SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-Q

          X    Quarterly Report Pursuant to Section 13 or 15(d) of the
               Securities Exchange Act of 1934
               For the quarterly period ended September 30, 1996

                                      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 0-19604

                          AAMES FINANCIAL CORPORATION
               (Exact name of Registrant as specified in its charter)

               DELAWARE                                95-4340340
     (State or other jurisdiction of              (I.R.S. Employer
     incorporation or organization)               Identification No.)

      3731 WILSHIRE BOULEVARD, 10TH FLOOR, LOS ANGELES, CALIFORNIA 90010
      ------------------------------------------------------------------
   (Address of Registrant's principal executive offices including ZIP Code)

                                (213) 351-6100
                                --------------
                         (Registrant's telephone number,
                               including area code)

                                   NO CHANGE
   --------------------------------------------------------------------------
               Former name, former address and former fiscal year,
                         if changed since last report

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
     -----                    -----

     At September 30, 1996, Registrant had 15,838,755 shares of common stock    
                                 outstanding.

<PAGE>

                               TABLE OF CONTENTS

ITEM
NO.
----

PART I         Financial Information

     1.        Financial Statements

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

PART II        Other Information

     6.        Exhibits and Reports on Form 8-K

               Signature Page

<PAGE>


<PAGE>

<TABLE>
<CAPTION>
                  AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                               (Unaudited)

                                                   JUNE 30,     SEPTEMBER 30,
                                                     1996           1996
                                                  ---------     ------------
<S>                                               <C>            <C>

ASSETS
Cash and cash equivalents                         $23,941,000    $102,065,000
Loans held for sale, at cost
  which approximates market                       186,189,000     143,259,000
Accounts receivable, less allowance for
  doubtful accounts of $473,000 and $531,000        9,685,000       8,197,000
Excess servicing receivable                       129,113,000     178,056,000
Mortgage servicing rights                          10,902,000      13,560,000
Residual assets                                    44,676,000      54,683,000
Equipment and improvements, net                     6,674,000       7,887,000
Prepaid and other                                  10,295,000       9,406,000
                                                 ------------    ------------
  Total assets                                   $421,475,000    $517,113,000
                                                 ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Borrowings                                       $138,045,000    $175,034,000
Revolving warehouse facility                      112,363,000     170,292,000
Accounts payable and accrued expenses              11,380,000      16,216,000
Accrued compensation and related expenses           4,427,000       7,456,000
Income taxes payable                               21,831,000      19,892,000
                                                 ------------    ------------
  Total liabilities                               288,046,000     388,890,000
                                                 ------------    ------------

Stockholders' equity:
  Preferred Stock, par value $.001 per
    share, 1,000,000 shares authorized;
      none outstanding
  Common Stock, par value $.001 per share
    50,000,000 shares authorized;
    15,838,800 shares outstanding                      16,000          16,000
Additional paid-in capital                         88,142,000      88,236,000
Retained earnings                                  45,271,000      39,971,000
                                                 ------------    ------------
  Total stockholders' equity                      133,429,000     128,223,000
                                                 ------------    ------------
  Total liabilities and stockholders' equity     $421,475,000    $517,113,000
                                                 ============    ============
</TABLE>


The accompanying note is an integral part of these financial statements.

<PAGE>

<TABLE>
<CAPTION>
                  AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)


                                                       Three Months Ended
                                                           September 30
                                                    -----------------------
                                                      1995           1996
                                                      ----           ----
<S>                                               <C>             <C>

Revenue:
  Excess servicing gain                           $12,585,000     $46,417,000
  Commissions                                       4,197,000       7,747,000
  Loan service                                      3,343,000       4,660,000
  Fees and other                                    2,707,000       7,035,000
                                                 ------------    ------------
    Total revenue                                  22,832,000      65,859,000
                                                 ------------    ------------

Expenses:
  Compensation and related expenses                 6,025,000     19,324,000 
  Sales and advertising costs                       3,470,000      7,474,000 
  General and administrative expenses               2,353,000      7,562,000 
  Interest expense                                  1,226,000      7,444,000 
  Nonrecurring charges                                            28,108,000 
                                                 ------------    ------------
    Total expenses                                 13,074,000     69,912,000 
                                                 ------------    ------------

Income (loss) before income taxes                   9,758,000     (4,053,000)
Provision for income taxes                          4,099,000        571,000 
                                                 ------------    ------------
Net income (loss)                                  $5,659,000    ($4,624,000)
                                                 ============    ============

Net income (loss) per share
  Primary                                               $0.35         ($0.26)
                                                 ============    ============
  Fully Diluted                                         $0.35         ($0.17)
                                                 ============    ============
  Prior to nonrecurring charges                                        $0.69 
                                                                 ============

Weighted average number
of shares outstanding
  Primary                                          16,394,000     17,486,000 
                                                 ============    ============
  Fully Diluted                                    16,394,000     21,593,000 
                                                 ============    ============
</TABLE>


The accompanying note is an integral part of these financial statements.

<PAGE>

<TABLE>
<CAPTION>
                AAMES FINANCIAL CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)


                                                       Three Months Ended
                                                           September 30,
                                                    -----------------------
                                                      1995           1996
                                                      ----           ----
<S>                                                <C>           <C>

Operating activities:

  Net income                                       $5,659,000    ($4,624,000)
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation and amortization                     181,000         521,000
    Deferred income taxes                           1,612,000       7,356,000
    Excess servicing gain                        (15,586,000)    (60,151,000)
    Excess servicing amortization                   2,404,000      11,208,000
    Mortgage servicing rights originated          (1,821,000)     (3,387,000)
    Mortgage servicing rights amortization                            728,000
    Changes in assets and liabilities:
      Loans originated or purchased             (142,406,000)   (501,319,000)
      Proceeds from sale of loans                 135,285,000     544,249,000
      (Increase) decrease in:
        Accounts receivable                         1,503,000       1,488,000
        Prepaid and other                           (502,000)         889,000
        Residual assets                           (4,089,000)    (10,007,000)
      Increase (decrease) in:
        Accounts payable and accrued expenses       1,927,000       4,836,000
        Accrued compensation and related
          expenses                                    796,000       3,029,000
        Income taxes payable                        2,516,000     (9,295,000)
                                                 ------------    ------------
Net cash used in operating activities            (12,521,000)    (14,479,000)
                                                 ------------    ------------
Investing activities:
  Purchases of property and equipment               (300,000)     (1,734,000)
                                                 ------------    ------------
Net cash used in investing activities               (300,000)     (1,734,000)
                                                 ------------    ------------
Financing activities:
  Proceeds from sale of stock or exercise of options  999,000          94,000
  Net proceeds from borrowing                        (38,000)      36,989,000
  Amounts outstanding under warehouse facilities   12,500,000      57,929,000
  Dividends paid                                    (668,000)       (675,000)
                                                 ------------    ------------
Net cash provided by  financing activities         12,793,000      94,337,000
                                                 ------------    ------------
Net increase (decrease) in cash                      (28,000)      78,124,000
Cash and cash equivalents at beginning of period   20,359,000      23,941,000
                                                 ------------    ------------
Cash and cash equivalents at end of period        $20,331,000    $102,065,000
                                                 ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                         AAMES FINANCIAL CORPORATION
                 NOTE TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BASIS OF PRESENTATION
-----------------------------

    The consolidated financial statements of Aames Financial Corporation, a
Delaware corporation, and its subsidiaries (collectively, the "COMPANY")
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission.  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted.

    The consolidated financial statements include the accounts of Aames
Financial Corporation and all of its subsidiaries after eliminating all
significant intercompany transactions and reflect all normal, recurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of the results of operations of the Company for the interim
periods reported.  The results of operations for the Company for the three
months ended September 30, 1996 are not necessarily indicative of the results
expected for the full fiscal year.

<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     The following discussion and analysis of the financial condition and
results of operations of the Company should be read in conjunction with the
Company's Consolidated Financial Statements included in Item 1 of this Form
10-Q.

GENERAL

     On August 28, 1996, the Company acquired One Stop Mortgage, Inc. ("One
Stop").  The acquisition of One Stop was accomplished through the merger (the
"Merger") of a wholly-owned subsidiary of the Company into One Stop, in a tax-
free exchange accounted for as a pooling-of-interests, in which the Company
issued approximately 2.3 million shares of its Common Stock and assumed options
granted to key employees to purchase approximately 375,000 shares of its Common
Stock.  Under the pooling rules, the historical financial results of the
Company have been restated to reflect the Merger and to reflect the historical
losses of One Stop.  From its commencement of operations in October 1995 until
the Merger, One Stop generally sold its loans on a whole loan servicing-
released basis or retained them in its portfolio, rather than selling them in
a securitization transaction.  The Company included $200 million of One Stop
loans in its September 1996 securitization and intends to continue to include
One Stop loans in future securitizations.  Therefore, the historical financial
performance of One Stop is of limited relevance in predicting its future
performance.

     Further, under the pooling rules, the costs incurred by the Company and
One Stop in consummating the Merger were expensed during the three months ended
September 30, 1996.  After nonrecurring, pre-tax charges of $28.1 million,
primarily consisting of Merger costs, Aames reported a net loss of $4.6 million
for the three months ended September 30, 1996 or ($.26) per primary and ($.17)
per fully diluted share, as compared to net income of $5.7 million or $.35 per
primary and fully diluted share for the three months ended September 30, 1995.
Pre-tax charges of $26.1 million represent Merger costs and the write-off of
prepaid financing charges related to credit facilities no longer in place.  The
charges also reflect $2.0 million associated with lease write-offs in
conjunction with the Company's planned move to new headquarters.

     The Company originates and purchases loans through three production
channels.  The Company has historically originated its loans through its retail
loan office network.  In 1994, the Company diversified its production channels
to include a wholesale correspondent program which consisted initially of
purchasing loans from other mortgage bankers and financial institutions
underwritten in accordance with the Company's guidelines.  In fiscal 1996, this
program was expanded to include the purchase of loans in bulk from other
mortgage bankers and financial institutions.  The Company's acquisition of One
Stop further diversified the Company's production channels to include the
origination and purchase of mortgage loans from a network of independent
mortgage brokers.  The Company is actively exploring the feasibility of
operating in the United Kingdom.

PAGE 1
<PAGE>

     The following table presents the volumes of loans originated and purchased
by the Company through each of the three production channels during the periods
presented:

<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED   THREE MONTHS ENDED
                                      SEPTEMBER 30, 1995   SEPTEMBER 30, 1996
                                      ------------------   ------------------
<S>                                       <C>                 <C>

Loans originated and purchased:
  Retail                                  $ 48,237,000        $ 92,000,000
  Wholesale Correspondent                   83,688,000         259,013,000
  Broker Network                                   N/A         140,916,000
                                          ------------        ------------
    Total                                 $131,925,000        $491,929,000
</TABLE>

<TABLE> 

RESULTS OF OPERATIONS--THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996

     The following table sets forth information regarding the components of the
Company's revenue and expenses for the three months ended September 30, 1995
and 1996:

<CAPTION>
                                      THREE MONTHS ENDED   THREE MONTHS ENDED
                                      SEPTEMBER 30, 1995   SEPTEMBER 30, 1996
                                      ------------------   ------------------
                                                   (In thousands)
<S>                                           <C>                 <C>

Revenue:
  Excess servicing gain                       $ 12,585            $ 46,417
  Commissions                                    4,197               7,747
  Loan service:
    Servicing spread                             2,309               3,007
    Prepayment fees                                536               1,034
    Late charges and other
     servicing fees                                498                 619
  Fees and other:
    Closing                                        635                 847
    Appraisal                                      285                 470
    Underwriting                                   433                 615
    Interest income                              1,048               4,893
    Other                                          306                 210
                                              --------            --------
      Total revenue                           $ 22,832            $ 65,859
                                              ========            ========
Expenses:
  Compensation and
   related expenses                            $ 6,025            $ 19,324
  Sales and advertising costs                    3,470               7,474
  General and administrative expenses            2,353               7,562
  Interest expense                               1,226               7,444
  Nonrecurring charges                             --               28,108
                                              --------            --------
      Total expenses                          $ 13,074            $ 69,912

  Income (loss) before income taxes              9,758             (4,053)
  Provision for income taxes                     4,099                 571
                                              --------            --------
      Net income (loss)                          5,659           $ (4,624)
                                              ========            ========
</TABLE>

PAGE 2
<PAGE>

REVENUE

     Total revenue for the three months ended September 30, 1996 increased
$43.0 million, or 188%, over total revenue for the three months ended September
1995.  This increase in total revenue was primarily due to the higher excess
servicing gain resulting from the increased volumes of mortgage loans
originated and purchased by the Company that it securitized and sold.  The
Company originated and purchased $132 million and $492 million of mortgage
loans during the three months ended September 30, 1995 and 1996, respectively.

     In a securitization, the Company recognizes a gain on the sale of loans
securitized upon the closing of the securitization, but does not receive the
excess servicing, which is payable over the actual life of the loans
securitized.  The excess servicing represents, over the estimated life of the
loans, the excess of the weighted average interest rate on the pool of loans
sold over the sum of the investor pass-through rate, normal servicing fee and
the monoline insurance fee.  The net present value of that excess (determined
based on certain prepayment and loss assumptions) less transaction expenses is
recorded as excess servicing gain or loss at the time of the closing of the
securitization.  Excess servicing gain increased 268% from $12.6 million for
the three months ended September 30, 1995 to $46.4 million at September 30,
1996.  The increase resulted primarily from the greater size of the mortgage 
loan pool securitized and sold by the Company in the secondary market.  The 
increase, however, was offset by decreased servicing spreads and the application
of a change in excess servicing assumptions to reflect the changing composition 
of the Company's loan product mix and other factors. The Company securitized and
sold $121 million and $527 million of loans in the secondary market during the
three months ended September 30, 1995 and 1996, respectively.  The weighted
average servicing spread on loans securitized and sold was 4.98% and 4.39% for
the three monthS ended September 30, 1995 and 1996, respectively.  The lower
weighted average servicing spread in 1996 reflected a decrease in weighted
average interest rates on pooled loans due primarily to the larger percentage
of higher credit grade loans included in the pool.  While the Company intends
to continue focusing on its traditional niche in the "C-" and "D" credit grade
loans, the Company also intends to continue to diversify loan originations and
purchases through its production channels to include more "A-," "B" and "C"
credit grade loans.

     Commissions earned on loan originations continue to be an important
component of total revenue, although to a lesser degree than in prior years,
comprising 18% and 12% of total revenue for the three months ended September
30, 1995 and 1996, respectively.  Commissions increased $3.6 million, or 85%,
for the three months ended September 30, 1996, compared to the three months
ended September 30, 1995.  Commission revenue is primarily a function of the
volume of mortgage loans originated by the Company through its retail loan
office network and the weighted average commission rate charged on such loans.
The increase in commissions for the three months ended September 30, 1996 was a
result of increased origination volume, offsetting a decline in weighted
average commission rate.  The weighted average commission rate was 9.2% and
5.8% during the three months ended September 30, 1995 and 1996, respectively.
The lower weighted average commission rate in 1996 reflected competitive
factors, and the increase of higher credit grade loans originated through the
Company's retail loan office network.

     Loan service revenue increased $1.3 million, or 39%, for the three months
ended September 30, 1996, compared to the three months ended September 30,
1995.  Loan service revenue consists of net servicing spread earned on the
principal balances of the loans in the Company's loan servicing portfolio,

PAGE 3
<PAGE>

prepayment fees, late charges and other fees retained by the Company in
connection with the servicing of loans reduced by the amortization of the
excess servicing receivable.  The increases for the three months ended
September 30, 1996 were due primarily to the greater size of the portfolio
of loans serviced in this period offset by increased amortization of excess
servicing due to increased prepayment activity in the first quarter and changes
in amortization assumptions.  The Company's loan servicing portfolio increased
to $1.8 billion at September 30, 1996, up 152% from the September 30, 1995
balance of $703 million.

     The Company has historically experienced delinquency rates that are higher
than those prevailing in its industry.  However, management believes the
Company's historical loan losses are generally lower than those experienced by
most other lenders to credit-impaired borrowers because of the lower combined
loan-to-value ratios on the Company's lower credit grade loans.  The following
table sets forth delinquency, foreclosure, loss and reserve information of the
Company's servicing portfolio for the periods indicated:

PAGE 4
<PAGE>

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED 
                                                        SEPTEMBER 30, 
                                                 --------------------------
                                                  1995                1996
                                                 --------         --------- 
     <S>                                         <C>               <C>

     Percentage of dollar amount of delinquent loans
      to loans serviced (period end)<1> <2> <3>
       One month                                   5.6%               5.0%
       Two months                                  1.2%               1.9%
       Three or more months:
         Not foreclosed <4>                        7.1%               7.3%
         Foreclosed <5>                            1.1%               1.0%
                                                  ------             ------
           Total                                  15.0%              15.2%

     Percentage of dollar amount of loans
      foreclosed to loans serviced<2>              0.25%              0.42%

     Number of loans foreclosed                     42                 86

     Principal amount at time of foreclosure of
      foreclosed loans (in thousands)             $ 1,686            $ 7,272

     Net losses (in thousands)<6>                 $   203            $   932

     Percentage of losses to average servicing
      portfolio                                    0.12%              0.24%

     Liquidation loss reserve (in thousands)<7>   $ 4,288            $19,410

<FN>
------------------------- 
   <1> Delinquent loans are loans for which more than one payment is due.

   <2> The delinquency and foreclosure percentages are calculated on the basis
of the total dollar amount of mortgage loans originated or purchased by the
Company and, in each case, serviced by the Company, or the Company and any
subservicers, as applicable, as of the end of the three month periods indicated.

   <3> At September 30, 1996, the dollar volume of loans delinquent more than 90
days in the Company's four securitization trusts formed during the period from
December 1994 to September 1995 exceeded the permitted limit in the related
pooling and servicing agreements.  The higher delinquency rates could result in
the termination of the Company's normal servicing rights with respect to the
loans in these trusts, although to date no servicing rights have been
terminated, negatively affect the Company's cash flows and adversely influence
the Company's assumptions underlying the excess servicing gain.  (See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors--Delinquencies; Negative Impact on Cash Flow; Right to
Terminate Normal Servicing" in the Company's Form 10-K for the fiscal year
ended June 30, 1996.)

   <4> Represents loans which are in foreclosure but as to which foreclosure
proceedings have not concluded.  

   <5> Represents properties acquired following a foreclosure sale and still
serviced by the Company.  

   <6> Represents net losses on foreclosed properties sold during the period
indicated.

   <7> Represents period end reserves for future liquidation losses.
</FN>
</TABLE>

PAGE 5
<PAGE>

     Fees and other revenue increased by $4.3 million, or 160%, for the three
months ended September 30, 1996, compared to the three months ended September
30, 1995.  Fees and other revenue consist of fees received by the Company
through its retail loan office network in the form of closing, appraisal,
underwriting and other fees, plus interest income.  The dollar amount of other
fees increased due to the larger number of mortgage loans originated through
the Company's retail loan office network during the respective periods. 
Interest income increased for the three months ended September 30, 1996 due to
interest earned on larger amounts of loans held by the Company during the
period from origination or purchase of the loans until the date sold by the
Company.

EXPENSES

     Compensation and related expenses increased $13.3 million, or 221%, for
the three months ended September 30, 1996, compared to the three months ended
September 30, 1995.  These increases reflected compensation paid to new
personnel and increased commissions and bonuses paid to certain employees. 
Compensation and related expenses as a percentage of total revenues were 26%
and 29% for the three months ended September 30, 1995 and 1996, respectively.

     Sales and advertising costs increased $4.0 million, or 115%, for the three
months ended September 30, 1996, compared to the three months ended September
30, 1995, due primarily to the Company's nationwide expansion of its retail
loan office network.  The Company operated 52 retail loan offices in 18 states
throughout the United States at September 30, 1996 compared to 32 offices in
seven states at September 30, 1995.  Sales and advertising costs as a
percentage of total revenue were 15% and 11% for the three months ended
September 30, 1995, and 1996, respectively.

     General and administrative expenses increased $5.2 million, or 221%, for
the three months ended September 30, 1996, compared to the three months ended
September 30, 1995, and increased from 10% to 11% of revenue for the same
periods.  The dollar increase was primarily the result of occupancy and
communications costs related to the expansion of the Company's retail loan
office network.

     Interest expense increased from $1.2 million for the three months ended
September 30, 1995, to $7.4 million for the three months ended September 30,
1996, primarily as a result of increased borrowings under various financing
arrangements used to fund the origination and purchase of mortgage loans prior
to their securitization and sale in the secondary market.  Interest expense is
expected to increase in future periods due to the Company's continued reliance
on warehousing facilities to fund increased originations and purchases of loans
pending their securitization, and as a result of the Company's sale in the
third quarter of fiscal 1996 of $115 million of its 5.5% Convertible
Subordinated Debentures due 2006, and the sale in the second quarter of fiscal
1997 of $150 million of its 9.125% Senior Notes due 2003.

PAGE 6
<PAGE>

INCOME TAXES

     The Company's provision for income taxes decreased from $4.1 million for
the three months ended September 30, 1995 to $571,000 for the three months
ended September 30, 1996.  Despite the net loss reported in the three months
ended September 30, 1996, a provision for income taxes was required as a result
of the impact of $5.4 million of nonrecurring charges that were not tax
deductible.

FINANCIAL CONDITION

     LOANS HELD FOR SALE.  Prior to securitization, the Company holds mortgage
loans in its portfolio.  The Company's portfolio of loans held for sale
decreased from $186 million at June 30, 1996 to $143 million at September 30,
1996.  Included in the June 30, 1996 loans held for sale was $119 million of
loans held by One Stop.

     ACCOUNTS RECEIVABLE.  Accounts receivable, representing servicing fees and
advances, decreased by $1.5 million from $9.7 million at June 30, 1996 to $8.2
million at September 30, 1996.

     EXCESS SERVICING RECEIVABLE.  Excess servicing receivable increased $48.9
million from $129 million at June 30, 1996 to $178 million at September 30,
1996 reflecting the increased size of the Company's first quarter
securitization.

     MORTGAGE SERVICING RIGHTS.  The September 30, 1996 balance represents
mortgage servicing rights capitalized in accordance with the
Statement of Financial Accounting Standards No.  122, "Accounting For Mortgage
Servicing Rights" ("SFAS 122").  This balance reflects the capitalization under
SFAS 122 of $3.4 million of servicing rights partially offset by amortization
of $729,000 for the three months ended September 30, 1996.

     RESIDUAL ASSETS.  Residual assets represent the reserve accounts and
overcollateralization amounts required to be maintained in connection with the
securitization of loans.  Residual assets include cash and mortgage loans in
excess of the principal amounts of the senior certificates of the
securitization trusts.  Residual assets increased $10.0 million from $44.7
million at June 30, 1996 to $54.7 million at September 30, 1996.

     EQUIPMENT AND IMPROVEMENTS.  Primarily as a result of the expansion of the
Company's loan office network and the associated investment in technology,
equipment and improvements, net increased $1.2 million from $6.7 million at
June 30, 1996 to $7.9 million at September 30, 1996.

     PREPAID AND OTHER ASSETS.  Prepaid and other assets decreased $889,000
from $10.3 million at June 30, 1996 to $9.4 million at September 30, 1996.

     BORROWINGS.  Borrowings increased by $37 million from $138 million at June
30, 1996 to $175 million at September 30, 1996.  This increase was primarily
related to outstanding amounts on the Company's credit facility secured by
certain excess servicing receivables.

PAGE 7
<PAGE>

     REVOLVING WAREHOUSE FACILITIES.  Amounts outstanding under warehouse
facilities increased by $58 million from $112 million at June 30, 1996 to a
$170 million balance at September 30, 1996.  This increase was primarily a
result of the amount of restricted cash held by the Company related to the
pre-funding of the securitization completed during the three months ended
September 30, 1996.  While such cash is restricted, it cannot be used to repay
amounts outstanding under warehouse facilities.  The restricted cash was
released in October 1996 and used to pay down warehouse facilities.

LIQUIDITY

     The Company's operations require continued access to short-term and long-
term sources of cash.  The Company's operating cash requirements include the
funding of: (i) mortgage loan originations and purchases prior to their
securitization and sale, (ii) fees and expenses incurred in connection with the
securitization and sale of loans, (iii) cash reserve account or
overcollateralization requirements in connection with the securitization and
sale of mortgage loans, (iv) tax payments due on recognition of excess
servicing gain, and (v) ongoing administrative and other operating expenses.

     The Company has operated on a negative operating cash flow basis and
expects to continue to do so for as long as the Company's cash requirements
necessitated by the growth in volume of its securitization program continue to
grow at rates in excess of the cash generated by the Company from its
operations, including its servicing activities.  Historically, the Company has
funded, and expects to continue to fund, these negative operating cash flows,
subject to limitations under the Company's existing credit facilities,
principally through borrowings from financial institutions, sales of equity
securities and sales of senior and subordinated notes, among other sources. 
There can be no assurance that the Company will have access to the capital
markets in the future or that financing will be available to satisfy the
Company's operating and debt service requirements or to fund its future growth.

     New loan originations and purchases represent the Company's most
significant cash flow requirement.  The Company pays a premium on loans
purchased through its wholesale correspondent program and on loans purchased
from independent mortgage brokers.  The amount of cash used to pay premiums
approximated $15.2 million for the three months ended September 30, 1996.

     The Company securitized and sold in the secondary market $121 million and
$527 million of loans for the three months ended September 30, 1995 and 1996,
respectively.  In connection with securitization transactions completed during
these periods, the Company was required to provide credit enhancements in the
form of overcollateralization amounts.  In addition, during the life of the
related securitization trusts, the Company subordinates a portion of the excess
servicing otherwise due it to the rights of holders of senior interests as a
credit enhancement to support the sale of the senior interests.  In connection
with securitizations effected in September 1995 and 1996, overcollateralization
requirements were set at $462,000 and $1.8 million, respectively.  The terms of
the securitization trusts generally require that all excess servicing otherwise
payable to the Company during the early months of the trusts be used to repay
the senior interests in order to increase overcollateralization to specified
maximums.

PAGE 8
<PAGE>

     In addition, the increasing use of securitization transactions as a
funding source by the Company has resulted in a significant increase in the
amount of excess servicing gain recognized by the Company.  During the three
months ended September 30, 1995 and 1996, the Company recognized excess
servicing gain in the amounts of $12.6 million and $46.4 million, respectively.
The recognition of excess servicing gain has a negative impact on the cash flow
of the Company since the Company is required to pay federal and state taxes on
a portion of these amounts in the period recognized although it does not
receive the cash representing the gain until later periods as the related
service fees are collected and applicable overcollateralization requirements
are met.  The Company is considering alternative securitization structures that
may defer the amount of taxes payable on the excess servicing gain.

     The Company also incurs certain expenses in connection with
securitizations, including underwriting fees, credit enhancement fees, trustee
fees, hedging and other costs which, for the pool sold during the three months
ended September 30, 1996, approximated 0.50% of the principal amount of the
securitized mortgage loans.

CAPITAL RESOURCES

     The Company finances its operating cash requirements primarily through (i)
warehouse and other credit facilities, (ii) the securitization and sale of
mortgage loans, and (iii) the issuance of debt and equity securities.

     WAREHOUSE AND OTHER CREDIT FACILITIES.  The Company currently has two
warehouse facilities and one other credit facility in place.  There is a $150
million warehouse and working capital line of credit from a syndicate of six
commercial banks that is secured by loans originated and purchased by the
Company as well as certain servicing receivables, and which bears interest at
the rate of 0.875% over one-month LIBOR.  This line is currently scheduled to
expire on December 24, 1996 and is subject to renewal.  There is an additional
warehouse line of credit from one investment bank that is secured by loans
originated and purchased by the Company.  This line of $150 million bears
interest at the rate of 0.875% over one-month LIBOR, subject to renewal
periodically and is currently scheduled to expire on January 1, 1997. 
Additionally, the Company has a written commitment for a $125 million warehouse
facility from an investment bank.  This facility would bear interest at a rate
of 0.875% over one-month LIBOR and would expire on the earlier of December 31,
1996 or the completion of the third quarter's securitization.  Finally, the
Company has a $50.0 million credit facility from a commercial bank that is
secured by certain excess servicing receivables in certificated form and which
expires on December 6, 1996.  This facility bears interest at the rate of 2.625%
over the federal funds rate.  Upon certain capital raising events, the lender
may require all outstanding amounts under this facility in excess of $30.0
million to be prepaid and may reduce the credit limit under the facility to
$30.0 million.  Management expects, although there can be no assurance, that
the Company will be able to maintain these or similar facilities in the future.
In addition, the Company is currently negotiating with a number of financial
institutions for additional warehouse facilities.

     SECURITIZATION PROGRAM.  The Company's most important capital resource has
been its ability to sell loans originated and purchased by it in the secondary
market in order to generate cash proceeds

PAGE 9
<PAGE>

to pay down its warehouse facilities and fund new originations and purchases. 
The value of and market for the Company's loans are dependent upon a number of
factors, including general economic conditions, interest rates and governmental
regulations.  Adverse changes in such factors may affect the Company's ability
to securitize and sell loans for acceptable prices within a reasonable period of
time.  The ability of the Company to sell loans in the secondary market on
acceptable terms is essential for the continuation of the Company's loan
origination and purchase operations.  A reduction in the size of the secondary
market for loans of the types originated or purchased by the Company may 
adversely affect the Company's ability to sell loans in the secondary market 
with a consequent adverse impact on the Company's profitability and ability to 
fund future originations and purchases.

     In addition, in order to gain access to the secondary market, the Company
has relied on monoline insurance companies to provide financial guarantee
insurance on senior interests in the securitization trusts established by the
Company.  The Company has not structured a pool for securitization and sale in
the secondary market based solely on the internal credit enhancements of the
pool or the Company's guarantees.  Any substantial reduction in the size or
availability of the secondary market for the Company's loans or the
unwillingness of monoline insurance companies to provide financial guarantee
insurance for the senior interests in the securitization trusts could have a
material adverse effect on the Company's financial position and results of
operations.  At September 30, 1996, the dollar volume of loans delinquent more
than 90 days on the Company's four securitization trusts formed during the
period from December 1994 to September 1995 exceeded the permitted limit in the
related pooling and servicing agreements.  The higher delinquency rates could
result in the termination of the Company's normal servicing rights with respect
to the loans in these trusts, although to date no servicing rights have been
terminated, negatively affect the Company's cash flows and adversely influence
the Company's assumptions underlying the excess servicing gain.  See "Item 7. 
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors-- Delinquencies; Negative Impact on Cash Flow; Right
to Terminate Normal Servicing" in the Company's Form 10-K for the fiscal year
ended June 30, 1996.

     OTHER CAPITAL RESOURCES.  The Company has funded negative cash flows
primarily from the sale of its equity and debt securities.  In December 1991,
July 1993, June 1995, and October 1996, the Company effected offerings of its
Common Stock with net proceeds to the Company aggregating $179.1 million.  In
March 1995, the Company completed an offering of its 10.5% Senior Notes due
2002 with net proceeds to the Company of $22.2 million.  In February 1996, the
Company completed an offering of its 5.5% Convertible Subordinated Debentures
due 2006 with net proceeds to the Company of $112 million.  In October 1996,
the Company completed an offering of its 9.125% Senior Notes due 2003 with net
proceeds to the Company of $145 million.  The Company had cash and cash
equivalents of approximately $102 million (of which $91.7 million was
restricted) at September 30, 1996.  The Company anticipates that its sources of
liquidity will be sufficient to fund the Company's liquidity requirements for
at least the next 12 months, if the Company's future operations are consistent
with management's current growth expectations.  There can be no assurance that
the Company will be successful in consummating any such financing transaction
in the future on terms the Company would consider to be favorable.

PAGE 10
<PAGE>

RISK MANAGEMENT

     The Company employs a variety of strategies in order to manage the risk
that mortgage loans held for sale pending securitization will fluctuate in
value as a result of changing interest rates prevailing in the market.  The
Company hedges against interest rate fluctuations by selling United States
Treasury securities not yet purchased and by purchasing treasury put options. 
The amount and timing of hedging transactions are determined by members of the
Company's senior management.  Management assesses factors including the
interest rate environment, loan production levels and open positions of current
hedge positions.  The Company has also mitigated its interest rate exposure by
effecting securitizations once each quarter resulting in a holding period for
most of the mortgage loans originated and purchased by it of less than one
quarter.

     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
30 days.  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.

FORWARD-LOOKING STATEMENTS

     From time to time, the Company may publish forward-looking statements
relating to such matters as anticipated financial performance, business
prospects and similar matters.  The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking statements.  In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements.  The risks and uncertainties that may affect the
operations, performance and results of the Company's business include the
following: negative cash flows and capital needs, delinquencies, risks of
contracted servicing, dependence on funding sources, capitalized excess
servicing receivable, recent addition of wholesale correspondent program,
recent acquisition of One Stop, concentration of wholesale correspondent
program, competition, concentration of operations, timing of loan sales,
economic conditions, contingent risks, and government regulation.  For a more
complete discussion of these risks and uncertainties, see "Item 7. 
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors" in the Company's Form 10-K for the fiscal year ended
June 30, 1996.

PAGE 11
<PAGE>

                          AAMES FINANCIAL CORPORATION

OTHER INFORMATION

PART II

Item 1.   Legal Proceedings - None

Item 2.   Changes in Securities - None

Item 3.   Defaults upon Senior Securities - None

Item 4.   Submission of Matters to a Vote of Security Holders - None

Item 5.   Other Information - None

Item 6.   Exhibits and Reports on Form 8-K

          (a) Exhibits

               4.1  First Supplemental Indenture, dated as of October 21, 1996,
                    between Registrant, The Chase Manhattan Bank, as Trustee,
                    and Aames Capital Corporation, Aames Capital Corporation of
                    Minnesota, Aames Funding Corporation, Aames Home Loan,
                    Aames Home Loan of America, Aames Home Loan of Colorado,
                    Inc., Aames Home Loan of Nevada, Inc., One Stop Mortgage,
                    Inc., Oxford Aviation Corporation, Inc., Oxford Escrow Co.,
                    Rossmore Financial, Inc., Serrano Insurance Services, Inc.
                    and Windsor Management Co.

              27.1  Financial Data Schedule

          (b)  Reports on Form 8-K: Current Reports on Form 8-K dated July 10,
               1996, August 7, 1996, August 13, 1996, September 12, 1996 and
               September 26, 1996.

PAGE 12
<PAGE>

                          AAMES FINANCIAL CORPORATION

                                  SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report on Form 10-Q to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                    AAMES FINANCIAL CORPORATION

Date: November 14, 1996             By:/s/ Gregory J. Witherspoon
                                       --------------------------
                                       Gregory J. Witherspoon
                                       Executive Vice President - Finance and
                                       Chief Financial Officer

                                    By:/s/ Mark E. Elbaum
                                       --------------------------
                                       Mark E.  Elbaum
                                       Senior Vice President - Finance and
                                       Principal Accounting Officer

PAGE 13
<PAGE>


                               EXHIBIT INDEX

EXHIBIT                                                                PAGE NO.
-------                                                                --------
  4.1     First Supplemental Indenture, dated as of                      _____
          October 21, 1996, between Registrant, The Chase
          Manhattan Bank, as Trustee, and Aames Capital
          Corporation, Aames Capital Corporation of Minnesota,
          Aames Funding Corporation, Aames Home Loan,
          Aames Home Loan of America, Aames Home Loan of
          Colorado, Inc., Aames Home Loan of Nevada, Inc.,
          One Stop Mortgage, Inc., Oxford Aviation
          Corporation, Inc., Oxford Escrow Co., Rossmore
          Financial, Inc., Serrano Insurance Services, Inc. and
          Windsor Management Co.

    27.1  Financial Data Schedule

PAGE 14