevent the scheduled       
foreclosure sale.                                                               

Typically, the Company has chosen not to pursue foreclosures due to the 
costs involved. However, the Company may pursue foreclosure as an alternative in
its default management process. The Company evaluates loans and determines      
whether foreclosure is economically and procedurally the most viable alternative
for collection of each loan that is in default. For loans that reach the later  
states of delinquency (typically more than 91 days), a loan work-up is          
initiated. This work-up outlines the type of loan, (i.e., Title I or non-Title  
I), lien position (first or junior) and other qualification information. An     
appraisal is ordered from a select group of qualified appraisers approved by the
Company in order to assess property value and calculate potential equity. If    
this initial assessment suggests that equity exists above certain thresholds,   
the Company will order a title opinion from a qualified source. The title       
opinion reveals lien position as well as any potential tax delinquency issues or
judgments. Upon completion of this work-up, the loan's recovery potential is    
assessed. For Title I loans, if the recovery potential approximates 100% of the 
principal balance plus a pre-determined amount, the loan is considered for      
foreclosure. If this potential recovery is not met, the loan will be referred to
HUD as a claim. For non-Title I loans, a determination is made on the partial or
full recovery of principal balance and associated expense. If the recovery      
potential is sufficient from a cost/benefit/loss perspective, the Company may   
initiate foreclosure proceedings. If the evaluations indicate that foreclosure  
offers no economic advantage to the Company, it may be determined to secure and 
file a judgment against the borrower instead of pursuing further foreclosure    
efforts and incurring additional costs. In addition, the Company may choose to  
pursue garnishment proceedings against the borrower.                            

The Company's loans under the Title I Loan Program are eligible for HUD 
insurance. HUD insurance insures 90% of Title I loans, provided that the Company
has not depleted its loss reserve account established with HUD and provided the 
loans were originated within applicable HUD guidelines. The                     

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balance in the loss reserve account is adjusted by HUD as claims are paid and   
new Title I loans are originated or purchased. At September 30, 1997, claims in 
process for all loans serviced by the Company were approximately $15.8 million. 
If at any time claims exceed the Company's or any securitization trust's loss   
reserve balance, the remaining Title I loans will be uninsured until the        
respective reserve account balance is increased by new loan originations or     
purchases. The Company's non-Title I loans are non-insured.                     

 The activity in the allowance for possible credit losses is summarized as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                                YEAR ENDED SEPTEMBER  
                                                                         30,          
                                                                --------------------- 
                                                                                      
                                                                  1996        1997    
                                                                ---------  ---------- 
                                                                     (AMOUNTS IN      
                                                                     THOUSANDS)       
Balance, beginning of year..................................... $   4,794  $   60,752 
Provision for possible credit losses...........................    59,644     276,926 
Charge-offs, net...............................................    (3,902)    (35,544)
Other..........................................................       216       8,592 
                                                                ---------  ---------- 
Balance, end of year........................................... $  60,752  $  310,726 
                                                                ---------  ---------- 
                                                                ---------  ---------- 
Components of Allowance:                                                              
Allowance for possible credit losses on loans held for sale.... $   6,495  $   31,539 
Allowance for possible credit losses on loans sold.............    54,257     279,187 
                                                                ---------  ---------- 
Total.......................................................... $  60,752  $  310,726 
                                                                ---------  ---------- 
                                                                ---------  ---------- 

The following tables set forth delinquency, loss and default information
with respect to the Serviced Loan Portfolio at the dates and for the periods    
indicated:                                                                      

DELINQUENCY CHARACTERISTICS 
OF THE SERVICED LOAN PORTFOLIO

                                                        [Enlarge/Download Table]

                                                         FIRSTPLUS                                               
                                                        FINANCIAL(1)                     COMPANY                 
                                                    --------------------  -------------------------------------- 
                                                       SEPTEMBER 30,                  SEPTEMBER 30,              
                                                    --------------------  -------------------------------------- 
                                                      1993       1994        1995         1996          1997     
                                                    ---------  ---------  ----------  ------------  ------------ 
                                                                                                                 
                                                                       (DOLLARS IN THOUSANDS)                    
Amount of Serviced Loan Portfolio at end of                                                                      
 period............................................ $  62,629  $  52,835  $  238,584  $  1,267,147  $  4,657,669 
Delinquent loans as a percentage of loans service                                                                
 (period end)(2):                                                                                                
  31-60 days.......................................       3.1%       2.5%        1.8%          0.8%          0.9%
  61-90 days.......................................       0.8        0.8         0.7           0.4           0.4 
  91 days and over.................................       2.9        3.6         2.2           1.6           1.2 
                                                    ---------  ---------  ----------  ------------  ------------ 
    TOTAL..........................................       6.8%       6.9%        4.7%          2.8%          2.5%
                                                    ---------  ---------  ----------  ------------  ------------ 
                                                    ---------  ---------  ----------  ------------  ------------ 

------------------------                                                        

(1) Data is presented for FIRSTPLUS Financial, Inc. ("FIRSTPLUS Financial")     
because prior to October 4, 1994 the Company did not have servicing     
    operations and because the servicing operations of FIRSTPLUS Financial West,
  Inc. ("FIRSTPLUS West") for such periods related primarily to non-High LTV
Loans. See "--Combination," below.                                      

(2) Includes loans on properties on which the Company is foreclosing and        
properties in bankruptcy, but excludes real estate owned.               

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LOSS AND DEFAULT CHARACTERISTICS
OF THE SERVICED LOAN PORTFOLIO

                                                        [Enlarge/Download Table]

                                                 FIRSTPLUS                                                   
                                                FINANCIAL(1)                        COMPANY                  
                                            --------------------  -------------------------------------------
                                            YEAR ENDED DECEMBER                   YEAR ENDED                 
                                                    31,           -------------------------------------------
                                            --------------------  DECEMBER 31,   SEPTEMBER 30,  SEPTEMBER 30,
                                              1993       1994         1995           1996           1997     
                                            ---------  ---------  -------------  -------------  -------------
                                                                                                             
Net losses as a percentage of the average                                                                    
 Serviced Loan Portfolio(2)................     0.39%      0.44%        0.04%          0.26%          0.23%  
Defaults as a percentage of the average                                                                      
 Serviced Loan Portfolio(2)(3).............     2.04%      2.64%        0.69%          1.29%          1.32%  

------------------------                                                        

(1) Data is presented for FIRSTPLUS Financial because prior to October 4, 1994  
the Company did not have servicing operations and because the servicing 
   operations of FIRSTPLUS West for such periods related primarily to non-High
LTV Loans. See "-- Combination," below.                                 

(2) The average Serviced Loan Portfolio is calculated by adding the beginning   
and ending balances for the fiscal year and dividing the sum by two.    

(3) A loan is defaulted when management deems that the loan is no longer        
collectible. Generally, this occurs after 180 days of delinquency.      

While the preceding tables generally indicate that the Company is       
experiencing declining delinquency, loss and default rates on its Serviced Loan 
Portfolio as a whole, such rates have followed historical trends on a           
pool-by-pool basis, which trends assume increased rates of delinquencies over   
time. Although such increases to date have been within the parameters           
anticipated by the Company at the time of each securitization, there can be no  
assurance that such rates will not continue to increase. Loans selected by the  
Company to contribute to the securitization trusts generally possess reduced    
delinquency, default and loss rates due to certain requirements of the          
securitization trusts and the Company's own policy with regard to selecting     
loans to contribute to the securitization trusts. As these loans age, the       
securitization trusts will tend to experience gradual increases in delinquency, 
default and loss rates because of the underlying securitized loans' trend toward
historically higher delinquency, default and loss rates. The overall decline in 
such rates on the Serviced Loan Portfolio is principally due to the increased   
volume of loans originated by the Company. The Company calculates its           
delinquency and default rates by dividing the amount of delinquent or defaulted 
loans in the Serviced Loan Portfolio by the total Serviced Loan Portfolio. Since
the Company originates higher volumes of new loans that, due to their lack of   
seasoning, tend to have lower delinquency and default rates, the Company's      
overall delinquency and default rates have decreased. See "--Securitization,"   
below.                                                                          

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  The following table sets forth certain delinquency and default information
with respect to the Company's securitizations:                                  

DELINQUENCY AND DEFAULTS FOR THE COMPANY'S SECURITIZATIONS

                                                        [Enlarge/Download Table]

                                                  1994-1                  1995-1                  1995-2            1995-3   
                                          ----------------------  ----------------------  ----------------------  ---------- 
                                                                                                                             
As of September 30, 1995                                                                                                     
Current.................................. $34,868,000      91.3%  $15,139,000      92.5%  $96,420,000      96.0%  $65,297,000
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $1,387,000        3.6%  $  453,000        2.8%  $1,800,000        1.8%  $  199,000 
61-90 days...............................    473,000        1.3      250,000        1.5      793,000        0.8      191,000 
91 days and over.........................  1,444,000        3.8      526,000        3.2    1,433,000        1.4       30,000 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $3,304,000        8.7%  $1,229,000        7.5%  $4,026,000        4.0%  $  420,000 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $   71,000        0.2%  $   --            0.0%  $   --            0.0%  $   --     
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
As of December 31, 1995                                                                                                      
Current.................................. $32,363,000      91.3%  $14,259,000      93.0%  $91,198,000      94.6%  $72,189,000
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $1,778,000        5.0%  $  444,000        2.9%  $2,080,000        2.2%  $  947,000 
61-90 days...............................    379,000        1.1      204,000        1.3      785,000        0.8      229,000 
91 days and over.........................    939,000        2.6      425,000        2.8    2,345,000        2.4      317,000 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $3,096,000        8.7%  $1,073,000        7.0%  $5,210,000        5.4%  $1,493,000 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $  987,000        2.4%  $  490,000        3.0%  $  558,000        0.6%  $   --     
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
As of March 31, 1996                                                                                                         
Current.................................. $30,713,649      94.2%  $13,811,292      93.8%  $86,622,634      93.9%  $69,665,579
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $  905,179        2.8%  $  278,372        1.9%  $1,491,122        1.6%  $1,295,274 
61-90 days...............................    239,990        0.7      125,908        0.9      838,610        0.9      549,267 
91 days and over.........................    793,467        2.3      508,113        3.4    3,330,116        3.6      970,070 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $1,938,636        5.8%  $  912,393        6.2%  $5,659,848        6.1%  $2,814,611 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $  185,054        0.5%  $  105,556        0.7%  $  471,493        0.5%  $   97,304 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
As of June 30, 1996                                                                                                          
Current.................................. $28,168,294      93.0%  $13,019,667      92.9%  $81,073,528      92.8%  $66,219,920
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $  855,792        2.8%  $  398,922        2.8%  $1,820,636        2.1%  $1,287,665 
61-90 days...............................    297,607        1.0      130,923        0.9      823,536        0.9      732,604 
91 days and over.........................    970,497        3.2      475,344        3.4    3,700,779        4.2    2,429,046 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $2,123,896        7.0%  $1,005,189        7.1%  $6,344,951        7.2%  $4,449,315 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $  199,381        0.6%  $  225,326        1.6%  $1,110,712        1.2%  $  137,237 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
As of September 30, 1996                                                                                                     
Current.................................. $26,144,645      93.0%  $11,679,850      91.2%  $75,587,362      92.3%  $62,174,546
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $  715,727        2.5%  $  550,826        4.3%  $1,774,053        2.2%  $1,664,704 
61-90 days...............................    242,578        0.9      114,445        0.9      819,700        1.0      894,362 
91 days and over.........................  1,004,791        3.6      464,207        3.6    3,722,225        4.5    2,118,067 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $1,963,096        7.0%  $1,129,478        8.8%  $6,315,978        7.7%  $4,677,133 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $  320,051        1.1%  $  264,774        2.0%  $1,536,788        1.8%  $  857,380 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 


                                                              1995-4                                                         
                                                      ----------------------                                                 
                                                                                                                             
As of September 30, 1995                                                                                                     
Current..................................      99.4%                                                                         
                                              ---                                                                            
                                              ---                                                                            
31-60 days...............................       0.3%                                                                         
61-90 days...............................       0.3                                                                          
91 days and over.........................       0.0                                                                          
                                              ---                                                                            
  Total..................................       0.6%                                                                         
                                              ---                                                                            
                                              ---                                                                            
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       0.0%                                                                         
                                              ---                                                                            
                                              ---                                                                            
As of December 31, 1995                                                                                                      
Current..................................      98.0%  $74,663,000      99.7%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
31-60 days...............................       1.3%  $  218,000        0.3%                                                 
61-90 days...............................       0.3       16,000        0.0                                                  
91 days and over.........................       0.4       25,000        0.0                                                  
                                              ---     ----------      ---                                                    
  Total..................................       2.0%  $  259,000        0.3%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       0.0%  $   --            0.0%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
As of March 31, 1996                                                                                                         
Current..................................      96.1%  77,427,295       98.5%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
31-60 days...............................       1.8%  $  617,991        0.8%                                                 
61-90 days...............................       0.8      225,096        0.3                                                  
91 days and over.........................       1.3      275,033        0.4                                                  
                                              ---     ----------      ---                                                    
  Total..................................       3.9%   1,118,120        1.5%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       0.1%  $   40,000        0.1%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
As of June 30, 1996                                                                                                          
Current..................................      93.8%  $73,917,023      95.9%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
31-60 days...............................       1.8%  $1,283,481        1.7%                                                 
61-90 days...............................       1.0      782,049        1.0                                                  
91 days and over.........................       3.4      108,581        1.4                                                  
                                              ---     ----------      ---                                                    
  Total..................................       6.2%  $2,174,111        4.1%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       0.2%  $  100,109        0.1%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
As of September 30, 1996                                                                                                     
Current..................................      93.0%  $70,611,343      95.4%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
31-60 days...............................       2.5%  $1,379,826        1.9%                                                 
61-90 days...............................       1.3      687,279        0.9                                                  
91 days and over.........................       3.2    1,356,079        1.8                                                  
                                              ---     ----------      ---                                                    
  Total..................................       7.0%  $3,423,184        4.6%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       1.2%  $  394,616        0.5%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    

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                                                  1994-1                  1995-1                  1995-2            1995-3   
                                          ----------------------  ----------------------  ----------------------  ---------- 
As of December 30, 1996                                                                                                      
                                                                                                                             
Current.................................. $23,532,768      92.0%  $10,665,351      91.7%  $70,457,783      92.1%  $59,383,111
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $1,080,529        4.2%  $  462,741        4.0%  $1,807,848        2.4%  $1,468,843 
61-90 days...............................    350,183        1.4      233,389        2.0      823,190        1.0      658,259 
91 days and over.........................    619,926        2.4      263,562        2.3    3,446,709        4.5    1,793,172 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $2,050,638        8.0%  $  959,692        8.3%  $6,077,747        7.9%  $3,920,274 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $  634,203        2.4%  $  490,392        4.1%  $1,813,791        2.3%  $  800,500 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
As of March 30, 1997                                                                                                         
Current.................................. $22,114,581      92.8%  $10,618,716      94.9%  $66,114,521      92.2%  $56,938,309
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $  825,212        3.5%  $  272,528        2.4%  $1,577,440        2.2%  $  962,811 
61-90 days...............................    288,668        1.2      101,867        0.9      572,560        0.8      691,445 
91 days and over.........................    606,693        2.5      198,544        1.8    3,463,309        4.8    1,300,808 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $1,720,573        7.2%  $  572,939        5.1%  $5,613,309        7.8%  $2,955,064 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $  178,380        0.7%  $   48,209        0.4%  $1,358,895        2.4%  $  641,747 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
As of June 30, 1997                                                                                                          
Current.................................. $20,283,423      93.9%  $9,941,667       93.9%  $61,081,909      92.0%  $53,575,335
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $  531,183        2.5%  $  294,120        2.8%  $1,631,118        2.5%  $1,207,350 
61-90 days...............................    287,073        1.3       86,402        0.8      573,466        0.9      644,270 
91 days and over.........................    482,870        2.3      262,737        2.5    3,108,656        4.6    1,254,797 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $1,301,126        6.1%  $  643,259        6.1%  $5,313,240        8.0%  $3,106,417 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $  404,878        1.8%  $  173,790        1.6%  $1,767,437        2.6%  $1,021,438 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
As of September 30, 1997                                                                                                     
Current.................................. $18,072,652      91.8%  $8,866,499       89.2%  $55,488,546      90.8%  $49,187,177
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
31-60 days............................... $  692,133        3.5%  $  593,298        6.0%  $1,969,756        2.8%  $1,602,473 
61-90 days...............................    342,706        1.7      186,600        1.9      828,135        1.4      565,210 
91 days and over.........................    585,576        3.0      288,825        2.9    3,050,793        5.0    1,401,868 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
  Total.................................. $1,620,415        8.2%  $1,068,723       10.8%  $5,848,684        9.2%  $3,569,551 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................ $  269,331        1.3%  $  134,480        1.3%  $1,272,839        2.0%  $  913,673 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 
                                          ----------      ---     ----------      ---     ----------      ---     ---------- 


                                                              1995-4                                                         
                                                      ----------------------                                                 
As of December 30, 1996                                                                                                      
                                                                                                                             
Current..................................          %  $66,304,004      94.7%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
31-60 days...............................       2.3%  $1,760,430        2.5%                                                 
61-90 days...............................       1.0      562,062        0.8                                                  
91 days and over.........................       2.7    1,386,342        2.0                                                  
                                              ---     ----------      ---                                                    
  Total..................................       6.0%  $3,708,834        5.3%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       1.2%  $  679,389        1.0%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
As of March 30, 1997                                                                                                         
Current..................................      95.0%  $62,347,932      94.9%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
31-60 days...............................       1.6%  $1,644,842        2.5%                                                 
61-90 days...............................       1.2      450,710        0.7                                                  
91 days and over.........................       2.2    1,263,599        1.9                                                  
                                              ---     ----------      ---                                                    
  Total..................................       5.0%  $3,359,151        5.1%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       1.1%  $  716,857        1.4%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
As of June 30, 1997                                                                                                          
Current..................................      94.6%  $59,660,176      94.9%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
31-60 days...............................       2.1%  $1,292,324        2.0%                                                 
61-90 days...............................       1.1      678,822        1.1                                                  
91 days and over.........................       2.2    1,311,599        2.0                                                  
                                              ---     ----------      ---                                                    
  Total..................................       5.4%  $3,282,745        5.1%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       1.8%  $1,023,114        1.6%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
As of September 30, 1997                                                                                                     
Current..................................      93.0%  $55,617,635      93.2%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
31-60 days...............................       3.1%  $1,707,917        2.9%                                                 
61-90 days...............................       1.1      746,972        1.3                                                  
91 days and over.........................       2.8    1,607,128        2.6                                                  
                                              ---     ----------      ---                                                    
  Total..................................       7.0%  $4,062,017        6.8%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    
Defaults/Defaults as a percentage of                                                                                         
  average monthly balance................       1.7%  $  961,716        1.6%                                                 
                                              ---     ----------      ---                                                    
                                              ---     ----------      ---                                                    

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                                              1996-1                   1996-2                  1996-A            1996-3    
                                      -----------------------  -----------------------  ---------------------  ----------- 
                                                                                                                           
As of March 31, 1995                                                                                                       
Current.............................. $117,918,981      99.3%                                                              
                                      -----------      ---                                                                 
                                      -----------      ---                                                                 
31-60 days...........................     326,276        0.3%                                                              
61-90 days...........................     361,219        0.3                                                               
91 days and over.....................      74,722        0.1                                                               
                                      -----------      ---                                                                 
  Total.............................. $   762,217        0.7%                                                              
                                      -----------      ---                                                                 
                                      -----------      ---                                                                 
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............ $   --             0.0%                                                              
                                      -----------      ---                                                                 
                                      -----------      ---                                                                 
As of June 30, 1996                                                                                                        
Current.............................. $113,928,024      97.4%  $208,420,466      99.8%  $8,333,228      99.2%              
                                      -----------      ---     -----------      ---     ---------      ---                 
                                      -----------      ---     -----------      ---     ---------      ---                 
31-60 days........................... $ 1,511,784        1.3%  $   427,930        0.2%  $  65,949        0.8%              
61-90 days...........................     638,324        0.6       --             0.0           0        0.0               
91 days and over.....................     860,779        0.7        28,385        0.0           0        0.0               
                                      -----------      ---     -----------      ---     ---------      ---                 
  Total.............................. $ 3,010,887        2.6%  $   456,315        0.2%  $  65,949        0.8%              
                                      -----------      ---     -----------      ---     ---------      ---                 
                                      -----------      ---     -----------      ---     ---------      ---                 
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............ $   --             0.0%  $   --             0.0%  $  --            0.0%              
                                      -----------      ---     -----------      ---     ---------      ---                 
                                      -----------      ---     -----------      ---     ---------      ---                 
As of September 30, 1996                                                                                                   
Current.............................. $109,902,730      96.3%  $243,902,224      98.9%  $7,690,213      96.9%  $254,868,067
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
31-60 days........................... $ 1,336,403        1.2%  $ 1,480,512        0.6%  $ 116,997        1.5%  $    25,000 
61-90 days...........................     558,174        0.5       591,187        0.3      55,477        0.7        20,000 
91 days and over.....................   2,266,643        2.0       589,090        0.2      72,897        0.9             0 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
  Total.............................. $ 4,161,220        3.7%  $ 2,660,789        1.1%  $ 245,371        3.1%  $    45,000 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............ $   175,637        0.2%  $   200,030        0.1%  $  --            0.0%  $   --      
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
As of December 31, 1996                                                                                                    
Current.............................. $105,266,013      95.6%  $236,002,357      97.8%  6,809,793       95.2%  295,021,700 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
31-60 days........................... $ 2,227,931        2.0%  $ 2,599,079        1.0%  $ 170,583        2.4%  $ 1,410,730 
61-90 days...........................     929,707        0.9     1,380,711        0.6      50,708        0.7       507,110 
91 days and over.....................   1,665,290        1.5     1,388,226        0.6     121,214        1.7       206,053 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
  Total.............................. $ 4,822,928        4.4%  $ 5,368,016        2.2%  $ 342,505        4.8%  $ 2,123,893 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............ $ 1,123,446        1.0%  $   440,064        1.8%  $  57,447        0.8%  $   --      
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 


                                                          1996-4                                                           
                                                  -----------------------                                                  
                                                                                                                           
As of March 31, 1995                                                                                                       
Current..............................                                                                                      

31-60 days...........................                                                                                      
61-90 days...........................                                                                                      
91 days and over.....................                                                                                      

  Total..............................                                                                                      

Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............                                                                                      

As of June 30, 1996                                                                                                        
Current..............................                                                                                      

31-60 days...........................                                                                                      
61-90 days...........................                                                                                      
91 days and over.....................                                                                                      

  Total..............................                                                                                      

Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............                                                                                      

As of September 30, 1996                                                                                                   
Current..............................     100.0%                                                                           
                                        -----                                                                              
                                        -----                                                                              
31-60 days...........................       0.0%                                                                           
61-90 days...........................       0.0                                                                            
91 days and over.....................       0.0                                                                            
                                        -----                                                                              
  Total..............................       0.0%                                                                           
                                        -----                                                                              
                                        -----                                                                              
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............       0.0%                                                                           
                                        -----                                                                              
                                        -----                                                                              
As of December 31, 1996                                                                                                    
Current..............................      99.3%  346,944,358       99.5%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
31-60 days...........................       0.5%  $   989,446        0.3%                                                  
61-90 days...........................       0.2       543,897        0.2                                                   
91 days and over.....................       0.0       122,019        0.0                                                   
                                        -----     -----------      ---                                                     
  Total..............................       0.7%  $ 1,655,362        0.5%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............       0.0%  $   --             0.0%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     

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                                              1996-1                   1996-2                  1996-A            1996-3    
                                      -----------------------  -----------------------  ---------------------  ----------- 
As of March 30, 1997                                                                                                       
                                                                                                                           
Current.............................. $101,613,983      96.3%  $227,178,957      97.3%  $6,753,126      96.4%  $287,341,905
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
31-60 days........................... $ 1,424,564        1.4%  $ 2,347,100        1.0%  $ 108,681        1.6%  $ 2,247,690 
61-90 days...........................     871,113        0.8     1,190,151        0.5      50,910        0.7     1,425,593 
91 days and over.....................   1,636,840        1.5     2,785,904        1.2      93,532        1.3     1,236,080 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
  Total.............................. $ 3,932,517        3.7%  $ 6,323,155        2.7%  $ 253,123        3.6%  $ 4,909,363 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............ $   951,492        0.9%  $ 1,660,128        0.7%  $  58,890        0.8%  $    95,557 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
As of June 30, 1997                                                                                                        
Current.............................. $96,315,509       95.7%  $214,467,653      96.4%  $6,112,007      95.0%  $275,944,211
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
31-60 days........................... $ 1,626,416        1.6%  $ 2,758,418        1.2%  $ 115,608        1.8%  $ 3,638,976 
61-90 days...........................     703,507        0.7     1,371,029        0.7     101,526        1.6     2,062,225 
91 days and over.....................   1,962,182        2.0     3,791,681        1.7     100,900        1.6     3,220,510 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
  Total.............................. $ 4,292,105        4.3%  $ 7,921,128        3.6%  $ 318,034        5.0%  $ 8,921,711 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............ $ 1,592,801        1.6%  $ 2,275,500        1.0%  $  90,102        1.4%  $ 1,391,811 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
As of September 30, 1997                                                                                                   
Current.............................. $84,803,215       94.8%  $199,122,950      95.0%  $5,641,689      93.6%  $260,420,883
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
31-60 days........................... $ 1,644,166        1.7%  $ 4,231,050        2.0%  $ 126,240        2.1%  $ 4,269,060 
61-90 days...........................   1,090,910        1.2     2,055,542        1.0      90,543        1.5     2,676,132 
91 days and over.....................   2,187,792        2.3     4,313,916        2.0     168,860        2.8     5,198,596 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
  Total.............................. $ 4,922,868        5.2%  $10,600,508        5.0%  $ 385,643        6.4%  $12,143,788 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............ $ 1,282,167        1.3%  $ 2,782,107        1.3%  $  51,688        0.9%  $ 2,534,166 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 
                                      -----------      ---     -----------      ---     ---------      ---     ----------- 


                                                          1996-4                                                           
                                                  -----------------------                                                  
As of March 30, 1997                                                                                                       
                                                                                                                           
Current..............................      98.3%  $386,003,905      98.4%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
31-60 days...........................       0.8%  $ 3,482,976        0.9%                                                  
61-90 days...........................       0.5     1,163,532        0.3                                                   
91 days and over.....................       0.4     1,588,531        0.4                                                   
                                        -----     -----------      ---                                                     
  Total..............................       1.7%  $ 6,235,039        1.6%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............       0.3%  $   455,114        0.1%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
As of June 30, 1997                                                                                                        
Current..............................      96.9%  $372,819,289      98.0%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
31-60 days...........................       1.3%  $ 3,371,302        0.7%                                                  
61-90 days...........................       0.7     2,251,278        0.5                                                   
91 days and over.....................       1.1     3,868,870        0.8                                                   
                                        -----     -----------      ---                                                     
  Total..............................       3.1%  $ 9,491,450        2.0%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............       0.5%  $ 1,449,334        0.6%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
As of September 30, 1997                                                                                                   
Current..............................      95.5%  $354,229,887      96.2%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
31-60 days...........................       1.6%  $ 5,658,964        1.5%                                                  
61-90 days...........................       1.0     3,085,950        0.8                                                   
91 days and over.....................       1.9     5,300,546        1.5                                                   
                                        -----     -----------      ---                                                     
  Total..............................       4.5%  $14,045,460        3.8%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     
Defaults/Defaults as a percentage of                                                                                       
  average monthly balance............       0.9%  $ 3,240,850        0.9%                                                  
                                        -----     -----------      ---                                                     
                                        -----     -----------      ---                                                     

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                                                        1997-1                   1997-2                   1997-3         
                                                -----------------------  -----------------------  -----------------------
                                                                                                                         
As of March 30, 1997                                                                                                     
Current........................................ $485,624,541      99.5%                                                  
                                                -----------      ---                                                     
                                                -----------      ---                                                     
31-60 days..................................... $ 1,839,260        0.4%                                                  
61-90 days.....................................     535,362        0.1                                                   
91 days and over...............................           0        0.0                                                   
                                                -----------      ---                                                     
  Total........................................ $ 2,374,622        0.5%                                                  
                                                -----------      ---                                                     
                                                -----------      ---                                                     
Defaults/Defaults as a percentage of average                                                                             
  monthly balance.............................. $   --             0.1%                                                  
                                                -----------      ---                                                     
                                                -----------      ---                                                     
As of June 30, 1997                                                                                                      
Current........................................ $581,974,459      98.8%  $562,506,359      99.7%                         
                                                -----------      ---     -----------      ---                            
                                                -----------      ---     -----------      ---                            
31-60 days..................................... $ 3,403,985        0.6%  $ 1,561,006        0.3%                         
61-90 days.....................................   1,439,664        0.2             0        0.0                          
91 days and over...............................   2,461,163        0.4             0        0.0                          
                                                -----------      ---     -----------      ---                            
  Total........................................ $ 7,304,822        1.2%  $ 1,561,006        0.3%                         
                                                -----------      ---     -----------      ---                            
                                                -----------      ---     -----------      ---                            
Defaults/Defaults as a percentage of average                                                                             
  monthly balance.............................. $   --             0.6%  $   --             0.0%                         
                                                -----------      ---     -----------      ---                            
                                                -----------      ---     -----------      ---                            
As of September 30, 1997                                                                                                 
Current........................................ $561,445,682      97.7%  $726,587,736      99.0%  $646,169,548      99.8%
                                                -----------      ---     -----------      ---     -----------      ---   
                                                -----------      ---     -----------      ---     -----------      ---   
31-60 days..................................... $ 5,424,873        0.9%    4,321,224        0.6%  $ 1,048,375        0.2%
61-90 days.....................................   2,977,183        0.5     1,604,839        0.2             0        0.0 
91 days and over...............................   5,131,242        0.9     1,340,478        0.2             0        0.0 
                                                -----------      ---     -----------      ---     -----------      ---   
  Total........................................ $13,533,298        2.3%  $ 7,266,541        1.0%  $ 1,048,375        0.2%
                                                -----------      ---     -----------      ---     -----------      ---   
                                                -----------      ---     -----------      ---     -----------      ---   
Defaults/Defaults as a percentage of average                                                                             
  monthly balance.............................. $ 1,764,460        0.8%  $   --           --   %  $   --           --   %
                                                -----------      ---     -----------      ---     -----------      ---   
                                                -----------      ---     -----------      ---     -----------      ---   

MANAGEMENT INFORMATION SYSTEMS                                                  

 The Company has made substantial investments in upgrading its information
technology infrastructure during the past year and will continue to make such   
investments throughout 1998. The Company has installed large scale Unix-based   
Sun hardware to run the new loan origination software and believes such hardware
will become the Company's platform for the future. The Company has standardized 
on an ATM-based network backbone technology and a frame relay network to connect
its major processing locations. Other standardization efforts include addressing
database management, data warehousing, knowledge management, application        
development and back-office systems architectures. The Company's communications 
and knowledge-sharing are supported by a group-wide Lotus Notes infrastructure. 

The Company is making major upgrades to the call center technologies    
employed by the various sites of the Company and is planning to employ          
Internet-based technology to create online communication network with its       
Correspondents and other customers. Intelligent document imaging technologies   
will be deployed throughout the Company during fiscal 1998.                     

SECURITIZATION                                                                  

    Since fiscal 1995, substantially all of the loans originated or purchased by
the Company have been sold through securitization transactions. The Company sold
through securitization transactions approximately $723.1 million and $2.4       
billion of loans during fiscal 1996 and fiscal 1997, respectively. See          
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations--Certain Accounting Considerations."                                 

HOME IMPROVEMENT INDUSTRY                                                       

  Home improvement lending is a large, highly fragmented industry. In recent
years, a trend toward consolidation has developed. From the standpoint of       
individual owners, the Company believes that this                               

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trend results from family succession issues, a desire for liquidity and         
increasing tax estate planning and regulatory complexities, as well as the      
increasing competitive threat posed by larger lenders. From the standpoint of   
such larger lenders, it appears that the consolidation trend is driven by the   
benefits derived from economies of scale, improved managerial control and       
strategic planning.                                                             

    While there are many factors driving the home improvement market the Company
believes that appreciation of housing values is a key factor driving the growth 
of the industry. Other factors that affect the growth of the industry include   
aging and turnover rates of the housing stock, the length of time the homeowner 
has lived in the home and real rental rates.                                    

COMPETITION                                                                     

The consumer finance market is highly competitive and fragmented. The   
Company competes with a number of finance companies that provide financing      
programs to individuals who cannot qualify for traditional financing. In the    
past year, competition has increased for these individuals, thereby providing   
more financing alternatives. To a lesser extent, the Company competes, or will  
compete, with commercial banks, savings and loan associations, credit unions,   
insurance companies and captive finance arms of major manufacturing companies   
that currently tend to apply more traditional lending criteria. In addition, in 
the past year, several companies announced loan programs that will compete      
directly with the Company's loan products, particularly its High LTV Loans. Many
of these competitors and potential competitors are substantially larger and have
significantly greater capital and other resources than the Company. In fiscal   
1996 and fiscal 1997, approximately 97% and 77%, respectively, of the Company's 
loans originated were Correspondent Loans, which are expected to remain a       
significant part of the Company's loan production program. As a purchaser of    
Correspondent Loans, the Company is exposed to fluctuations in the volume and   
price of Correspondent Loans resulting from competition from other purchasers of
such loans, market conditions and other factors. In addition, Fannie Mae has    
purchased and is expected to continue to purchase significant volumes of Title I
loans on a whole-loan basis. Purchases by Fannie Mae could be made from sources 
from which the Company also purchases loans. To the extent that purchasers of   
loans, such as Fannie Mae, enter, or increase their purchasing activities in,   
the markets in which the Company purchases loans, competitive pressures may     
decrease the availability of loans or increase the price the Company would have 
to pay for loans, a phenomenon that has occurred with respect to Title I loans. 
In addition, increases in the number of companies seeking to originate or       
purchase loans tend to lower the rates of interest that the Company can charge  
borrowers and can cause higher prepayment rates, thereby reducing the potential 
value of subsequently earned gain on securitized loan sales. To the extent that 
any of these lenders or Fannie Mae significantly expands its activities in the  
Company's market, or to the extent that new competitors enter the market, the   
Company's results of operations and financial condition could be materially     
adversely affected. However, by focusing primarily on higher LTV home           
improvement loans and debt consolidation loans and by relying on the            
creditworthiness of the borrower rather than the collateral, the Company        
believes it is able to differentiate itself from other participants in the      
market.                                                                         

REGULATION                                                                      

The operations of the Company are subject to extensive regulation,      
supervision and licensing by federal, state and local governmental authorities. 
Regulated matters include, without limitation, loan origination, credit         
activities, maximum interest rates and finance and other charges, disclosure to 
customers, the terms of secured transactions, the collection, repossession and  
claims handling procedures utilized by the Company, multiple qualification and  
licensing requirements for doing business in various jurisdictions and other    
trade practices.                                                                

The Company's loan origination activities are subject to laws and       
regulations in each of the states in which those activities are conducted. The  
Company's activities as a lender are also subject to various federal laws       
including but not limited to the Truth in Lending Act ("TILA"), the Real Estate 
Settlement Procedures Act ("RESPA"), the Equal Credit Opportunity Act ("ECOA"), 
the Home Mortgage Disclosure Act ("HMDA") and the Fair Credit Reporting Act of  
1970, as amended, ("FCRA").                                                     

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    TILA and Regulation Z promulgated thereunder contain disclosure requirements
designed to provide consumers with uniform, understandable information with     
respect to the cost, terms and conditions of loans and credit transactions in   
order to give them the ability to compare credit terms. TILA also provides      
consumers a three-day right to cancel certain credit transactions after         
consummation of those transactions, including loans of the type originated by   
the Company. The Company believes that it is in compliance with TILA in all     
material respects. If the Company were found not to be in compliance with TILA, 
aggrieved borrowers could have the right to rescind their loan transactions with
the Company and demand the return of finance charges paid to the Company.       

    In September 1994, the Home Ownership and Equity Protection Act of 1994 (the
"HOEPA") was enacted. Among other things, the HOEPA makes certain amendments to 
TILA. The TILA amendments, which became effective in October 1995, generally    
apply to mortgage loans ("covered loans") with (i) total points and fees upon   
origination in excess of the greater of eight percent of the loan amount or     
$400, or (ii) an annual percentage rate of more than 10 percentage points higher
than comparably maturing United States Treasury securities. A substantial       
majority of the loans originated or purchased by the Company are covered by the 
HOEPA.                                                                          

   The HOEPA imposes additional disclosure requirements on lenders originating
covered loans and prohibits lenders from originating covered loans that are     
underwritten solely on the basis of the borrower's home equity without regard to
the borrower's ability to repay the loan. The Company applies to all covered    
loans underwriting criteria that take into consideration the borrower's ability 
to repay.                                                                       

 The HOEPA also prohibits lenders from including prepayment fee clauses in
covered loans to borrowers with a debt-to-income ratio in excess of 50% or      
covered loans used to refinance existing loans originated by the same lender.   
The Company will continue to collect prepayment fees on loans originated prior  
to effectiveness of the HOEPA and on non-covered loans, as well as on covered   
loans in permitted circumstances. Because the HOEPA did not become effective    
until October 1995, the level of prepayment fee revenues were not affected in   
fiscal 1995, but the level of prepayment fee revenues may decline in future     
years. The HOEPA imposes other restrictions on covered loans, including         
restrictions on balloon payments and negative amortization features, that the   
Company does not believe will have a material effect on its operations.         

   The Company is also required to comply with ECOA, which prohibits creditors
from discriminating against applicants on the basis of race, color, sex, age or 
marital status. Regulation B promulgated under ECOA restricts creditors from    
obtaining certain types of information from loan applicants. It also requires   
certain disclosures by the lender regarding consumer rights and requires lenders
to advise applicants of the reasons for any credit denial. In instances where   
the applicant is denied credit or the rate or charge for loans increases as a   
result of information obtained from a consumer credit agency, another statute,  
the FCRA, requires lenders to supply the applicant with the name and address of 
the reporting agency. The Company is also required to file an annual report with
HUD pursuant to the HMDA.                                                       

RESPA and Regulation X promulgated thereunder certain certain disclosure
requirements designed to provide consumers with uniform, understandable         
information with respect to settlement charges and other costs incurred in      
connection with obtaining a mortgage loan secured by the borrower's principal   
residence. RESPA and Regulation X also prohibit any person from paying or       
receiving a referral fee or any other compensation with respect to covered loans
except for the payment of reasonable value for settlement services actually     
provided in connection with the loan. The Company believes that it is in        
compliance with RESPA in all material respects.                                 

    In addition, the Company is subject to various other federal and state laws,
rules and regulations governing, among other things, the licensing of, and      
procedures that must be followed by, mortgage lenders and servicers, and        
disclosures that must be made to consumer borrowers. Failure to comply with     
these laws may result in civil and criminal liability and may, in some cases,   
give consumer borrowers the right to rescind their mortgage loan transactions   
and to demand the return of finance charges paid to the Company.                

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  In the course of its business, the Company may acquire properties securing
loans that are in default. See "--Servicing Operations." There is a risk that   
hazardous or toxic waste could be found on such properties. In such event, the  
Company could be held responsible for the cost of cleaning up or removing such  
waste, and such cost could exceed the value of the underlying properties.       

FIRSTPLUS Bank is subject to extensive regulation and supervision under 
various federal and state laws. FIRSTPLUS Bank is an industrial loan company    
organized under the laws of the State of California and is subject to regulation
by the California Department of Financial Institutions. The deposits of         
FIRSTPLUS Bank are insured by the Federal Depository Insurance Corporation to   
the maximum extent permitted by law, which is currently $100,000 per depositor  
in most cases.                                                                  

California and federal law and regulations govern most aspects of the   
business and operations of FIRSTPLUS Bank, including investments, reserves, the 
nature and amount of any collateral for loans, maximum loans to one borrower,   
the timing of availability of deposited funds, the issuance of securities,      
payment of dividends, branching and expansion. FIRSTPLUS Bank is also subject to
requirements and restrictions of various consumer laws and regulations in       
connection with both its lending and deposit-taking activities.                 

Federal and state agencies have broad enforcement powers over depository
institutions, including the power to impose substantial fines and other civil   
and criminal penalties, to terminate deposit insurance and to appoint a         
conservator or a receiver under a variety of circumstances.                     

Because the Company's business is highly regulated, the laws, rules and 
regulations applicable to the Company are subject to subsequent modification and
change. There are currently proposed various laws, rules and regulations that,  
if adopted, could have an adverse effect on the Company. There can be no        
assurance that proposed laws, rules and regulations, or other such laws, rules  
or regulations, will not be adopted in the future that could make compliance    
much more difficult or expensive, restrict the Company's ability to originate,  
broker, purchase or sell loans, further limit or restrict the amount of         
commissions, interest and other charges earned on loans originated, brokered,   
purchased or sold by the Company, or otherwise adversely affect the business or 
prospects of the Company.                                                       

COMBINATION                                                                     

The Company was incorporated in Nevada in October 1994 to combine the   
operations of SFA: State Financial Acceptance Corporation ("SFAC"), a High LTV  
Loan originator formed in January 1990, and FIRSTPLUS Financial, an approved    
Title I loan originator and servicer formed in April 1986 (the "Combination").  
The Company entered into an agreement with the shareholders of SFAC and with    
Farm Bureau Life Insurance Company, Inc. ("Farm Bureau"), which at the time was 
an affiliate of a principal shareholder of FIRSTPLUS Financial, whereby the     
shareholders of SFAC exchanged their common and preferred stock of SFAC and Farm
Bureau exchanged its common stock of FIRSTPLUS Financial for common and         
preferred stock of the Company. Effective October 4, 1994, FIRSTPLUS Financial  
and SFAC became wholly owned subsidiaries of the Company, with the shareholders 
of SFAC controlling the voting shares of the Company. For accounting purposes,  
the Combination was treated as a purchase of FIRSTPLUS Financial by the Company,
and SFAC was accounted for at book value in a manner similar to a pooling of    
interests as a transaction between entities under common control. In connection 
with the Combination, each of SFAC and FIRSTPLUS Financial changed their        
respective fiscal year end from a calendar year end to a September 30 year end. 

EMPLOYEES                                                                       

   At September 30, 1997, the Company employed approximately 3,250 persons. Of
the total number of employees at such date, approximately 1,000 were located at 
the Company's headquarters in Dallas, Texas, and approximately 2,250 were       
located at the Company's other offices. None of the Company's employees is      
subject to a collective bargaining agreement, and the Company believes that its 
relations with its employees are good.                                          

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ITEM 2.  PROPERTIES.                                                            

   The executive and administrative offices of the Company are located at 1600
Viceroy Drive, Dallas, Texas 75235, and consist of approximately 248,000 square 
feet. The lease on the premises extends through August 31, 2012 and the current 
annual rental is approximately $3.2 million.                                    

The Company also leases space for 199 of its offices. These facilities  
aggregate approximately 665,000 square feet, with an annual aggregate base      
rental of approximately $5.5 million. The terms of these leases vary as to      
duration and escalation provisions. In general, the leases expire through       
September 2001.                                                                 

    The Company believes that its facilities are adequate for its current needs,
but it will need additional space within the next 12 months. In order to support
the growth of its business, the Company is pursuing the purchase and            
sale-leaseback of other properties in Dallas, Texas.                            

ITEM 3.  LEGAL PROCEEDINGS.                                                     

  The Company is involved from time to time in routine litigation incidental
to its business. However, the Company believes that it is not a party to any    
material pending litigation that, if decided adversely to the Company, would    
have a material adverse effect on the business, income, assets or operations of 
the Company. The Company is not aware of any material threatened litigation that
might involve the Company.                                                      

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                   

   No matter was submitted to a vote of the stockholders of the Company during
the fourth quarter of the fiscal year ended September 30, 1997.                 

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PART II 

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                      
STOCKHOLDER MATTERS.                                              

 The share price information below has been retroactively adjusted to give
effect to the one-for-one common stock dividend paid by the Company on November 
29, 1996 to stockholders of record on November 15, 1996. The common stock has   
been quoted on the Nasdaq National Market ("Nasdaq") under the symbol "FPFG"    
since March 1997 and before that it was quoted on the Nasdaq under the symbol   
"RACF" since the Company's Initial Public Offering. The following table sets    
forth the high and low sales prices of the common stock for the periods         
indicated, as reported by Nasdaq.                                               

                                                        [Enlarge/Download Table]

                                                                              HIGH        LOW   
                                                                            ---------  ---------
                                                                                                
YEAR ENDED SEPTEMBER 30, 1996                                                                   
Second Quarter (beginning February 1, 1996)................................ $   11.88  $    8.75
Third Quarter.............................................................. $   16.25  $   11.00
Fourth Quarter............................................................. $   22.88  $   12.44

YEAR ENDING SEPTEMBER 30, 1997                                                                  
First Quarter.............................................................. $   30.75  $   19.75
Second Quarter............................................................. $   36.75  $   20.50
Third Quarter.............................................................. $   35.00  $   20.50
Fourth Quarter............................................................. $   56.25  $   32.75

YEAR ENDED SEPTEMBER 30, 1998                                                                   
First Quarter (through November 28, 1997).................................. $   61.88  $   37.00

    On November 28, 1997, the last reported sales price for the common stock was
$38.13 per share. As of November 28, 1997, the Company had 36,700,327           
outstanding shares of common stock held by 281 stockholders of record. As of    
November 28, 1997, the Company had 690,905 outstanding shares of common stock   
non-voting, held by two stockholders of record.                                 

The Company has never paid, and has no present intention of paying, cash
dividends on its common stock. The Company currently intends to retain its      
earnings to finance the growth and development of its business. Any             
determination in the future to pay dividends will depend on the Company's       
financial condition, capital requirements, results of operations, contractual   
limitations and any other factors deemed relevant by the Board of Directors.    
Under the terms of the Company's warehouse facilities and other debt agreements,
the Company's ability to pay cash dividends to its stockholders is limited.     

ITEM 6.  SELECTED FINANCIAL DATA.                                               

   The following table sets forth historical selected financial information of
the Company as of the dates and for the periods indicated. The Company was      
formed by the shareholders and management of SFAC and the parent of FIRSTPLUS   
Financial to acquire FIRSTPLUS Financial in the Combination, which was accounted
for as a purchase of FIRSTPLUS Financial and was consummated on October 4, 1994.

    The income statement and balance sheet data is derived from the consolidated
audited financial statements of the Company. The information set forth below    
should be read in conjunction with "Management's Discussion and Analysis of     
Financial Condition and Results of Operations" and all of the                   

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financial statements and the notes thereto and other financial information      
included elsewhere in this Report.                                              

                                                        [Enlarge/Download Table]

                                                                         YEAR ENDED SEPTEMBER 30,                 
                                                         -------------------------------------------------------- 
                                                           1993       1994       1995        1996         1997    
                                                         ---------  ---------  ---------  -----------  ---------- 
                                                              (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)       
                                                                                                                  
INCOME STATEMENT DATA:                                                                                            
  Revenues:                                                                                                       
    Gains on sales of securitized loans, net of costs..  $  17,115  $  27,671  $  24,597  $   142,433  $  519,426 
    Provision for possible credit losses on securitized                                                           
      loan sales.......................................     --         --         (3,907)     (48,397)   (231,211)
                                                         ---------  ---------  ---------  -----------  ---------- 
      Net gain on securitized loan sales...............     17,115     27,671     20,690       94,036     288,215 
    Net gains on other loan sales......................     --         --          4,517       11,091      30,086 
                                                         ---------  ---------  ---------  -----------  ---------- 
    Total gain on sale of loans, net...................     17,115     27,671     25,207      105,127     318,301 
    Interest income....................................        145      1,845      2,860       25,727     172,734 
    Interest only strips interest income...............     --         --         --            5,115      26,920 
    Servicing income...................................     --             72      1,049        4,008      21,122 
    Origination income.................................     --         --            553        7,242      41,537 
    Other income.......................................         54        252        321        2,441      10,826 
                                                         ---------  ---------  ---------  -----------  ---------- 
      Total revenues...................................     17,314     29,840     29,990      149,660     591,440 
  Expenses:                                                                                                       
    Salaries and employee benefits.....................      7,265     17,054     10,110       36,402     107,558 
    Interest expenses..................................         28      1,041      2,660       16,892      93,514 
    Other operating expense............................      2,632      6,465      6,964       29,938     120,581 
    Provision for possible credit losses...............     --            125        513       11,247      45,307 
                                                         ---------  ---------  ---------  -----------  ---------- 
      Total expenses...................................      9,925     24,685     20,247       94,479     366,960 
                                                         ---------  ---------  ---------  -----------  ---------- 
  Income before income taxes...........................      7,389      5,155      9,743       55,181     224,480 
  Provision for income taxes...........................     --         --         (3,903)     (20,969)    (85,311)
                                                         ---------  ---------  ---------  -----------  ---------- 
  Net income...........................................  $   7,389  $   5,155  $   5,840  $    34,212  $  139,169 
                                                         ---------  ---------  ---------  -----------  ---------- 
                                                         ---------  ---------  ---------  -----------  ---------- 
Per Share Data:                                                                                                   
Net income per share of common stock:                                                                             
  Primary..............................................  $    0.47  $    0.31  $    0.28  $      1.35  $     3.95 
                                                         ---------  ---------  ---------  -----------  ---------- 
                                                         ---------  ---------  ---------  -----------  ---------- 
  Fully diluted........................................  $    0.47  $    0.31  $    0.28  $      1.31  $     3.52 
                                                         ---------  ---------  ---------  -----------  ---------- 
                                                         ---------  ---------  ---------  -----------  ---------- 
Weighted average common and common equivalent shares                                                              
  outstanding:                                                                                                    
  Primary..............................................     15,597     16,277     20,297       25,358      35,242 
  Fully diluted........................................     15,597     16,277     20,297       26,354      40,522 

                                                        [Enlarge/Download Table]

                                                                                AS OF SEPTEMBER 30,             
                                                                    --------------------------------------------
                                                                      1994       1995       1996        1997    
                                                                    ---------  ---------  ---------  -----------
                                                                                                                
BALANCE SHEET DATA:                                                                                             
Loans held for sale, net........................................... $   6,105  $  19,435  $ 430,812  $ 1,400,446
Interest only strips, net..........................................    --         29,744    132,973      456,123
Total assets.......................................................    12,141     61,341    656,127    2,447,206
Warehouse financing................................................     4,995     18,530    354,481    1,238,156
Term lines.........................................................    --          9,249     57,465      211,751
Notes payable and other borrowings.................................    --          8,003      8,969       39,321
Convertible subordinated notes.....................................    --         --        100,000       69,920
Total liabilities..................................................     7,821     49,607    561,558    2,017,061
Stockholders' equity...............................................     4,321     11,734     94,569      430,145

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.                                                

   The following analysis of the financial condition and results of operations
of the Company should be read in conjunction with the preceding "Selected       
Financial Data." Additionally, the Company's Consolidated Financial Statements  
and the notes thereto, as well as other data included in this Report, should be 
read and analyzed in combination with the analysis below.                       

FIRSTPLUS is a specialized consumer finance company that originates,    
purchases, services and sells consumer finance receivables. The Company's       
principal loan product is a debt consolidation or home improvement loan secured 
by a second lien on real property. The Company sells substantially all of its   
High LTV Loans through its securitization program and retains rights to service 
these loans.                                                                    

During the current fiscal year and in prior fiscal years, the Company   
utilized securitized loan sales as a fundamental part of its business and       
financing strategy. Securitized loan sales require companies to recognize       
revenue at the date of sale based on the present value of estimated future cash 
flow streams (i.e., gain-on-sale accounting). See "--Certain Accounting         
Considerations." The Company increased its non-securitization related revenue   
(primarily the sum of interest income, interest only interest income, servicing 
income, origination income, and net gains on other loan sales) in fiscal 1997   
and decreased the percentage of revenues resulting from the gain on securitized 
loan sales. Non-securitization related revenue for fiscal 1997 grew to 51.3% of 
total revenues, compared to 37.2% for fiscal 1996. The Company is continuing to 
explore ways to increase its non-securitization related revenues, and to reduce 
or eliminate the use of gain-on-sale accounting.                                

RESULTS OF OPERATIONS                                                           

FISCAL YEAR ENDED SEPTEMBER 30, 1997                                            
VERSUS FISCAL YEAR ENDED SEPTEMBER 30, 1996                                 

  The Company's total revenues increased from $149.7 million for fiscal 1996
to $591.4 million for fiscal 1997, an increase of $441.7 million, or 295.1%.    

  The following table sets forth information regarding the components of the
Company's revenues for fiscal 1996 and fiscal 1997:                             

                                                        [Enlarge/Download Table]

                                                               YEAR ENDED SEPTEMBER 30,            
                                                     --------------------------------------------- 
                                                                                                   
                                                             1996                    1997          
                                                     ---------------------  ---------------------- 
                                                                (DOLLARS IN THOUSANDS)             
Gains on securitized loan sales, net of costs....... $  142,433             $   519,426            
Provision for possible credit losses on securitized                                                
  loan sales........................................    (48,397)               (231,211)           
                                                     ----------             -----------            
  Net gain on securitized loan sales................     94,036       62.9%     288,215       48.7%
Net gain on other loan sales........................     11,091        7.4       30,086        5.1 
                                                     ----------  ---------  -----------  --------- 
  Total gain on sale of loans, net..................    105,127       70.3      318,301       53.8 
Interest income.....................................     25,727       17.2      172,734       29.2 
Interest only strips interest income................      5,115        3.4       26,920        4.6 
Servicing income....................................      4,008        2.7       21,122        3.6 
Origination income..................................      7,242        4.8       41,537        7.0 
Insurance and other income..........................      2,441        1.6       10,826        1.8 
                                                     ----------  ---------  -----------  --------- 
  Total Revenues.................................... $  149,660        100% $   591,440        100%
                                                     ----------  ---------  -----------  --------- 
                                                     ----------  ---------  -----------  --------- 

    Total gain on sale of loans increased from $105.1 million for fiscal 1996 to
$318.3 million for fiscal 1997, an increase of $213.2 million, or 202.9%. Total 
gain on sale of loans decreased as a percentage of                              

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total revenue from 70.3% in fiscal 1996 to 53.8% in fiscal 1997. The Company    
securitized and sold $723.1 million of High LTV Loans during fiscal 1996        
(resulting in net gain on securitized loan sales of $94.0 million) and $2.4     
billion of High LTV Loans during fiscal 1997 (resulting in net gain on          
securitized loan sales of $288.2 million), an increase of $1.7 billion, or      
231.9%. The Company earned a weighted average 13.0% profit margin (the ratio of 
its net gain on sale of loans, after commissions earned, premiums paid and      
provision for possible credit losses, as a percentage of loans securitized and  
sold) on the securitized loan sales during fiscal 1996, compared to a 12.0%     
weighted average profit margin during fiscal 1997.                              

The following table sets forth certain data with respect to each of the 
securitizations the Company closed during fiscal 1997:                          

                                                        [Enlarge/Download Table]

                                                     1996-3(1)     1996-4      1997-1      1997-2       1997-3    
                                                    -----------  ----------  ----------  ----------  -------------
                                                                        (DOLLARS IN THOUSANDS)                    

                                                                                                                  
High LTV Loans sold................................  $  44,587   $  400,000  $  600,000  $  750,000  $  650,332(2)
Overcollateralization(3)...........................     --              238         393         169         606   
                                                    -----------  ----------  ----------  ----------  -------------
Total High LTV Loans securitized...................  $  44,587   $  400,238  $  600,393  $  750,169  $  650,938   
                                                    -----------  ----------  ----------  ----------  -------------
                                                    -----------  ----------  ----------  ----------  -------------
Gain on securitized loan sales.....................  $  10,078   $   89,710  $  136,458  $  148,197  $  134,983   
Provision for possible credit losses...............      4,000       39,619      58,721      68,559      60,311   
                                                    -----------  ----------  ----------  ----------  -------------
Net gain on securitized loan sales.................  $   6,078   $   50,091  $   77,737  $   79,638  $   74,672   
                                                    -----------  ----------  ----------  ----------  -------------
                                                    -----------  ----------  ----------  ----------  -------------
Net gain on securitized loan sales as a percentage                                                                
  of total loans securitized and sold (profit                                                                     
  margin)(4).......................................       13.6%        12.5%       12.9%       10.6%       11.5%  
Weighted average life of certificates sold                                                                        
  (yrs.)...........................................        5.3          5.3         5.5         5.7         5.9   
Weighted average FICO score........................        664          664         676         682         684   

------------------------                                                        

(1)  Reflects remaining portion of securitization, the larger portion of which  
was completed during the quarter ended September 30, 1996.            

(2) Only $650.3 million of the $800.0 million securitization was funded during  
    fiscal 1997. Therefore, the remaining balance will be funded in fiscal 1998.

(3) Represents the overcollateralization requirement that is funded with loans. 

(4) Gain after commissions earned, premiums paid and recognition of provision   
for possible credit losses.                                             

The Company's increase in securitization activity is related to the     
increased origination of High LTV Loans from fiscal 1996 to fiscal 1997, due to 
the following reasons:                                                          

   1.  The Company increased the size of its Correspondent network during this
time period, both numerically (306 to 631 for the fiscal year) and
     geographically (26 states versus 33 states during the respective fiscal
years);                                                           

 2.  The Company increased its production of Direct to Consumer Loans from
 $45.1 million to $765.3 million during the respective fiscal years;

    The Company paid net loan premiums of $36.4 million in fiscal 1996, compared
to net loan premiums of $65.1 million in fiscal 1997, representing an average   
loan purchase price of 103.1% of par for fiscal 1997, and 102.4% of par for     
fiscal 1996. This increase resulted from the Company's purchase of loans with   
relatively higher FICO scores in fiscal 1997. Loan purchase prices are directly 
related to the quality of the loans purchased, the face interest rate of the    
acquired loans, the quantity of loans that the Correspondent commits to sell,   
the nature and longevity of the relationship that the Company maintains with the
Correspondent and competitive pressures.                                        

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The Company increased the number of whole-loan sales during fiscal 1997 
through the sale of Title I Loans and Conforming First Lien Loans to government 
agencies and Home Equity Loans to other finance companies.                      

  Interest only strips interest income increased from $5.1 million in fiscal
1996 to $26.9 million in fiscal 1997, an increase of $21.8 million, or 427.5%.  
The increase is the result of the Company having an increased amount of         
securitizations that produce more interest income.                              

Interest income increased from $25.7 million for fiscal 1996 to $172.7  
million for fiscal 1997, an increase of $147.0 million, or 572.0%. The increase 
is a result of the increased loan production during fiscal 1997 and the         
Company's ability to hold loans on its balance sheet for longer periods of time 
prior to securitization, thereby increasing the average loans held for sale     
balance. During fiscal 1996 and fiscal 1997, the Company's average monthly      
balance of loans held for sale was $197.5 million and $1.0 billion,             
respectively, an increase of $847.5 million, or 429.1%, respectively.           

 Servicing fee income increased from $4.0 million for fiscal 1996 to $21.1
million for fiscal 1997, an increase of $17.1 million, or 427.5%. This increase 
was primarily the result of a significant increase in the average balance of the
Serviced Loan Portfolio from $1.3 billion for fiscal 1996 to $2.9 billion for   
fiscal 1997, an increase of $1.6 billion, or 123%. This increase in the         
Company's average Serviced Loan Portfolio was the result of the Company's       
increase in securitizations during fiscal 1997.                                 

Origination income increased from $7.2 million in fiscal 1996 to $41.5  
million in fiscal 1997, an increase of $34.3 million, or 476.4%. The Company    
collects origination fees on Direct to Consumer Loan originations. The          
origination fees are deferred and recognized when the loans are securitized,    
based on an average allocation methodology. The increase in origination income  
is the result of Direct to Consumer Loan originations increasing from 4% to 23% 
of total High LTV Loan production in fiscal 1996 and fiscal 1997, respectively. 

   Other income increased from $2.4 million in fiscal 1996 to $10.8 million in
fiscal 1997, an increase of $8.4 million, or 350.0%. A large component of this  
increase is due to the increase of insurance-related premiums. The increase in  
Direct to Consumer Loans provides the Company with the opportunity to sell      
add-on products such as credit-related policies.                                

  The following table sets forth information regarding the components of the
Company's expenses for fiscal 1996 and fiscal 1997:                             

                                                        [Enlarge/Download Table]

                                                                        YEAR ENDED SEPTEMBER 
                                                                                 30,         
                                                                        ---------------------
                                                                          1996        1997   
                                                                        ---------  ----------
                                                                             (AMOUNTS IN     
                                                                             THOUSANDS)      
                                                                                             
Salaries and employee benefits......................................... $  36,402  $  107,558
Interest expense.......................................................    16,892      93,514
Other operating expenses...............................................    29,938     120,581
Provision for possible credit losses...................................    11,247      45,307
                                                                        ---------  ----------
  Total Expenses....................................................... $  94,479  $  366,960
                                                                        ---------  ----------
                                                                        ---------  ----------

   Salaries and employee benefits increased from $36.4 million for fiscal 1996
to $107.6 million for fiscal 1997, an increase of $71.2 million, or 195.6%. The 
Company employed approximately 950 persons as of September 30, 1996, compared to
approximately 3,250 persons as of September 30, 1997, an increase of 242.1%.    
However, during the same time, total revenues increased from $149.7 million to  
$591.4 million, an increase of $441.7 million, or 295.1%. Although the number of
employees increased, the Company's employees were able to originate, securitize 
and service a proportionately larger loan volume, thereby generating            
proportionately larger revenues per employee. The Company earned $158,000 of    
revenue per employee for fiscal 1996, compared to $182,000 of revenue per       
employee for fiscal 1997.                                                       

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Interest expense increased from $16.9 million for fiscal 1996 to $93.5  
million for fiscal 1997, an increase of $76.6 million, or 453.3%. Interest      
expense increased primarily because there were significant increases in         
borrowings under the Company's various facilities during fiscal 1997 and        
subordinated debt was outstanding for all of fiscal 1997, while it was          
outstanding for only 1.5 months during fiscal 1996. As of September 30, 1996,   
the Company's warehouse debt totaled $354.5 million and bore interest at a      
weighted average rate of approximately 6.6%. As of September 30, 1997, the      
Company's warehouse debt totaled $1.2 billion and bore interest at a weighted   
average interest rate of approximately 6.6%.                                    

Other operating expenses increased as the Company accommodated the      
significantly expanded loan origination, securitization and servicing volumes   
during the respective fiscal years. Other operating expenses consist primarily  
of rents, professional fees and the costs associated with marketing,            
underwriting, administration and servicing. The Company expects to incur        
significantly greater marketing expenses in fiscal 1998 due to its continued    
strategy of increasing its brand name recognition and its goal of generating    
significantly larger amounts of Direct to Consumer Loans.                       

 The provision for possible credit losses increased from $11.2 million for
fiscal 1996 to $45.3 million for fiscal 1997, an increase of $34.1 million, or  
304.5%. This increase reflects the 225% growth in the loans held for sale       
portfolio during fiscal 1997, as well as the impact of holding the loans on the 
balance sheet for longer periods of time during fiscal 1997.                    

FISCAL YEAR ENDED SEPTEMBER 30, 1996                                            
VERSUS FISCAL YEAR ENDED SEPTEMBER 30, 1995                                 

    The Company's total revenues increased from $30.0 million for fiscal 1995 to
$149.7 million for fiscal 1996, an increase of $119.7 million, or 399.0%. This  
increase was primarily the result of increases in the Company's net gain on     
securitized loan sales, although the Company also experienced significant       
increases in its servicing-related income, interest income and other income     
during this time period.                                                        

  The following table sets forth information regarding the components of the
Company's revenues for fiscal 1995 and fiscal 1996:                             

                                                        [Enlarge/Download Table]

                                                                          YEAR ENDED SEPTEMBER 30,           
                                                                 ------------------------------------------- 
                                                                         1995                  1996          
                                                                 --------------------  --------------------- 
                                                                           (DOLLARS IN THOUSANDS)            
                                                                                                             
Gain on securitized loan sales, net of costs.................... $  24,597             $  142,433            
Provision for possible credit losses on securitized loan                                                     
  sales.........................................................    (3,907)               (48,397)           
  Net gain on securitized loan sales............................    20,690       69.0%     94,036       62.9%
                                                                 ---------             ----------            
Net gain on other loan sales....................................     4,517       15.1      11,091        7.4 
                                                                 ---------  ---------  ----------  --------- 
  Total gain on sale of loans, net..............................    25,207       84.1     105,127       70.3 
Interest income.................................................     2,860        9.5      25,727       17.2 
Interest only strips interest income............................    --         --           5,115        3.4 
Servicing income................................................     1,049        3.5       4,008        2.7 
Origination income..............................................       553        1.8       7,242        4.8 
Insurance and other income......................................       321        1.1       2,441        1.6 
                                                                 ---------  ---------  ----------  --------- 
  Total Revenues................................................ $  29,990      100.0% $  149,660      100.0%
                                                                 ---------  ---------  ----------  --------- 
                                                                 ---------  ---------  ----------  --------- 

   Total gain on sale of loans increased from $25.2 million for fiscal 1995 to
$105.1 million for fiscal 1996, an increase of $79.9 million, or 317.1%. The    
Company securitized and sold $234.8 million of High LTV Loans during fiscal 1995
(resulting in a net gain on securitized loan sales of $20.7 million), compared  
to $723.1 million of High LTV Loans during fiscal 1996 (resulting in a net gain 
on securitized loan sales of $94.0 million), an increase of $488.3 million, or  
208.0%. The Company sold $113.5 million of loans that did                       

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not meet its securitization parameters ("non-strategic loans") in whole-loan    
sales during fiscal 1995 (resulting in net gain on other loan sales of $4.5     
million), compared to $290.5 million of non-strategic loans in whole-loan sales 
during fiscal year 1996 (resulting in net gain on other loan sales of $11.1     
million). Additionally, the Company earned a weighted average 8.8% profit margin
(the ratio of its gain on sale of loans, after commissions earned, premiums paid
and provision for possible credit losses, as a percentage of loans securitized  
and sold) on the loans it securitized and sold during fiscal 1995, compared to a
13.0% weighted average profit margin on the loans securitized and sold during   
fiscal 1996.                                                                    

The following table sets forth certain data with respect to each of the 
securitizations the Company closed during fiscal 1996:                          

                                                        [Enlarge/Download Table]

                                               1995-3(1)    1995-4      1996-1      1996-2     1996-A(2)     1996-3   
                                              -----------  ---------  ----------  ----------  -----------  ---------- 
                                                                      (AMOUNTS IN THOUSANDS)                          
                                                                                                                      
Loans sold..................................   $   9,284   $  77,599  $  115,559  $  241,625   $   8,516   $  255,413 
Overcollateralization (3)...................      --           2,400       4,440       8,375      --              113 
                                              -----------  ---------  ----------  ----------  -----------  ---------- 
Total loans securitized.....................   $   9,284   $  79,999  $  119,999  $  250,000   $   8,516   $  255,526 
                                              -----------  ---------  ----------  ----------  -----------  ---------- 
                                              -----------  ---------  ----------  ----------  -----------  ---------- 
Gain on securitized loan sales, net.........   $   1,503   $  16,049  $   24,190  $   43,239   $     691   $   56,761 
Provision for possible credit losses........         270       3,706       5,551      12,546         203       26,121 
                                              -----------  ---------  ----------  ----------  -----------  ---------- 
Net gain on securitized loan sales..........   $   1,233   $  12,343  $   18,639  $   30,693   $     488   $   30,640 
                                              -----------  ---------  ----------  ----------  -----------  ---------- 
                                              -----------  ---------  ----------  ----------  -----------  ---------- 
Net gain after provision for credit losses                                                                            
  as a percentage of total loans securitized                                                                          
  and sold ("profit margin") (4)............        13.3%       15.4%       15.5%       12.3%        5.7%        12.0%
Weighted average life of certificates sold                                                                            
  (yrs.)....................................         4.9         4.2         4.4         4.8         2.9          5.4 
Weighted average FICO score.................         636         645         656         662         651          664 
Percentage of total loans securitized:                                                                                
  Conventional..............................        53.9%       62.5%       80.7%       89.0%       41.5%       100.0%
  Title I...................................        46.1%       37.5%       19.3%       11.0%       58.5%         0.0%

------------------------                                                        

(1) Reflects remaining portion of securitization, the larger portion of which   
was completed during the quarter ended September 30, 1995.              

(2) Most of the Title I loans in this securitization were unsecured.            

(3) Represents the overcollateralization requirement that is funded with loans. 

(4) Gain after commissions earned, premiums paid and recognition of provision   
for possible credit losses.                                             

The Company's increased securitization activity relates to the increased
origination of High LTV Loans for fiscal 1996. The Company was able to increase 
its production of High LTV Loans from fiscal 1995 to fiscal 1996, for the       
following reasons:                                                              

   1.  The Company increased the size of its Correspondent network during this
   time period, both numerically (86 to 306 during the respective fiscal
     years) and geographically (19 states to 26 states during the respective
fiscal years);                                                    

 2.  The Company increased its production of Direct to Consumer Loans from
$906,000 to $45.1 million during the respective fiscal years;     

 3.  The Company decreased its production of loans originated through home
       improvement contractors, which are generally of lower quality, from $36.8
million to $21.6 million during the respective fiscal years; and  

 4.  The Company acquired First Security Mortgage Corp. (which the Company
       operates as its "FIRSTPLUS East" division) in December 1995 in a purchase
transaction and FIRSTPLUS West                                    

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      in May 1996 in a pooling transaction. During fiscal 1996, FIRSTPLUS East
  and FIRSTPLUS West originated a total of $206.0 million of strategic
loans.                                                            

During fiscal 1996, the Company originated and securitized a greater    
percentage of non-Title I loans, when compared to fiscal 1995. This continued   
increase in non-Title I loan emphasis was a result of the relatively small size 
of the Title I loan market and the Company's desire to meet the needs of its    
customers, who generally request higher loan amounts and more flexible loan     
proceeds utilization than the Title I Program offers. Although non-Title I loans
require the Company to reserve greater amounts for anticipated losses than do   
Title I loans, Title I loans generally produce lower gross revenues due to the  
increased premiums paid in acquisition.                                         

The Company's profit margin on securitized loans sold increased from a  
weighted average of 8.8% for fiscal 1995 to 13.0% for fiscal 1996. A portion of 
this increase was due to the fact that the Company was contractually required to
share its securitization gains in its 1994-1 and 1995-2 securitizations, which  
closed in December 1994 and June 1995, respectively. While the Company was not  
required to share any securitization gain for any securitizations closed during 
fiscal 1996, $9.2 million of loans delivered in October 1995, that were         
attributable to the 1995-3 securitization were subject to the sharing           
arrangement. Profit margin increases also resulted from the favorable interest  
rate environment during the period from October 1995 to January 1996, and from  
increases in interest paid over the life of the loan.                           

  The Company's gain on securitized loan sales, net, profit margin decreased
during fiscal 1996, from 15.4% in the first quarter to 12.0% in the fourth      
quarter. The decrease was primarily due to the sharp increases in general       
interest rates from February 1996 to June 1996.                                 

The Company received net loan discounts of $826,000 for fiscal 1995,    
compared to $36.4 million of net loan premiums paid for fiscal 1995. This       
represented an average loan purchase price of 99.6% of par for fiscal 1995,     
compared to 102.4% of par for fiscal 1996. This increase resulted from the      
Company's purchase of loans with relatively higher FICO scores and from         
increased competition for Title I loans. Loan purchase prices are directly      
related to the quality of the loans purchased, the face interest rate of the    
acquired loans, the quantity of loans that the Correspondent commits to sell,   
the nature and longevity of that the relationship the Company maintains with the
Correspondent and competitive pressures.                                        

  Interest only strips interest income increased from none in fiscal 1995 to
$5.1 million in fiscal 1996. The increase was the result of the Company having  
no interest only strips outstanding in fiscal 1995.                             

    Interest income increased from $2.9 million for fiscal 1995 to $25.7 million
for fiscal 1996, an increase of $22.8 million, or 786.2%. This increase was     
primarily the result of a significant increase in the Company's average balance 
of loans held for sale. The Company securitizes its loans on a regular basis;   
however, it earns interest income on the loans it originates prior to such      
securitizations. During fiscal 1995 and fiscal 1996, the Company's average      
monthly balance of loans held for sale, including non-strategic loans, was $19.4
million at par and $197.5 million at par, respectively, an increase of $178.1   
million, or 918.0%.                                                             

Servicing fee income increased from $1.0 million for fiscal 1995 to $4.0
million for fiscal 1996, an increase of $30 million, or 300.0%. This increase   
was primarily the result of a significant increase in the average balance of the
Serviced Loan Portfolio from $238.6 million for fiscal 1995 to $1.3 billion for 
fiscal 1996, an increase of $1.0 billion, or 444.8%. This increase in the       
Company's average Serviced Loan Portfolio was the result of the Company's       
increases in loan originations and securitizations during the respective fiscal 
years.                                                                          

Remaining revenue items increased from $874,000 for fiscal 1995 to $9.7 
million for fiscal 1996, an increase of $8.8 million, or 1,007.9%. Remaining    
revenue items consist primarily of loan origination fees that are funded by     
borrowers at closing.                                                           

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  The following table sets forth information regarding the components of the
Company's expenses for fiscal 1995 and fiscal 1996:                             

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED SEPTEMBER
                                                                              30,         
                                                                      --------------------
                                                                        1995       1996   
                                                                      ---------  ---------
                                                                          (AMOUNTS IN     
                                                                           THOUSANDS)     
                                                                                          
Salaries and employee benefits....................................... $  10,110  $  36,402
Interest expense.....................................................     2,660     16,892
Other operating expenses.............................................     6,964     29,938
Provision for possible credit losses.................................       513     11,247
                                                                      ---------  ---------
  Total.............................................................. $  20,247  $  94,479
                                                                      ---------  ---------
                                                                      ---------  ---------

   Salaries and employee benefits increased from $10.1 million for fiscal 1995
to $36.4 million for fiscal 1996, an increase of $26.3 million, or 260.1%. The  
Company employed approximately 480 persons as of September 30, 1995, compared to
approximately 950 persons as of September 30, 1996, an increase of 97.9%.       
However, during the same time, total revenues increased from $30.0 million to   
$149.7 million, an increase of $119.7 million, or 399.0%. Although the number of
employees increased, the Company's employees were able to originate, securitize 
and service a proportionately larger amount of loan volume, thereby generating  
proportionately larger revenues per employee. The Company earned $62,000 of     
revenue per employee for fiscal 1995, compared to $158,000 of revenue per       
employee for fiscal 1996.                                                       

Interest expense increased from $2.7 million for fiscal 1995 to $16.9   
million for fiscal 1996, an increase of $14.2 million, or 535.0%. Interest      
expense increased primarily because of the significant increases in borrowings  
under the Company's warehouse facilities that were incurred during fiscal 1996, 
partially offset by more favorable interest rates. As of September 30, 1995, the
Company's warehouse debt totaled $18.5 million and bore interest at a weighted  
average rate of approximately 9.25%. As of September 30, 1995, the Company's    
warehouse debt totaled $354.5 million and bore interest at a weighted average   
rate of approximately 6.6%.                                                     

Other operating expenses increased as the Company accommodated the      
significantly expanded loan origination, loan servicing and loan securitization 
volumes during the respective fiscal years. Other operating expenses consist    
primarily of Title I Program insurance premiums paid upon the origination of    
Title I loans, professional fees, rents and the costs associated with marketing,
underwriting, administration and servicing.                                     

    The provision for possible credit losses on securitized loan sales increased
from $3.9 million for fiscal 1995 to $48.4 million for fiscal 1996, an increase 
of $44.5 million, or 1,141.0%. The increase was primarily attributable to the   
208.1% increase in volume of loans securitized from $234.8 million in fiscal    
1995 to $723.1 million in fiscal 1996, and to the fact that a greater amount of 
securitized loans in fiscal 1996 were non-Title I loans, which require the      
Company to provide for a higher level of losses, as compared to insured Title I 
loans. To a lesser extent, the increase is the result of (i) an increase of $2.5
million taken because the default rate for a pool of bulk purchased loans       
included in the 1995-2 securitization exceeded the estimates made at the time of
the securitization, which adjustment was determined in conformity with the      
Company's current estimation methodology, (ii) an increase of $5.6 million taken
for the increased amount of loans held for sale on the Company's balance sheet  
and (iii) the Company's change from a constant default rate to default curves   
commencing in the fourth quarter of fiscal 1996.                                

Income tax expense increased from $3.9 million for fiscal 1995 to $21.0 
million for fiscal 1996, an increase of $17.1 million, or 437.3%. The income tax
expense was recorded at statutory rates.                                        

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LIQUIDITY AND CAPITAL RESOURCES                                                 

   The Company's operations require continued access to financing sources. The
Company's primary operating cash requirements include the funding of (i) loan   
originations, (ii) reserve accounts, overcollateralization requirements, fees   
and expenses incurred in connection with its securitization transactions, (iii) 
television, radio and direct mail advertising and other marketing and (iv)      
administrative and other operating expenses. The Company has been able to       
utilize a new securitization structure for the 1997-2 and 1997-2 securitizations
that does not require an attendant monoline insurance policy. This structure    
allows the Company to issue the bonds without initial overcollateralization     
requirements. Overcollateralization requirements are met by future excess cash  
flows of the specific securitizations. The Company expects to continue to       
utilize this structure in future securitization transactions.                   

  In October 1996, the Company increased a warehouse line facility with Bank
One, Texas, N.A. ("Bank One Facility") from $60 million to $110 million. In     
August 1997, the Company increased a repurchase facility with Bear Stearns Home 
Equity Trust 1996-1 ("Bear Sterns Facility") from $300 million to $600 million. 
At September 30, 1997, the Company had $79.6 million outstanding under the Bank 
One Facility and $317.7 million outstanding under the Bear Stearns Facility.    

 In November 1996, the Company entered into the $75 million term line with
Bear Stearns and Co. Inc. ("Bear Stearns Term Line"). The Bear Stearns Term Line
may be utilized by pledging as collateral the interest only strips generated by 
securitizations in which Bear Stearns is the lead manager. At September 30,     
1997, the Company had borrowed $55.0 million under this facility.               

  In December 1996, the Company entered into the $100 million term line with
PaineWebber Real Estate Securities Inc. (the "PaineWebber Term Line") and the   
$400 million repurchase facility with PaineWebber Real Estate Securities Inc.   
("PaineWebber Repurchase Facility"). In June 1997, the repurchase facility was  
increased to $500 million. At September 30, 1997, the Company had $66.0 million 
outstanding under the Term Line and $412.8 million outstanding under the        
repurchase facility.                                                            

  In April 1997, the Company entered into a $300 million repurchase facility
with Merrill Lynch Mortgage Capital, Inc. ("Merrill Lynch Repurchase Facility") 
and a $75 million term line with Merrill Lynch Mortgage Capital, Inc. In June   
1997, the Company increased the repurchase facility to $400 million. At         
September 30, 1997, the Company had borrowed $278.2 million under the repurchase
facility and none under the term line.                                          

In April 1997, the Company entered into a $200 million warehouse line   
facility with Industrial Bank of Japan ("IBJ Warehouse Facility"). At September 
30, 1997, the Company had $190.9 million outstanding under this facility.       

At September 30, 1997, the Company had borrowed $31.3 million from a    
nationally recognized finance company under a warehouse line facility and term  
line facility.                                                                  

As a result of the Company's increasing volume of loan originations and 
purchases, and its expanding securitization activities, the Company operates,   
and expects to continue to operate, on a negative operating cash flow basis. The
Company's operations used $496.7 million during fiscal 1996 and $1.2 billion    
during fiscal 1997. The increase in the use of cash in operations is primarily  
related to the costs of an enlarged infrastructure, an increasing employee base 
and the Company's securitization strategy (which increases the gain on sale of  
securitized loans but reduces the amount of cash received on the sale of loans  
as compared to whole-loan sales). Cash from financing and investing activities  
increased primarily due to additional borrowings related to the repurchase      
facilities, the term lines and other borrowings, which have been used to fund   
loan originations, working capital and securitization costs. The Company has    
significantly improved its negative cash flow experience by improving certain   
negative cash flow features of its securitization program and by maintaining a  
larger balance of loans held for sale on its balance sheet, which produces a    
positive net interest cash flow, as well as, increasing the collection of       
origination fees related to Direct to Consumer Loans.                           

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   In addition, the Company has begun to implement a strategy of maintaining a
significant quantity of loans on its balance sheet, thus increasing the length  
of time that loans are held for sale and materially increasing its interest rate
risk. Because the Company's present loan facilities bear interest at variable   
rates, the Company has a need for medium to long term fixed-rate financing. If  
the Company is unable to obtain such financing, it could have a material adverse
effect on the Company's results of operations and financial conditions.         

    Based on the Company's anticipated rate of growth, the Company believes that
it will need to arrange additional warehouse lines of credit or other financing 
sources within the next 90 days. The Company is currently negotiating for       
increased and/or additional warehouse facilities. The Company's existing        
warehouse lines of credit restrict its ability to incur other indebtedness. The 
Company has no commitments for such increased and/or additional financings, and 
there can be no assurance that the Company will be successful in consummating   
any such financing transactions in the future or on terms the Company would     
consider to be favorable. In such event, the Company's growth and operations    
could be curtailed, which could have a material adverse effect on the Company's 
results of operations and financial condition.                                  

CERTAIN ACCOUNTING CONSIDERATIONS                                               

    During fiscal 1996 and fiscal 1997, the Company sold a substantial amount of
its High LTV Loans to third-party investors in securitization transactions. In a
securitization transaction, loans originated and purchased by the Company are   
sold to an independent entity, generally a grantor or owner trust, that holds   
the loans as trustee for third-party investors. The Company retains the right to
service the securitized loans or appoint an approved subservicer.               

The Company retains an interest only strip ("I/O Strip"), which is      
certificated, which represents the present value of the right to the excess cash
flows generated by the securitized loans that represents the difference between 
(a) interest at the stated rate paid by borrowers and (b) the sum of (i)        
pass-through interest paid to third-party investors, (ii) trustee fees, (iii)   
FHA insurance fees (if applicable), (iv) third-party credit enhancement fees (if
applicable), (v) stipulated servicing fees and (vi) estimated loan portfolio    
losses. The Company's right to receive this excess cash flow stream begins after
certain reserve requirements have been met, which are specific to each          
securitization and are used as a means of credit enhancement. The Company       
determines the present value of this anticipated cash flow stream at the time   
each securitization transaction closes, utilizing valuation assumptions         
appropriate for each particular transaction.                                    

    The significant valuation assumptions are related to the anticipated average
lives of the loans sold, the anticipated prepayment speeds and the anticipated  
credit losses related thereto. In order to determine the present value of this  
excess cash flow, the Company currently applies an estimated market discount    
rate of between 10% and 11% to the expected pro forma gross cash flows, which   
are calculated utilizing the weighted average lives of the securitized loans,   
and currently applies a risk free discount rate of 6.5% to the anticipated      
losses attendant to this pro forma cash flow stream (the "Allowance for Possible
Credit Losses on Loans Sold" on its balance sheet). Accordingly, the overall    
effective discount rate utilized on the cash flows, net of expected credit      
losses is approximately 12.5%. As of September 30, 1996 and 1997, the Company's 
I/O Strips were $187.2 million and $735.3 million, respectively, and its        
allowance for possible credit losses on loans securitized were $54.3 million and
$279.2 million, respectively. The allowance represented approximately 29% and   
38% of the I/O Strips at September 30, 1996 and 1997, respectively.             

 The annual prepayment rate of the securitized loans is a function of full
and partial prepayments and defaults. In the I/O Strips' fair value estimates,  
the Company makes assumptions of the prepayment rates of the underlying loans,  
which the Company believes are reasonable. During fiscal 1997, the Company      
utilized proprietary prepayment curves generated by the Company's structured    
finance group (reaching an approximate maximum annual rate of between 14% and   
16%).                                                                           

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With respect to the calculation of the gross charge-off rate for a      
particular securitization pool, the Company, in part, utilizes the FICO scores  
of that securitization pool to measure the creditworthiness of the borrowers    
whose loans are included in the pool. During fiscal 1997, the Company's         
securitization pool score distributions typically were between 620 and 720, with
a weighted average pool score of between 664 and 684. The Company estimates     
default rates for FICO scores based on historical loan performance and other    
data available to the Company. The Company has developed historical default     
rates for its borrowers based on each ten point interval of the FICO score      
range. Using the expected default rate for each FICO score interval for each    
securitization, the Company estimates the overall default rate for the borrowers
in the securitized pool. When estimating the fair value of the I/O Strips       
attributable to these securitizations, the Company assumes that its             
securitization pools will produce annual default rates that correspond to the   
historical default rates for the FICO score ranges associated with the          
individual pools, adjusted for accelerated levels of defaults for loan pools    
with FICO scores lower than 620 and for seasoned loans that have little or no   
increase in the frequency of defaults.                                          

In its estimates of annual default rates and total delinquencies, the   
Company utilizes assumptions that it believes are reasonable. The Company       
estimates annual default rates and total delinquencies based upon FICO scores,  
the life of the loans and the mix of the Title I loans to Conventional loans in 
the securitization, as well as other factors. To more accurately reflect the    
timing of the actual loan default rates and the impact of the defaults on the   
overall prepayment rates, the Company utilizes proprietary default curves rather
than assuming that defaults occur in a straight line manner over time. The use  
of the default curves does not impact the estimated total amount of defaults in 
a securitization, only the timing of when such defaults will occur. The Company 
believes that the recourse portion of the net I/O Strips' value should be       
adequate to cover anticipated losses. The Company assumes that there will be no 
recoveries on charged-off Conventional Loans in its loss estimates. The Company 
also estimates that total delinquencies (i.e., loans more than 30 days past due)
will average 6% to 9% over the life of each securitization.                     

   The I/O Strips are accounted for under SFAS 115 "ACCOUNTING FOR INVESTMENTS
IN CERTAIN DEBT AND EQUITY MARKETABLE SECURITIES." As an I/O Strip is subject to
significant prepayment risk, and therefore has an undetermined maturity date, it
cannot be classified as held to maturity. The Company has chosen to classify its
I/O Strips as available for sale securities. Based on this classification, the  
Company is required to mark these securities to fair value with the accompanying
increases or decreases in fair value being recorded as a separate component of  
stockholders' equity, net of tax. The determination of fair value is based on   
the previously mentioned valuation basis, and the Company assesses fair value   
quarterly.                                                                      

   As the gain recognized in the year of sale is equal to the present value of
the estimated future cash flows from the I/O Strips, the amount of cash actually
received over the lives of the loans normally exceeds the gain previously       
recognized at the time of the loans were sold, and, therefore, residual interest
income is recognized over the life of the loans securitized. The I/O Strips are 
amortized based on an accelerated method that is not materially different from  
the interest method.                                                            

 The Company generally retains the right to service loans it originates or
purchases and then subsequently securitizes. Fees for servicing loans are based 
on a stipulated percentage (generally 0.75%) of the unpaid principal balance of 
the associated loans. Prior to fiscal 1997, the Company recognized servicing fee
income, late charges and other ancillary income when collected and charged costs
to service loans when incurred. For loan portfolios securitized subsequent to   
December 31, 1996, the Company began recognizing a servicing asset as part of   
its gain on securitized loan sales. The servicing asset is calculated as the    
present value of the expected future net servicing revenue based on common      
industry assumptions and the Company's historical experience. These factors     
include default and prepayment speeds.                                          

On a quarterly basis, the Company assesses the carrying value of its I/O
Strips and servicing assets for impairment. There can be no assurance that the  
Company's estimates used to determine the gain on securitized loan sales, I/O   
Strips and servicing assets valuations will remain appropriate for the life of  
each securitization. If actual loan prepayments or defaults exceed the Company's
estimates, the carrying value                                                   

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of the Company's I/O Strips and/or servicing assets may be decreased or the     
Company may increase its allowance for possible credit losses on loans sold     
through a charge against earnings during the period management recognizes the   
disparity. Other factors may also result in a writedown of the Company's I/O    
Strips in subsequent periods. As of September 30, 1997, the Company determined  
that no such impairment existed.                                                

The Company records its loans at the lower of cost or market. Any       
originations below par are recorded as loan origination discounts, thereby      
reducing the Company's cost basis in such loans. Any purchases above par are    
recorded as loan purchase premiums, thereby increasing the Company's cost basis 
in its loans. If the Company's accounts reflect net discounts in excess of      
premiums at the time it securitizes such loans, the Company recognizes such net 
discount as a reduction to its cost of loans sold. Conversely, if the Company's 
accounts reflect net premiums in excess of discounts at the time it securitizes 
its loans, the Company recognizes such net premium as an addition to its cost of
loans sold.                                                                     

HEDGING ACTIVITIES                                                              

The Company's profitability may be directly affected by fluctuations in 
interest rates. While the Company monitors interest rates and employs a strategy
designed to hedge some of the risks associated with changes in interest rates,  
no assurance can be given that the Company's results of operations and financial
condition will not be adversely affected during periods of fluctuations in      
interest rates. The Company's interest rate hedging strategy currently includes 
purchasing put contracts on treasury securities, selling short treasury         
securities and maintaining a pre-funding strategy with respect to its           
securitizations. Since the interest rates on the Company's indebtedness used to 
fund and acquire loans are variable and the rates charged on loans the Company  
originates are fixed, increases in the interest rates after loans are originated
and prior to their sale could have a material adverse effect on the Company's   
results of operations and financial condition. In addition, increases in        
interest rates prior to sale of the loans may reduce the gain on securitized    
loan sales earned by the Company. The ultimate sale of the Company's loans will 
fix the spread between the interest rates paid by borrowers and the interest    
rates paid to investors in securitization transactions with respect to such     
loans, although increases in interest rates may narrow the potential spread that
existed at the time the loans were originated by the Company.                   

IMPACT OF INFLATION                                                             

Increases in the inflation rate generally result in increased interest  
rates. Since the Company borrows funds at a variable rate, increased interest   
rates will increase the borrowing costs of the Company. Inflation will also     
increase the operating costs of the Company. The Company may not be able to pass
on the effects of inflation and accompanying higher interest rates to its       
borrowers due to usury laws, other legal or regulatory restrictions or          
competitive pressures.                                                          

SEASONALITY                                                                     

  The Company is affected by consumer demand for debt consolidation and home
improvement loans, which is partially influenced by regional trends, economic   
conditions and personal preferences. The Company's business is generally subject
to seasonal trends, with home improvements generally peaking during the spring  
and summer seasons and declining to lower levels in the fall and winter months. 
Delinquencies on loan payments typically increase in November and December of   
each calendar year.                                                             

YEAR 2000                                                                       

  The Company utilizes a number of software systems to originate, securitize
and service its various loan products. The Company has and will continue to make
certain investments in its software systems and applications to ensure the      
Company is Year 2000 compliant. The financial impact of becoming year 2000      

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compliant has not been and is not expected to be material to the Company to its 
financial position or results of operations in a given year.                    

FORWARD LOOKING STATEMENTS                                                      

    Certain information contained in this Form 10-K constitutes "Forward-Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as 
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,    
which can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "anticipate," "estimate" or "continue" or the negative thereof
or other variations thereon or comparable terminology. The statements in "Risk  
Factors" contained in the Company's current report on Form 8-K, filed with the  
Securities and Exchange Commission on December 19, 1996, constitute cautionary  
statements identifying important factors, including certain risks and           
uncertainties, with respect to such forward-looking statements that could cause 
actual results to differ materially from those reflected in such forward-looking
statements, and reference is made to such Form 8-K.                             

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                           

The Financial Statements and Supplementary Data are set forth herein    
commencing on page F-1 of this Report.                                          

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND        
FINANCIAL DISCLOSURE.                                         

Not Applicable.                                                         

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                   

   The information required in response to this Item is incorporated herein by
reference to the Company's proxy statement to be filed with the Securities and  
Exchange Commission pursuant to Regulation 14A, not later than 120 days after   
the end of the fiscal year covered by this report.                              

ITEM 11.  EXECUTIVE COMPENSATION.                                               

   The information required in response to this Item is incorporated herein by
reference to the Company's proxy statement to be filed with the Securities and  
Exchange Commission pursuant to Regulation 14A, not later than 120 days after   
the end of the fiscal year covered by this report.                              

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.       

   The information required in response to this Item is incorporated herein by
reference to the Company's proxy statement to be filed with the Securities and  
Exchange Commission pursuant to Regulation 14A, not later than 120 days after   
the end of the fiscal year covered by this report.                              

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                       

   The information required in response to this Item is incorporated herein by
reference to the Company's proxy statement to be filed with the Securities and  
Exchange Commission pursuant to Regulation 14A, not later than 120 days after   
the end of the fiscal year covered by this report.                              

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PART IV 

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.      

(a) Documents filed as part of Report.                                  

1.  FINANCIAL STATEMENTS:                                         

      The Financial Statements are listed in the index to Consolidated
Financial Statements on page F-1 of this Report.          

2.  FINANCIAL STATEMENT SCHEDULES:                                

Not applicable.                                           

3.  EXHIBITS:                                                     

   The exhibits are listed on the Exhibit Index attached hereto.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        [Enlarge/Download Table]

                                                                                                            PAGE   
                                                                                                            -----  
                                                                                                                   
FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES                                                                   
  Report of Independent Auditors...........................................................................     F-2
  Consolidated Balance Sheets as of September 30, 1996 and 1997............................................     F-3
  Consolidated Statements of Income for the Fiscal Years Ended September 30, 1995, 1996 and 1997...........     F-4
  Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended September 30, 1995, 1996 and          
    1997...................................................................................................     F-5
  Consolidated Statements of Cash Flows for the Fiscal Years Ended September 30, 1995, 1996 and 1997            F-6
  Notes to Consolidated Financial Statements...............................................................     F-7

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REPORT OF INDEPENDENT AUDITORS

Board of Directors                                                              
FIRSTPLUS Financial Group, Inc.                                                 

 We have audited the accompanying consolidated balance sheets of FIRSTPLUS
Financial Group, Inc. and subsidiaries as of September 30, 1996 and 1997, and   
the related consolidated statements of income, stockholders' equity, and cash   
flows for each of the three years in the period ended September 30, 1997. These 
financial statements are the responsibility of the Company's management. Our    
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of FIRSTPLUS      
Financial Group, Inc. and subsidiaries at September 30, 1996 and 1997, and the  
consolidated results of their operations and their cash flows for each of the   
three years in the period ended September 30, 1997, in conformity with generally
accepted accounting principles.                                                 

                         /s/ Ernst & Young LLP

Dallas, Texas                                                                   

October 30, 1997                                                                

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ASSETS

                                                        [Enlarge/Download Table]

                                                                                               SEPTEMBER 30      
                                                                                          ---------------------- 
                                                                                            1996        1997     
                                                                                          ---------  ----------- 
                                                                                                                 
Cash and cash equivalents................................................................ $  23,167  $    94,978 
Securities, available for sale...........................................................    --           40,995 
Loans held for sale, net.................................................................   430,812    1,400,446 
Investment in securitized loans..........................................................    --          190,861 
Subordinated certificates available for sale.............................................    16,528       18,047 
Interest only strips.....................................................................   187,230      735,310 
Allowance for possible credit losses on loans sold.......................................   (54,257)    (279,187)
                                                                                          ---------  ----------- 
Interest only strips, net................................................................   132,973      456,123 
Servicing assets.........................................................................    --           40,516 
Receivable from trusts...................................................................    32,105      138,816 
Other assets.............................................................................    20,542       66,424 
                                                                                          ---------  ----------- 
    Total assets......................................................................... $ 656,127  $ 2,447,206 
                                                                                          ---------  ----------- 
                                                                                          ---------  ----------- 
                                      LIABILITIES AND STOCKHOLDERS' EQUITY                                       
Accounts payable and accrued liabilities................................................. $  19,669  $    44,445 
Warehouse financing......................................................................   354,481    1,238,156 
Term lines...............................................................................    57,465      211,751 
Time deposits............................................................................    --          120,025 
Bonds....................................................................................    --          174,088 
Convertible subordinated notes...........................................................   100,000       69,920 
Notes payable and other borrowings.......................................................     8,969       39,321 
Deferred tax liabilities, net............................................................    20,974      119,355 
                                                                                          ---------  ----------- 
    Total liabilities....................................................................   561,558    2,017,061 
Commitments and contingencies                                                                                    
Stockholders' equity:                                                                                            
  Preferred stock Series A, non-voting, $1.00 par value, 8% cumulative                                           
    dividend:                                                                                                    
    Authorized shares--300                                                                                       
    Issued and outstanding shares--none--1996; none--1997                                    --          --      
  Preferred stock Series B, non-voting, $1.00 par value, 8% cumulative                                           
    dividend:                                                                                                    
    Authorized shares--2,300                                                                                     
    Issued and outstanding shares--none--1996; none--1997                                    --          --      
  Common stock, $0.01 par value:                                                                                 
    Authorized shares--100,000                                                                                   
    Issued and outstanding shares--22,499--1996 and 36,580--1997.........................       225          366 
  Common stock, non-voting, $0.01 par value:                                                                     
    Authorized shares--25,000                                                                                    
    Issued and outstanding shares--4,441--1996 and 691--1997.............................        44            7 
  Additional capital.....................................................................    54,696      216,881 
  Unrealized gains on available for sale securities, net.................................    --           20,253 
  Retained earnings......................................................................    39,604      192,638 
                                                                                          ---------  ----------- 
    Total stockholders' equity...........................................................    94,569      430,145 
                                                                                          ---------  ----------- 
    Total liabilities and stockholders' equity........................................... $ 656,127  $ 2,447,206 
                                                                                          ---------  ----------- 
                                                                                          ---------  ----------- 

See accompanying notes

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME 
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                        [Enlarge/Download Table]

                                                                                    YEAR ENDED SEPTEMBER 30       
                                                                               ---------------------------------- 
                                                                                 1995        1996        1997     
                                                                               ---------  ----------  ----------- 
                                                                                                                  
Revenues:                                                                                                         
  Gains on sales of securitized loans, net of costs........................... $  24,597  $  142,433  $   519,426 
  Provision for possible credit losses on securitized loan sales..............    (3,907)    (48,397)    (231,211)
                                                                               ---------  ----------  ----------- 
    Net gain on securitized loan sales........................................    20,690      94,036      288,215 
  Net gain on other loan sales................................................     4,517      11,091       30,086 
                                                                               ---------  ----------  ----------- 
    Total gain on sale of loans, net..........................................    25,207     105,127      318,301 
  Interest income.............................................................     2,860      25,727      172,734 
  Interest only strips interest income........................................    --           5,115       26,920 
  Servicing income............................................................     1,049       4,008       21,122 
  Origination income..........................................................       553       7,242       41,537 
  Other income................................................................       321       2,441       10,826 
                                                                               ---------  ----------  ----------- 
    Total revenues............................................................    29,990     149,660      591,440 

Expenses:                                                                                                         
  Salaries and employee benefits expense......................................    10,110      36,402      107,558 
  Interest expense............................................................     2,660      16,892       93,514 
  Other operating expenses....................................................     6,964      29,938      120,581 
  Provision for possible credit losses........................................       513      11,247       45,307 
                                                                               ---------  ----------  ----------- 
    Total expenses............................................................    20,247      94,479      366,960 
                                                                               ---------  ----------  ----------- 
Income before income taxes....................................................     9,743      55,181      224,480 
Provision for income taxes....................................................    (3,903)    (20,969)     (85,311)
                                                                               ---------  ----------  ----------- 
    Net income................................................................ $   5,840  $   34,212  $   139,169 
                                                                               ---------  ----------  ----------- 
                                                                               ---------  ----------  ----------- 
Weighted average common shares and common equivalent                                                              
  shares outstanding..........................................................    20,297      25,358       35,242 
                                                                               ---------  ----------  ----------- 
                                                                               ---------  ----------  ----------- 
Primary net income per share.................................................. $    0.28  $     1.35  $      3.95 
                                                                               ---------  ----------  ----------- 
                                                                               ---------  ----------  ----------- 
Weighted average fully diluted common and common equivalent shares                                                
  outstanding.................................................................    20,297      26,354       40,522 
                                                                               ---------  ----------  ----------- 
                                                                               ---------  ----------  ----------- 
Fully diluted net income per share............................................ $    0.28  $     1.31  $      3.52 
                                                                               ---------  ----------  ----------- 
                                                                               ---------  ----------  ----------- 

See accompanying notes

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
(AMOUNTS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                    PREFERRED STOCK                                COMMON STOCK             
                                   --------------------------------------------------  -------------------------------------
                                          SERIES "A"                SERIES "B"                  VOTING           NON-VOTING 
                                   ------------------------  ------------------------  ------------------------  -----------
                                     SHARES       AMOUNT       SHARES       AMOUNT       SHARES       AMOUNT       SHARES   
                                   -----------  -----------  -----------  -----------  -----------  -----------  -----------
                                                                                                                            
Balance at September 30, 1994....         300    $     300       --        $  --           10,980    $     110       --     
Investment in subsidiary--RNFC...                                 2,300        2,300        4,020           40              
Issuance of common stock and                                                                                                
  exercise of warrants...........                                                                                     2,949 
Redemption of preferred stock....        (200)        (200)                                                                 
Preferred stock dividends........                                                                                           
Distributions....................                                                                                           
Net income.......................                                                                                           
                                          ---        -----   -----------  -----------  -----------       -----   -----------
Balance at September 30, 1995....         100          100        2,300        2,300       15,000          150        2,949 
Issuance of common stock and                                                                                                
  exercise of stock warrants.....                                                           6,590           66        2,401 
Conversion of non-voting to                                                                                                 
  voting.........................                                                             909            9         (909)
Redemption of preferred stock....        (100)        (100)      (2,300)      (2,300)                                       
Preferred stock dividends........                                                                                           
Net income.......................                                                                                           
Other............................                                                                                           
                                          ---        -----   -----------  -----------  -----------       -----   -----------
Balance at September 30, 1996....      --           --           --           --           22,499          225        4,441 
Acquisitions.....................                                                           3,975           40              
Conversion of subordinated                                                                                                  
  notes..........................                                                           1,931           20              
Issuance of common stock and                                                                                                
  exercise of warrants...........                                                           4,524           45           67 
Conversion of non-voting to                                                                                                 
  voting.........................                                                           3,817           38       (3,817)
Retirement of common stock.......                                                            (166)          (2)             
Unrealized gains on available for                                                                                           
  sale securities, net...........                                                                                           
Net income.......................                                                                                           
                                          ---        -----   -----------  -----------  -----------       -----   -----------
Balance at September 30, 1997....      --        $  --           --        $  --           36,580    $     366          691 
                                          ---        -----   -----------  -----------  -----------       -----   -----------
                                          ---        -----   -----------  -----------  -----------       -----   -----------


                                                             UNREALIZED                                                     
                                                              GAINS ON                                                      
                                                              AVAILABLE                                                     
                                                              FOR SALE     RETAINED                                         
                                                ADDITIONAL   SECURITIES,   EARNINGS                                         
                                     AMOUNT       CAPITAL        NET       (DEFICIT)     TOTAL                              
                                   -----------  -----------  -----------  -----------  ---------                            
                                                                                                                            
Balance at September 30, 1994....   $  --        $   5,124    $  --        $  (1,213)  $   4,321                            
Investment in subsidiary--RNFC...                    1,127                                 3,467                            
Issuance of common stock and                                                                                                
  exercise of warrants...........          29          471                                   500                            
Redemption of preferred stock....                                                           (200)                           
Preferred stock dividends........                                                (27)        (27)                           
Distributions....................                   (2,167)                               (2,167)                           
Net income.......................                   (1,018)                    6,858       5,840                            
                                          ---   -----------  -----------  -----------  ---------                            
Balance at September 30, 1995....          29        3,537       --            5,618      11,734                            
Issuance of common stock and                                                                                                
  exercise of stock warrants.....          24       51,121                                51,211                            
Conversion of non-voting to                                                                                                 
  voting.........................          (9)                                            --                                
Redemption of preferred stock....                                                         (2,400)                           
Preferred stock dividends........                                               (265)       (265)                           
Net income.......................                      (39)                   34,251      34,212                            
Other............................                       77                                    77                            
                                          ---   -----------  -----------  -----------  ---------                            
Balance at September 30, 1996....          44       54,696       --           39,604      94,569                            
Acquisitions.....................                    6,476                    13,865      20,381                            
Conversion of subordinated                                                                                                  
  notes..........................                   30,515                                30,535                            
Issuance of common stock and                                                                                                
  exercise of warrants...........           1      125,192                               125,238                            
Conversion of non-voting to                                                                                                 
  voting.........................         (38)                                                                              
Retirement of common stock.......                        2                                                                  
Unrealized gains on available for                                                                                           
  sale securities, net...........                                20,253                   20,253                            
Net income.......................                                            139,169     139,169                            
                                          ---   -----------  -----------  -----------  ---------                            
Balance at September 30, 1997....   $       7    $ 216,881    $  20,253    $ 192,638   $ 430,145                            
                                          ---   -----------  -----------  -----------  ---------                            
                                          ---   -----------  -----------  -----------  ---------                            

See accompanying notes

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(AMOUNTS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                                            YEAR ENDED SEPTEMBER 30         
                                                                                     -------------------------------------- 
                                                                                        1995         1996          1997     
                                                                                     ----------  ------------  ------------ 
                                                                                                                            
OPERATING ACTIVITIES:                                                                                                       
Net income.......................................................................... $    5,840  $     34,212  $    139,169 
Adjustments to reconcile net income to net cash                                                                             
  used in operating activities:                                                                                             
  Provision for possible credit losses..............................................      4,387        59,644       276,926 
  Depreciation and amortization.....................................................        420           663         4,393 
  Gain on sales of loans............................................................    (34,009)     (170,679)     (606,992)
  Changes in operating assets and liabilities:                                                                              
    Interest only strip amortization................................................        488        13,392        61,610 
    Loans originated or acquired....................................................   (208,710)   (1,662,943)   (4,132,778)
    Principal collected and proceeds from sale of loans.............................    203,840     1,257,526     3,101,788 
    Accrued interest receivable.....................................................        458        (3,030)      (10,745)
    Interest only strips, net.......................................................      1,365          (198)       17,763 
    Servicing assets, net...........................................................     --           --            (39,719)
    Receivable from trusts..........................................................     (2,418)      (33,324)     (126,576)
    Subordinated certificates.......................................................     (1,313)      (15,215)       (1,519)
    Other assets....................................................................     (1,049)       (7,845)      (24,737)
    Accounts payable and accrued liabilities........................................      2,382        12,303        10,517 
    Deferred tax liabilities, net...................................................      2,111        18,842        98,381 
    Other...........................................................................        484       --              1,832 
                                                                                     ----------  ------------  ------------ 
NET CASH USED IN OPERATING ACTIVITIES...............................................    (25,724)     (496,652)   (1,230,687)
INVESTING ACTIVITIES:                                                                                                       
Cash from acquisitions..............................................................        625           252        15,055 
Purchases of available for sale securities..........................................     --           --             (8,887)
Proceeds from sale of available for sale securities.................................     --           --             24,730 
Purchases of equipment and leasehold improvements...................................       (761)       (4,447)      (20,853)
Other...............................................................................         22       --              1,909 
                                                                                     ----------  ------------  ------------ 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES.................................       (114)       (4,195)       11,954 

FINANCING ACTIVITIES:                                                                                                       
Borrowings on warehouse financing, net..............................................     10,436       324,892       839,053 
Borrowings on term lines............................................................      9,249        48,216       136,712 
Borrowings on bonds.................................................................     --           --            174,088 
Borrowings on other facilities, net.................................................        222           876        16,581 
Proceeds from subordinated notes payable to affiliates..............................      8,003       --            --      
Proceeds from convertible subordinated notes........................................     --           100,000       --      
Common stock issued.................................................................        500        51,211       125,238 
Other...............................................................................     (2,395)       (3,665)       (1,128)
                                                                                     ----------  ------------  ------------ 
NET CASH PROVIDED BY FINANCING ACTIVITIES...........................................     26,015       521,530     1,290,544 
                                                                                     ----------  ------------  ------------ 
INCREASE IN CASH....................................................................        177        20,682        71,811 
Cash and cash equivalents at beginning of year......................................      2,308         2,485        23,167 
                                                                                     ----------  ------------  ------------ 
Cash and cash equivalents at end of year............................................ $    2,485  $     23,167  $     94,978 
                                                                                     ----------  ------------  ------------ 
                                                                                     ----------  ------------  ------------ 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                           
Interest paid during the year....................................................... $    1,997  $     16,892  $     93,938 
                                                                                     ----------  ------------  ------------ 
                                                                                     ----------  ------------  ------------ 
Non-cash investing activities:                                                                                              
Acquisition of assets, net.......................................................... $    2,312  $    --       $    --      
                                                                                     ----------  ------------  ------------ 
                                                                                     ----------  ------------  ------------ 

See accompanying notes

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1997

1. DESCRIPTION OF BUSINESS AND ACQUISITIONS                                     

FIRSTPLUS Financial Group, Inc., a Nevada corporation (together with its
subsidiaries, the "Company") is a specialized consumer finance company that     
originates, purchases, services and sells consumer finance receivables. The     
Company's principal loan product is a debt consolidation or home improvement    
loan secured by a second lien on real property ("High LTV Loans"). The Company  
sells substantially all of its High LTV Loans through its securitization program
and retains rights to service these loans.                                      

   In May 1996, 1,600,000 common shares of the Company were issued in exchange
for all of the outstanding common stock of Mortgage Plus Incorporated (MPI), in 
a transaction accounted for as a pooling of interests. MPI was subsequently     
renamed FIRSTPLUS Financial West, Inc. (FIRSTPLUS West). As such, the           
consolidated financial information of the Company was restated to include the   
accounts of FIRSTPLUS West for all periods presented. As FIRSTPLUS West was a   
Subchapter S corporation prior to the pooling with RAC, its retained earnings   
activity (net income (loss) and distributions) on a separate company basis has  
been reclassified to additional capital. Prior to the acquisition, FIRSTPLUS    
West operated on a fiscal year end of April 30. FIRSTPLUS West's prior years    
financial statements have been combined with the Company's financial statements 
without recasting the periods presented, except for the financial information as
of and for the fiscal years ended September 30, 1996 and 1995. Such combination 
results in operations for FIRSTPLUS West for the period from July 1, 1995       
through September 30, 1995 being excluded from the representation.              

   During fiscal 1997, FIRSTPLUS acquired National Loans, Inc. ("National"), a
consumer finance company on October 1, 1996, for 501,996 common shares; Capital 
Direct Funding Group, Inc. ("FIRSTPLUS Direct"), an originator of High LTV Loans
and other loans through direct mail marketing techniques on February 28, 1997,  
for 1,104,478 common shares. The Modern Financial Company ("Modern"), a consumer
finance company based in Columbus, Ohio was acquired on March 31, 1997, for     
380,038 common shares; Western Interstate Bancorp ("FIRSTPLUS Bank"), a Tustin, 
California-based industrial loan company on August 28, 1997, for 589,745 common 
shares; Freedom Mortgage Company ("FIRSTPLUS Freedom"), an originator of home   
equity loans and conforming first lien loans, on August 29, 1997, for 574,050   
common shares; and Southern Management Corporation ("SMC"), a consumer finance  
company based in Greenville, South Carolina on August 29, 1997 for 824,340      
common shares. All of the acquisitions in fiscal 1997 have been accounted for as
poolings-of-interests, and have been pooled from the first day of the quarter in
which they were acquired, except for FIRSTPLUS Bank. FIRSTPLUS Bank has been    
pooled beginning on October 1, 1996. Due to the immaterial impact of all these  
transactions, prior periods have not been restated.                             

2. SIGNIFICANT ACCOUNTING POLICIES                                              

PRINCIPLES OF CONSOLIDATION                                                     

The consolidated financial statements include the accounts of FIRSTPLUS 
Financial Group, Inc. and its wholly owned subsidiaries. All significant        
intercompany balances and transactions have been eliminated in consolidation.   

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                  
REVENUE RECOGNITION                                                             

In June 1996, the Financial Accounting Standards Board ("FASB") issued  
Statement of Financial Accounting Standards No. ("SFAS") 125 "Accounting for    
Transfer and Servicing of Financial Assets and Extinguishment of Liabilities."  
SFAS 125 distinguishes transfers of financial assets that are sales from        
transfers that are secured borrowings. SFAS 125 is generally effective for      
transactions that occur after December 31, 1996, and is to be applied           
prospectively. In applying SFAS 125 to the Company's securitized loan sales, the
Company is required to recognize revenue ("Net gain on securitized loan sales") 
and allocate the total cost of the High LTV Loans sold to the following         
financial components based on their relative fair values: High LTV Loans sold,  
retained subordinated certificates, interest only strips ("I/O Strips") and     
servicing rights. The Company adopted SFAS 125 as of January 1, 1997.           

 The Company retains an I/O Strip, which is certificated, which represents
the present value of the right to the excess cash flows generated by the        
securitized loans which represents the difference between (a) interest at the   
stated rate paid by borrowers and (b) the sum of (i) pass-through interest paid 
to third-party investors, (ii) trustee fees, (iii) FHA insurance fees (if       
applicable), (iv) third-party credit enhancement fees (if applicable), (v)      
stipulated servicing fees and (vi) estimated loan portfolio losses. The         
Company's right to receive this excess cash flow stream begins after certain    
reserve requirements have been met, which are specific to each securitization   
and used as a means of credit enhancement. The Company determines the present   
value of this anticipated cash flow stream at the time each securitization      
transaction closes, utilizing valuation assumptions appropriate for each        
particular transaction.                                                         

    The significant valuation assumptions are related to the anticipated average
lives of the loans sold, including the anticipated prepayment speeds and the    
anticipated credit losses related thereto. In order to determine the present    
value of this excess cash flow, the Company currently applies an estimated      
market discount rate of between 10% and 11% to the expected pro forma gross cash
flows, which is calculated utilizing the weighted average lives of the          
securitized loans, and currently applies a risk free discount rate of 6.5% to   
the anticipated losses attendant to this pro forma cash flow stream (the        
"Allowance for Possible Credit Losses on Loans Sold"). Accordingly, the overall 
effective discount rate utilized on the cash flows, net of expected credit      
losses is approximately 12.5%.                                                  

   The I/O Strips are accounted for under SFAS 115 "Accounting for Investments
in Certain Debt and Equity Marketable Securities." As an I/O Strip is subject to
significant prepayment risk, and therefore has an undetermined maturity date, it
cannot be classified as held to maturity. The Company has chosen to classify its
I/O Strips as available for sale securities. Based on this classification, the  
Company is required to mark these securities to fair value with the accompanying
increases or decreases in fair value being recorded as a separate component of  
stockholders' equity, net of tax. The determination of fair value is based on   
the previously mentioned basis.                                                 

As the gain recognized in the year of sale is equal to the net estimated
future cash flows from the I/O Strips, discounted at a market interest rate, the
amount of cash actually received over the lives of the loans is expected to     
exceed the gain previously recognized at the time the loans are sold. The I/O   
Strips are amortized based on an accelerated method against the cash flows      
resulting in income recognition that is not materially different from the       
interest method.                                                                

 The Company generally retains the right to service loans it originates or
purchases and subsequently securitizes. Fees for servicing loans are based on a 
stipulated percentage (generally 0.75%) of the unpaid                           

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                  
principal balance of the associated loans. For loan portfolios securitized prior
to the adoption of SFAS 125, the Company recognized servicing fee income, late  
charges and other ancillary income when collected and charged costs to service  
loans when incurred. With the adoption of SFAS 125, the Company recognizes a    
servicing asset as part of its gain on securitized loan sales. The servicing    
asset is calculated as the present value of the expected future net servicing   
revenue based on common industry assumptions as well as on the Company's        
historical experience. These assumptions include default and prepayment speeds. 

On a quarterly basis, the Company assesses the carrying value of its I/O
Strips and servicing assets for impairment. There can be no assurance that the  
Company's estimates used to determine the gain on securitized loan sales, I/O   
Strips and servicing assets valuations will remain appropriate for the life of  
each securitization. If actual loan prepayments or defaults exceed the Company's
estimates, the carrying value of the Company's I/O Strips and/or servicing      
assets may be decreased or the Company may increase its allowance for possible  
credit losses on loans sold through a charge against earnings during the period 
management recognizes the disparity. Other factors may also result in a         
writedown of the Company's I/O Strips in subsequent periods. As of September 30,
1997, the Company determined that no such impairment existed.                   

    With the adoption of SFAS 125, the Company reclassified certain items on its
balance sheet and income statements. On the balance sheet, the Excess Servicing 
Receivable presented in prior periods has been reclassified as I/O Strips and   
the allowance for possible credit losses on loans sold has been reclassified    
from the liabilities section and presented as a contra asset to the I/O Strips. 
In the income statement, the provision for possible credit losses on securitized
loans sold is now shown as a reduction of the gains on sales of securitized     
loans, net of costs.                                                            

Interest income from loans is recognized using the interest method.     

 Origination fees, premiums, and discounts are deferred when collected and
are recognized using an average allocation methodology when the loans are sold, 
which is typically within six months of origination.                            

CASH EQUIVALENTS                                                                

    The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.                           

LOANS HELD FOR SALE                                                             

  Loans held for sale are carried at the lower of cost or market. Typically,
the Company obtains a second lien as collateral.                                

RECEIVABLE FROM TRUSTS                                                          

The Company is required to maintain cash and other collateral with the  
trustees for the Trusts equal to a set percentage of the par value of the       
securitized portfolio to supplement unanticipated shortfalls in payments to     
certificate holders (the Receivable from Trusts). The certificate holders'      
recourse to the Company is limited to this required reserve balance and the     
Receivable related to the specific securitization. Cash on deposit is invested  
in certain short-term instruments as permitted by each Trust's pooling and      
servicing agreement. To the extent that amounts on deposit exceed specified     
levels, distributions are made                                                  

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                  
to the Company. Upon maturity of the certificates, any remaining amounts on     
deposit are distributed to the Company.                                         

ALLOWANCE FOR POSSIBLE CREDIT LOSSES ON LOANS HELD FOR SALE                     

  The provision for credit losses is charged to income in amounts sufficient
to maintain the allowance at a level considered adequate to cover anticipated   
losses resulting from liquidation of outstanding loans. The allowance for credit
losses is based upon periodic analysis of the portfolio, economic conditions and
trends, historical credit loss experience, borrowers' ability to repay, and     
collateral values. The Company charges off defaulted loans when the loans are   
deemed to be uncollectible.                                                     

FURNITURE, EQUIPMENT, LEASEHOLD IMPROVEMENTS AND GOODWILL                       

Depreciable assets are stated at cost less accumulated depreciation.    
Equipment is depreciated using a straight-line method based on estimated useful 
lives ranging from 1 to 5 years. Leasehold improvements are amortized over the  
life of the lease or asset whichever is shorter.                                

Goodwill is amortized on a straight-line basis over ten years.          

INCOME TAXES                                                                    

Federal and state income taxes are accounted for utilizing the liability
method, and deferred tax assets and liabilities are determined based on         
differences between financial reporting and tax bases of assets and liabilities 
and are measured using enacted tax rates and laws that will be in effect when   
the differences are expected to reverse.                                        

ADVERTISING                                                                     

 Advertising costs are expensed as incurred. During fiscal 1995, 1996, and
1997, the Company incurred advertising costs of $130,000, $2.5 million and $45.8
million, respectively.                                                          

RISK MANAGEMENT                                                                 

    Derivatives involve, to varying degrees, credit and market risk. With regard
to credit risk, the Company may be exposed to loss in the event of              
non-performance by a counterparty. The Company controls credit risk by entering 
into derivative contracts only with highly credit rated counterparties and      
through credit approvals, limits and monitoring procedures. The Company has not 
experienced non-performance by any counterparty.                                

 Market risk is the possibility that a change in interest rates will cause
the value of a financial instrument to decrease or its obligations to become    
more costly to settle. When derivatives are used for the purpose of risk        
management they generally do not expose the Company to market risk because gains
and losses on the derivatives largely offset losses and gains on the asset,     
liability or transaction being hedged.                                          

  The level of and fluctuation in interest rates and the level of prepayment
in the Company's securitizations may directly affect the Company's earnings. The
interest rates on the Company's debt used to fund and acquire loans are variable
and the rates charged on the loans the Company originates or purchases are      
fixed. While the Company monitors the interest rate environment and employs     
fixed rate                                                                      

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                  
hedging strategies, changes in interest rates after loans are originated or     
purchased and prior to their sale could have a material adverse impact on the   
Company's results or operations and financial condition. In addition, increase  
in interest rates prior to the sale of the loans may reduce the gain on         
securitized loan sales. The current fixed rate hedge products utilized are the  
purchases of United States Treasury put options, and selling short on United    
States treasuries. Members of the Company's senior management determine the     
amount and timing of hedging transactions. At September 30, 1997, the Company   
had open hedging positions with notional balances of $100 million.              

The Company also mitigates its exposure to interest rate risk through a 
pre-funding strategy in which it agrees to sell loans to the securitization     
trust in the future at an agreed-upon price. The pre-funding locks in the price 
agreed upon with investors on the pricing date (typically five business days    
prior to the closing date of the securitization) for a period of generally 60   
days or less. In a pre-funding arrangement, the Company typically delivers      
approximately 75% of the loans sold at the closing and the remainder generally  
within 30 days after the closing.                                               

EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE                                 

Primary earnings per common and common equivalent share are computed by 
dividing net income less preferred dividends by the weighted average number of  
shares of Common Stock and Common Stock equivalents outstanding for the period. 
Common Stock equivalents consist of the dilutive effect of Common Stock which   
may be issued assuming exercise of stock options or warrants for the period such
options or warrants were outstanding, using the treasury stock method. Fully    
diluted earnings per share reflect the dilutive effect of Common Stock that may 
be issued, assuming conversion of the convertible subordinated notes and        
exercise of stock options and warrants.                                         

USE OF ESTIMATES                                                                

The preparation of financial statements in conformity with generally    
accepted accounting principles requires management to make estimates and        
assumptions that affect the amounts reported in the financial statements and    
accompanying notes. Actual results could differ from those estimates.           

RECLASSIFICATIONS                                                               

Certain items for fiscal 1995 and fiscal 1996 have been reclassified to 
conform to current year presentation.                                           

RECENT ACCOUNTING ANNOUNCEMENTS                                                 

In February 1997, the FASB issued SFAS 128, "Earnings Per Share" ("SFAS 
128") which establishes standards for computing and presenting earnings per     
share ("EPS") by replacing the presentation of primary EPS with a presentation  
of basic EPS. Primary EPS includes common stock equivalents while basic EPS     
excludes them. This change simplifies the computation of EPS. It also requires  
dual presentation of basic and fully diluted EPS on the face of the income      
statement for all entities with complex capital structures. The Company will    
adopt SFAS 128 effective December 31, 1997 and does not expect the adoption of  
SFAS 128 to have a material impact on its financial statements.                 

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                  
    In February 1997, the FASB issued SFAS 129, "Disclosure of Information about
Capital Structure" ("SFAS 129"). SFAS 129 establishes disclosure requirements   
regarding pertinent rights and privileges of outstanding securities. Examples of
disclosure items regarding securities include, though are not limited to, items 
such as dividend and liquidation preferences, participation rights, call prices 
and dates, conversion or exercise prices or rates. The number of shares issued  
upon conversion, exercise or satisfaction of required conditions during at least
the most recent annual fiscal period and any subsequent interim period must also
be disclosed. Disclosure of liquidation preferences of preferred stock in the   
equity section of the Balance Sheet is also required. SFAS 129 is effective for 
financial periods beginning after December 15, 1997.                            

   In June 1997, FASB issued SFAS 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes disclosure standards for reporting comprehensive    
income in a full set of general purpose financial statements. SFAS 130 is       
effective for fiscal years beginning after December 15, 1997. The adoption of   
this standard is not expected to have an impact on the Company's financial      
position or results of operations.                                              

 In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131") which is effective for periods 
beginning after December 15, 1997. SFAS 131 establishes standards for the way   
that public business enterprises report information about operating segments in 
annual financial statements and requires that those enterprises report selected 
information about operating segments in interim financial reports issued to     
stockholders. It also establishes standards for related disclosures about       
products and services, geographic areas and major customers. The adoption of    
this standard is not expected to have an impact on the Company's financial or   
results of operation.                                                           

3. SECURITIES                                                                   

  The following is a summary of available for sale securities (excluding I/O
Strips):                                                                        

                                                        [Enlarge/Download Table]

                                                                 SEPTEMBER 30, 1997                 
                                                ----------------------------------------------------
                                                               GROSS          GROSS                 
                                                            UNREALIZED     UNREALIZED     ESTIMATED 
                                                  COST         GAINS         LOSSES      FAIR VALUE 
                                                ---------  -------------  -------------  -----------
                                                               (AMOUNTS IN THOUSANDS)               
                                                                                                    
U.S. Government and agency obligations......... $  37,983    $      79      $     (36)    $  38,026 
Other debt securities..........................     2,927           55            (13)        2,969 
                                                ---------        -----            ---    -----------
Total debt securities.......................... $  40,910    $     134      $     (49)    $  40,995 
                                                ---------        -----            ---    -----------
                                                ---------        -----            ---    -----------

                                                        [Enlarge/Download Table]

                                                                          SEPTEMBER 30, 1997   
                                                                       ------------------------
                                                                                     ESTIMATED 
                                                                          COST      FAIR VALUE 
                                                                       -----------  -----------
                                                                        (AMOUNTS IN THOUSANDS) 
                                                                                               
Due in one year or less...............................................  $  21,321    $  21,294 
Due after one year through five years.................................      1,277        1,284 
Due after five years..................................................     18,312       18,417 
                                                                       -----------  -----------
                                                                        $  40,910    $  40,995 
                                                                       -----------  -----------
                                                                       -----------  -----------

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

4. LOANS HELD FOR SALE                                                          

The components of loans held for sale are as follows:                   

                                                        [Enlarge/Download Table]

                                                                           SEPTEMBER 30       
                                                                     ------------------------ 
                                                                        1996         1997     
                                                                     ----------  ------------ 
                                                                      (AMOUNTS IN THOUSANDS)  
                                                                                              
High LTV Loans...................................................... $  421,646  $  1,310,576 
Personal consumer...................................................     --            93,172 
Conforming first lien mortgages.....................................     --            16,488 
Other...............................................................      3,541        14,581 
                                                                     ----------  ------------ 
  Subtotal..........................................................    425,187     1,434,817 
Allowance for possible credit losses................................     (6,495)      (31,539)
Deferred finance charges............................................     --           (16,568)
Net purchase premiums...............................................     12,120        13,736 
                                                                     ----------  ------------ 
  Total............................................................. $  430,812  $  1,400,446 
                                                                     ----------  ------------ 
                                                                     ----------  ------------ 

The serviced loan portfolio, which includes the High LTV Loans held for 
sale, the High LTV Loans serviced for the securitizations and other investors,  
totaled $4.7 billion at September 30, 1997.                                     

5. ALLOWANCE FOR POSSIBLE CREDIT LOSSES                                         

 The activity in the allowance for possible credit losses is summarized as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                                        YEAR ENDED SEPTEMBER  
                                                                                 30           
                                                                        --------------------- 
                                                                          1996        1997    
                                                                        ---------  ---------- 
                                                                             (AMOUNTS IN      
                                                                             THOUSANDS)       
                                                                                              
Balance, beginning of year............................................. $   4,794  $   60,752 
Provision for possible credit losses...................................    59,644     276,926 
Charge-offs, net.......................................................    (3,902)    (35,544)
Other..................................................................       216       8,592 
                                                                        ---------  ---------- 
Balance, end of year................................................... $  60,752  $  310,726 
                                                                        ---------  ---------- 
                                                                        ---------  ---------- 
Components of Allowance:                                                                      
Allowance for possible credit losses on loans held for sale............ $   6,495  $   31,539 
Allowance for possible credit losses on loans sold.....................    54,257     279,187 
                                                                        ---------  ---------- 
Total.................................................................. $  60,752  $  310,726 
                                                                        ---------  ---------- 
                                                                        ---------  ---------- 

At September 30, 1996 and 1997, the gross allowance for possible credit 
losses on loans sold of $69.6 million and $372.5 million, respectively, was     
recorded at a discount using a risk-free discount rate of 6.5%.                 

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

6. INTEREST ONLY STRIPS                                                         

The activity in the I/O Strips is summarized as follows:                

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED SEPTEMBER 30 
                                                                      ----------------------- 
                                                                         1996        1997     
                                                                      ----------  ----------- 
                                                                      (AMOUNTS IN THOUSANDS)  
                                                                                              
Balance, beginning of year........................................... $   29,744  $   187,230 
Gains on sales of securitized loans..................................    170,679      608,548 
Amortization.........................................................    (12,982)     (61,707)
Other................................................................       (211)       1,239 
                                                                      ----------  ----------- 
Balance, end of year.................................................    187,230      735,310 
Allowance for possible credit losses.................................    (54,257)    (279,187)
                                                                      ----------  ----------- 
Balance, net......................................................... $  132,973  $   456,123 
                                                                      ----------  ----------- 
                                                                      ----------  ----------- 

7. OTHER ASSETS                                                                 

Other assets consists of the following:                                 

                                                        [Enlarge/Download Table]

                                                                             SEPTEMBER 30    
                                                                         --------------------
                                                                           1996       1997   
                                                                         ---------  ---------
                                                                             (AMOUNTS IN     
                                                                              THOUSANDS)     
                                                                                             
Goodwill, net........................................................... $     424  $     853
Debt offering costs.....................................................     3,112      1,767
Furniture, equipment and leasehold improvements, net....................     5,497     26,012
Prepaids and other......................................................    11,509     37,792
                                                                         ---------  ---------
                                                                         $  20,542  $  66,424
                                                                         ---------  ---------
                                                                         ---------  ---------

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

8. DEBT                                                                         

                                                        [Enlarge/Download Table]

                                                        SEPTEMBER 30, 1996        SEPTEMBER 30, 1997   
                                                      -----------------------  ------------------------
                                                      AMOUNT OF   OUTSTANDING  AMOUNT OF   OUTSTANDING 
LENDER AND INTEREST RATE                               FACILITY     BALANCE     FACILITY     BALANCE   
----------------------------------------------------  ----------  -----------  ----------  ------------
                                                                                                       
                                                                   (AMOUNTS IN THOUSANDS)              
WAREHOUSE FINANCING                                                                                    
Bank One, Texas, N.A., Fed Funds + 1.0%.............  $   60,000   $  50,968   $  110,000  $     79,580
Residential Funding Corp; LIBOR + 1.5%..............     130,000     116,445      145,000        31,262
REPURCHASE AGREEMENTS                                                                                  
Bear Stearns Home Equity Trust 1996-1; LIBOR +                                                         
  1.0%..............................................     300,000     144,564      600,000       317,712
PaineWebber Real Estate Securities Inc.; LIBOR +                                                       
  1.0%..............................................      --          --          600,000       412,334
Merrill Lynch Mortgage Capital Inc.; LIBOR + 1.0%...      --          --          400,000       278,187
Industrial Bank of Japan; LIBOR + 2.0%..............      --          --                         16,798
Other; various......................................                  42,504                    102,283
                                                                  -----------              ------------
                                                                   $ 354,481               $  1,238,156
                                                                  -----------              ------------
                                                                  -----------              ------------

                                                        [Enlarge/Download Table]

                                                        SEPTEMBER 30, 1996        SEPTEMBER 30, 1997   
                                                      -----------------------  ------------------------
                                                      AMOUNT OF   OUTSTANDING  AMOUNT OF   OUTSTANDING 
LENDER AND INTEREST RATE                               FACILITY     BALANCE     FACILITY     BALANCE   
----------------------------------------------------  ----------  -----------  ----------  ------------
                                                                   (AMOUNTS IN THOUSANDS)              
                                                                                                       
TERM LINES                                                                                             
Bear Stearns and Co. Inc.; LIBOR + 2.25%............      --          --       $   75,000  $     55,500
PaineWebber Real Estate Securities Inc.; LIBOR +                                                       
  2.1%..............................................      --          --          100,000        66,000
Merrill Lynch Mortgage Capital, Inc.; LIBOR +                                                          
  2.25%.............................................      --          --           75,000       --     
Residential Funding Corp.; GMAC CD Rate + 2.5%......      70,000      57,465       70,000        51,200
Other; various......................................                  --                         39,051
                                                                  -----------              ------------
                                                                   $  57,465               $    211,751
                                                                  -----------              ------------
                                                                  -----------              ------------

 The warehouse financing and term lines are generally renewable within one
year.                                                                           

TIME DEPOSITS                                                                   

The Company, through FIRSTPLUS Bank, has various time deposits, mostly  
Certificates of Deposits, from customers bearing interest rates of 3.75% to     
7.50%.                                                                          

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

8. DEBT (CONTINUED)                                                             
BONDS                                                                           

    The Company has a committed borrowing arrangement that allows the Company to
warehouse up to                                                                 
$200 million of loans for a period of up to a year bearing interest at LIBOR +  
0.575%. These loans are classified as investment in securitized loans.          

CONVERTIBLE SUBORDINATED NOTES                                                  

    In August 1996, the Company issued the Convertible Subordinated Notes in the
aggregate principal amount of $100 million. The Convertible Subordinated Notes  
mature in August 2003 and bear interest at 7.25%, and, as of September 30, 1997,
are convertible into 4,289,571 shares of common stock at a conversion price of  
$16.30 per share.                                                               

    Maturities of long-term debt for years subsequent to September 30, 1997, are
as follows (amounts in thousands).                                              

                                                                [Download Table]
                                                            
1998............................................  $1,246,557
1999............................................    508,627 
2000............................................     16,855 
2001............................................      3,509 
2002............................................      6,741 
Thereafter......................................     70,972 
                                                  --------- 
                                                  $1,853,261
                                                  --------- 
                                                  --------- 

In conjunction with the various borrowings, the Company has agreed to   
certain financial covenants regarding tangible net worth and leverage. In       
addition, FIRSTPLUS Financial is restricted from transferring the I/O Strips to 
FIRSTPLUS or any of its subsidiaries.                                           

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

9. INCOME TAXES                                                                 

The provision for income taxes consists of the following:               

                                                        [Enlarge/Download Table]

                                                                         YEAR ENDED SEPTEMBER
                                                                                  30         
                                                                         --------------------
                                                                           1996       1997   
                                                                         ---------  ---------
                                                                             (AMOUNTS IN     
                                                                              THOUSANDS)     
                                                                                             
Current:                                                                                     
  Federal............................................................... $   1,884  $  --    
  State.................................................................       222        157
                                                                         ---------  ---------
                                                                             2,106        157
                                                                         ---------  ---------
Deferred:                                                                                    
  Federal...............................................................    16,878     79,777
  State.................................................................     1,985      5,377
                                                                         ---------  ---------
                                                                            18,863     85,154
                                                                         ---------  ---------
                                                                         $  20,969  $  85,311
                                                                         ---------  ---------
                                                                         ---------  ---------

   The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities are as follows:                                          

                                                        [Enlarge/Download Table]

                                                                        YEAR ENDED SEPTEMBER 
                                                                                 30          
                                                                        ---------------------
                                                                          1996        1997   
                                                                        ---------  ----------
                                                                             (AMOUNTS IN     
                                                                             THOUSANDS)      
                                                                                             
Deferred tax assets:                                                                         
  Allowance for possible credit losses................................. $   2,566  $   11,985
  Other................................................................    --             751
                                                                        ---------  ----------
                                                                            2,566      12,736
Deferred tax liabilities:                                                                    
  I/O Strips...........................................................    23,455     118,377
  Servicing assets.....................................................    --          13,591
  Other................................................................        85         123
                                                                        ---------  ----------
                                                                           23,540     132,091
                                                                        ---------  ----------
Net deferred tax liabilities........................................... $  20,974  $  119,355
                                                                        ---------  ----------
                                                                        ---------  ----------

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

9. INCOME TAXES (CONTINUED)                                                     
  A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:                                               

                                                        [Enlarge/Download Table]

                                                                               YEAR ENDED SEPTEMBER 
                                                                                        30          
                                                                               -------------------- 
                                                                                 1996       1997    
                                                                               ---------  --------- 
                                                                                                    
Statutory rate................................................................      35.0%      35.0%
State tax, net of federal benefit.............................................       3.0        2.2 
Other.........................................................................    --            0.8 
                                                                               ---------  --------- 
                                                                                    38.0%      38.0%
                                                                               ---------  --------- 
                                                                               ---------  --------- 

10. STOCKHOLDERS' EQUITY                                                        

    On October 22, 1996, the Company's Board of Directors approved a two-for-one
common stock split. The split, effectuated as a stock dividend of one newly     
issued share of common stock for each share of common stock outstanding, was    
effective for shareholders of record at the close of business on November 15,   
1996, and payable on November 29, 1996. Par value remained at $0.01 per share.  
Financial information contained in these financial statements has been adjusted 
to reflect the impact of the common stock split.                                

  As of September 30, 1997, the Company had outstanding warrants to purchase
500,000 shares of the common stock at an exercise price of $7.00 per share. The 
warrants were associated with the issuance of certain subordinated notes.       

11. STOCK COMPENSATION PLANS                                                    

The Company has stock options outstanding to participants under the 1995
Employee Stock Option Plan. The 1995 Employee Stock Option Plan provides for    
grants of incentive stock options (Incentive Options) and nonqualified stock    
options (Nonqualified Options) to all eligible employees of the Company and its 
subsidiaries. All Incentive Options will have an exercise price per share no    
less than the market value of the Company's Common Stock on the date the option 
is granted. Nonqualified Options may be granted with an exercise price per share
less than fair market value of the Common Stock at the date of grant. No options
under the 1995 Employee Option Plan may be exercised more than ten years from   
the date of grant. A maximum of 3,200,000 shares of Common Stock have been      
reserved for sale upon exercise of options under this plan.                     

The Company has stock options outstanding to participants under the 1995
Non-Employee Director Plan to grant options to members of the Board of Directors
who are not employees of the Company or its subsidiaries on the date they become
a director. Each non-employee director, at the time the 1995 Non-Employee       
Director Plan was adopted, received an option to purchase 10,000 shares of      
Common Stock (Initial Option) at the initial public offering price less the     
underwriters' discount. Subsequently, on the date of each annual stockholder's  
meeting, the director will receive a nonqualified stock option to purchase 2,000
shares of Common Stock with an exercise price equal to the fair market value of 
the Common Stock on the date of grant. A maximum of 100,000 shares of Common    
Stock have been reserved under the 1995 Director Plan.                          

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

11. STOCK COMPENSATION PLANS (CONTINUED)                                        
The Company has an employee stock purchase plan, the FIRSTPLUS Financial
Group, Inc. Employee Stock Purchase Plan ("Purchase Plan"), with a total number 
of common shares issuable of 500,000. The Purchase Plan provides a means for    
employees to purchase shares of Common Stock at 85% of the fair market value.   

Changes in options outstanding are as follows:                          

                                                        [Enlarge/Download Table]

                                                                YEARS ENDED SEPTEMBER 30               
                                                 ------------------------------------------------------
                                                                                        1997           
                                                            1996              -------------------------
                                                 ---------------------------                WEIGHTED-  
                                                                WEIGHTED-                    AVERAGE   
                                                 NUMBER OF       AVERAGE      NUMBER OF     EXERCISE   
                                                   SHARES    EXERCISE PRICE     SHARES        PRICE    
                                                 ----------  ---------------  ----------  -------------
                                                                                                       
Options outstanding at beginning of                                                                    
  year..........................................     --         $  --          1,457,358    $    9.34  
Options granted.................................  1,476,006          9.31      1,805,848        26.90  
Option canceled.................................     18,648          7.00        178,159        17.38  
Options exercised...............................     --            --            300,741         8.49  
                                                 ----------                   ----------               
Options outstanding at end of year..............  1,457,358          9.34      2,784,306        20.31  
                                                 ----------                   ----------               
                                                 ----------                   ----------               
Options exercisable.............................     10,000         12.75        388,342        13.55  
                                                 ----------                   ----------               
                                                 ----------                   ----------               

The following table summarizes information about options outstanding at 
September 30, 1997:                                                             

                                                        [Enlarge/Download Table]

                                                                                      WEIGHTED AVERAGE     
                                                   NUMBER OF   WEIGHTED AVERAGE   REMAINING CONTRACTED LIFE
                                                     SHARES     EXERCISE PRICE           (IN YEARS)        
                                                   ----------  -----------------  -------------------------
                                                                                                           
Exercise prices:                                                                                           
  $5.00 - $12.00                                                                                           
  Options outstanding.............................    972,605      $    7.87                    8.2        
  Options exercisable.............................    276,146      $    7.90                               

  $12.01 - $24.00                                                                                          
  Options outstanding.............................  1,013,851      $   21.12                    8.3        
  Options exercisable.............................     54,194      $   15.50                               

  $24.01 - $36.00                                                                                          
  Options outstanding.............................    659,400      $   32.26                    9.4        
  Options exercisable.............................     24,667      $   30.61                               

  $36.01 - $48.00                                                                                          
  Options outstanding.............................    126,450      $   44.29                    9.9        
  Options exercisable.............................     33,335      $   44.50                               

  $48.01 - $50.88                                                                                          
  Options outstanding.............................     12,000      $   50.20                    8.3        
  Options exercisable.............................     --          $  --                                   

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

11. STOCK COMPENSATION PLANS (CONTINUED)                                        
In October 1995, SFAS 123 "ACCOUNTING FOR STOCK-BASED COMPENSATION" was 
issued. This statement established a new fair value-based accounting method for 
stock-based compensation plans and encourages (but does not require) employers  
to adopt the new method in place of the provisions of Accounting Principles     
Board Opinion No. 25 "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" ("APB 25").     
Companies may continue to apply the accounting provisions of APB 25 in          
determining net income; however, they must apply the disclosure requirements of 
SFAS 123 for all grants issued after 1994. The Company elected to continue to   
apply the provisions of APB 25 in accounting for the employee stock plans       
described above. Accordingly, no compensation cost has been recognized.         

  Had compensation cost for these employee stock plans been determined based
on the new fair value method under SFAS 123, the Company's net income and net   
income per share would have been reduced to the pro forma amounts indicated as  
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                                        YEARS ENDED SEPTEMBER
                                                                                 30          
                                                                        ---------------------
                                                                          1996        1997   
                                                                        ---------  ----------
                                                                             (AMOUNTS IN     
                                                                        THOUSANDS, EXCEPT PER
                                                                             SHARE DATA)     
                                                                                             
Net income:                                                                                  
  As reported.......................................................... $  34,212  $  139,169
  Pro forma............................................................    31,670     120,833
Net income per common share:                                                                 
  Primary:                                                                                   
    As reported........................................................ $    1.35  $     3.95
    Pro forma.......................................................... $    1.25  $     3.43
  Fully diluted:                                                                             
    As reported........................................................ $    1.31  $     3.52
    Pro forma.......................................................... $    1.22  $     3.07

    The fair value of each option grant is estimated based on the date of grant.
In determining the fair value, the Company used a modified Black-Scholes        
option-pricing model. For the fixed stock option plans, the following           
weighted-average assumptions are used for 1996 and 1997, respectively, expected 
volatility of 41.5% and 56.6%; risk-free interest rates of 6.3% and 5.9%; and   
expected lives of five years for both years. The weighted-average grant-date    
fair value of options granted are $4.47 and $17.21 for the years ended September
30, 1996 and 1997, respectively. Because options vest over several years and    
additional option grants are expected, the effect of pro forma calculations are 
not likely to be representative of similar future calculations.                 

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

12. GAINS ON SALES OF LOANS                                                     

   The gains on sales of loans, as defined in Note 2, and the related cost are
as follows:                                                                     

                                                        [Enlarge/Download Table]

                                                                YEAR ENDED SEPTEMBER 30       
                                                           ---------------------------------- 
                                                             1995        1996        1997     
                                                           ---------  ----------  ----------- 
                                                                 (AMOUNTS IN THOUSANDS)       
                                                                                              
Gains on sales of securitized loans....................... $  30,065  $  170,679  $   606,992 
Servicing assets--basis allocation........................    --          --           36,686 
Unrealized gains on I/O Strips............................    --          --          (37,904)
Premiums, net.............................................    (1,994)    (20,836)     (75,093)
Transaction costs.........................................    (3,474)     (7,410)     (11,255)
                                                           ---------  ----------  ----------- 
Net gain before provision for possible credit losses on                                       
  securitized loan sales..................................    24,597     142,433      519,426 
Provision for possible credit losses on securitized loan                                      
  sales...................................................    (3,907)    (48,397)    (231,211)
                                                           ---------  ----------  ----------- 
Net gain on securitized loan sales........................ $  20,690  $   94,036  $   288,215 
                                                           ---------  ----------  ----------- 
                                                           ---------  ----------  ----------- 

13. TRANSACTIONS WITH AFFILIATES                                                

  In December 1994, the Company repurchased certain loan participations from
an affiliate, Farm Bureau, and other investors at par value. The repurchased    
loans were sold in a securitization transaction. The affiliate received a       
participation interest in the securitization. The affiliate held $2.6 million of
loan participations. These participations were subsequently repurchased by the  
Company.                                                                        

    The Company has a warehouse facility with Bank One, an affiliate of Banc One
Capital Partners II and Banc One Capital Partners V, which are stockholders of  
the Company.                                                                    

The Company has issued the 12% fixed rate subordinated notes to Banc One
Capital Partners II, Banc One Capital Partners V, and Farm Bureau.              

Additionally, the Company used Bear, Stearns & Co. Inc., as co-placement
agent in the Company's 1995-4, 1996-1, 1996-2, 1996-3, 1996-4, 1997-1, 1997-2,  
and 1997-3 securitization transactions. The Company also is provided financing  
through the Bear Stearns Facility. A managing director from Bear, Stearns & Co. 
Inc., is a director of the Company.                                             

  The Company had a credit facility with Farm Bureau, which is a stockholder
of the Company.                                                                 

14. EMPLOYEE BENEFIT PLANS                                                      

 The Company has an Employees' 401(k) Savings Plan (the Plan) for eligible
employees. An employee is eligible to participate in the Plan after employment  
of at least one month.                                                          

    Participants may elect to make contributions to the Plan in amounts equal to
not less than 1% nor more than 15% of their eligible compensation. The Company  
may elect to match elective contributions up to a maximum of 4% of the          
participant's eligible compensation. The Company has made no such contributions 
for the fiscal year ended September 30, 1997.                                   

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

15. COMMITMENTS AND CONTINGENCIES                                               

The Company leases premises and equipment under operating leases with   
various expiration dates. Approximate future minimum lease payments are as      
follows:                                                                        

                                                                [Download Table]

                                                               SEPTEMBER 30, 1997  
                                                             ----------------------
                                                             (AMOUNTS IN THOUSANDS)
                                                                                   
1998........................................................      $     16,907     
1999........................................................            16,347     
2000........................................................            12,417     
2001........................................................             7,486     
2002........................................................             5,863     
Thereafter..................................................            43,926     
                                                                      --------     
Total.......................................................      $    102,946     
                                                                      --------     
                                                                      --------     

Rent expense for the years ended September 30, 1995, 1996 and 1997 was  
approximately $715,000, $2.8 million and $5.9 million, respectively.            

  The Company is involved in certain litigation arising in the normal course
of business. Management's opinion is that the resolution of such litigation will
not have a material adverse effect on the Company's financial condition.        

16. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK        

  In certain securitization transactions, the Company subordinates a portion
of its residual interest in excess cash flows to investors. The investors'      
protection from losses is provided by the subordination of the Company's cash   
flows including various combinations of cash deposits and credit enhancements   
provided by third parties, primarily attendant monoline insurance policies.     
These balances are classified as receivables from trusts on the Company's       
balance sheet. In senior subordinated structures, the senior certificate holders
are protected from losses by outstanding subordinated certificates.             

The Company is active in originating loans to customers throughout the  
United States. All loans are primarily made on a secured basis after reviewing  
each potential borrower's credit application and evaluating their financial     
history and ability to repay.                                                   

    Approximately 41.2% of the loans in the Company's serviced loan portfolio at
September 30, 1997 was secured by residential properties located in California. 
No other state accounted for more than 10%.                                     

   SFAS 107, "DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS," requires
the Company to disclose the estimated fair value of its financial instruments.  
The fair value estimates as of September 30, 1996 and 1997 are based on         
pertinent information available to management as of the respective dates.       
Although management is not aware of any factors that would significantly affect 
the estimated fair value amounts, such amounts have not been revalued for       
purposes of these financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts presented     
herein. The following describes the methods and assumptions used by the Company 
in estimating fair values:                                                      

CASH AND CASH EQUIVALENTS.  The carrying amount of cash and cash        
equivalents, approximates fair value because they generally mature in 90 days or
less and do not present unanticipated credit concerns.                          

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

16. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK        
(CONTINUED)                                                                     
    SECURITIES, AVAILABLE FOR SALE.  The fair value of securities are determined
based on the quoted market price of the listed securities at year end.          

 LOANS HELD FOR SALE AND INVESTMENT IN SECURITIZED LOANS.  Since it is the
Company's business to sell loans it originates, the fair values were estimated  
using current investor yields or outstanding commitments from investors.        

I/O STRIPS AND SERVICING ASSET.  The fair values of the I/O Strips and  
servicing assets are calculated using prepayment, default and interest rate     
assumptions that the Company believes market participants would use for similar 
instruments at the time of sale. Projected performance is monitored on an       
ongoing basis.                                                                  

   WAREHOUSE FINANCING, TERM LINES AND BONDS.  The fair value of the warehouse
financing facilities and term lines of credit approximate the carrying value as 
the instruments carry variable rates of interest at terms the Company believes  
to be reflective of current market conditions.                                  

TIME DEPOSITS.  The fair value of the time deposits approximates the    
carrying value as the instruments are of a short term nature and are at terms   
the Company considers to be reflective of current market conditions.            

   CONVERTIBLE SUBORDINATED NOTES.  The fair value of convertible subordinated
notes is determined based upon a quoted market price for both notes and the     
associated common shares.                                                       

HEDGE POSITIONS.  The fair value of hedge positions are based on quoted 
market prices at year end.                                                      

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

16. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK        
(CONTINUED)                                                                     
DERIVATIVES.  The fair value of derivatives has been determined by      
multiplying the contracted amount by the difference in the contracted rates and 
the current market rate.                                                        

                                                        [Enlarge/Download Table]

                                                                       SEPTEMBER 30                   
                                                    --------------------------------------------------
                                                             1996                      1997           
                                                    ----------------------  --------------------------
                                                     CARRYING   ESTIMATED     CARRYING     ESTIMATED  
                                                      VALUE     FAIR VALUE     VALUE       FAIR VALUE 
                                                    ----------  ----------  ------------  ------------
                                                                                                      
                                                                  (AMOUNTS IN THOUSANDS)              
ASSETS                                                                                                
Cash and cash equivalents.......................... $   23,167  $   23,167  $     94,978  $     94,978
Securities, available for sale.....................     --          --            40,995        40,995
Loans held for sale, net...........................    430,812     433,573     1,400,446     1,467,845
Investment in securitized loans....................     --          --           190,861       199,450
Subordinated certificates available for sale.......     16,528      16,528        18,047        18,047
Interest only strips, net..........................    132,973     132,973       456,123       456,123
Servicing assets...................................     --          --            40,516        40,516

LIABILITIES                                                                                           
Warehouse financing................................    354,481     354,481     1,238,156     1,238,156
Term lines.........................................     57,465      57,465       211,751       211,751
Time Deposits......................................     --          --           120,025       120,025
Bonds..............................................     --          --           174,088       174,088
Convertible subordinated notes.....................    100,000     100,000        69,920       245,419

Hedge position notional amount outstanding.........         --          --       100,000       100,000

    Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. The estimates
do not reflect any premium or discount that could result from offering for sale 
at one time the Company's entire holdings of a particular financial instrument. 
Fair value estimates are based on judgments regarding future loss and prepayment
experience, current economic conditions, specific risk characteristics and other
factors. Changes in assumptions could significantly affect the estimates.       

Fair value estimates are based on existing balance sheet financial      
instruments without attempting to estimate the value of anticipated future      
business and the value of assets and liabilities that are not considered        
financial instruments. For example, the Company has a regional branch network   
with significant dealer relationships and proprietary credit scoring systems,   
which contribute to the Company's ongoing profitability and neither of which is 
considered a financial instrument.                                              

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)                                 

    The unaudited quarterly results of operations for the year end September 30,
1996 and 1997 are as follows:                                                   

                                                        [Enlarge/Download Table]

                                                                                QUARTER ENDED                   
                                                             ---------------------------------------------------
                                                             DECEMBER 31,  MARCH 31,    JUNE 30,   SEPTEMBER 30,
                                                                 1995         1996        1996         1996     
                                                             ------------  ----------  ----------  -------------
                                                                                                                
                                                                           (AMOUNTS IN THOUSANDS)               
REVENUES                                                                                                        
Gain on securitized loan sales, net of costs................  $   17,849   $   23,883  $   36,730   $    63,971 
Provision for possible credit losses........................      (3,358)      (6,169)    (10,711)      (28,159)
                                                             ------------  ----------  ----------  -------------
  Net gain on securitized loan sales........................      14,491       17,714      26,019        35,812 
Net gain on other loan sales................................       2,315        3,150       3,015         2,611 
                                                             ------------  ----------  ----------  -------------
  Total gain on sale of loans...............................      16,806       20,864      29,034        38,423 
Interest income.............................................       1,767        2,290       6,704        14,966 
Interest only strips interest income........................         109        1,187       1,577         2,242 
Servicing income............................................         694          940       1,040         1,334 
Origination income..........................................         471        2,158       1,884         2,729 
Other income................................................         263          190         426         1,562 
                                                             ------------  ----------  ----------  -------------
  Total revenues............................................      20,110       27,629      40,665        61,256 

EXPENSES                                                                                                        
Salaries and employee benefits..............................       5,459        7,699       9,383        13,861 
Interest....................................................       2,043        2,816       3,751         8,282 
Other operating.............................................       3,761        5,100       8,458        12,619 
Provision for possible credit losses........................       1,291        1,686       3,347         4,923 
                                                             ------------  ----------  ----------  -------------
  Total expenses............................................      12,554       17,301      24,939        39,685 
                                                             ------------  ----------  ----------  -------------
Income before income taxes..................................       7,556       10,328      15,726        21,571 
Provision for income taxes..................................      (2,871)      (3,929)     (5,976)       (8,193)
                                                             ------------  ----------  ----------  -------------
Net income..................................................  $    4,685   $    6,399  $    9,750   $    13,378 
                                                             ------------  ----------  ----------  -------------
                                                             ------------  ----------  ----------  -------------

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED)                     

                                                        [Enlarge/Download Table]

                                                                                QUARTER ENDED                   
                                                             ---------------------------------------------------
                                                             DECEMBER 31,  MARCH 31,    JUNE 30,   SEPTEMBER 30,
                                                               1996(1)      1997(1)     1997(1)        1997     
                                                             ------------  ----------  ----------  -------------
                                                                                                                
                                                                           (AMOUNTS IN THOUSANDS)               
REVENUES                                                                                                        
Gain on securitized loan sales, net of costs................  $   88,652   $  119,859  $  142,096   $   168,819 
Provision for possible credit losses........................     (38,711)     (52,919)    (62,531)      (77,050)
                                                             ------------  ----------  ----------  -------------
  Net gain on securitized loan sales........................      49,941       66,940      79,565        91,769 
Net gain on other loan sales................................       6,296        8,219       6,570         9,001 
                                                             ------------  ----------  ----------  -------------
  Total gain on sale of loans...............................      56,237       75,159      86,135       100,770 
Interest income.............................................      22,412       34,601      50,565        65,156 
Interest only strips interest income........................       2,717        2,700       8,525        12,978 
Servicing income............................................       3,283        3,855       6,189         7,795 
Origination income..........................................       3,738       11,520      10,325        15,954 
Other income................................................       2,468        1,331       1,568         5,459 
                                                             ------------  ----------  ----------  -------------
    Total revenues..........................................      90,855      129,166     163,307       208,112 

EXPENSES                                                                                                        
Salaries and employee benefits..............................      16,586       22,385      28,475        40,112 
Interest....................................................      14,713       20,635      26,460        31,706 
Other operating.............................................      22,612       24,123      31,834        42,012 
Provision for possible credit losses........................       5,272       12,747      13,032        14,256 
                                                             ------------  ----------  ----------  -------------
    Total expenses..........................................      59,183       79,890      99,801       128,086 
                                                             ------------  ----------  ----------  -------------
Income before income taxes..................................      31,672       49,276      63,506        80,026 
Provision for income taxes..................................     (12,036)     (18,725)    (24,132)      (30,418)
                                                             ------------  ----------  ----------  -------------
Net income..................................................  $   19,636   $   30,551  $   39,374   $    49,608 
                                                             ------------  ----------  ----------  -------------
                                                             ------------  ----------  ----------  -------------

------------------------                                                        

(1) These quarters have been restated from previously disclosed interim results 
to show the effect of the FIRSTPLUS Bank pooling.                       

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

18. PARENT COMPANY ONLY INFORMATION                                             

The condensed financial statements of FIRSTPLUS Financial Group, Inc.,  
prepared on a parent company unconsolidated basis are as follows:               

CONDENSED BALANCE SHEETS

                                                        [Enlarge/Download Table]

                                                                            SEPTEMBER 30     
                                                                       ----------------------
                                                                          1996        1997   
                                                                       ----------  ----------
                                                                       (AMOUNTS IN THOUSANDS)
                                                                                             
Assets                                                                                       
  Cash and cash equivalents........................................... $       31  $   27,299
  Investment in subsidiaries..........................................    206,548     429,732
  Receivable from subsidiary..........................................      2,166      34,805
  Other assets........................................................      6,649       8,229
                                                                       ----------  ----------
    Total assets...................................................... $  215,394  $  500,065
                                                                       ----------  ----------
                                                                       ----------  ----------
Liabilities and Stockholders' equity                                                         
  Accrued expenses and other liabilities.............................. $   20,825  $   --    
  Convertible subordinated notes......................................    100,000      69,920
                                                                       ----------  ----------
    Total liabilities.................................................    120,825      69,920
  Stockholders' equity                                                                       
    Common stock......................................................        225         366
    Common stock, non-voting..........................................         44           7
    Additional capital................................................     54,696     216,881
    Retained earnings.................................................     39,604     212,891
                                                                       ----------  ----------
    Total stockholders' equity........................................     94,569     430,145
                                                                       ----------  ----------
    Total liabilities and stockholders' equity........................ $  215,394  $  500,065
                                                                       ----------  ----------
                                                                       ----------  ----------

                                CONDENSED STATEMENTS OF INCOME                               



                                                                            SEPTEMBER 30     
                                                                       ----------------------
                                                                          1996        1997   
                                                                       ----------  ----------
                                                                       (AMOUNTS IN THOUSANDS)
                                                                                             
Equity in earnings of subsidiaries.................................... $   57,045  $  227,006
Other income..........................................................         --         417
                                                                       ----------  ----------
  Total revenues......................................................     57,045     227,423
Interest expense......................................................        814         736
Other operating expenses..............................................      1,050       2,207
                                                                       ----------  ----------
  Income before income taxes..........................................     55,181     224,480
Provision for income taxes............................................     20,969      85,311
                                                                       ----------  ----------
  Net income.......................................................... $   34,212  $  139,169
                                                                       ----------  ----------
                                                                       ----------  ----------

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FIRSTPLUS FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1997

18. PARENT COMPANY ONLY INFORMATION (CONTINUED)                                 

                                                        [Enlarge/Download Table]
                                                                                              
                              CONDENSED STATEMENTS OF CASH FLOW                               


                                                                            SEPTEMBER 30      
                                                                       ---------------------- 
                                                                          1996        1997    
                                                                       ----------  ---------- 
                                                                       (AMOUNTS IN THOUSANDS) 
                                                                                              
Operating Activities:                                                                         
  Net income.......................................................... $   34,212  $  139,169 
    Undistributed earnings in equity of subsidiaries..................    (57,045)   (206,753)
    Other operating activities........................................     10,798     (22,407)
                                                                       ----------  ---------- 
      Net cash used in operating activities...........................    (12,035)    (89,991)
Investing Activities:                                                                         
    Capital contributions to subsidiaries.............................   (136,481)     (7,305)
                                                                       ----------  ---------- 
      Net cash used in investing activities...........................   (136,481)     (7,305)
Financing Activities:                                                                         
    Redemptions of preferred stock....................................     (2,400)     --     
    Proceeds of convertible note......................................    100,000      --     
    Common stock issued...............................................     51,211     125,238 
    Other.............................................................       (265)       (674)
                                                                       ----------  ---------- 
      Net cash provided by financing activities.......................    148,546     124,564 
                                                                       ----------  ---------- 
  Increase in cash and cash equivalents...............................         30      27,268 
  Cash and cash equivalents at beginning of year......................          1          31 
                                                                       ----------  ---------- 
  Cash and cash equivalents at end of year............................ $       31  $   27,299 
                                                                       ----------  ---------- 
                                                                       ----------  ---------- 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Dallas, 
State of Texas, on December 8, 1997.                                            

                                                                [Download Table]
                                         
FIRSTPLUS FINANCIAL GROUP, INC.          

          /S/ DANIEL T. PHILLIPS         
-----------------------------------------
            Daniel T. Phillips           
        CHAIRMAN OF THE BOARD AND        
         CHIEF EXECUTIVE OFFICER         

 Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the          
registrant and in the capacities and on the dates indicated.                    

 SIGNATURE                      CAPACITY                  DATE
------------------------------  --------------------------  ------------------- 

         Chairman of the Board and
/s/ DANIEL T. PHILLIPS        Chief Executive Officer                   
------------------------------    (Principal Executive       December 8, 1997   
Daniel T. Phillips          Officer)                                

/s/ ERIC C. GREEN                                                   
------------------------------  President and Director       December 8, 1997   
Eric C. Green                                                   

/s/ WILLIAM P. BENAC       Chief Financial Officer                    
------------------------------    (Principal Financial and   December 8, 1997   
William P. Benac           Accounting Officer)                    

/s/ JOHN FITZGERALD                                                   
------------------------------  Director                     December 8, 1997   
John Fitzgerald                                                   

/s/ DAN JESSEE                                                  
------------------------------  Director                     December 8, 1997   
Dan Jessee                                                  

/s/ PAUL NUSSBAUM                                                   
------------------------------  Director                     December 8, 1997   
Paul Nussbaum                                                   

/s/ PAUL SEEGERS                                                  
------------------------------  Director                     December 8, 1997   
Paul Seegers                                                  

/s/ SHELDON I. STEIN                                                  
------------------------------  Director                     December 8, 1997   
Sheldon I. Stein                                                  

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EXHIBIT INDEX 

                                                        [Enlarge/Download Table]

 EXHIBIT                                                                                                          
  NUMBER                                             DOCUMENT DESCRIPTION                                         
----------  ------------------------------------------------------------------------------------------------------
                                                                                                                  
   3.1*     Amended and Restated Articles of Incorporation of the Registrant (Exhibit 3.1)                        
   3.2*     Amended and Restated Bylaws of the Registrant (Exhibit 3.2)                                           
   4.1*     Specimen certificate for Common Stock of the Registrant (Exhibit 4)                                   
   4.2****  Indenture, dated August 20, 1996, between the Registrant and Bank One, Columbus, N.A., as trustee     
            thereunder                                                                                            
   4.3****  Note Resale Registration Rights Agreement, dated August 20, 1996, among the Registrant and the Initial
            Purchasers named therein                                                                              
   4.4****  Form of Definitive 7.25% Convertible Subordinated Note Due 2003 of the Registrant                     
   4.5****  Form of Restricted Global 7.25% Convertible Subordinated Note Due 2003 of the Registrant              
   4.6****  Form of Regulation S Global 7.25% Convertible Subordinated Note Due 2003 of the Registrant            
  10.1*     Form of Home Improvement Buy-Sell Agreement (Exhibit 10.1)                                            
  10.2*     Form of Continuous Purchase FHA Title I Loan Correspondent Agreement (Exhibit 10.2)                   
  10.3*     Form of Continuous Purchase Conventional Direct Loan Broker Agreement (Exhibit 10.3)                  
  10.4*     1995 Employee Stock Option Plan for FIRSTPLUS Financial Group, Inc. (Exhibit 10.4)                    
  10.5*     Non-Employee Director Stock Option Plan for FIRSTPLUS Financial Group, Inc. (Exhibit 10.5)            
  10.6*     FIRSTPLUS Financial Group, Inc. Employee Stock Purchase Plan (Exhibit 10.6)                           
  10.7*     Description of Officer Bonus Program (Exhibit 10.7)                                                   
  10.8*     Credit Agreement among FIRSTPLUS Financial Group, Inc., Remodelers National Funding Corporation, and  
            Bank One, Texas, National Association, dated as of March 17, 1995, as amended by First Amendment to   
            Credit Agreement dated as of May 12, 1995 and by Second Amendment to Credit Agreement dated as of June
            6, 1995 (Exhibit 10.8)                                                                                
  10.9*     Promissory Note, dated as of June 6, 1995, from Remodelers National Funding Corporation, as maker, to 
            Bank One, Texas, National Association (Exhibit 10.9)                                                  
  10.10*    Security Agreement, dated as of March 17, 1995, among Remodelers National Funding Corporation and Bank
            One, Texas, National Association (Exhibit 10.10)                                                      
  10.11*    Guaranty, dated as of March 17, 1995, from FIRSTPLUS Financial Group, Inc. to Bank One, Texas,        
            National Association (Exhibit 10.11)                                                                  
  10.12*    Warehousing Credit, Term Loan and Security Agreement, dated as of June 15, 1995, among Remodelers     
            National Funding Corporation, FIRSTPLUS Financial Group, Inc., and Residential Funding Corporation, as
            amended by First Amendment to The Warehouse Credit, Term Loan and Security Agreement, dated August 25,
            1995 (Exhibit 10.12)                                                                                  
  10.13*    Promissory Note, dated as of June 15, 1995, from Remodelers National Funding Corporation, as maker, to
            Residential Funding Corporation (Exhibit 10.13)                                                       
  10.14*    Promissory Note, dated as of June 29, 1995, from Remodelers National Funding Corporation, as maker, to
            Residential Funding Corporation (Exhibit 10.14)                                                       
  10.15*    Guaranty, dated as of June 15, 1995, from FIRSTPLUS Financial Group, Inc. to Residential Funding      
            Corporation (Exhibit 10.15)                                                                           
  10.16*    Custodian Agreement, dated as of June 15, 1995, among Remodelers National Funding Corporation,        
            FIRSTPLUS Financial Group, Inc., Residential Funding Corporation and First Trust National Association 
            (Exhibit 10.16)                                                                                       
  10.17*    Senior Subordinated Note and Warrant Purchase Agreement, dated as of March 31, 1995, among FIRSTPLUS  
            Financial Group, Inc., Remodelers National Funding Corporation, SFA: State Financial Acceptance       
            Corporation, Banc One Capital Partners II, Limited Partnership and Farm Bureau Life Insurance Company 
            (Exhibit 10.17)                                                                                       
  10.18*    Senior Subordinated Note, dated as of March 31, 1995, from FIRSTPLUS Financial Group, Inc., Remodelers
            National Funding Corporation and SFA: State Financial Acceptance Corporation, as makers, to Farm      
            Bureau Life Insurance Company (Exhibit 10.18)                                                         

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                                                        [Enlarge/Download Table]
                                                                                                              
10.19*  Senior Subordinated Note, dated as of March 31, 1995, from FIRSTPLUS Financial Group, Inc., Remodelers
        National Funding Corporation and SFA: State Financial Acceptance Corporation, as makers, to Banc One  
        Capital Partners II, Limited Partnership (Exhibit 10.19)                                              
10.20*  FIRSTPLUS Financial Group, Inc. Warrant Certificate, dated as of April 12, 1995, for Farm Bureau Life 
        Insurance Corporation (including registration rights agreement) (Exhibit 10.20)                       
10.21*  FIRSTPLUS Financial Group, Inc. Warrant Certificate, dated as of March 31, 1995, for Banc One Capital 
        Partners II, Limited Partnership (including registration rights agreement) (Exhibit 10.21)            
10.22*  Subordinated Security Agreement, dated as of March 31, 1995, among FIRSTPLUS Financial Group, Inc.,   
        Remodelers National Funding Corporation, SFA: State Financial Acceptance Corporation, Banc Once       
        Capital Partners II, Limited Partnership and Farm Bureau Life Insurance Company (Exhibit 10.22)       
10.23*  Security Agreement _ Assignment of Servicing Agreements, dated as of March 31, 1995, among FIRSTPLUS  
        Financial Group, Inc., Remodelers National Funding Corporation, SFA: State Financial Acceptance       
        Corporation and Banc Once Capital Partners II, Limited Partnership, as agent for Banc One Capital     
        Partners II, Limited Partnership and Farm Bureau Life Insurance Company (Exhibit 10.23)               
10.24*  Security Agreement _ Pledge of Common Stock, dated as of March 31, 1995, among FIRSTPLUS Financial    
        Group, Inc. and Banc One Capital Partners II, Limited Partnership, as agent for Banc One Capital      
        Partners II, Limited Partnership and Farm Bureau Life Insurance Company (Exhibit 10.24)               
10.25*  Employment Agreement by and between FIRSTPLUS Financial Group, Inc. and Ronald M. Mankoff (Exhibit    
        10.25)                                                                                                
10.26*  Employment Agreement by and between FIRSTPLUS Financial Group, Inc. and Daniel T. Phillips (Exhibit   
        10.26)                                                                                                
10.27*  Employment Agreement by and between FIRSTPLUS Financial Group, Inc. and Eric C. Green (Exhibit 10.27) 
10.28*  Employment Agreement by and between FIRSTPLUS Financial Group, Inc. and James H. Poythress (Exhibit   
        10.28)                                                                                                
10.29*  Loan Commitment from Bank One, Texas, N.A., to FIRSTPLUS Financial Group, Inc. (Exhibit 10.29)        
10.30*  Form of Continuous Purchase Home Improvement Broker Agreement (Exhibit 10.30)                         
10.31*  Form of Pass-Through Home Improvement Financing Agreement (Exhibit 10.31)                             
10.32*  Form of Dealer/Contractor Application (Exhibit 10.32)                                                 
10.33*  Form of Broker/Correspondent Application (Exhibit 10.33)                                              
10.34*  Promissory Note, dated December 29, 1995, from FIRSTPLUS Financial Group, Inc., Remodelers National   
        Funding Corporation and State Financial Acceptance Corporation, as makers, to Farm Bureau Life        
        Insurance Company (Exhibit 10.34)                                                                     
10.35*  Loan Commitment from Residential Funding Corporation to Remodelers National Funding Corporation and   
        FIRSTPLUS Financial Group, Inc. (Exhibit 10.35)                                                       
10.36*  Stock Purchase and Sale Agreement, dated as of November 30, 1995, by and among FIRSTPLUS Financial    
        Group, Inc., FIRSTPLUS East Mortgage Corporation and its shareholders (Exhibit 10.36)                 
10.37*  First Amendment to Credit Agreement and Note, dated as of June 21, 1995, by and among Remodelers      
        National Funding Corporation, SFA: State Financial Acceptance Corporation, FIRSTPLUS Financial Group, 
        Inc. and Banc One Capital Partners V, Ltd. (Exhibit 10.37)                                            
10.38*  Senior Subordinated Note, dated November 1, 1995, from FIRSTPLUS Financial Group, Inc., Remodelers    
        National Funding Corporation and State Financial Acceptance Corporation, as makers, to Banc One       
        Capital Partners II, Limited Partnership (Exhibit 10.38)                                              
10.39*  Senior Subordinated Note, dated November 16, 1995, from FIRSTPLUS Financial Group, Inc., Remodelers   
        National Funding Corporation and State Financial Acceptance Corporation, as makers, to and Banc One   
        Capital Partners II, Limited Partnership (Exhibit 10.39)                                              

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10.40*   Senior Subordinated Note, dated September 27, 1995, from FIRSTPLUS Financial Group, Inc., Remodelers  
         National Funding Corporation and State Financial Acceptance Corporation, as makers, to Farm Bureau    
         Life Insurance Company (Exhibit 10.40)                                                                
10.41*   Senior Subordinated Note, dated September 27, 1995, from FIRSTPLUS Financial Group, Inc., Remodelers  
         National Funding Corporation and State Financial Acceptance Corporation, as makers, to Farm Bureau    
         Life Insurance Company (Exhibit 10.41)                                                                
10.42*   Senior Subordinated Note and Warrant Purchase Agreement, amended and restated as of July 16, 1995,    
         among FIRSTPLUS Financial Group, Inc., Remodelers National Funding Corporation and SFA: State         
         Financial Acceptance Corporation, as sellers, and Banc One Capital Partners II, Limited Partnership,  
         Farm Bureau Life Insurance Company and Banc One Capital Partners V, Ltd., as purchasers (Exhibit      
         10.42)                                                                                                
10.43*   FIRSTPLUS Financial Group, Inc. Warrant Certificate, dated as of July 16, 1995, for Banc One Capital  
         Partners V, Ltd. (Exhibit 10.43)                                                                      
10.44*   Second Amended and Restated Subordinated Security Agreement, amended and restated as of September 27, 
         1995, made by FIRSTPLUS Financial Group, Inc., Remodelers National Funding Corporation and SFA: State 
         Financial Acceptance Corporation for the benefit of Banc One Capital Partners II, Limited Partnership,
         Farm Bureau Life Insurance Company and Banc One Capital Partners V, Ltd. (Exhibit 10.44)              
10.45*   Second Amended and Restated Security Agreement _ Pledge of Common Stock, amended and restated as of   
         September 27, 1995, made by FIRSTPLUS Financial Group, Inc., for the benefit of Banc One Capital      
         Partners II, Limited Partnership, Farm Bureau Life Insurance Company and Banc One Capital Partners V, 
         Ltd. (Exhibit 10.45)                                                                                  
10.46*   Second Amended and Restated Security Agreement _ Assignment of Servicing Agreements, amended and      
         restated as of September 27, 1995, made by FIRSTPLUS Financial Group, Inc., for the benefit of Banc   
         One Capital Partners II, Limited Partnership, Farm Bureau Life Insurance Company and Banc One Capital 
         Partners V, Ltd. (Exhibit 10.46)                                                                      
10.47*   Second Amendment to the Warehouse Credit, Term Loan and Security Agreement, dated as of September 15, 
         1995, by and among Remodelers National Funding Corp., FIRSTPLUS Financial Group, Inc. and Residential 
         Funding Corporation (Exhibit 10.47)                                                                   
10.48*   Form of Letter Agreement, dated January 29, 1996, by and between FIRSTPLUS Financial Group, Inc. and  
         Residential Funding Corporation, regarding the Warehouse Credit, Term Loan and Security Agreement,    
         dated June 15, 1995 (Exhibit 10.48)                                                                   
10.49*   Form of Letter Agreement, dated January 29, 1996, by and between FIRSTPLUS Financial Group, Inc. and  
         Banc One, Texas, National Association, regarding the Credit Agreement, dated as of March 17, 1995     
         (Exhibit 10.49)                                                                                       
10.50*   Form of Letter Agreement, dated January 29, 1996, by and among FIRSTPLUS Financial Group, Inc., Banc  
         One Capital Partners II, Limited Partnership, Farm Bureau Life Insurance Company and Banc One Capital 
         Partners V, Ltd., regarding the Senior Subordinated Note and Warrant Purchase Agreement, dated as of  
         March 31, 1995 (Exhibit 10.50)                                                                        
10.51*   Third Amendment to the Warehouse Credit, Term Loan and Security Agreement, dated as of January 22,    
         1996, by and among Remodelers National Funding Corp., FIRSTPLUS Financial Group, Inc. and Residential 
         Funding Corporation (Exhibit 10.51)                                                                   
10.52*   Subordinated Loan Agreement, dated as of September 27, 1995, by and among FIRSTPLUS Financial Group,  
         Inc., Remodelers National Funding Corporation and SFA: State Financial Acceptance Corp., as borrowers,
         and Banc One Capital Partners II, Limited Partnership and Farm Bureau Life Insurance Company, as      
         lenders, as amended by First Amendment to Subordinated Loan Agreement (Exhibit 10.52)                 
10.53*   Letter Agreement, dated June 7, 1995, between Banc One Capital Corporation and FIRSTPLUS Financial    
         Group, Inc. regarding financial advisory and consultation services (Exhibit 10.53)                    
10.54**  Registration Rights Agreement, dated as of March 31, 1996, by and among FIRSTPLUS Financial Group,    
         Inc. and the shareholders of Mortgage Plus Incorporated (Exhibit 10.2)                                

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10.55**   Agreement and Plan of Merger, dated as of May 22, 1996, among FIRSTPLUS Financial Corporation, Inc.,  
          FIRSTPLUS West, Inc. and Mortgage Plus Incorporated and the shareholders (Exhibit 10.1)               
10.56***  Master Repurchase Agreement, dated as of May 10, 1996, by and between FIRSTPLUS Financial, Inc. and   
          Bear Stearns Home Equity Trust 1996-1 (Exhibit 10.1)                                                  
10.57***  Custody Agreement, dated May 10, 1996, among FIRSTPLUS Financial, Inc., Bear Stearns Home Equity Trust
          1996-1, and Bank One Texas, N.A. (Exhibit 10.2)                                                       
10.58***  Fifth Amendment to Credit Agreement, dated June 20, 1996, by and among FIRSTPLUS Financial, Inc.,     
          FIRSTPLUS Financial Group, Inc. and Bank One, Texas, National Association (Exhibit 10.3)              
10.59***  Promissory Note, dated June 30, 1996, between FIRSTPLUS Financial, Inc. and Bank One, Texas, National 
          Association (Exhibit 10.4)                                                                            
10.60*    Credit Agreement, dated October 17, 1996, between FIRSTPLUS Financial, Inc. and Bank One Texas,       
          National Association                                                                                  
10.61+    Master Assignment Agreement between FIRSTPLUS FINANCIAL, INC. and Merrill Lynch Mortgage Capital Inc. 
          (Exhibit 10.1)                                                                                        
10.62+    Tri-Party Custodial Agreement among FIRSTPLUS FINANCIAL, INC., Merrill Lynch Mortgage Capital Inc.,   
          Merrill Lynch Credit Corporation and Bank One, Texas, N.A. (Exhibit 10.2)                             
10.63+    Annex I Supplemental Terms to Master Repurchase Agreement Dated as of April 10, 1997, among Merrill   
          Lynch Mortgage Capital, Inc. and Merrill Lynch Credit Corporation and FIRSTPLUS FINANCIAL, INC.       
          (Exhibit 10.3)                                                                                        
10.64+    Revolving Credit Agreement between FIRSTPLUS FINANCIAL, INC. and working Capital Management Co. dated 
          June 16, 1997. (Exhibit 10.4)                                                                         
10.65+    Sale and Servicing Agreement dated June 1, 1997 between FIRSTPLUS FUNDING TRUST, FIRSTPLUS FINANCIAL, 
          INC. and FIRSTBANK NATIONAL ASSOCIATION (Exhibit 10.5)                                                
10.66+    INDENTURE between FIRSTPLUS FUNDING TRUST and FIRSTBANK NATIONAL ASSOCIATION (Exhibit 10.6)           
11        Statement Regarding Computation of Per Share Earnings                                                 
23.1      Consent of Ernst & Young LLP                                                                          
27        Financial Data Schedule                                                                               

------------------------                                                        

   *Incorporated by reference from exhibit shown in parenthesis contained in the
 Company's Registration Statement on Form S-1 (Registration No. 33-96688),
filed by the Company with the Commission.                               

  **Incorporated by reference from exhibit shown in parenthesis contained in the
Company's current report on Form 8-K, filed by the Company with the     
Commission on June 14, 1996.                                            

 ***Incorporated by reference from exhibit shown in parenthesis contained in the
  Company's Form 10-Q for the quarterly period ended June 30, 1996, filed by
the Company with the Commission on August 6, 1996.                      

****Incorporated by reference from the exhibit shown in parenthesis contained in
the Company's registration Statement on Form S-1 (Registration No.      
333-14171), filed by the Company with the Commission.                   

   +Incorporated by reference from exhibit shown in parenthesis contained in the
  Company's Form 10-Q for the quarterly period ended June 30, 1997, filed by
the Company with the Commission on August 14, 1997.                     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		8/31/12		23
		9/30/98		24					10-Q,  NT 10-Q
		3/4/98		1					DEF 14A
		12/31/97		49					10-QT,  10-QT/A
		12/15/97		50					8-K/A
Filed on:		12/9/97
		12/8/97		67
		11/28/97		1		24
		10/30/97		40
For Period End:		9/30/97		1		66
		8/29/97		4		45
		8/28/97		45
		8/14/97		71					10-Q
		6/30/97		16		71			10-Q
		6/16/97		71
		6/1/97		71
		4/10/97		71
		3/31/97		45					10-Q
		3/30/97		16		19
		2/28/97		45
		1/1/97		46
		12/31/96		7		46			10-Q
		12/30/96		16					424B3
		12/19/96		37					8-K
		11/29/96		24		56
		11/15/96		24		56
		10/22/96		56
		10/17/96		71
		10/1/96		45
		9/30/96		3		64			10-K,  10-K/A
		8/20/96		68
		8/6/96		71					10-Q
		6/30/96		15		71			10-Q
		6/20/96		71
		6/14/96		71					8-K
		5/22/96		71
		5/10/96		71
		3/31/96		15		70
		2/1/96		24
		1/29/96		70
		1/22/96		70
		12/31/95		7		15
		12/29/95		69
		11/30/95		69
		11/16/95		69
		11/1/95		69
		9/30/95		15		60
		9/27/95		70
		9/15/95		70
		8/25/95		68
		7/16/95		70
		7/1/95		45
		6/29/95		68
		6/21/95		69
		6/15/95		68		70
		6/7/95		70
		6/6/95		68
		5/12/95		68
		4/12/95		69
		3/31/95		17		70
		3/17/95		68		70
		10/4/94		13		24
		9/30/94		43
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