United States Securities and Exchange Commission
                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)

           (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 1999

                                       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: 0-26412

                          UNION ACCEPTANCE CORPORATION
                          ----------------------------
             (Exact name of registrant as specified in its charter)


          Indiana                                      35-1908796
          -------                                      ----------
(State or other jurisdiction                        (I.R.S. Employer
of incorporation or organization)                 Identification Number)



250 N. Shadeland Avenue, Indianapolis, IN                 46219
-----------------------------------------                 -----
 (Address of principal executive office)                (Zip Code)



                                 (317) 231-6400
                                 --------------
              (Registrant's telephone number, including area code)

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

Yes (X)           No ( )

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date:

                  Class                        Outstanding at February 4, 2000

Class A Common Stock, without par value              5,816,024 Shares
---------------------------------------              ----------------
Class B Common Stock, without par value              7,461,608 Shares
---------------------------------------              ----------------



<PAGE>

                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

                                    FORM 10-Q

                                      INDEX

                                                                            Page

Part I.  FINANCIAL INFORMATION

Item 1.  Consolidated Condensed Financial Statements (unaudited):

         Consolidated Condensed Balance Sheets as of
         December 31, 1999 and June 30, 1999                                  3

         Consolidated Condensed Statements of Earnings
         for the Three and Six Months Ended December 31, 1999 and 1998        4

         Consolidated Condensed Statements of Cash Flows for the
         Six Months Ended December 31, 1999 and 1998                          5

         Consolidated Condensed Statement of  Shareholders' Equity for the
         Six Months Ended December 31, 1999                                   6

         Notes to Consolidated Condensed Financial Statements                 7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                 10

Item 3.  Quantitative and Qualitative Disclosures about Market Risk          21

Part II. OTHER INFORMATION                                                   23


         Signatures                                                          24




<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>

                                                                        December 31,     June 30,
Assets                                                                     1999            1999
                                                                        -------------------------
<S>                                                                      <C>             <C>
Cash and cash equivalents                                                $ 10,876        $  8,088
Restricted cash                                                            12,430          12,379
Receivables held for sale, net                                            174,998         267,316
Retained interest in securitized assets                                   198,619         190,865
Accrued interest receivable                                                 1,425           2,035
Property, equipment, and leasehold improvements, net                        9,727           8,375
Other assets                                                               22,460          25,868
                                                                         --------        --------

Total Assets                                                             $430,535        $514,926
                                                                         ========        ========

Liabilities and Shareholders' Equity

Liabilities
-----------
Amounts due under warehouse facilities                                   $127,359        $185,500
Long-term debt                                                            177,000         199,000
Accrued interest payable                                                    4,506           5,287
Amounts due to trusts                                                      14,018          13,152
Dealer premiums payable                                                     1,122           2,564
Current and deferred income taxes payable                                   3,326          16,022
Other payables and accrued expenses                                         4,020           3,922
                                                                         --------        --------

Total Liabilities                                                         331,351         425,447
                                                                         --------        --------

Commitment and Contingencies                                                   --              --

Shareholders' Equity
--------------------
 Preferred Stock, without par value, authorized
 10,000,000 shares; none issued and outstanding                                --              --

 Class A Common Stock, without par value, authorized
 30,000,000 shares; 5,816,024 and 5,099,344 shares issued and
 outstanding at December 31, 1999 and June 30, 1999, respectively          58,620          58,452

 Class B Common Stock, without par value, authorized
 20,000,000 shares; 7,461,608 and 8,150,266 shares issued and
 outstanding at December 31, 1999 and June 30, 1999, respectively              --              --

Accumulated other comprehensive earnings, net of income taxes               2,169             199
Retained earnings                                                          38,395          30,828
                                                                         --------        --------

Total Shareholders' Equity                                                 99,184          89,479
                                                                         --------        --------

Total Liabilities and Shareholders' Equity                               $430,535        $514,926
                                                                         ========        ========
</TABLE>


See accompanying notes to consolidated condensed financial statements.



<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Earnings
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>


                                                              Three Months Ended                      Six Months Ended
                                                                 December 31,                           December 31,
                                                        ------------------------------        ------------------------------
                                                           1999               1998               1999               1998
                                                        -----------        -----------        -----------        -----------


<S>                                                     <C>                <C>                <C>                <C>
Interest on receivables held for sale                   $     6,684        $     6,938        $    14,829        $    15,189
Retained interest and other                                   6,442              5,195             12,170             10,827
                                                        -----------        -----------        -----------        -----------

 Total interest income                                       13,126             12,133             26,999             26,016
Interest expense                                              6,179              6,496             12,743             13,601
                                                        -----------        -----------        -----------        -----------

 Net interest margin                                          6,947              5,637             14,256             12,415
Provision for estimated credit losses                           665              1,275              1,415              3,600
                                                        -----------        -----------        -----------        -----------
 Net interest margin after provision
 for estimated credit losses                                  6,282              4,362             12,841              8,815
                                                        -----------        -----------        -----------        -----------

Gain on sales of receivables, net                             1,261              4,087              7,791              6,793
Servicing fees                                                6,188              5,469             12,256             10,422
Late charges and other fees                                   1,508              1,173              3,013              2,379
                                                        -----------        -----------        -----------        -----------

   Other revenues                                             8,957             10,729             23,060             19,594
                                                        -----------        -----------        -----------        -----------

Salaries and benefits                                         6,737              5,453             13,664             11,123
Other general and administrative expenses                     4,993              4,856              9,907              9,177
                                                        -----------        -----------        -----------        -----------

   Total operating expenses                                  11,730             10,309             23,571             20,300
                                                        -----------        -----------        -----------        -----------

Earnings before provision for income taxes                    3,509              4,782             12,330              8,109
Provision for income taxes                                    1,361              1,859              4,763              3,129
                                                        -----------        -----------        -----------        -----------

Net earnings                                            $     2,148        $     2,923        $     7,567        $     4,980
                                                        ===========        ===========        ===========        ===========

Net earnings per common share (basic & diluted)         $      0.16        $      0.22        $      0.57        $      0.38
                                                        ===========        ===========        ===========        ===========

Basic weighted average number of common
  shares outstanding                                     13,264,379         13,236,313         13,257,519         13,233,897
                                                        ===========        ===========        ===========        ===========
Diluted weighted average number of common
  shares outstanding                                     13,308,923         13,236,313         13,302,220         13,236,038
                                                        ===========        ===========        ===========        ===========
</TABLE>


See accompanying notes to consolidated condensed financial statements.





<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

<TABLE>
<CAPTION>
                                                                                        Six Months Ended
                                                                                           December 31,
                                                                                  ---------------------------
                                                                                     1999              1998
                                                                                  ---------         ---------

Cash flows from operating activities:
<S>                                                                               <C>               <C>
   Net earnings                                                                   $   7,567         $   4,980
      Adjustments to reconcile net earnings to net cash
      from operating activities:
          Increase in receivables held for sale, net of liquidations               (580,250)         (756,893)
          Dealer premiums paid, net on receivables held for sale                    (16,324)          (28,456)
          Proceeds from securitization of receivables held for sale                 667,484           627,293
          Gain on sales of receivables                                              (11,347)          (20,912)
          Impairment of retained interest in securitized assets                       4,243             5,172
          Accretion of discount on retained interest in securitized assets          (11,412)           (9,640)
          Provision for estimated credit losses                                       1,415             3,600
          Amortization and depreciation                                               1,742             2,430
          Restricted cash                                                               (50)            5,288
          Other assets and accrued interest receivable                                2,926              (701)
          Amounts due to trusts                                                         866            (2,656)
          Other payables and accrued expenses                                       (13,287)            2,928
                                                                                  ---------         ---------
             Net cash from operating activities                                      53,574          (167,567)
                                                                                  ---------         ---------

Cash flows from investing activities:
   Collections on retained interest in securitized assets
      and change in spread accounts                                                  31,768            21,264
   Capital expenditures                                                              (2,060)           (1,225)
                                                                                  ---------         ---------
             Net cash from investing activities                                      29,708            20,039

Cash flows from financing activities:
   Principal payment on long-term debt                                              (22,000)          (22,000)
   Stock options exercised                                                               93                --
   Net change in warehouse credit facilities                                        (58,141)          101,708
   Payment of borrowing fees                                                           (446)             (102)
                                                                                  ---------         ---------
             Net cash from financing activities                                     (80,494)           79,606
                                                                                  ---------         ---------

Change in cash and cash equivalents                                                   2,788           (67,922)

Cash and cash equivalents, beginning of period                                        8,088            75,612
                                                                                  ---------         ---------

Cash and cash equivalents, end of period                                          $  10,876         $   7,690
                                                                                  =========         =========

Supplemental disclosures of cash flow information:
Income taxes paid                                                                 $  18,987         $       6
Interest paid                                                                     $  13,253         $  14,366
</TABLE>


See accompanying notes to consolidated condensed financial statements.



<PAGE>

Union Acceptance Corporation and Subsidiaries
Consolidated Condensed Statement of Shareholders' Equity
For the Six Months Ended December 31, 1999
(Dollars in thousands, except per share data)
(Unaudited)

<TABLE>
<CAPTION>


                                         Number of Common Stock                         Accumulated
                                           Shares Outstanding                              Other                        Total
                                     --------------------------------     Common        Comprehensive   Retained    Shareholders'
                                         Class A          Class B          Stock         Earnings       Earnings       Equity
                                     ---------------------------------------------------------------------------------------------

<S>                                        <C>             <C>              <C>                 <C>       <C>            <C>
Balance at June 30, 1999                   5,099,344       8,150,266        $ 58,452         $   199      $ 30,828       $ 89,479

Comprehensive earnings:
   Net earnings                                    -               -               -               -         7,567          7,567
   Net unrealized gain on retained
     interest in securitized assets                -               -               -           3,159             -          3,159
   Income taxes related to unrealized
     gain in securitized assets                    -               -               -          (1,189)            -         (1,189)
                                                                                                                    --------------
Total comprehensive earnings                                                                                                9,537

Grants of common stock                        10,550                              75                                           75

Stock options exercised                       17,472               -              93               -             -             93

Conversion of Class B
   Common Stock into
   Class A Common Stock                      688,658        (688,658)              -               -             -              -
                                     ---------------------------------------------------------------------------------------------
Balance at December 31, 1999               5,816,024       7,461,608        $ 58,620         $ 2,169      $ 38,395       $ 99,184
                                     =============================================================================================

</TABLE>


See accompanying notes to consolidated condensed financial statements.



<PAGE>

Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Six Months Ended December 31, 1999 and 1998

(Unaudited)

Note 1 - Basis of Presentation

         The  foregoing   consolidated   condensed   financial   statements  are
unaudited.  However, in the opinion of management, all adjustments necessary for
a fair  presentation  of the results of the interim  period  presented have been
included.  All adjustments are of a normal and recurring nature. Results for any
interim period are not necessarily  indicative of results to be expected for the
year. The consolidated  condensed  financial  statements include the accounts of
Union Acceptance Corporation ("UAC") and its subsidiaries.

         During  fiscal  1995,  Union  Acceptance   Funding   Corporation,   UAC
Securitization  Corporation,  Performance  Funding  Corporation  and Performance
Securitization  Corporation  were formed as  wholly-owned  subsidiaries  of UAC.
During  fiscal  1996,  UAC Boat  Funding  Corp.  was  formed as a wholly-  owned
subsidiary  of UAC.  In fiscal  1997,  UAC Finance  Corporation  was formed as a
wholly-owned  subsidiary  of UAC.  Circle City Car Company and Union  Acceptance
Receivables  Corporation were formed as wholly-owned  subsidiaries of UAC during
the first and second quarters, respectively, of fiscal 1998.

         The  consolidated  condensed  interim  financial  statements  have been
prepared in accordance with Form 10-Q  specifications,  and,  therefore,  do not
include  all  information  and  footnotes  normally  shown in  annual  financial
statements.  A summary of the Company's  significant  accounting policies is set
forth in "Note 1" of the "Notes to  Consolidated  Financial  Statements"  in the
Company's Annual Report on Form 10-K for the year ended June 30, 1999.

         In determining  the fair value of the Retained  Interest in Securitized
Assets  ("Retained  Interest"),  the Company  must  estimate the future rates of
gross credit losses and credit loss severity,  delinquencies and prepayments, as
they  impact the amount and timing of the  estimated  cash  flows.  The  Company
estimates  prepayments  by  evaluating  historical  prepayment   performance  of
comparable  receivables and the impact of trends in the economy. The Company has
used annual  prepayment  estimates  ranging  from 21.31% to 28.00% and 14.16% to
20.73% on Tier I and Tier II  receivables,  respectively,  at December 31, 1999.
The  Company  estimates  gross  credit  losses and credit  loss  severity  using
available  historical  loss data for  comparable  receivables  and the  specific
characteristics  of the receivables  purchased by the Company.  The Company used
estimated net credit losses  ranging from 4.00% to 6.63% and 12.00% to 16.00% on
Tier I and Tier II  receivables,  respectively,  as a percentage of the original
principal balance over the life of the receivables to value Retained Interest at
December  31,  1999.  The Company  determines  the  estimated  fair value of its
Retained Interest by discounting the expected cash flows released from the Trust
(the cash out  method)  using a discount  rate  which the  Company  believes  is
commensurate  with the risks  involved.  The Company used tiered  discount rates
based  on a  pool's  specific  risk  factors  up to 900  basis  points  over the
applicable U.S.  Treasury Rate ranging from 8.90% to 15.24% and 12.40% to 16.11%
on Tier I and Tier II  receivables,  respectively,  at December  31,  1999.  The
weighted average  discount rate used to value Retained  Interest at December 31,
1999 was 13.55% compared to 12.83% at June 30, 1999.

Note 2 - Reclassification

         Certain amounts for the prior period have been  reclassified to conform
to the current period presentation.

Note 3 - Retained Interest and Other Interest Income

         Retained  interest and other  interest  income  primarily  includes the
discount  accretion  recognized  on Retained  Interest,  the discount  accretion
related to the servicing asset,  interest earned on cash collection  accounts on
all securitization  transactions  before January 1, 1997, and interest earned on
cash and cash equivalents.


<PAGE>




Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Six Months Ended December 31, 1999 and 1998

(Unaudited)

Note 4 - Segment Information

         The Company adopted Statement of Financial Accounting Standards No. 131
"Disclosures  about  Segments of an Enterprise  and Related  Information  ("SFAS
131")  effective  June 30,  1999.  SFAS 131  provided  new  guidance  on segment
reporting.  The Company  determined it has a single reportable  segment which is
acquiring,  securitizing  and  servicing  retail  automobile  installment  sales
contracts  originated by dealerships  affiliated with major domestic and foreign
automobile   manufacturers.   The  single  segment  was   determined   based  on
management's   approach  to  operating  decisions,   assessing  performance  and
reporting financial information.

Note 5 - Earnings Per Share

         Earnings  per Share  have been  computed  on the basis of the  weighted
average  number of common shares  outstanding  in accordance  with  Statement of
Financial  Standards  No. 128  "Earnings  per Share"  (EPS).  The following is a
reconciliation  of the weighted  average common shares for the basic and diluted
earnings per share computations:
<TABLE>
<CAPTION>

                                         Three Months Ended           Six Months Ended
                                             December 31,                December 31,
                                       -----------------------    ------------------------
                                          1999         1998          1999          1998
                                       -----------------------    ------------------------
<S>                                    <C>          <C>           <C>           <C>
Basic EPS:
    Weighted average common shares     13,264,379   13,236,313    13,257,519    13,233,897
                                       ==========   ==========    ==========    ==========

Diluted EPS:
    Weighted average common shares     13,264,379   13,236,313    13,257,519    13,233,897
    Dilutive effect of stock options       44,544            -        44,701         2,141
                                       ----------   ----------    ----------    ----------
    Weighted average common and
         incremental shares            13,308,923   13,236,313    13,302,220    13,236,038
                                       ==========   ==========    ==========    ==========
</TABLE>


         The  effect of stock  options  not  exercised  during the three and six
months ended December 31, 1999 are dilutive  although the effect on earnings per
share is less than $.01.  The effect of stock options not  exercised  during the
six months ended December 31, 1998 are dilutive  although the effect on earnings
per share is less than $.01.  The effect of stock options not  exercised  during
the three months ended  December 31, 1998 are  anti-dilutive  and  therefore not
included in weighted average common shares.

Note 6 - Current Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging Activities." The Statement, as amended, is effective for
fiscal years beginning after June 15, 2000,  with earlier  application  allowed.
Management is currently  assessing the impact,  if any, of this Statement on the
financial condition and operations of the Company upon adoption.


<PAGE>




Union Acceptance Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
For the Six Months Ended December 31, 1999 and 1998

(Unaudited)

Note 7 - Retained Interest in Securitized Assets

         Retained  Interest in  Securitized  Assets is recorded as an "available
for sale"  security  and is  recorded  at fair value with  unrealized  gains and
losses attributable to changes in fair value, net of income taxes, recorded as a
separate component of shareholders'  equity  ("accumulated  other  comprehensive
earnings").  Other  than  temporary  impairment  charges  are  recorded  through
earnings as a component of gain on sale of receivables, net.

Retained Interest in Securitized Assets is as follows (in thousands) at:
<TABLE>
<CAPTION>


                                                           December 31,          June 30,
                                                              1999                 1999
                                                          -----------          -----------
<S>                                                       <C>                  <C>
Estimated gross interest spread from receivables,
  net of estimated prepayments and fees                   $   278,568          $   248,687
Estimated dealer premium rebates refundable                    19,943               22,923
Estimated credit losses on securitized receivables           (107,625)            (104,448)
Spread accounts                                                61,424               69,757
Discount to present value                                     (53,691)             (46,054)
                                                          -----------          -----------
    Total Retained Interest in Securitized Assets         $   198,619          $   190,865
                                                          ===========          ===========

Outstanding balance of securitized receivables            $ 2,408,857          $ 2,256,415
                                                          ===========          ===========
Estimated credit losses as a percentage of
  securitized receivables serviced                               4.47%                4.63%
</TABLE>





<PAGE>

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

General

         The  Company  derives  substantially  all  of  its  earnings  from  the
acquisition,  securitization and servicing of retail installment sales contracts
and installment  loan  agreements.  The retail  installment  sales contracts are
originated  by   dealerships   affiliated   with  major   domestic  and  foreign
manufacturers, and the loan agreements are originated by the Company as a result
of referrals by the  dealerships.  To fund the acquisition of these  receivables
prior to  securitization,  the  Company  utilizes a revolving  warehouse  credit
facility,    discussed   in   "Liquidity   and   Capital   Resources."   Through
securitizations, the Company periodically pools and sells receivables to a trust
which issues  Securities  to investors  representing  pro-rata  interests in the
receivables sold or notes  representing the indebtedness of the trust secured by
the receivables sold. When the Company sells receivables in a securitization, it
records  a gain  (or  loss)  on sale of  receivables  and  establishes  Retained
Interest in Securitized  Assets ("Retained  Interest") as an asset.  Excess cash
flows are recorded  against  Retained  Interest as received over the life of the
related securitization.

         Acquisition  Volume. The Company currently  acquires  receivables in 35
states from over 4,300  manufacturer-franchised  auto  dealerships.  The Company
focuses its efforts on acquiring receivables on late model used and, to a lesser
extent,  new  automobiles  made to  purchasers  who exhibit a  favorable  credit
profile ("Tier I"). Total  receivable  acquisitions  were $263.8 million for the
quarter  ended  December  31, 1999,  compared to $330.3  million for the quarter
ended September 30, 1999, and $361.9 million for the same quarter of last fiscal
year.  The  Company's  primary focus is on acquiring  high  quality,  profitable
receivables.  The  Company  operated  in a  lower,  more  stable  interest  rate
environment during the prior fiscal year which contributed to higher acquisition
volume.  During  the first and  second  quarters  of fiscal  2000,  the  Company
experienced  pricing pressures due to increasing  treasury rates and as a result
experienced  lower  receivable  acquisitions.  The  Company  also  believes  the
decrease in receivable acquisitions is due to the seasonality of the industry in
which it operates  and its  commitment  to  maintaining  a high  credit  quality
obligor.  Although receivable  acquisitions were lower, the Company succeeded in
its effort to improve credit  quality by increasing the weighted  average credit
score on receivables acquired during the second quarter ended December 31, 1999,
over the fiscal 2000 first quarter and any fiscal 1999 quarter.  The Company had
receivable  acquisitions  of  $106.0  million  for the month of  January  and is
targeting higher  receivables  acquisitions for the third and fourth quarters of
fiscal 2000 compared to the quarter ended  December 31, 1999.  The Company plans
to continue its expansion into the northeastern states during the latter half of
the third  quarter and into the fourth  quarter.  The Company  believes that its
increased  emphasis on growing existing  markets and its planned  expansion will
result in increased  acquisition  volume.  See - "Discussion of  Forward-Looking
Statements".

         Gross and Net Spreads.  The gross and net spreads on the second quarter
securitization  of fiscal 2000 were 7.06% and 5.66% compared to 6.89% and 5.25%,
respectively, over the same quarter of last fiscal year. Gross spread is defined
as the difference between the weighted average receivable rate and the rate born
by the related  asset-backed  securities.  Net spread is defined as gross spread
less servicing fees, upfront costs, ongoing credit enhancement and trustee fees,
and hedging gains or losses.

         Net spreads are currently targeted at 5.00% to 5.50% on securitizations
for the quarter  ended  March 31, 2000 and 5.25% to 5.75% for the quarter  ended
June 30, 2000.  Management believes that by targeting a spread of 7.00% to 7.50%
between  receivable rates and the two-year  treasury rate that these net spreads
can be achieved.  Although  management  believes  these spreads can be achieved,
material  factors  affecting  the net spreads are difficult to predict and could
cause  management's  projections  to be  materially  inaccurate.  These  include
current  market  conditions  with  respect  to  interest  rates and  demand  for
asset-backed  securities  generally and for securities issued in securitizations
sponsored by the Company. See - "Discussion of Forward-Looking Statements".

         Gain on Sales of Receivables, Net and Interest Rate Risk. Gain on sales
of  receivables  continues  to be a  significant  element of the  Company's  net
earnings. The gain on sales of receivables is affected by several factors but is
primarily affected by the amount of receivables securitized, the net spread, and
the level of estimation for net credit losses.

         The  Company's  sources  for funds  generally  have  variable  rates of
interest,  and its  receivable  portfolio  bears  interest at fixed  rates.  The
Company  therefore  bears  interest  rate  risk on  receivables  until  they are
securitized  and employs a hedging  strategy to mitigate this risk.  The Company
uses a hedging  strategy  that  primarily  consists of the  execution of forward
interest rate swaps having a maturity  approximating the average maturity of the
receivable  production  during the relevant  period.  There is no assurance that
this strategy will  completely  offset changes in interest rates. In particular,
such strategy depends on management's estimates of receivable acquisition volume
and timing of its  securitizations.  The Company  realizes a gain on its hedging
transactions  during  periods of  increasing  interest  rates and widening  swap
spreads and realizes a loss on such  transactions  during  periods of decreasing
interest  rates and  tightening  swap spreads.  The hedging gain or loss will in
part offset changes in interest rates as reflected by a lower or higher reported
gain on sales of receivables,  respectively.  Recognition of unrealized gains or
losses is deferred until the sale of receivables during the  securitization.  On
the date of the sale,  deferred  hedging  gains and losses are  recognized  as a
component of the gain on sales of receivables, net.

         Portfolio  Performance.  The Company saw a stabilization  of net credit
losses during the previous  three  quarters but  experienced an increase for the
quarter ended December 31, 1999.  Tier I net credit losses totaled 2.40% for the
quarter  ended  December 31, 1999,  compared to 1.97% and 2.15% for the quarters
ended September 30, 1999 and December 31, 1998, respectively.  Tier I net credit
losses for the six months  ended  December  31,  1999 were 2.19% which was lower
than 2.46% for the six months ended December 31, 1998. Delinquency on the Tier I
automobile portfolio was 3.33% at December 31, 1999, compared to 3.18% and 3.04%
at September 30, 1999 and December 31, 1998,  respectively.  Management believes
that the increase in net credit  losses and  delinquency  is a result of several
factors,  including a  continued  deterioration  in credit  quality of the older
pools  including  1997A and before and general  seasonality  experienced  in the
portfolio.  The Company  expects Tier I net credit losses and  delinquencies  to
stabilize in the third quarter.  Recoveries as a percentage of gross charge-offs
on the Tier I portfolio  decreased to 38.87% for the quarter ended  December 31,
1999, compared to 41.12% for the quarter ended September 30, 1999, and increased
from 37.79% for the same quarter of last year. This increase over the prior year
is primarily  due to an increase in the retail sale of  repossessed  vehicles at
the Company's new car  franchised  dealership  in  Indianapolis  for the quarter
ended December 31, 1999,  compared to the quarter ended December 31, 1998.  This
method of disposing  of  repossessions  along with  stricter  monitoring  of the
repossession  and resale  process  should  increase the recovery rate over time.
Recovery  rates  for  repossessed  automobiles  sold  by  the  Company's  retail
operation  are  significantly  higher than  recovery  rates on vehicles  sold at
auction. Approximately 20% of repossessed automobiles were sold at the Company's
retail  operation  during the three months ended December 31, 1999,  compared to
approximately  18% for the three  months  ended  December  31,  1998.  For those
automobiles  sold at retail during the quarter ended  December 31, 1999, the net
proceeds  received  were  approximately  56% of  the  percentage  of  the  gross
charge-off amount. See - "Discussion of Forward-Looking Statements".

         Provisions are made for estimated net credit losses in conjunction with
each  receivable  sale. The current  assumption  utilized in the gain on sale of
receivables  calculation  for  estimated  net credit  losses on the fiscal  2000
second  quarter  securitization  was 4.50%  over the life of the pool based on a
combined sale of Tier I, Tier II and modified receivables.  Estimated net credit
losses as a percentage of securitized receivables serviced (inherent in Retained
Interest)  was  4.47% at  December  31,  1999,  compared  to 4.57%  and 4.59% at
September 30, 1999, and December 31, 1998, respectively.


<PAGE>

         Tier I Portfolio. Set forth below is certain information concerning the
Company's  experience  pertaining to delinquencies  and net credit losses on the
Tier I fixed rate retail automobile, light truck and van receivables serviced by
the Company.  There can be no assurance that future  delinquency  and net credit
loss experience on receivables  will be comparable to that set forth below.  See
"Discussion of Forward-Looking Statements".

<TABLE>
<CAPTION>
                                                                   Tier I Delinquency Experience
                               -----------------------------------------------------------------------------------------------------
                                     At December 31, 1999              At September 30, 1999              At December 31, 1998
                               --------------------------------- ----------------------------------  -------------------------------
                                                                      (Dollars in thousands)

                                  Number of                        Number of                           Number of
                                 Receivables        Amount        Receivables         Amount          Receivables          Amount
                                 -----------      ----------     ------------      -----------        -----------        -----------
<S>                                 <C>           <C>               <C>            <C>                    <C>            <C>
Servicing portfolio                 217,904       $2,540,391        217,296        $ 2,530,654            202,890        $2,277,112
Delinquencies:
     30-59 days                       4,636         $ 49,988          4,714            $50,734              4,379          $ 44,626
     60-89 days                       2,202           24,505          1,955             20,439              1,682            17,475
     90 days or more                    944           10,151            875              9,291                694             7,161
                                  ----------      -----------       --------       ------------           --------       -----------
Total delinquencies                   7,782         $ 84,644          7,544            $80,464              6,755          $ 69,262
                                  ==========      ===========       ========       ============           ========       ===========
Delinquency as a percentage
     of servicing portfolio            3.57%            3.33%          3.47%              3.18%              3.33%             3.04%
</TABLE>



         As  indicated  by  the  above  table,   delinquency  rates  based  upon
outstanding receivable balances of accounts 30 days past due and over were 3.33%
at December 31,  1999,  compared to 3.18% at  September  30, 1999,  and 3.04% at
December 31, 1998, for the Company's Tier I servicing portfolio.

<PAGE>

<TABLE>
<CAPTION>
                                                                     Tier I Credit Loss Experience
                                                                      For the Three Months Ended
                                        -----------------------------------------------------------------------------------------
                                               December 31, 1999            September 30, 1999            December 31, 1998
                                        -------------------------      --------------------------    ----------------------------
                                                                        (Dollars in thousands)

                                         Number of                      Number of                      Number of
                                        Receivables      Amount        Receivables      Amount        Receivables        Amount
                                        -----------      ------        -----------      ------        -----------        ------
<S>                                       <C>          <C>                <C>          <C>                <C>          <C>
Average servicing portfolio               217,695      $2,537,094         216,508      $2,515,461         200,164      $2,234,753

Gross charge-offs                           2,232      $   24,948           2,003      $   21,088           1,886      $   19,339
Recoveries                                                  9,698                           8,671                           7,309
                                                       ----------                      ----------                      ----------
    Net charge-offs                                    $   15,250                      $   12,417                      $   12,030
                                                       ==========                      ==========                      ==========

Gross charge-offs as a percentage
    of average servicing portfolio (1)       4.10%           3.93%           3.70%           3.35%           3.77%           3.46%
Recoveries as a percentage of
    gross charge-offs                                       38.87%                          41.12%                          37.79%
Net charge-offs as a percentage
    of average servicing portfolio (1)                       2.40%                           1.97%                           2.15%
</TABLE>

(1) Annualized

<TABLE>
<CAPTION>

                                                           For the Six Months Ended
                                      ---------------------------------------------------------------
                                             December 31, 1999                   December 31, 1998
                                      -----------------------------         -------------------------
                                                            (Dollars in thousands)

                                        Number of                            Number of
                                       Receivables       Amount             Receivables      Amount
                                       -----------     ----------           -----------    ----------
<S>                                      <C>           <C>                    <C>          <C>
Average servicing portfolio              217,102       $ 2,526,278            195,521      $2,161,458

Gross charge-offs                          4,235            46,037              4,082          42,990
Recoveries                                                  18,370                             16,455
                                                       -----------                        -----------
    Net charge-offs                                    $    27,667                         $   26,535
                                                       ===========                        ===========

Gross charge-offs as a percentage
    of average servicing portfolio (1)     3.90%             3.64%              4.18%           3.98%
Recoveries as a percentage
    of gross charge-offs                                    39.90%                             38.28%
Net charge-offs as a percentage
    of average servicing portfolio (1)                       2.19%                              2.46%
</TABLE>

(1) Annualized


         As indicated in the above table,  net credit  losses on the Tier I auto
portfolio  totaled  $15.3  million for the quarter  ended  December 31, 1999, or
2.40% (annualized) as a percentage of the average servicing portfolio,  compared
to 1.97% and 2.15% for the quarters  ended  September 30, 1999, and December 31,
1998, respectively.

Results of Operations

         Net  earnings  decreased  26.5% to $2.1  million,  or $.16 per  diluted
share,  for the quarter ended  December 31, 1999,  compared to $2.9 million,  or
$0.22 per diluted  share,  for the quarter ended December 31, 1998. Net earnings
increased 52.0% to $7.6 million,  or $.57 per diluted share,  for the six months
ended  December 31, 1999,  compared to $5.0 million,  or $.38 per diluted share,
for the six months ended December 31, 1998. The decrease in net earnings for the
quarter ended  December 31, 1999 was primarily  related to other than  temporary
impairments  taken during the quarter.  The increase in net earnings for the six
months ended  December 31, 1999 was primarily  related to an increase in the net
interest margin after  provision for estimated  credit losses and an increase in
servicing fees over the same period of the prior fiscal year.

         Net  interest  margin  after  provision  for  estimated  credit  losses
increased  44.0% to $6.3 million and 45.7% to $12.8  million for the quarter and
six months ended December 31, 1999,  respectively,  compared to $4.4 million and
$8.8 million for the corresponding periods ended December 31, 1998. The increase
in the net interest  margin after  provision  for  estimated  credit  losses was
primarily due to a decrease in the provision for estimated  credit losses and an
increase in discount  accretion included in retained interest and other interest
income.

         Interest on  receivables  held for sale  decreased 3.7% to $6.7 million
and 2.4% to $14.8  million  for the quarter and six months  ended  December  31,
1999,  respectively,  compared to $6.9  million  and $15.2  million for the same
periods of fiscal 1999.  The decrease in interest on  receivables  held for sale
was  primarily  a result of a decrease  in the  average  outstanding  balance of
receivables  held for sale to $190.0  million and $214.5 million for the quarter
and six months ended December 31, 1999, respectively, compared to $218.9 million
and $237.5 million for the same periods ended December 31, 1998.

         Retained  interest and other interest  income  increased  24.0% to $6.4
million and 12.4% to $12.2 million for the quarter and six months ended December
31,  1999,  respectively,  compared to $5.2  million  and $10.8  million for the
corresponding  periods ended December 31, 1998. Other interest income related to
discount  accretion  was $6.1 million and $11.5  million for the quarter and six
months ended December 31, 1999, respectively,  compared to $4.7 million and $9.8
million for the quarter and six months ended  December  31,  1998.  The discount
component of Retained  Interest  increased at June 30, 1998 by implementing  the
"cash out" method and again at June 30, 1999 by  increasing  the  discount  rate
used to record the gain on sale of receivables.  (A more detailed discussion can
be found in the  Company's  Annual  Report on Form 10-K for  fiscal  1999).  The
resulting  effect during the current period was an increase in the amount of the
discount accreted into income. This increase in accretion was somewhat offset by
slower  accretion of the discount into income on some pools that were determined
to be at risk for other than temporary impairment. Other interest income related
to the restricted cash accounts (collection and spread accounts) for the quarter
and six months ended December 31, 1999, was $330,000 and $686,000, respectively,
compared to $484,000  and $1.0  million,  respectively,  for the quarter and six
months ended December 31, 1998.

         Interest  expense  decreased  4.9% to $6.2  million  and  6.3% to $12.7
million for the quarter and six months ended  December  31, 1999,  respectively,
compared to $6.5 million and $13.6 million for the  corresponding  periods ended
December 31, 1998.  The decrease was a result of lower  long-term  debt interest
expense as a result of a lower  principal  balance on long-term  debt due to the
required second principal  payment of $22.0 million on Senior Debt during August
1999 as well as lower average warehouse  borrowing needs due to lower receivable
acquisitions.

         Provision for estimated  credit losses  decreased 47.8% to $665,000 and
60.1% to $1.4  million for the quarter and six months  ended  December 31, 1999,
respectively,  compared to $1.3 million and $3.6 million,  respectively, for the
same  periods  of the  fiscal  1999.  The  decrease  is  primarily  due to lower
receivable  acquisitions  and a  smaller  portfolio  of  Tier  II  and  modified
receivables held on balance sheet.  Additionally,  the allowance as a percentage
of the Tier II and modified  portfolios has been increasing as these  portfolios
have been experiencing  fewer losses.  The allowance for estimated credit losses
related to the held for sale portfolio  serviced was 1.67% at December 31, 1999,
compared to 1.28% at September 30, 1999 and .92% at December 31, 1998.

         Gain on sales of  receivables,  net decreased 69.2% to $1.3 million and
increased  14.7% to $7.8 million for the quarter and six months  ended  December
31,  1999,  respectively,  compared  to $4.1  million  and $6.8  million for the
quarter and six months ended December 31, 1998,  respectively.  The gain for the
quarters ended December 31, 1999 and 1998,  consisted of gains on securitization
transactions  of $5.3 million and $5.7 million  offset by charges for other than
temporary  impairments  of Retained  Interest of $4.0 million and $1.6  million,
respectively.  The gain for the six months  ended  December  31,  1999 and 1998,
consisted of gains on  securitization  transactions  of $12.1  million and $12.0
million and charges for other than temporary impairments of Retained Interest of
$4.3  million  and $5.2  million,  respectively.  Unrealized  gains or losses on
Retained  Interest  are not  charged to income.  (See -  Financial  Condition  -
"Retained  interest  in  securitized   assets,"  below).  The  decrease  in  the
securitization   transaction  gain  primarily   relates  to  a  higher  discount
assumption and a higher credit loss  assumption  used in the  calculation of the
second quarter of fiscal 2000 gain on sale compared to the gain on sale recorded
in the same  period  of the  prior  fiscal  year.  Offsetting  the  increase  in
assumptions was an increase in the volume of receivables sold in the fiscal 2000
second  quarter  securitization  compared  to the  fiscal  1999  second  quarter
securitization.  The  receivables  sold in the  securitization  for the quarters
ended  December  31,  1999 and  1998,  of $302.7  million  and  $275.9  million,
respectively,  primarily  included  receivable  acquisitions  for the  months of
September, October and November of 1999 and 1998, respectively.

         Set forth below is certain  information  relating to the second quarter
fiscal 2000 and 1999 securitizations.

Second Quarter Securitizations                               Fiscal
                                                   ------------------------
                                                     2000            1999
                                                   --------        --------
                                                   1999 - D        1998 - D

Amount securitized (in millions)                     $302.7         $275.9
Weighted average receivable rate                     13.62%         12.74%
Certificate rate                                      6.56%          5.85%
Gross spread (1)                                      7.06%          6.89%
Net spread (2)                                        5.66%          5.25%
Weighted average life (in years)                       1.95           2.01
Credit loss assumption                                4.50%          4.40%
Annual prepayment speed assumption                   28.00%         25.00%
Discount rate assumption                             14.81%          9.76%
Weighted average remaining maturity (in months)        69.9           69.1
Gain as a percentage of amount securitized            1.73%          2.10%

(1)  Gross spread - difference  between the weighted average receivable rate and
     rate born by the related asset-backed securities.

(2)  Net spread - gross  spread less  servicing  fees,  upfront  costs,  ongoing
     credit enhancement and trustee fees, and hedging gain or losses.


         Servicing  fees  increased  13.1% to $6.2  million  and  17.6% to $12.3
million for the quarter and six months ended  December  31, 1999,  respectively,
compared to $5.5 million and $10.4  million for the quarter and six months ended
December 31, 1998,  respectively.  The increase in servicing fees is a result of
the increase in average securitized receivables by 14.8% to $2.4 billion for the
second quarter of fiscal 2000 compared to $2.1 billion for the second quarter of
fiscal 1999.  Servicing fees consist primarily of contractual  servicing fees of
1.0% on Tier I securitizations.

         Late charges and other fees  increased  28.6% to $1.5 million and 26.6%
to $3.0 million for the quarter and six months ended December 31, 1999, compared
to $1.2 million and $2.4 million for the  corresponding  periods of fiscal 1999.
Other fees consist  primarily of late charges and other fee income and the gross
profit from the dealership  sales.  The increase in the current quarter resulted
primarily from the dealership gross profit on sales of $235,000 and $559,000 for
the three and six months  ended  December 31,  1999,  respectively,  compared to
$65,000 and $105,000 for the comparable periods of the prior fiscal year.

         Salaries and benefits expense increased 23.5% to $6.7 million and 22.8%
to $13.7  million  for the  quarter  and six months  ended  December  31,  1999,
respectively,  from $5.5 million and $11.1 million for the corresponding periods
ended  December 31, 1998.  The increase was primarily  related to an increase in
full-time  equivalent  employees  and the  accrual of annual  performance  based
incentives.  The average  full-time  equivalents  for the quarter and six months
ended December 31, 1999 were 574 and 556, respectively,  compared to 528 and 534
for the same periods of fiscal 1999.

         Other general and administrative expense increased 2.8% to $5.0 million
and 8.0% to $9.9 million for the quarter and six months ended December 31, 1999,
respectively,  compared to $4.9 million and $9.2 million for the same periods of
fiscal 1999.  Other operating  expense  includes  occupancy and equipment costs,
outside and professional  services,  receivable expenses,  promotional expenses,
travel,  office supplies and other. Total operating expenses (including salaries
and benefits) as a percentage of the average  servicing  portfolio was 1.82% and
1.83% for the quarter and six months  ended  December  31,  1999,  respectively,
compared to 1.79% and 1.82% for the same periods of fiscal 1999 and continues to
be below the industry average.

Financial Condition

         Receivables  held for sale,  net and servicing  portfolio.  Receivables
held for sale, net includes the principal  balance of receivables held for sale,
net of  unearned  discount  and  allowance  for  estimated  net  credit  losses,
receivables in process, and prepaid dealer premiums.  The Company's portfolio of
receivables held for sale, net decreased to $175.0 million at December 31, 1999,
from $267.3 million at June 30, 1999. The decrease was primarily due to a higher
volume of Tier I receivables securitized compared to Tier I receivables acquired
in the current fiscal quarter  resulting from lower  receivable  acquisitions in
the second quarter of fiscal 2000 compared to the fourth quarter of fiscal 1999.
Allowance for net credit losses on receivables held for sale was $2.9 million at
December  31,  1999,  compared  to $2.8  million at June 30,  1999.  The Company
serviced $2.4 billion and $2.3 billion in securitized receivables, and the total
servicing portfolio was $2.6 billion and $2.5 billion as of December 31 and June
30, 1999, respectively.

         Retained interest in securitized assets ("Retained Interest"). Retained
Interest  increased  $7.8 million to $198.6  million at December 31, 1999,  from
$190.9  million at June 30, 1999.  The Retained  Interest  balance  increased or
decreased by the amounts  capitalized upon  consummation of the first and second
quarter securitizations including estimated dealer premium rebates, collections,
accretion of discount,  change in spread accounts,  impairment and net change in
unrealized  gain. The Company's  collections are the receipt of the net interest
spread.

The following table  illustrates  the activity of Retained  Interest for the six
months ended December 31, 1999 (in thousands):


Balance at June 30, 1999                                        $190,865

Amounts capitalized (including estimated dealer rebates)          29,194
Collections                                                      (23,435)
Accretion of discount                                             11,412
Change in spread accounts                                         (8,333)
Impairment                                                        (4,243)
Net change in unrealized gain (loss)                               3,159
                                                                --------
Balance at December 31, 1999                                    $198,619
                                                                ========

         Allowance for net credit losses on securitized  receivables is included
as a component of Retained Interest. At December 31, 1999, the allowance related
to both Tier I and Tier II securitized  receivables  totaled $107.6 million,  or
4.47% of the total securitized receivable portfolio, compared to $104.4 million,
or 4.63%,  at June 30, 1999.  The  Company's  assumptions  for valuing  Retained
Interest  on a "cash out" basis at December  31,  1999,  include  the  Company's
latest  estimates  for net credit losses of 4.00% to 6.63% on Tier I receivables
and  12.00%  to  16.00%  on Tier II  receivables  as a  percentage  of  original
principal  balance over the life of  receivables,  annual  prepayment  estimates
ranging from 21.31% to 28.00% on Tier I receivables and 14.16% to 20.73% on Tier
II  receivables,  and  discount  rates  ranging  from  8.90% to 15.24% on Tier I
receivables  and 12.40% to 16.11% on Tier II receivables.  The weighted  average
discount  rate used to value  Retained  Interest at December 31, 1999 was 13.55%
compared  to  12.83% at June 30,  1999.  Impairment  of  Retained  Interest,  an
available-for-sale  security, is measured on a disaggregate (pool by pool) basis
in accordance with SFAS 115. See - "Discussion of Forward-Looking Statements".

         Amounts due under  revolving  warehouse  credit  facility and long-term
debt. The balance of the revolving  warehouse credit facility and the Senior and
Senior  Subordinated Notes was $304.4 million at December 31, 1999,  compared to
$384.5  million at June 30, 1999.  The decrease in borrowings  was a result of a
required  principal payment on the Company's Senior Note in August 1999 of $22.0
million and a decrease  in  acquisition  volume for the period  after the second
quarter  securitization  through December 31, 1999,  compared to the acquisition
volume for the period after the fourth quarter  securitization  through June 30,
1999.

         Current and deferred income taxes payable.  Current and deferred income
taxes  payable was $3.3 million at December 31, 1999,  compared to $16.0 million
at June 30, 1999. The decrease is a result of tax payments made during the first
and second  quarters  offset by an increase  in tax  liability  associated  with
current year earnings.


<PAGE>
Liquidity and Capital Resources

         Sources and Uses of Cash in Operations. The Company's business requires
significant  amounts of cash to support  operations.  Its  primary  uses of cash
include (i) acquisition of receivables,  (ii) payment of dealer premiums,  (iii)
securitization  costs  including  cash held in spread  accounts and similar cash
collateral accounts under the revolving warehouse credit facility, (iv) servicer
advances of  payments  on  securitized  receivables  pursuant to  securitization
trusts,  (v) losses on hedging  transactions  realized  in  connection  with the
closing of securitization transactions where interest rates have declined during
the period  covered by the hedge,  (vi)  operating  expenses,  (vii)  payment of
income taxes, and (viii) interest  expense.  The Company's  sources of cash from
operations include (i) standard servicing fees,  generally 1.0% per annum of the
Tier I  securitized  portfolio,  (ii)  cash  flows  from  retained  interest  in
securitized  receivables,  (iii) dealer premium  rebates,  (iv) gains on hedging
transactions   realized  in  connection  with  the  closing  of   securitization
transactions  where interest rates have increased  during the periods covered by
the hedge,  (v) interest income and (vi) sales of receivables in  securitization
transactions and (vii) proceeds from sale of interest-only strips in conjunction
with securitization  transactions.  Net cash from operating activities increased
to $53.6 million for the six months ended December 31, 1999,  from net cash used
in operating  activities of $167.6 million for the six months ended December 31,
1998.  The increase was  primarily  attributable  to an increase in  receivables
securitized relative to receivables acquired. Net cash from investing activities
was $29.7 million and $20.0  million for the six months ended  December 31, 1999
and  1998,  respectively.  The  increase  over  prior  year  relates  to  higher
collections on Retained  Interest and change in spread accounts due to lower net
credit losses and the release of the 1995B spread account of approximately  $7.0
million due to repurchasing the remaining receivables from this securitization.

         Derivative  financial  instruments.   Derivative  financial  instrument
transactions  may  represent  a source  or a use of cash  during a given  period
depending on the change in interest  rates.  In the first and second quarters of
fiscal 2000,  derivative financial instrument  transactions provided a source of
cash of $2.6 million  compared to a use of cash of $6.6 million during the first
and second quarters of fiscal 1999.

         Financing  Activities.  Net cash from financing  activities for the six
months  ended  December 31, 1999 was ($80.5)  million  compared to net cash from
financing  activities  of $79.6  million for the six months  ended  December 31,
1998.  The decrease was a result of a decrease in warehouse  borrowings  for the
period  after the  second  quarter  securitization  through  December  31,  1999
compared to the same period ended December 31, 1998.

         The Company has substantial capital requirements to support its ongoing
operations  and  anticipated  growth.  The  Company's  sources of liquidity  are
currently  funds  from  operations,  securitization  transactions  and  external
financing  including long-term debt and the revolving warehouse credit facility.
Historically, the Company has used the securitization of receivable pools as its
primary source of long-term funding.  In August 1999, the Company established an
additional  source of  liquidity  through a  securitization  arrangement  with a
commercial  paper  conduit  which will be available for future use as management
deems appropriate.  Such facility has a capacity of $250.0 million, all of which
is  currently  available.  Securitization  transactions  enable  the  Company to
improve its liquidity, to recognize gains from the sales of the receivable pools
while  maintaining  the  servicing  rights to the  receivables,  and to  control
interest  rate risk by matching the repayment of amounts due to investors in the
securitizations with the actual cash flows from the securitized assets.  Between
securitization  transactions,  the Company  relies  primarily  on the  revolving
warehouse credit facility to fund ongoing receivable  acquisitions not including
dealer premiums. In addition to receivable acquisition funding, the Company also
requires  substantial capital on an ongoing basis to fund the advances of dealer
premiums,   securitization   costs,   servicing   obligations   and  other  cash
requirements  previously  described.  The Company's  ability to borrow under the
revolving  warehouse  credit  facility is dependent upon its compliance with the
terms  and  conditions  thereof.  The  Company's  ability  to  obtain  successor
facilities  or  similar  financing  will  depend on,  among  other  things,  the
willingness  of financial  institutions  to  participate  in funding  automobile
financing  business  and  the  Company's  financial  condition  and  results  of
operations.   Moreover,  the  Company's  growth  may  be  inhibited,   at  least
temporarily,  if the Company is not able to obtain  additional  funding  through
these or other  facilities,  or if it is unable to  satisfy  the  conditions  to
borrowing  under  the  revolving   warehouse   credit   facility.   The  Company
consistently  assesses its long-term receivable funding arrangements with a view
to optimizing cash flows and reducing costs. The Company has several options for
funding including,  but not limited to, a public asset backed securitization,  a
sale into the commercial paper facility,  a private sale, or temporarily holding
the  receivables.  The Company  continues  to  evaluate  market  conditions  and
available  liquidity and could decide to alter the timing of its securitizations
in the future depending on the Company's cash position and available  short-term
funding.

         Warehouse  facility.  The Company has  borrowing  arrangements  with an
independent  financial  institution  for a $500.0  million  revolving  warehouse
credit  facility  that is  insured  by a surety  bond  provider  to fund  Tier I
receivable  acquisitions.  At December 31, 1999,  $127.4 million of the capacity
was utilized,  and an additional  $43.3 million was available to borrow based on

<PAGE>
the outstanding principal balance of eligible receivables. At June 30, 1999, and
December  31,  1998,  $185.5  million  and $174.8  million of the  capacity  was
utilized,  and an  additional  $67.2  million and $51.9 million was available to
borrow  based on the  outstanding  principal  balance of  eligible  receivables,
respectively.

         Long-term debt. The Company issued $110.0 million of 8.53% Senior Notes
due August 1, 2002, in connection  with the Company's  initial public  offering.
Interest on the Notes is payable  semiannually,  and  principal  payments  began
August 1, 1998, and are due on each subsequent August 1st in the amount equal to
approximately 20% of the stated original principal balance. A required principal
payment  was made on the Senior  Notes in August  1998 and August  1999 of $22.0
million.  In April 1996,  the Company  completed  a private  placement  of $46.0
million of 9.99% Senior  Subordinated  Notes due March 30, 2003,  with  interest
payable  quarterly  and principal  due at maturity.  In March 1997,  the Company
issued $65.0  million of Senior  Notes due  December  27,  2002.  The Notes were
issued as "Series A" in the principal  amount of $50.0 million at 7.75% interest
and  "Series B" in the  principal  amount of $15.0  million  at 7.97%  interest.
Interest on the Notes is payable  semiannually  and a  principal  payment is due
March 15,  2002,  in the  amount  equal to  approximately  33 1/3% of the stated
original balance, with the remaining principal due at maturity.

         The Company's credit agreements, among other things, require compliance
with  monthly  and  quarterly  financial  maintenance  tests  and  restrict  the
Company's ability to create liens, incur additional indebtedness,  sell or merge
assets and make investments. The Company is in compliance with all covenants and
restrictions imposed by the terms of indebtedness.

         Based on current cash flow  projections,  management  believes that the
Company's  existing capital resources,  the revolving  warehouse credit facility
described above,  future earnings,  expected growth in receivable  acquisitions,
and periodic  securitization of receivables should provide the necessary capital
and liquidity for its operations  through at least the next twelve  months.  The
period  during  which  its  existing  capital  resources  will  continue  to  be
sufficient will,  however,  be affected by the factors described above affecting
the  Company's  cash  requirements.  A number of these  factors are difficult to
predict,  particularly  including the cash effect of hedging  transactions,  the
availability of outside credit enhancement in securitizations or other financing
transactions   and  other   factors   affecting   the  net  cash   provided   by
securitizations.   Depending  on  the  Company's   ongoing  cash  and  liquidity
requirements,  market conditions and investor interest,  the Company may seek to
issue  additional  debt or  equity  securities  in the  near  term.  The sale of
additional  equity,  including  Class A Common Stock or preferred  stock,  would
dilute  the   interests  of  current   shareholders.   See  -   "Discussion   of
Forward-Looking Statements".

Discussion of Forward-Looking Statements

         The above  discussions  and notes to consolidated  condensed  financial
statements contain forward-looking  statements made by the Company regarding its
results of  operations,  effects of changes in  accounting  policies,  cash flow
needs and liquidity,  receivable  acquisition volume, target spreads,  potential
credit losses,  recovery rates,  prepayment rates,  servicing income,  and other
aspects of its business.  Similar forward-looking  statements may be made by the
Company  from time to time.  Such  forward-looking  statements  are subject to a
number of important  factors that cannot be predicted  with  certainty and which
could cause such forward-looking  statements to be materially  inaccurate.  Such
factors include, for example,  demand for new and used autos,  competition,  and
consumer credit and delinquency  trends.  See the "Discussion of Forward-Looking
Information" under "Management's  Discussion and Analysis of Financial Condition
and  Results of  Operations"  in the  Company's  Annual  Report on Form 10-K for
fiscal 1999 which is incorporated herein by this reference.

Year 2000 Compliance

Pre-Century Rollover
--------------------
         All known  mission  critical  systems were either  replaced or upgraded
with Year 2000 compliant solutions.  The last of these upgrades was performed in
March 1999 as  scheduled.  The Company had re-tested all systems by November 15,
1999.  There was also a "quiet period" that was implemented from October 1, 1999
through  December 31, 1999.  The purpose of the "quiet  period" was to eliminate
any new Year 2000 issues by blocking any new software or hardware  installations
or upgrades unless to correct a Year 2000 bug.

Post-Century Rollover
---------------------
         All mission  critical  systems  were  monitored  and tested  during the
December  31st  through  January  2nd  weekend.  There  have  been  three  known
non-mission  critical  issues that have arisen since the rollover  weekend.  The
first two were  identified and corrected  without any outages or service delays.
The third issue centered around custom code on two non-mission critical download
files that slipped through testing. Once the issue was identified and corrected,
normal  operation  was restored.  There were two days of  incomplete  files with
limited impact.


<PAGE>
Costs
-----
         The replacement or remedial costs for year 2000 compliance  issues with
the  Company  was  approximately  $100,000,  which  the  Company  recognized  as
incurred. The cost was mostly due to software upgrades that include new features
which  were  combined  with  Year  2000   corrections.   See  -  "Discussion  of
Forward-Looking Statements".


Item 3.  Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

         The Company  bears the primary risk of loss due to credit losses in its
servicing portfolio.  Credit loss rates are impacted by general economic factors
that affect  customers'  ability to  continue  to make timely  payments on their
indebtedness.  Prepayments on receivables in the servicing  portfolio reduce the
size of the  portfolio and reduce the Company's  servicing  income.  The gain on
sales of receivables in connection with each securitization  transaction and the
amount of Retained Interest  recognized in each transaction  reflect  deductions
for estimates of future defaults and prepayments. The carrying value of Retained
Interest may be adjusted  periodically to reflect  differences between estimated
and actual  net  credit  losses and  prepayments  on past  securitizations.  For
example,  if net credit  losses  increased or decreased by 100 basis points on a
$300.0 million  securitization,  the gain on sale would result in a reduction or
an increase of the Gain (Loss) on Sales of  Receivables  by  approximately  $3.0
million pre-tax, before consideration of discounting.  The same 100 basis points
increase or decrease  would result in a reduction or an increase of the Retained
Interest of approximately  $24.0 million,  before  consideration of discounting,
based on a  securitized  receivable  portfolio  of $2.4  billion at December 31,
1999. The forgoing examples are developed utilizing the cash flow model employed
by management  to calculate the fair value of Retained  Interest by changing the
credit loss assumption as described.  The Company does not believe  fluctuations
in interest rates materially affect the rate of prepayments on receivables.

         The  Company's  sources  of  funds  generally  have  variable  rates of
interest,  and its  receivable  portfolio  bears  interest at fixed  rates.  The
Company  therefore  bears  interest  rate  risk on  receivables  until  they are
securitized and employs derivative financial  instruments to mitigate this risk.
The Company uses a hedging strategy that primarily  consists of the execution of
forward interest rate swaps having a maturity approximating the average maturity
of the receivable  production during the relevant period.  There is no assurance
that this  strategy  will  completely  offset  changes  in  interest  rates.  In
particular,  such  strategy  depends on  management's  estimates  of  receivable
acquisition  volume and timing of its  securitizations.  The Company  realizes a
gain on its hedging transactions during periods of increasing interest rates and
widening swap spreads and realizes a loss on such transactions during periods of
decreasing interest rates and tightening swap spreads.  The hedging gain or loss
should  substantially  offset  changes in  interest  rates as seen by a lower or
higher  reported  gain on sales of  receivables,  respectively.  Recognition  of
unrealized gains or losses is deferred until the sale of receivables  during the
securitization.  On the date of the sale,  deferred hedging gains and losses are
recognized as a component of Gain (Loss) on Sales of  Receivables.  Increases or
decreases in interest rates reduce or increase the fair value of long-term debt,
respectively.  At December 31, 1999, the Company had an unrealized  hedging gain
on  forward  interest  rate  swaps of $1.1  million  based on  notional  amounts
outstanding of $342.4 million.


<PAGE>



         The following  table presents the principal cash repayments and related
weighted  average  interest rates by maturity date for the current variable rate
and long-term debt at December 31, 1999.
<TABLE>
<CAPTION>


                                             Six months
                                             ended June
                                              30, 2000         2001         2002          2003          Total        Fair Value
                                              --------         ----         ----          ----          -----        ----------
                                                                            (Dollars in thousands)

<S>                                           <C>           <C>          <C>          <C>             <C>              <C>
Amounts due under warehouse facility          $  127,400    $     -      $     -      $      -        $ 127,400        $127,400
 Weighted average variable rate                    5.24%

Long-term debt                                $       -     $22,000      $43,667      $111,333        $ 177,000        $157,911
 Weighted average fixed rate                      0.00%       8.53%        8.14%         8.86%            8.64%
</TABLE>


Sensitivity analysis on Retained Interest

         At December 31, 1999, key economic  assumptions  and the sensitivity of
the current  fair value of Retained  Interest to  immediate  10% and 20% adverse
changes in assumed economics is as follows:

<TABLE>
<CAPTION>
Amounts as of December 31, 1999                           Tier I                  Tier II                  Total
                                                       -------------           ----------------        -------------
<S>                                                    <C>                        <C>                   <C>
Fair value of retained interest (1)                    $199,651,275               $6,684,463            $206,335,738

Prepayment speed assumption (annual rate)             21.31% - 28.00%            14.16% - 20.73%

Impact on fair value of 10% adverse change             $193,755,881               $6,639,148            $200,395,029
Impact on fair value of 20% adverse change             $188,163,503               $6,595,301            $194,758,804


Net loss rate assumption (pool life rate)              4.00% - 6.63%           12.00% - 16.00%

Impact on fair value of 10% adverse change             $179,142,917               $5,459,441            $184,602,358
Impact on fair value of 20% adverse change             $158,483,730               $4,222,674            $162,706,404


Discount rate assumption (annual rate)                 8.90% - 15.24%           12.40% - 16.11%

Impact on fair value of 10% adverse change             $194,869,223               $6,555,364            $201,424,587
Impact on fair value of 20% adverse change             $190,302,624               $6,430,194            $196,732,818
</TABLE>

(1)  Retained  Interest on the balance  sheet is lower than the total fair value
included in this analysis.  The difference is primarily relates to the inventory
value of repossessed  autos that have not been sold.  This amount is included in
Retained  Interest  as part of the  allowance  for  estimated  credit  losses on
securitized receivables but not included in the total fair value.

These  sensitivities  are hypothetical  and should be used with caution.  As the
figures  indicate,  any  change  in  fair  value  based  on a 10%  variation  in
assumptions  cannot be  extrapolated  because the  relationship of the change in
fair value is not linear.  Also,  in this table,  the effect of a variation in a
particular  assumption on the fair value of the retained  interest is calculated
independent from any change in another  assumption;  in reality,  changes in one
factor may result in changes in another,  which might magnify or counteract  the
sensitivities. See "Discussion of Forward-Looking Statements."

<PAGE>

Part II. Other Information

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

         At the Company's Annual Meeting of Shareholders,  on November 16, 1999,
the following nominees were elected to the Board of Directors.

                              Affirmative              Votes
                                 Votes                Withheld
                            ----------------------------------------

John M. Davis                  43,207,235              10,375
Fred M. Fehsenfeld, Jr.        43,206,835              10,775
Donald A. Sherman              43,207,135              10,475
John M. Stainbrook             43,206,835              10,775
Jerry D. Von Deylen            43,207,135              10,475
Richard D. Waterfield          43,207,235              10,375
Thomas M. West                 43,207,135              10,475



The  following  proposals  were  approved  at the  Company's  Annual  Meeting on
November 16, 1999:

Ratification  of appointment of auditors.  Deloitte & Touche LLP was retained as
the  Company's  auditors  for the fiscal  year 2000.  The votes were as follows:
12,575,727 Affirmative Votes; 17,351 Negative Votes; and 5,300 Votes Abstained.

Approval of the  adoption of the Union  Acceptance  Corporation  1999  Incentive
Stock Plan reserving  300,000 shares of Class A Common Stock.  The votes were as
follows:  10,340,707  Affirmative Votes; 221,161 Negative Votes; and 6,315 Votes
Abstained.

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

                  Exhibit 27 -  Financial Data Schedule

         (b)  Reports on Form 8-K

                  The Company filed no reports on Form 8-K during the quarter
                  ended December 31, 1999.


<PAGE>


Signatures

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                          Union Acceptance Corporation

February 14, 2000                         By:      /S/ John M. Stainbrook
                                                   ----------------------
                                          John M. Stainbrook
                                          President and Chief Executive Officer


February 14, 2000                         By:      /S/ Rick A. Brown
                                                   -----------------
                                          Rick A. Brown
                                          Treasurer and Chief Financial Officer