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 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: 0-26412

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


                Indiana                                       35-1908796
(State or other jurisdiction of incorporation              (I.R.S. Employer 
               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 November 14, 1996

  Class A Common Stock, without par value               4,016,788 Shares
  ---------------------------------------               ----------------
  Class B Common Stock, without par value               9,200,000 Shares
  ---------------------------------------               ----------------

<PAGE>

                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                    FORM 10-Q
                                      INDEX


                                                                           Page
Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements :

         Condensed Consolidated Balance Sheets as of
         September 30, 1996 and June 30, 1996                                3

         Condensed Consolidated Statements of Earnings
         for the Three Months  Ended  September 30, 1996 and 1995            4

         Condensed Consolidated Statements of Cash Flows for the
         Three Months Ended September 30, 1996 and 1995                      5

         Condensed Consolidated Statement of  Shareholders' Equity for
         Three Months Ended September 30, 1996                               6

         Notes to Condensed Consolidated Financial Statements                7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                 8

Part II. OTHER INFORMATION                                                  14


         Signatures                                                         15

<PAGE>
Union Acceptance Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
Dollars in thousands, except share data

<TABLE>
<CAPTION>
                                                            September 30,     June 30,
                                                                1996           1996
                                                            -------------   -----------
Assets                                                       (Unaudited)

<S>                                                           <C>            <C>     
Cash                                                          $  9,787       $ 13,459
Restricted cash                                                 16,119         14,789
Loans, net                                                     232,412        259,290
Accrued interest receivable                                      2,063          2,127
Furniture and equipment, net                                     2,149          2,026
Excess servicing                                                89,182         83,434
Spread accounts                                                 71,489         63,590
Other assets                                                    11,480         12,480
                                                              ========       ========
  Total Assets                                                $434,681       $451,195
                                                              ========       ========
Liabilities                                                                  
                                                                             
Amounts due under warehouse facilities                         164,483        187,756
Long-term debt                                                 156,000        156,000
Accrued interest payable                                         2,350          5,820
Amounts due to trusts                                           11,561          7,931
Dealer premiums payable                                          2,220          3,381
Other payables and accrued expenses                              2,695          3,326
Income tax payable                                               1,134              -
Deferred income tax payable                                      9,696          8,357
                                                              --------       --------
  Total Liabilities                                            350,139        372,571
                                                              --------       --------
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; 4,011,358 shares                             
  issued and outstanding                                        58,180         58,180
                                                                             
Class B Common Stock, without par value,                                     
  authorized 20,000,000 shares; 9,200,000 shares                             
  issued and outstanding                                             -              -
                                                                             
Retained earnings                                               26,362         20,444
                                                              --------       --------
  Total Shareholders' Equity                                    84,542         78,624
                                                              ========       ========
  Total Liabilities and Shareholders' Equity                  $434,681       $451,195
                                                              ========       ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.


<PAGE>




Union Acceptance Corporation and Subsidiaries
Condensed Consolidated Statement of Earnings
Dollars in thousands, except share data
(Unaudited)

                                                 Three Months Ended
                                                    September 30,
                                         --------------------------------
                                              1996                1995
                                          ----------           -----------
Interest on loans                        $     9,233           $     6,946
Interest on spread accounts and                                
  restricted cash                              1,510                 1,370
                                          ----------           -----------
  Total interest income                       10,743                 8,316
Interest expense                               6,410                 5,289
                                          ----------           -----------
  Net interest margin                          4,333                 3,027
Provision for credit losses                      855                 1,150
                                          ----------           -----------
  Net interest margin                                          
         after provision                       3,478                 1,877
                                                               
Gain on sales of loans, net                    6,875                 6,724
Servicing fees, net                            5,826                 3,966
Other                                            934                   750
                                          ----------           -----------
                                                               
  Total revenues                              17,113                13,317
                                          ----------           -----------
                                                               
Salaries and benefits                          3,632                 2,321
Other                                          3,514                 2,398
                                          ----------           -----------
                                                               
  Total operating expenses                     7,146                 4,719
                                          ----------           -----------
                                                               
Earnings before provision for                                  
  income taxes                                 9,967                 8,598
Provision for income taxes                     4,049                 3,482
                                          ----------           -----------
                                                               
  Net earnings                           $     5,918           $     5,116
                                          ==========           ===========
                                                               
  Earnings per share                     $      0.45           $      0.39
                                          ==========           ===========
                                                               
  Weighted average common                                      
        shares outstanding                13,211,358            13,205,622
                                          ==========           ===========
                                                          
See accompanying notes to condensed consolidated financial statements.


<PAGE>

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

<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                                   September 30,
                                                                         ----------------------------------
                                                                              1996                1995
                                                                         -------------        ------------
Cash flows from operating activities:
<S>                                                                   <C>                  <C>            
  Net earnings                                                        $          5,918     $         5,116
    Adjustments to reconcile net earnings to net cash
    provided (used) by operating activities:
      Gain on sales of loans                                                   (9,756)             (8,943)
      Dealer premiums paid in excess of dealer premium
        rebates received on loans held for sale                               (14,185)            (12,918)
      Return of excess servicing cashflows                                       9,869               9,286
      Provision for credit losses                                                  855               1,150
      Spread accounts                                                          (7,899)             (3,027)
      Amortization and depreciation                                                960               1,023
      Restricted cash                                                          (1,330)             (4,142)
      Other assets and accrued interest receivable                                 492               (572)
      Amounts due to trusts                                                      3,630               1,070
      Other payables and accrued expenses                                      (1,628)               4,978
      Loan acquisitions in excess of liquidations                            (287,166)           (224,773)
      Securitization of loans held for sale                                    310,999             236,410
      Proceeds on sale of interest only strip                                    9,139               6,601
                                                                         -------------        ------------
        Net cash provided  by operating activities                              19,898              11,259
                                                                         -------------        ------------

Cash flows used in investing activities:
  Purchase of fixed assets                                                       (297)               (166)
                                                                         -------------        ------------

Cash flows provided (used) in financing activities:
  Net change in Due to Union Federal, including
    regulatory equity distribution                                                   -           (337,423)
  Net change in warehouse facilities                                          (23,273)             157,004
  Proceeds from issuance of senior notes                                             -             110,000
  Payment of borrowing fees                                                          -             (2,424)
  Net proceeds from issuance of common stock                                         -              58,000
                                                                         -------------        ------------
        Net cash used by financing activities                                 (23,273)            (14,843)
                                                                         -------------        ------------

Change in cash                                                                 (3,672)             (3,750)

Cash, beginning of period                                                       13,459               9,483
                                                                         -------------        ------------

Cash, end of period                                                   $          9,787     $         5,733
                                                                         =============        ============

Supplemental disclosures of cash flow information:

                                          Income taxes paid           $              -     $         3,171
                                                                         =============        ============

                                              Interest paid           $          9,880     $         4,401
                                                                         =============        ============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>

Union Acceptance Corporation and Subsidiaries
Condensed Consolidated Statement of Shareholders' Equity
For the Three Months Ended September 30, 1996
(Dollars in thousands, except share data)
(Unaudited)

<TABLE>
<CAPTION>
                                              Number of Common Stock                                             Total
                                               Shares Outstanding              Common          Retained       Shareholders'
                                          Class A             Class B          Stock           Earnings         Equity
                                          ---------           ---------         -------         -------          -------
<S>                                      <C>                 <C>               <C>             <C>              <C>    
Balance at June 30, 1996                  4,011,358           9,200,000         $58,180         $20,444          $78,624
                                          ---------           ---------         -------         -------          -------

Net Earnings                                                                                      5,918            5,918

Balance at September 30, 1996             4,011,358           9,200,000         $58,180         $26,362          $84,542
                                          =========           =========         =======         =======          =======
</TABLE>



See accompanying notes to condensed consolidated financial statements.




<PAGE>



Union Acceptance Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
For the Three Months Ended September 30, 1996 and September 30, 1995
(Unaudited)

Note 1 -  Basis of Presentation

The forgoing condensed consolidated 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
condensed  consolidated  financial  statements  include  the  accounts  of Union
Acceptance  Corporation and  Subsidiaries  (formerly the "Union  Division").  On
August 7, 1995,  the Company  ("UAC")  issued 4 million shares of Class A Common
Stock at $16.00 per share with net proceeds of $58.0 million simultaneously with
a private  placement  of $110.0  million of Senior  Notes with net  proceeds  of
$108.6  million.  These  proceeds  and  fundings  under a $350.0  million  Prime
Warehouse Facility and a $50.0 million Non-prime Warehouse Facility were used to
eliminate amounts due to its former parent, and to capitalize UAC's business and
fund ongoing  operations.  The Business Transfer was completed at this time. The
Company's business is conducted solely by UAC and its subsidiaries. A summary of
the Corporation's  significant  accounting  policies is set forth in "Note 1" of
the "Notes to Consolidated  Financial  Statements" in the  Corporation's  Annual
Report on Form 10-K for the year ended June 30, 1996.

The condensed  consolidated  financial  statements  for interim period have been
prepared in accordance with Form 10-Q  specifications,  and,  therefore,  do not
include all  information and footnotes  normally shown in full annual  financial
statements.

Note 2 - Earnings Per Share

The initial public offering was completed on August 7, 1995.  Earnings per share
for the three months ended  September  30, 1995,  were  computed by dividing net
earnings by the average  common  shares  outstanding  during the period.  Shares
outstanding from August 7, 1995,  through September 30, 1995, were assumed to be
outstanding  for the entire three months ended September 30, 1995. The effect of
unexercised  stock  options on  earnings  per share is less than  three  percent
dilutive and has not been included in the earnings per share computations.

Note 3 - Reclassifications

Certain amounts in the fiscal 1996 Condensed  Consolidated  Financial Statements
have been reclassified to conform to fiscal 1997 presentation.

Note 4 -  "Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishments of Liabilities"

During June 1996,  the FASB issued SFAS No. 125,  "Accounting  for Transfers and
Servicing of Financial Assets and  Extinguishments of Liabilities" ("SFAS 125").
SFAS 125 provides accounting and reporting standards for transfers and servicing
of financial  assets and  extinguishments  of  liabilities  based on  consistent
application  of a financial  components  approach  that  focuses on control.  It
distinguishes  transfers of financial  assets that are sales from transfers that
are secured borrowings.  The financial components approach focuses on the assets
and liabilities that exist after the transfer.

SFAS 125 is effective  for  transfers  and  servicing  of  financial  assets and
extinguishments  of liabilities  occurring after December 31, 1996, and is to be
applied prospectively.  Earlier or retroactive application is not permitted. Due
to the timing of the  issuance of this  pronouncement,  management  is currently
reviewing  SFAS  125 to  determine  the  effect,  if any,  it  will  have on the
financial statements of the Company.

<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 automobile  loans  originated by
dealerships  affiliated with major domestic and foreign  manufacturers.  To fund
the acquisition of loans prior to securitization, the Company utilizes revolving
warehouse  facilities,  discussed in "Liquidity and Capital  Resources." Through
securitizations, the Company periodically pools and sells loans to a trust which
issues  Certificates to investors  representing  pro-rata interests in the loans
sold.  When the Company sells loans in a  securitization,  it records a gain (or
loss) on sale of loans and  establishes  excess  servicing  as an asset.  Excess
servicing  cashflows are recorded against the excess servicing asset as received
over the life of the related securitization.

         Acquisition  Volume.  The Company currently  acquires loans in 45 major
metropolitan areas in 25 states from nearly 2,600  manufacturer-franchised  auto
dealerships.  The Company  acquires loans on  automobiles  made to borrowers who
exhibit a favorable credit profile ("Prime lending") and, since October 1994, to
borrowers  with adequate  credit  quality who would not qualify for a loan under
the Company's Prime lending program ("Non-prime lending"). The Company continues
to expand its  operations  by  entering  new cities and  signing  new dealers in
existing markets.  Loan acquisition  volume had remained  relatively level since
the third quarter of fiscal 1995, but  experienced a large seasonal  increase in
the fourth quarter of fiscal 1996.  First quarter loan  acquisitions  were lower
than in the previous  quarter,  as expected.  Loan  acquisitions  continue to be
stronger  than in  corresponding  periods  of prior  fiscal  years.  Prime  loan
acquisitions  increased  21.0% over the same quarter of last year. The non-prime
business  more than  doubled as compared to the same  quarter of last year.  The
Company made some  strategic  changes with respect to pricing and  underwriting,
including  an  increase  in cut-off  scores in several of its  existing  markets
during the third quarter of fiscal 1996.  This strategy was employed in order to
improve the average  quality of the contracts being  purchased.  The Company has
been  able to  increase  its  acquisitions  despite  the  tightening  of  credit
standards.  Management continues to focus on controlled growth, recognizing that
the  underlying  credit  quality of the  portfolio is one of the most  important
factors associated with long-term  profitability.  These strategies appear to be
providing  the  Company  with  the  desired  results,  as not  only  has  volume
increased,  but the implied  losses on the more  recent loan pools are  markedly
improved over the 1995 loan pools.

         Gross and Net Spreads.  Market  interest  rates  experienced  continued
decreases over most of fiscal 1996, but began to rebound in March 1996.  Because
changes in loan rates on  automobile  loans tend to lag behind  fluctuations  in
market  rates of  interest,  the  decrease in market  rates  during  fiscal 1996
resulted in very  positive  gross and net  spreads on the prime  securitizations
compared to previous years. Likewise, as market rates increased,  beginning with
the non-prime  securitization in March 1996 and the prime securitization in June
1996,  compression  of net spreads was  experienced.  Market  interest rates had
dropped slightly for the first quarter  securitization.  Gross spread is defined
as the  difference  between the weighted  average loan rate and the  Certificate
rate. Net spread is defined as gross spread less servicing fees,  upfront costs,
ongoing credit  enhancement  fees and trustee fees, and hedging gains or losses.
Prime loan rates also decreased  steadily over fiscal 1996, but increased during
the first quarter in response to earlier  increases in market rates. Net spreads
have experienced  steady compression since the first quarter of fiscal 1996. Net
spread on the most recent prime  securitization  was 5.11%  compared to 6.12% in
the year ago quarter.  Although  there were  compressions  in net spreads during
fiscal  1996  and  the  first  quarter  of  fiscal  1997,  the net  spreads  are
significantly higher than those in fiscal 1995 and prior years.

         Looking ahead,  management is currently  targeting net spreads of 5.00%
to 5.50% on prime  securitizations  (assuming a pricing spread for  asset-backed
certificates  over the  two-year  treasury  note of 50 basis  points) for fiscal
1997.  Management  believes that by targeting a spread of 7.00% to 7.50% between
loan rates and the two-year  treasury  rate,  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 market  interest  rates and demand for  asset-backed  securities
generally,  and  for  Certificates  representing  interests  in  securitizations
sponsored by the Company.  See - "Discussion  of  Forward-Looking  Statements ,"
below.

          Gain on Sales of  Loans.  Gain on  Sales  of Loans  continues  to be a
significant element of the Company's net earnings. The gain on sales of loans is
affected by several  factors,  but is primarily  affected by the amount of loans
securitized and the net spread.  The Company adjusts its pricing  frequently and
employs a hedging  strategy to help ensure an adequate net spread in the ensuing
securitization,  while mitigating the risks of increasing interest rates and the
volatility in net spreads.

         Portfolio   Performance.   Set  forth  below  is  certain   information
concerning  the  Company's  experience   pertaining  to  delinquencies  and  net
charge-offs  on the Prime  fixed rate  retail  automobile,  light  truck and van
receivables  serviced  by the  Company.  There can be no  assurance  that future
delinquency  and net loss  experience on receivables  will be comparable to that
set forth below.

<TABLE>
<CAPTION>


                                  September 30, 1996            June 30, 1996              June 30, 1995
                                ---------------------       ---------------------       ---------------------
                                Number of                    Number of                  Number of            
                                 Loans         Amount         Loans     Amount           Loans       Amount 
<S>                             <C>        <C>              <C>        <C>              <C>        <C>       
Servicing portfolio             155,853    $1,648,523       147,722    $1,548,538       117,837    $1,159,349
Delinquencies
   30-59 days                     1,498        16,605         1,602        17,030         1,169        12,097
   60-89 days                       907        10,650           694         7,629           377         4,124
   90 days or more                  499         6,047           333         3,811            --            -- 
                                -------    ----------       -------    ----------       -------    ----------
Total delinquencies               2,904        33,302         2,629        28,470         1,546        16,221
Delinquencies as a
   percentage of servicing
     portfolio                     1.86%         2.02%         1.78%         1.84%         1.31%         1.40%
</TABLE>

<PAGE>

         As  indicated in the above table,  current  delinquency  rates showed a
slight increase at September 30, 1996 compared to June 30, 1996; however,  there
was  improvement  compared to the  September 30, 1995,  delinquency  statistics.
Delinquency  rates based upon outstanding loan balances of accounts 30 days past
due and over were 2.02% at September  30,  1996,  compared to 3.06% at September
30, 1995, for the prime servicing portfolio.  Delinquency based on the number of
receivables 30 days past due and over was 1.86% at September 30, 1996,  compared
to 2.89% at September 30, 1995. The Company believes the increase in delinquency
since June 30, 1996,  is  attributable  primarily to the cyclical  nature of the
delinquency trends in the business of the Company since delinquencies tend to be
higher in the September and December  quarters as compared to the March and June
quarters.  The Company believes that this slight increase is not indicative of a
material change in the underlying credit quality of the portfolio.

         Non-prime  portfolio  delinquency  was 3.20% based on outstanding  loan
balances of accounts 30 days past due and over at September  30, 1996,  compared
to 3.35% at June 30, 1996, and 4.79% at September 30, 1995. Delinquency based on
the number of receivables 30 days past due and over was 3.13%,  3.29%, and 4.49%
at September 30, 1996, June 30, 1996, and September 30, 1995, respectively.  The
Company began  acquiring  non-prime  loans in October 1994.  Management  expects
fluctuations in delinquency rates on the non-prime  portfolio as it becomes more
seasoned. The non-prime portfolio makes up less than 3.5% of the Company's total
servicing  portfolio.  The Company has historically  focused on the prime end of
the credit spectrum and will continue to do so.

<TABLE>
<CAPTION>

                                Number of                  Number of                 Number of               
                                 Loans         Amount       Loans       Amount        Loans          Amount 
                                -------     ----------      -------   ----------     -------       --------             
<S>                             <C>         <C>             <C>       <C>            <C>           <C>                  
Avg. servicing portfolio        153,203     $1,616,606      132,363   $1,343,770     104,455       $982,875             

Gross charge-offs                   986         10,751        3,663       40,815       3,493         28,628                        
Recoveries                                       4,339                    19,543                     15,258
                                            ----------                ----------                   --------             
Net charge-offs                                  6,412                    21,272                     13,370      

Gross charge-offs as 
     a percentage of 
     average servicing 
     portfolio                     2.57%          2.66%        2.77%        3.04%       3.34%          2.91%
                                                                  
Recoveries as a % of gross                                                                         
   charge-offs                                    40.36%                   47.88%                     53.30%
                                                                           
Net charge-offs as a % of avg.                                                                          
   servicing portfolio                             1.59%*                   1.58%                      1.36%  

* Annualized
</TABLE>


         As indicated  on the table above,  quarterly  net  charge-offs  totaled
approximately  $6.4 million on the prime  servicing  portfolio.  Annualized  net
charge-offs  were 1.59% of the average prime  servicing  portfolio for the three
months ended  September  30,  1996,  compared to 1.58% for the fiscal year ended
June 30,  1996,  and  1.73% for the  three  months  ended  September  30,  1995.
Management  believes  that the  stability  of losses  results from the fact that
loans acquired during late 1994 and early 1995,  which have  experienced  higher
loss rates,  are  nearing or have  reached the end of the peak period for credit
losses.  Company  management  believes such period to be nine to sixteen  months
from the date of closing.

         Non-prime  net  charge-offs  totaled  approximately  $477,000  for  the
quarter.  Annualized  net  charge-offs  were  3.54%  of  the  average  Non-prime
servicing  portfolio for the three months ended September 30, 1996,  compared to
2.37% for the fiscal year ended June 30,  1996,  and 1.49% for the three  months
ended  September 30, 1995.  Management is closely  monitoring the performance of
the Non-prime portfolio as it matures, and is comfortable with the level of risk
in relation to its earning potential.

         Overall, the Company has made strategic changes with respect to pricing
and  underwriting,  including  an increase  in cut-off  scores in several of its
markets  during the third quarter of fiscal 1996,  and the  implementation  of a
scoring matrix in October 1996. The scoring matrix combines the Company's custom
score with a credit  bureau score in order to improve the average  quality o the
contracts  being  acquired.  The  Company  has been  able to  increase  its loan
acquisitions  despite  the  tightening  of  its  credit  standards.   Management
continues  to focus on  controlled  growth with an  emphasis on credit  quality.
These  strategies  appear to be providing the Company with the desired  results;
not only has loan acquisition  volume increased,  but the current implied losses
on the more recent loan pools are improved over the 1995 loan pools.

         Provisions  are made for estimated  credit losses in  conjunction  with
each loan sale.  The allowance  for  estimated  credit losses is inherent in the
excess  servicing  asset  recorded  upon  sale.  Management  believes  that  the
allowance  for  estimated  credit  losses  on  securitized  loans  represents  a
conservative  estimate of potential  credit losses.  The allowance for estimated
credit  losses as a percentage  of  outstanding  securitized  loans was 3.27% at
September compared to 3.22% at June 30, 1996, and 2.27% a year ago.

Results of Operations

         The Company's  loan  acquisitions  increased to $296.6  million for the
three months ended September 30, 1996, from $239.8 million for the corresponding
quarter  of fiscal  1996.  The  increases  resulted  primarily  from  geographic
expansion as well as improved market penetration in many markets. Non-prime loan
acquisitions  totaled  $14.2  million for the three months ended  September  30,
1996,  compared to $7.0 million for the  comparable  quarter of fiscal 1996. The
Company's  servicing portfolio increased 33.7% to over $1.7 billion at September
30, 1996, compared to $1.3 billion at September 30, 1995.

         Net  earnings  for the quarter  were up 15.7%  compared to the year ago
quarter. The increase in net earnings is primarily  attributable to improved net
interest margin and increased servicing fees.

         Net  interest  margin  increased  85.3% to $3.5 million for the quarter
ended  September  30,  1996,  compared to $1.9  million  for the  quarter  ended
September 30, 1995.  Interest on loans for the quarter  increased  32.9% to $9.2
million compared to $6.9 million for the corresponding quarter of last year. The
increase in interest income  resulted,  in part, from an increase in the average
monthly  balance of prime loans held for sale to $208.0  million for the quarter
ended September 30, 1996, from $156.8 million for the corresponding period ended
September,  1995,  which  was a result of  increased  loan  acquisitions  in the
quarter ended  September 30, 1996,  relative to the quarter ended  September 30,
1995.  The  Non-prime  portfolio  also  contributed  to the increase in interest
income.  The  Company  carried an average  of over  $23.1  million in  non-prime
receivables held for sale during the quarter which produced over $1.1 million in
interest income. The Company's cost of funds has increased slightly to 7.74% for
the three months ended  September  30,  1996,  from 7.46% for the  corresponding
period of fiscal 1996.  The increase in cost of funds is primarily a result of a
slightly   higher   interest  rate   environment  and  the  issuance  of  Senior
Subordinated  Notes. The Company issued Senior  Subordinated  Notes with a 9.99%
rate in April  1996.  The  interest  cost  related to the  warehouse  facilities
(through  which  loan  acquisitions  are  funded ) is  variable  and is based on
commercial paper rates.


<PAGE>

         Gain on sales of loans increased slightly to $6.9 million for the three
months ended September 30, 1996, from $6.7 million for the corresponding  period
ended September 30, 1995. The Company securitized nearly $311.0 million in loans
during the first  quarter of fiscal  1997,  compared  to $236.4  million for the
first  quarter of fiscal 1996.  However,  net spreads were down 101 basis points
compared to the year ago quarter. Net spreads suffered compression due to upward
moving market interest rates.  There tends to be a lag between changes in market
rates of interest (i.e.  treasury  rates) and automobile  rates.  Treasury rates
sharply increased from the March 1996 securitization to June 1996 securitization
(107 b.p.) while contract rates during the same period increased by only 30 b.p.
Treasury  rates  were  relatively  stable  from the  June  1996  quarter  to the
September 1996 quarter securitization;  however, contract rates on loans sold in
August  1996  (acquired  in May,  June and July of 1996) had not risen in tandem
with  treasury  rates,  thereby  effecting  a lower  gross and net spread on the
August securitization

          Servicing  fees,  net  increased  46.9% to $5.8  million for the three
months ended  September 30, 1996,  compared to $4.0 million for the three months
ended September 30, 1995.  Servicing fees consist of contractual  servicing fees
(1% on  prime  securitizations),  excess  servicing,  and  excess  rebates.  The
increase in  servicing  fees,  net is  primarily a result of the increase in the
average  securitized  loans to more than $1.4  billion for the first  quarter of
fiscal 1997,  compared to just over $1.0 billion for the first quarter of fiscal
1996. Excess rebates were also increased over the prior year.

         Other  revenues  increased  to  $934,000  for the  three  months  ended
September 30, 1996, from $750,000 for the three months ended September 30, 1995.
The increase resulted primarily from increases in late charge fee income.

         Salaries  and  benefits  increased to $3.6 million for the three months
ended September 30, 1996, from $2.3 million for the  corresponding  period ended
September 30, 1995. This increase  resulted  primarily from increased  full-time
equivalent ("FTE") employees. Average FTE's for the three months ended September
30, 1996, were 347 compared to 229 for the comparable period ended September 30,
1995.  The  Company  has  experienced  growth  in  collections,  credit,  sales,
operations, and support. These increases are in response to, and in anticipation
of  continued  expansion  and  loan  acquisition  growth,  as well as a  growing
servicing portfolio. Additional levels of management and support staff have been
added to ensure efficiency in operations as the Company's acquisition volume and
servicing portfolio  continues to grow.  Increases in salary and benefit expense
were  also due to  increased  profitability-based  incentives  during  the three
months ended September 30, 1996.

         Other  expense  increased  46.5% to $3.5  million for the three  months
ended September 30, 1996, from $2.4 million for the three months ended September
30, 1995.  Other  operating  expenses  include  occupancy and  equipment  costs,
outside and professional services, loan expenses,  promotional expenses, travel,
office  supplies and other.  Many of these expenses vary directly with increased
loan acquisition volume and the increased size of the servicing portfolio.  Both
loan  acquisition  volume and the servicing  portfolio were increased during the
three  months  ended  September  30,  1996,  compared to the three  months ended
September 30, 1995.  Occupancy and equipment costs were increased as a result of
the Company's move to its new  headquarters in January 1996. The employee growth
experienced by the Company required both additional square footage and furniture
and equipment. The Company updated its phone system in conjunction with the move
to its new headquarters. The Company obtained new equipment through an operating
lease,  and  implemented  a  voice  messaging  system.  Additionally,  increased
telephone usage  resulting from an increase in collections  staff and collection
hours  contributed to increased  office  expense.  Although there were increased
expenses  related  to  the  collections  department  as a  whole  (salaries  and
benefits,  equipment,  telephone, etc.), there have been notable improvements in
both credit loss and delinquency, as described above.


<PAGE>

Financial Condition

         Loans, Net and Servicing  Portfolio.  Loans, net includes the principal
balance of loans held for sale,  net of  unearned  discount  and  allowance  for
estimated credit losses,  loans in process,  and dealer premiums.  The Company's
portfolio of loans,  net decreased to $232.4 million at September 30, 1996, from
$259.3 million at June 30, 1996. Loan acquisition volume was higher in the three
months ended June 30, 1996,  than in the three months ended  September 30, 1996,
as  discussed  above.  The Company had one prime  securitization  in the quarter
ended  September  30,  1996,  and the quarter  ended June 30,  1996,  for $311.0
million and $245.1 million of loans, respectively.

         Excess  Servicing  increased to $89.1 million as of September 30, 1996,
from $83.4  million as of June 30, 1996.  This  balance  increased by the amount
capitalized upon consummation of the UACSC 1996-C Grantor Trust ("1996-C") prime
securitization related to excess servicing and estimated dealer premium rebates.
Structuring of the securitization  included the sale of an "interest only strip"
which generated more cash from the sale, but served to reduce the initial excess
servicing  asset  recorded.  The amount  capitalized was offset by the return of
excess  cashflows as received  over the three months ended  September  30, 1996,
related to all outstanding securitizations.  The Company made an additional $1.1
million  provision to the allowance for estimated  credit losses on  securitized
loans during the first  quarter of fiscal 1997.  The provision was recorded as a
reduction of the gain  recognized  on the 1996-C  securitization.  Allowance for
estimated  credit losses on securitized  loans is included as a component of the
excess servicing  asset. At September 30, 1996, the allowances,  related to both
prime and  non-prime  securitized  loans,  totaled $48.7 million or 3.27% of the
total securitized loan portfolio.

         Spread Accounts  increased to $71.5 million at September 30, 1996, from
$63.6 million at June 30, 1996.  These  balances were increased by deposits made
monthly from excess servicing  cashflows,  and are reduced by any withdrawals of
funds from the Spread  Accounts.  Withdrawals  of spread  account funds are made
when the  balance  of the  Spread  Accounts  are in excess  of the  requirements
stipulated in the servicing  agreement.  No initial spread  account  deposit was
made in  connection  with the last few  prime  transactions  as a result  of the
structuring which utilized  alternative  credit  enhancements in lieu of initial
spread account deposits.

         Warehouse Facilities and Notes. The Warehouse Facilities, Senior Notes,
and  Senior   Subordinated   Notes  constitute  the  Company's  primary  funding
facilities.  The Company  issued $110.0 million in 8.53% Senior Notes (Due 2002)
in August 1995,  in  conjunction  with the spin-off from its former  parent.  In
April 1996,  the Company issued $46 million in 9.99% Senior  Subordinated  Notes
(Due 2003) in a private placement.  The balance of the Warehouse  Facilities was
$164.5  million at September  30, 1996,  compared to $187.8  million at June 30,
1996. The decrease in total  borrowings was directly  related to the decrease in
first quarter fiscal 1997 loan  acquisitions as compared to the previous quarter
ended June 30, 1996.

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)  acquisitions  and  financing  of  loans,  (ii)  payment  of Dealer
Premiums,  (iii) securitization costs including cash held in Spread Accounts and
similar cash  collateral  accounts  under  Warehouse  Facilities,  (iv) servicer
advances of payments on securitized loans 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) interest  expense,  and
(viii) payment of income taxes.  The Company's  sources of cash from  operations
include  (i)  standard  servicing  fees,  generally  1.0% per annum of the prime
securitized  portfolio,  (ii) Excess Servicing Cash Flows,  (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,  (vi) sales of
loans in securitization  transactions,  and (vii) sales of interest-only strips.
Net cash  provided by operating  activities  increased to $19.9  million for the
three months ended  September 30, 1996,  from $11.3 million for the three months
ended September 30, 1995.

         Hedging  transactions  may represent a source or a use of cash during a
given period  depending on the change in interest rates. In the first quarter of
fiscal 1997, hedging transactions have required a use of cash of $1.6 million.

         Financing Activities and Credit Facilities. 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,
securitizations and external  financings  including long-term debt and revolving
warehouse   credit   facilities.   Historically,   the   Company  has  used  the
securitization  of loan pools as its primary  source of long-term  funding,  and
intends to continue to do so. Securitization  transactions enable the Company to
improve its liquidity, to recognize gains from the sales of the loan pools while
maintaining the servicing rights to the loans, 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.


<PAGE>

         The Company has borrowing  arrangements  with an independent  financial
institution  for the Prime  Warehouse  Facility  of up to $350.0  million  and a
similar Non-prime Facility of up to $50.0 million.  The Prime Warehouse Facility
provides funding for loan acquisitions at a purchase price of up to 98.0% of the
outstanding  principal  balance of eligible loans at the time of purchase to the
extent  allocable  to loans  which,  upon  origination,  provided for 72 monthly
payments or less. Additional funding is provided for eligible loans with greater
than 72 monthly  payments at a purchase price of up to 90.0% of the  outstanding
principal  balance.  The  advance  rate may be  reduced  to as low as 88.0%  (72
monthly  payments  and less) and 80.0%  (greater  than 72 monthly  payments)  if
certain  financial  tests are not met, and/or if a  securitization  has not been
effected in the  preceding  sixteen  weeks.  The  Non-prime  Warehouse  Facility
provides  funding  for loan  acquisitions  at a  purchase  price of 80.0% of the
outstanding  principal  balance of eligible  loans at the time of purchase.  The
Company  also  issued  $110.0  million in Senior  Notes in  connection  with the
spin-off  of the  Company by Union  Federal  and the  Company's  initial  public
offering,  and  completed  a  private  placement  of  $46.0  million  in  Senior
Subordinated  Notes in April  1996.  Between  securitization  transactions,  the
Company  relies  primarily on these  Warehouse  Facilities  to fund ongoing loan
acquisitions  (not including Dealer  Premiums).  In addition to loan 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  described above. The Company's ability
to borrow under the Warehouse  Facilities 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  businesses  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 Warehouse Facilities.

         Management believes that the proceeds from the Company's initial public
offering,  the  Senior  Notes,  the Senior  Subordinated  Notes,  the  Warehouse
Facilities  described above,  future earnings,  and periodic  securitization  of
loans should  provide the necessary  capital and  liquidity  for its  operations
during the remainder of fiscal 1997.

         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,   including  particularly  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.   The  Company  is  currently
negotiating the terms of a $50 million warehouse facility for the funding of its
marine portfolio.

Discussion of Forward-Looking Information

         The above discussions  contain  forward-looking  statements made by the
Company regarding its results of operations, cash flow needs and liquidity, loan
acquisition volume, target spreads,  potential credit losses,  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.   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 1996 which is
incorporated herein by this reference.

<PAGE>

Other Matters

         During July of 1996,  the Company  began  servicing  receivables  under
agreements  with  individual  dealerships.  These  agreements  provide  for  the
servicing of dealer  originated  loans for a servicing fee, but do not currently
entail any advances by the Company for the purchase of the vehicle.  The Company
may,  however,  consider  partial  funding of loans in  conjunction  with dealer
servicing in the future.

         As a part of its ongoing  development of its business plan, the Company
is researching the possibilities of engaging in other finance-related businesses
such as leasing, and other non-auto consumer lending.  Additionally, the Company
is  researching  the  possibility  of  expanding  its  dealer  base  to  include
nationally-recognized    used    rental    car    outlets    which    are    not
manufacturer-franchised  dealerships.  Based on this  research,  the Company may
expand  its   current   operations   to  include   some  or  all  of  the  above
finance-related  businesses. It is management's philosophy to continually search
for new products and markets to grow and expand the Company in order to maximize
profits and shareholder value.

Part II. Other Information

         Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits- Exhibits Index appears on Page E-1.

         (b)  Reports on Form 8-K

                  No  reports on Form 8-K were filed  during the  quarter  ended
September 30, 1996.

<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

November 14, 1996                           By:    /S/   John M. Stainbrook
                                                  -------------------------
                                                  John M. Stainbrook
                                                  President

November 14, 1996                           By:   /S/   Rick A. Brown
                                                  -------------------
                                                  Rick A. Brown
                                                  VP, Treasurer and 
                                                  Chief Financial Officer



<PAGE>
                                  EXHIBIT INDEX

Exhibit No.             Description                              
-----------             -----------    

    5             Amendment No. 5 to Transfer and Administration Agreement 

   27             Financial Data Schedule