**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-K**

**x**
**ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES **
**EXCHANGE      ACT OF 1934**

**or**

**o**
**TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES **
**EXCHANGE      ACT OF 1934**

**RESOURCE      AMERICA, INC.**

| **Delaware____________** (State                or other jurisdictionof                incorporation or organization)                                                                           | **                        72-0654145**(I.R.S.                Employer Identification                No.) |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| **One                Crescent Drive, Suite 203****Navy                Yard Corporate Center****Philadelphia,                PA______** (Address                of principal executive offices) |   **________19112**(Zip                Code)                                                                                           |
| Registrant’s                telephone number, including area code:  **215-546-5005**                                                                                                     |                                                                                                                                             |
| Securities                registered pursuant to Section 12(b) of the Act:                                                                                                                          |
| Title                of each class                                                                                                                                                                  | Name                of each exchange on which registered                                                                                         |
| **None**                                                                                                                                                                                            | **None**                                                                                                                                         |

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**RESOURCE      AMERICA, INC. AND SUBSIDIARIES**

**INDEX      TO ANNUAL REPORT**

**ON      FORM 10-K**

|                        |                    | **Page**                                                                                                                                                                                         |
|-----------------------------|-------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **PART                I**   |                    |                                                                                                                                                                                             |
|                        | Item                1:  | Business                                                                                                                                                                                         | 3−                10 |
|                        | Item                1A: | Risk                Factors                                                                                                                                                                      | 10                − 15 |
|                        | Item                1B: | Unresolved                Staff Comments                                                                                                                                                         | 15 |
|                        | Item                2:  | Properties                                                                                                                                                                                       | 16 |
|                        | Item                3:  | Legal                Proceedings                                                                                                                                                                 | 16 |
|                        | Item                4:  | Submission                of Matters to a Vote of Security Holders                                                                                                                               | 16 |
|                        |                    |                                                                                                                                                                                             |   |
| **PART                II**  |                    |                                                                                                                                                                                             |
|                        | Item                5:  | Market                for Registrant's Common Equity, Related Stockholder Matters and                Issuer                Purchases of     Equity                Securities |  17                − 18 |
|                        | Item                6:  | Selected                Financial Data                                                                                                                                                           | 19 |
|                        | Item                7:  | Management’s                Discussion and Analysis of Financial Condition and Results                of Operations                                                                        | 20                − 46 |
|                        | Item                7A: | Quantitative                and Qualitative Disclosures About Market Risk                                                                                                                        | 47 |
|                        | Item                8:  | Financial                Statements and Supplementary Data                                                                                                                                       | 48                − 93 |
|                        | Item                9:  | Changes                in and Disagreements with Accountants on Accounting and Financial                Disclosure                                                                               | 94 |
|                        | Item                9A: | Controls                and Procedures                                                                                                                                                           | 94                − 95 |
|                        | Item                9B: | Other                Information                                                                                                                                                                 | 96 |
|                        |                    |                                                                                                                                                                                             |   |
| **PART                III** |                    |                                                                                                                                                                                             |
|                        | Item                10: | Directors                and Executive Officers of the Registrant                                                                                                                                | 97                  − 99 |
|                        | Item                11: | Executive                Compensation                                                                                                                                                            | 100                  − 103 |
|                        | Item                12: | Security                Ownership of Certain Beneficial Owners and Management and Related                Stockholder Matters                                                                     | 104                − 105 |
|                        | Item                13: | Certain                Relationships and Related Transactions                                                                                                                                    | 106                − 107 |
|                        | Item                14: | Principal                Accounting Fees and Services                                                                                                                                            | 108 |
|                        |                    |                                                                                                                                                                                             |   |
| **PART                IV**  |                    |                                                                                                                                                                                             |
|                        | Item                15: | Exhibits,                Financial Statement Schedules                                                                                                                                           | 109                − 110 |
|                        |                    |                                                                                                                                                                                             |   |
| **SIGNATURES**              | 111                     |

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**PART      I**

**ITEM      1.**
**BUSINESS**

**General**

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|                                                                  |   |   **As                of September 30, 2006** |    | **As                of****September                30,****2005** |   |
|-----------------------------------------------------------------------|--------|---------------------------------------------------------|---------|------------------------------------------------------------------|--------|
|                                                                  |   |   Company                                     |    | Institutional                and Individual Investors            |   |   RCC |   | Assets                Held on Warehouse Facilities |   |   Total |   |   Total |   |
| Asset-backed                securities (1)                       |   | $                                                       | − |                                                             | $      | 2,675 |   | $ | 1,160 |   | $ | 568 |   | $ | 4,403 |   | $ | 2,821 |   |
| Trust                preferred securities (1)                    |   |                                                    | − |                                                             |   | 3,538 |   |   | − |   |   | 668 |   |   | 4,206 |   |   | 2,879 |   |
| Bank                loans (1)                                    |   |                                                    | 3       |                                                             |   | 593 |   |   | 615 |   |   | 624 |   |   | 1,835 |   |   | 413 |   |
| Real                properties (2)                               |   |                                                    | − |                                                             |   | 345 |   |   | − |   |   | − |   |   | 345 |   |   | 202 |   |
| Mortgage                and other real estate-related loans (2)  |   |                                                    | 99      |                                                             |   | − |   |   | 440 |   |   | − |   |   | 539 |   |   | 417 |   |
| Commercial                finance assets (3)                     |   |                                                    | 109     |                                                             |   | 412 |   |   | 92 |   |   | − |   |   | 613 |   |   | 340 |   |
| Private                equity and hedge fund assets (1)          |   |                                                    | − |                                                             |   | 58 |   |   | − |   |   | − |   |   | 58 |   |   | − |   |
| Resource                Europe (1)                               |   |                                                    | 66      |                                                             |   | − |   |   | − |   |   | 25 |   |   | 91 |   |   | 2 |   |
|                                                                  |   | $                                                       | 277     |                                                             | $      | 7,621 |   | $ | 2,307 |   | $ | 1,885 |   | $ | 12,090 |   | $ | 7,074 |   |

----

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|                                               |   | **CDOs** |    | **Limited                Partnerships** |   | **TIC                Property Interests** |   | **Other                Investment Funds** |    |
|----------------------------------------------------|--------|----------|---------|-----------------------------------------|--------|-------------------------------------------|--------|-------------------------------------------|---------|
| **As                of September 30, 2006****(1)** |   |     |    |                                    |   |                                      |   |                                      |    |
| Financial                fund management      |   |     | 19      |                                    |   | 11                                        |   |                                      | − |   |   | − |   |
| Real                estate                    |   |     | 1       |                                    |   | 5                                         |   |                                      | 4       |   |   | − |   |
| Commercial                finance             |   |     | − |                                    |   | 2                                         |   |                                      | − |   |   | 1 |   |
| Resource                Europe                |   |     | − |                                    |   | −                                   |   |                                      | − |   |   | − |   |
|                                               |   |     | 20      |                                    |   | 18                                        |   |                                      | 4       |   |   | 1 |   |
| **As                of September 30, 2005****(1)** |   |     |    |                                    |   |                                      |   |                                      |    |   |   |   |   |
| Financial                fund management      |   |     | 11      |                                    |   | 9                                         |   |                                      | − |   |   | − |   |
| Real                estate                    |   |     | − |                                    |   | 4                                         |   |                                      | 1       |   |   | − |   |
| Commercial                finance             |   |     | − |                                    |   | 2                                         |   |                                      | − |   |   | 2 |   |
|                                               |   |     | 11      |                                    |   | 15                                        |   |                                      | 1       |   |   | 2 |   |

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|   | (1) | All                of our operating segments, except for Resource Europe, manage assets                on                behalf of RCC. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

**Financial      Fund Management**

*General*

|   | · | Apidos                Capital Management, LLC, or Apidos, which invests in, finances, structures                and manages investments in bank                loans. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Ischus                Capital Management, LLC, or Ischus, which invests in, finances, structures                and manages investments in asset-backed securities or ABS, including                residential mortgage-backed securities, or RMBS, and commercial                mortgage-backed securities, or                CMBS. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Trapeza                Capital Management, LLC, or Trapeza, a joint venture between us and                an                unrelated third party, which originates, structures, finances and                manages                investments in trust preferred securities and senior debt securities                of                banks, bank holding companies, insurance companies and other financial                companies. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*CDOs*

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| **Sponsor/Manager**                          |   | **Asset                Class** |                                      | **Number                of CDOs** |   | **Assets                Under Management** |   |
|----------------------------------------------|--------|--------------------------------|-------------------------------------------|-----------------------------------|--------|--------------------------------------------|--------|
|                                         |   |                           |                                      |                              |   | (in                billions)               |   |
| Ischus                (1)                (2) |   |                           | RMBS/CMBS/ABS                             |                              |   | 5                                          |   | $ | 3.1 |   |
| Apidos                (3)                    |   |                           | Bank                Loans                 |                              |   | 4                                          |   |   | 1.3 |   |
| Trapeza                (1)(4)                |   |                           | Trust                Preferred Securities |                              |   | 10                                         |   |   | 3.5 |   |
|                                         |   |                           |                                      |                              |   | 19                                         |   | $ | 7.9 |   |

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| (1) | We                also own a 50% interest in the general partners of the limited                partnerships that own a portion of the equity interests in each of                seven                Trapeza CDO issuers and one Ischus CDO issuer. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | RCC                holds 100% of the equity interests in one of these CDOs with assets                of $396.4 million. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

| (3) | RCC                holds 100% of the equity interests in two of these CDOs with                assets of $614.9 million. |
|-----|------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Through                Trapeza, we own a 50% interest in an entity that manages eight of                the                Trapeza CDO issuers and a 33.33% interest in an entity that manages                two of                the Trapeza CDO issuers. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Real      Estate **

*General.      *

|   | · | the                sponsorship and management of real estate investment partnerships                and TIC                programs; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                management, solely for RCC, of general investments in commercial                real                estate debt. These investments may include first mortgage debt, whole                loans, mortgage participations, subordinate notes, mezzanine debt                and                related commercial real estate securities;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | to                a lesser extent, the management and resolution of a legacy portfolio                of                real estate loans and property interests that we acquired at various                times                between 1991 and 1999. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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*Real      Estate Investment Partnerships and TIC Programs. *

*Resource      Capital Corp. *

*Legacy      Portfolio of Loan and Property Interests. *

|                                                               |   | Number                of Loans |   | Outstanding                LoansReceivable                (1) |   | Appraised                Value of Property Loan                (2) |   | Third                Party Liens                (3) |    | Carried                Cost ofInvestment                (4) |   | Net                Interest in Outstanding LoansReceivable                (6) |   |
|--------------------------------------------------------------------|--------|--------------------------------|--------|---------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|-----------------------------------------------------|---------|-------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
| **September                30, 2006**                              |   |                           |   |                                                          |   |                                                               |   |                                                |    |                                                        |   |                                                                          |   |   |   |   |   |   |   |
| Portfolio                loans                                |   |                           | 7      |                                                          | $      | 66,881                                                             |   | $                                                   | 136,450 |                                                        | $      | 25,546                                                                        |   | $ |             28,739 |   | $ | 41,335 |   |
| Loans                held as FIN 46-R entities’ assets  |   |                           | 2      |                                                          | $      | 9,237                                                              |   | $                                                   | 4,750   |                                                        | $      | 1,412                                                                         |   | $ |               1,980(5) |   | $ | 7,825 |   |
| **September                30, 2005**                              |   |                           |   |                                                          |   |                                                               |   |                                                |    |                                                        |   |                                                                          |   |   |   |   |   |   |   |
| Portfolio                loans                                |   |                           | 5      |                                                          | $      | 62,384                                                             |   | $                                                   | 59,690  |                                                        | $      | 15,452                                                                        |   | $ | 25,923                      |    | $ | 46,932 |   |
| Loans                held as FIN 46-R entities’ assets  |   |                           | 7      |                                                          | $      | 231,543                                                            |   | $                                                   | 138,625 |                                                        | $      | 84,612                                                                        |   | $ | 38,193(5)   |   | $ | 146,931 |   |

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| (1) | Consists                of the original stated or face value of the obligation plus interest                and                the amount of the senior lien                interest. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | We                generally obtain appraisals on each of the properties underlying                our                portfolio loans at least once every three years. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Represents                the amount of the senior lien                interests. |
|-----|-----------------------------------------------------------------------------------|

| (4) | Represents                the book cost of our investment, including subsequent advances, after                accretion of discount and allocation of gains from the sale of a                senior                lien interest in, or borrower refinancing of, the loan, but excludes                an                allowance for possible losses of** **$770,000                at September 30, 2006 and 2005, respectively. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | For                loans held as FIN 46 entities’ assets, the carried cost represents our                investment adjusted to reflect the requirements of FIN 46-R of which                $29.7                million was classified as held for sale on the balance sheet at September                30, 2005 (none at September 30,                2006). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**Resource      Capital Corp. **

**Commercial      Finance**

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**New      Initiatives**

|   | · | *Public                Equity.*We                sponsored three investment partnerships for institutional and individual                investors focused on private equity investments in domestic regional                banks. At September 30, 2006, we managed $20.5 million in assets                on behalf                of these investment partnerships. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Hedge                Fund.*We                sponsored one partnership for institutional and individual investors                that                was structured as a hedge fund. The fund focuses on credit products.                At                September 30, 2006, we managed $37.1 million in ABS and syndicated                bank                loans on behalf of this fund. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *Resource                Europe.*We                formed Resource Europe, Inc. in fiscal 2006 to focus on investments                in                international, principally European, bank loans. As of September                30, 2006,                we managed $66.4 million in bank loan assets held on a warehouse                line of                credit. We expect to acquire additional bank loan assets on the warehouse                line and to obtain term financing for these acquisitions through                a CDO                issuance in the second quarter of fiscal                2007. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Resource      Europe**

**Credit      Facilities **

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**Asset      Sourcing**

**Employees**

|                                      |   | **Total** |   | **Financial                Fund Management** |   | **Real                Estate** |   | **Commercial                Finance** |   | **Resource                Europe** |   | **Corporate/                Other** |   |
|-------------------------------------------|--------|-----------|--------|----------------------------------------------|--------|--------------------------------|--------|---------------------------------------|--------|------------------------------------|--------|-------------------------------------|--------|
|  **September              30, 2006** |   |      |   |                                         |   |                           |   |                                  |   |                               |   |                                |   |   |   |   |   |   |   |
| Investment                professionals   |   |      | 76     |                                         |   | 24                             |   |                                  | 22     |                               |   | 24                                  |   |   | 5 |   |   | 1 |   |
| Other                                     |   |      | 148    |                                         |   | 18                             |   |                                  | 9      |                               |   | 93                                  |   |   | − |   |   | 28 |   |
| Total                                     |   |      | 224    |                                         |   | 42                             |   |                                  | 31     |                               |   | 117                                 |   |   | 5 |   |   | 29 |   |
|                                      |   |      |   |                                         |   |                           |   |                                  |   |                               |   |                                |   |   |   |   |   |   |   |
| **September                30, 2005**     |   |      |   |                                         |   |                           |   |                                  |   |                               |   |                                |   |   |   |   |   |   |   |
| Investment                professionals   |   |      | 51     |                                         |   | 19                             |   |                                  | 15     |                               |   | 16                                  |   |   | − |   |   | 1 |   |
| Other                                     |   |      | 103    |                                         |   | 11                             |   |                                  | 7      |                               |   | 65                                  |   |   | − |   |   | 20 |   |
| Total                                     |   |      | 154    |                                         |   | 30                             |   |                                  | 22     |                               |   | 81                                  |   |   | − |   |   | 21 |   |

**ITEM          1A. RISK FACTORS**

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**Risks      Related to Our Business Generally**

***Our      business depends upon our ability to sponsor and raise investor capital for      our      investment funds.***

|   | · | the                performance of our existing funds; |
|--------|--------|-------------------------------------------------------|

|   | · | market                acceptance of the types of funds we                sponsor; |
|--------|--------|-----------------------------------------------------------------------------------|

|   | · | the                availability of qualified personnel to manage our                funds; |
|--------|--------|--------------------------------------------------------------------------------------------|

|   | · | the                availability of suitable investments in the types of loans, real                estate,                commercial finance assets and other assets that we seek to acquire                for our                funds; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | interest                rate changes and their effect on both the assets we seek to acquire                for                our funds, and the amount, cost and availability of acquisition                financing. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Our        revenues depend to a significant extent upon the performance of the assets        we        manage.***

***Increases      in interest rates may increase our operating costs.***

***Our      revenues depend to a significant extent upon the performance of the assets      we      manage.***

***If      we cannot generate sufficient cash to fund our participations in our investment      funds, our ability to maintain and increase our revenues may be      impaired.***

----

***Termination      of management arrangements with one or more of our investment funds could harm      our business.***

***We      may have difficulty managing our growth which may divert resources and limit      our      ability to expand our operations successfully.***

***Our      business will be harmed if we are unable to locate and retain key      personnel.***

***We      are subject to substantial competition in all aspects of our      business.***

***There      are few economic barriers to entry in the asset management      business.***

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**Risks      Relating to Particular Aspects of Our Financial Fund Management, Real Estate      and      Commercial Finance Operations**

***We      depend upon CDO issuances as the principal source of term financing for assets      we acquire for our account and for the account of investment entities we      sponsor. If we are unable to access the CDO market, or are able to do so only      on      unattractive terms, our ability to acquire assets and sponsor investment      vehicles may be limited.***

***We      arrange for warehouse and other short term financing for assets we accumulate      for CDOs for our own account and for the account of investment vehicles we      sponsor. We typically guarantee some portion of amounts drawn on these      facilities which exposes us to loss.***

***Our      income from our interests in CDOs may be volatile.***

----

***Real      estate loans in our portfolio are subject to higher risk of default than first      mortgage loans.***

***Real      estate loans in our portfolio require large lump sum payments at maturity,      increasing the risk of default.***

***The      value of our portfolio of real estate loans and property interests depends      upon      the value of the underlying real properties which may decline due to factors      beyond our control.***

***Our      portfolio of real estate loans principally consists of junior mortgage loans,      which are subject to higher default risks than senior      financing.***

***Our      real estate loan loss reserve may not be sufficient to cover future      losses.***

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***Our      real estate loans are illiquid, and we may not be able to divest them in      response to changing economic, financial and investment      conditions.***

***Hazardous      or toxic substances on properties underlying our loans may subject us to      environmental liabilities.***

***We      may be required to repurchase up to $3.5 million of real estate loan      participations we have sold.***

***Our      equipment leases and commercial notes may have greater risks of default than      senior secured loans.***

**ITEM      1B. UNRESOLVED STAFF COMMENTS**

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**ITEM      2.**
**PROPERTIES**

**Philadelphia,      Pennsylvania:**

**New      York City, New York:**

**Other:**

**ITEM      3.**
**LEGAL      PROCEEDINGS**

**ITEM      4.**
**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOL**
**DERS**

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**PART      II**

**ITEM      5.******MARKET      FOR REGISTRANT'S COMMON EQUITY, RELATED **STOCKHOLDER      MATTERS AND ISSUER PURCHASES OF******

********             EQUITY      SECURITIES********

|                           |   | **As                Reported** |   | **As                Adjusted** |   |
|--------------------------------|--------|--------------------------------|--------|--------------------------------|--------|
|                           |   | **High**                       |   | **Low**                        |   | **High** |   | **Low** |   |
| **Fiscal                2006** |   |                           |   |                           |   |   |   |   |   |
| Fourth                Quarter  |   | $                              | 22.31  |                           | $      | 17.75 |   | $ | 22.31 |   | $ | 17.75 |   |
| Third                Quarter   |   | $                              | 21.00  |                           | $      | 17.06 |   | $ | 21.00 |   | $ | 17.06 |   |
| Second                Quarter  |   | $                              | 20.12  |                           | $      | 15.98 |   | $ | 20.12 |   | $ | 15.98 |   |
| First                Quarter   |   | $                              | 17.92  |                           | $      | 14.60 |   | $ | 17.92 |   | $ | 14.60 |   |
|                           |   |                           |   |                           |   |   |   |   |   |   |   |   |   |
| **Fiscal                2005** |   |                           |   |                           |   |   |   |   |   |   |   |   |   |
| Fourth                Quarter  |   | $                              | 19.75  |                           | $      | 15.86 |   | $ | 19.75 |   | $ | 15.86 |   |
| Third                Quarter   |   | $                              | 38.67  |                           | $      | 31.74 |   | $ | 16.63 |   | $ | 13.65 |   |
| Second                Quarter  |   | $                              | 40.17  |                           | $      | 29.57 |   | $ | 17.28 |   | $ | 12.72 |   |
| First                Quarter   |   | $                              | 32.92  |                           | $      | 22.94 |   | $ | 14.16 |   | $ | 9.87 |   |

**Securities      Authorized for Issuance under Equity Compensation Plans**

|                                                                                                                        | (a)                                                                                                                                      | (b)                                                                                                       | (c)                                                                                                                                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Plan                category                                                                                                | Number                of securities to be issued upon exercise of outstanding options,                warrants                and rights | Weighted-average                exercise price of outstanding options, warrants                and rights | Number                of securities remaining available forfuture                issuance under equity compensationplans                excluding securities reflected                in column (a) |
| Equity                compensation plans approved                    by                security holders | 3,865,296                                                                                                                                | $7.54                                                                                                     | 821,698                                                                                                                                                                                             |

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**Issuer      Purchases of Equity Securities**

| **Period**                                       |   | **Total                Number of Shares Purchased** |    | **Average                Price Paid per Share** |   | **Total                Number of Shares Purchased as part of****Publicly                Announced****Plans                or****Programs****(2)(3)** |   | **Maximum                Number****(or                Approximate****Dollar                Value) of Shares that may yet be Purchased Under the Plans or Programs****(1)** |    |
|--------------------------------------------------|--------|-----------------------------------------------------|---------|-------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| July                1 to July 31, 2006           |   |                                                | − |                                            | $      | −                                                                                                                                              |   |                                                                                                                                                                       | − |   | $ | 31,362,326 |   |
| August                1 to August 31, 2006       |   |                                                | 34,956  |                                            | $      | 18.94                                                                                                                                                |   |                                                                                                                                                                       | 34,956  |   | $ | 30,700,099 |   |
| September                1 to September 30, 2006 |   |                                                | 26,123  |                                            | $      | 19.99                                                                                                                                                |   |                                                                                                                                                                       | 26,123  |   | $ | 30,177,850 |   |
| Total                                            |   |                                                | 61,079  |                                            |   |                                                                                                                                                 |   |                                                                                                                                                                       | 61,079  |   |   |   |   |

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| (1) | On                September 21, 2004, the Board of Directors approved a share repurchase                program under which we may buy up to $50.0 million of our outstanding                common stock from time to time in open market purchases or through                privately negotiated transactions. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | As                of September 30, 2006, we had repurchased an aggregate of 1,103,639                shares                at a total cost of $19.8 million pursuant to the repurchase program,                at an                average cost of $17.96 per share. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | On                August 30, 2006, we entered into a Stock Repurchase Agreement with                Morgan                Stanley & Co. Inc. to begin purchasing stock on September 1, 2006 at a                price up to $20.00 (excluding commission) to an aggregate cost of                $6.0                million, which expired on November 23, 2006. As of September 30,                2006, we                purchased an aggregate of 26,123 shares at a total cost of approximately                $522,000 pursuant to this repurchase agreement, at an average cost                of                $19.99 per share. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**ITEM      6.**
**SELECTED      FINANCIAL DATA**

|                                                                                                                                                                                        |   | **As                of and for the Years Ended September 30,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|---------|
|                                                                                                                                                                                        |   | **2006**                                                       |    | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                                                                                                                                        |   | (in                thousands, except per share data)           |    |
| **Statement                of operations data:**                                                                                                                                            |   |                                                           |    |   |   |   |   |   |   |   |   |
| Revenues                                                                                                                                                                                    |   |                                                           |    |   |   |   |   |   |   |   |   |
| Financial                fund management                                                                                                                                               |   | $                                                              | 30,834  |   | $ | 15,944 |   | $ | 7,585 |   | $ | 1,444 |   | $ | 185 |   |
| Real                estate                                                                                                                                                                  |   |                                                           | 23,676  |   |   | 17,791 |   |   | 10,519 |   |   | 13,331 |   |   | 16,582 |   |
| Commercial                finance                                                                                                                                                           |   |                                                           | 23,840  |   |   | 13,381 |   |   | 7,135 |   |   | 4,071 |   |   | 1,246 |   |
| Resource                Europe                                                                                                                                                              |   |                                                           | 474     |   |   | − |   |   | − |   |   | − |   |   | − |   |
| Total                revenues                                                                                                                                                               |   | $                                                              | 78,824  |   | $ | 47,116 |   | $ | 25,239 |   | $ | 18,846 |   | $ | 18,013 |   |
| Income                (loss) from continuing operations before                 cumulative effect                of changes in accounting      principles |   | $                                                              | 17,282  |   | $ | 5,388 |   | $ | 1,610 |   | $ | (3,556 | ) | $ | (1,101 | ) |
| Income                (loss) from discontinued operations, net                of tax                                                                                                        |   |                                                           | 1,231   |   |   | 11,070 |   |   | 16,799 |   |   | 14,522 |   |   | (2,208 | ) |
| Cumulative                effect of changes in accounting principles,                 net                of                tax                                                         |   |                                                           | 1,357   |   |   | − |   |   | − |   |   | (13,881 | ) |   | − |   |
| Net                income (loss)                                                                                                                                                       |   | $                                                              | 19,870  |   | $ | 16,458 |   | $ | 18,409 |   | $ | (2,915 | ) | $ | (3,309 | ) |
|                                                                                                                                                                                        |   |                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                earnings (loss) per common share:**                                                                                                                                  |   |                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing                operations                                                                                                                                              |   | $                                                              | 0.98    |   | $ | 0.30 |   | $ | 0.09 |   | $ | (0.21 | ) | $ | (0.06 | ) |
| Discontinued                operations                                                                                                                                                 |   |                                                           | 0.07    |   |   | 0.63 |   |   | 0.97 |   |   | 0.85 |   |   | (0.13 | ) |
| Cumulative                effect of changes in accounting principles                                                                                                                   |   |                                                           | 0.08    |   |   | − |   |   | − |   |   | (0.81 | ) |   | − |   |
| Net                income (loss)                                                                                                                                                       |   | $                                                              | 1.13    |   | $ | 0.93 |   | $ | 1.06 |   | $ | (0.17 | ) | $ | (0.19 | ) |
| **Diluted                earnings (loss) per common share:**                                                                                                                                |   |                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing                operations                                                                                                                                                   |   | $                                                              | 0.90    |   | $ | 0.28 |   | $ | 0.09 |   | $ | (0.21 | ) | $ | (0.06 | ) |
| Discontinued                operations                                                                                                                                                 |   |                                                           | 0.07    |   |   | 0.58 |   |   | 0.92 |   |   | 0.83 |   |   | (0.13 | ) |
| Cumulative                effect of changes in accounting principles                                                                                                                   |   |                                                           | 0.07    |   |   | − |   |   | − |   |   | (0.79 | ) |   | − |   |
| Net                income (loss)                                                                                                                                                       |   | $                                                              | 1.04    |   | $ | 0.86 |   | $ | 1.01 |   | $ | (0.17 | ) | $ | (0.19 | ) |
| **Cash                dividends per common share**                                                                                                                                     |   | $                                                              | 0.24    |   | $ | 0.20 |   | $ | 0.17 |   | $ | 0.13 |   | $ | 0.13 |   |
| **Balance                sheet data:**                                                                                                                                                      |   |                                                           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                                                                                                                                                                 |   | $                                                              | 416,753 |   | $ | 459,035 |   | $ | 740,386 |   | $ | 670,744 |   | $ | 467,498 |   |
| Debt                                                                                                                                                                                        |   | $                                                              | 172,238 |   | $ | 147,302 |   | $ | 43,694 |   | $ | 146,761 |   | $ | 106,005 |   |
| Stockholders’                equity                                                                                                                                                   |   | $                                                              | 193,062 |   | $ | 187,136 |   | $ | 257,915 |   | $ | 227,454 |   | $ | 233,539 |   |

----

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

**Overview**

|   | · | an                increase in the financial fund management assets we manage on behalf                of                individual and institutional investors and RCC; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                increase in real estate assets managed on behalf of limited partnerships                and TIC property interests that we sponsor and RCC; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an                increase in commercial finance assets managed on behalf of the limited                partnerships we sponsor, Merrill Lynch, and                RCC. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                           |   | **As                of September 30,** |   | **Increase** |   |
|------------------------------------------------|--------|----------------------------------------|--------|--------------|--------|
|                                           |   | **2006**                               |   | **2005**     |   | **Amount** |   | **Percentage** |   |
| Financial                fund management  |   | $                                      | 10,593 |         | $      | 6,115 |   | $ | 4,478 |   |   | 73 | % |
| Real                estate                |   |                                   | 884    |         |   | 619 |   |   | 265 |   |   | 43 | % |
| Commercial                finance         |   |                                   | 613    |         |   | 340 |   |   | 273 |   |   | 80 | % |
|                                           |   | $                                      | 12,090 |         | $      | 7,074 |   | $ | 5,016 |   |   | 71 | % |

----

|                                               |   | **CDOs** |    | **Limited                Partnerships** |   | **TIC                Property Interests** |   | **Other                Investment Funds** |    |
|----------------------------------------------------|--------|----------|---------|-----------------------------------------|--------|-------------------------------------------|--------|-------------------------------------------|---------|
| **As                of September 30, 2006****(1)** |   |     |    |                                    |   |                                      |   |                                      |    |
| Financial                fund management      |   |     | 19      |                                    |   | 11                                        |   |                                      | − |   |   | − |   |
| Real                estate                    |   |     | 1       |                                    |   | 5                                         |   |                                      | 4       |   |   | − |   |
| Commercial                finance             |   |     | − |                                    |   | 2                                         |   |                                      | − |   |   | 1 |   |
| Resource                Europe                |   |     | − |                                    |   | −                                   |   |                                      | − |   |   | − |   |
|                                               |   |     | 20      |                                    |   | 18                                        |   |                                      | 4       |   |   | 1 |   |
| **As                of September 30, 2005****(1)** |   |     |    |                                    |   |                                      |   |                                      |    |   |   |   |   |
| Financial                fund management      |   |     | 11      |                                    |   | 9                                         |   |                                      | − |   |   | − |   |
| Real                estate                    |   |     | − |                                    |   | 4                                         |   |                                      | 1       |   |   | − |   |
| Commercial                finance             |   |     | − |                                    |   | 2                                         |   |                                      | − |   |   | 2 |   |
|                                               |   |     | 11      |                                    |   | 15                                        |   |                                      | 1       |   |   | 2 |   |

----

| (1) | All                of our operating segments, except for Resource Europe, manage assets                on                behalf of RCC. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                |   | **Years                Ended September 30,** |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                |   | **2006**                                     |   | **2005** |   | **2004** |   |
| Fund                management revenues (1)                                    |   | $                                            | 45,963 |   | $ | 23,273 |   | $ | 13,193 |   |
| Finance                and rental revenues (2)                                 |   |                                         | 22,521 |   |   | 12,624 |   |   | 9,507 |   |
| Gains                on resolutions of loans and other property interests (3)  |   |                                         | 4,691  |   |   | 8,213 |   |   | 890 |   |
| Net                gains (loss) from TIC property interests (4)                |   |                                         | 1,363  |   |   | (97 | ) |   | − |   |
| Other                (5)                                                       |   |                                         | 4,286  |   |   | 3,103 |   |   | 1,649 |   |
|                                                                                |   | $                                            | 78,824 |   | $ | 47,116 |   | $ | 25,239 |   |

----

| (1) | Includes                fees from each of our financial fund management, real estate and                commercial finance operations and our share of the income or loss                from                limited and general partnership interests we own in our financial                fund                management and real estate                operations. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Includes                interest income on bank loans from our financial fund management                and                Resource Europe operations, interest and accreted discount income                from our                real estate operations, interest and rental income from our commercial                finance operations and revenues from certain real estate                assets. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes                the resolution of loans we hold in our real estate                segment. |
|-----|----------------------------------------------------------------------------------------------------|

| (4) | Reflects                net gains (losses) recognized by our real estate segment on the sale                of                TIC interests to outside investors. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes                the equity compensation earned in connection with the formation of                RCC and                the disposition of leases and loans as well as other charges in our                commercial finance operations. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Results      of Operations: Financial Fund Management **

|   | · | Apidos                Capital Management, LLC, which invests in, finances, structures and                manages investments in bank loans. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Ischus                Capital Management, LLC, which invests in, finances, structures and                manages investments in asset-backed securities or ABS, including                residential mortgage-backed securities, or RMBS, and commercial                mortgage-backed securities, or                CMBS. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Trapeza                Capital Management, LLC, a joint venture between us and an unrelated                third                party, which originates, structures, finances and manages investments                in                trust preferred securities and senior debt securities of banks, bank                holding companies, insurance companies and other financial                companies. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                |   | **As                of September 30, 2006**                     |   | **As                of****September                30, 2005** |   |
|-----------------------------------------------------|--------|-----------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                                |   | **Institutional                and****Individual****Investors** |   |    **RCC**                                     |   | **Assets                Held on Warehouse Facilities** |   |    **Total** |   |    **Total** |   |
| Apidos                                         |   | $                                                               | 687    |                                                          | $      | 615 |   | $ | 624 |   | $ | 1,926 |   | $ | 413 |   |
| Ischus                                         |   |                                                            | 2,675  |                                                          |   | 1,160 |   |   | 568 |   |   | 4,403 |   |   | 2,821 |   |
| Trapeza                                        |   |                                                            | 3,538  |                                                          |   | − |   |   | 668 |   |   | 4,206 |   |   | 2,879 |   |
| Other                company sponsored partnerships |   |                                                            | 58     |                                                          |   | − |   |   | − |   |   | 58 |   |   | 2 |   |
|                                                |   | $                                                               | 6,958  |                                                          | $      | 1,775 |   | $ | 1,860 |   | $ | 10,593 |   | $ | 6,115 |   |

|   | · | *collateral                management fees*−                these vary by CDO, ranging from an annual fee between 0.08% and 0.75%                of                the aggregate principal balance of the collateral securities owned                by the                CDO issuers; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | *administration                fees*−                these vary by limited partnership, ranging from between 0.75% and                2.00% of                the partnership capital balance. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Apidos***

----

***Ischus***

***Trapeza***

***Other      Company Sponsored Partnerships***

----

|                                                                  |   | **Years                Ended September 30,** |   |
|-----------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                  |   | **2006**                                     |   | **2005** |   | **2004** |   |
| Revenues:                                                             |   |                                         |   |   |   |   |   |
| Fund                management fees                                   |   | $                                            | 9,213  |   | $ | 4,260 |   | $ | 1,821 |   |
| Interest                income on loans                               |   |                                         | 6,910  |   |   | 744 |   |   | − |   |
| RCC                management fee and equity compensation             |   |                                         | 5,518  |   |   | 3,205 |   |   | − |   |
| Limited                and general partner interests                  |   |                                         | 5,404  |   |   | 4,825 |   |   | 4,775 |   |
| Earnings                of Structured Finance Fund partnerships       |   |                                         | 2,218  |   |   | 2,177 |   |   | − |   |
| Earnings                on unconsolidated CDOs                        |   |                                         | 737    |   |   | 161 |   |   | − |   |
| Interest                income on ABS                                 |   |                                         | 283    |   |   | − |   |   | − |   |
| Other                                                                 |   |                                         | 551    |   |   | 572 |   |   | 989 |   |
|                                                                  |   | $                                            | 30,834 |   | $ | 15,944 |   | $ | 7,585 |   |
|                                                                  |   |                                         |   |   |   |   |   |   |   |   |
| Costs                and expenses:                                    |   |                                         |   |   |   |   |   |   |   |   |
| General                and administrative expenses                    |   | $                                            | 9,447  |   | $ | 8,087 |   | $ | 2,370 |   |
| Equity                compensation expense − RCC                |   |                                         | 1,650  |   |   | 757 |   |   | − |   |
| Expenses                of Structured Finance Fund partnerships  |   |                                         | 7      |   |   | 266 |   |   | − |   |
|                                                                  |   | $                                            | 11,104 |   | $ | 9,110 |   | $ | 2,370 |   |

***Year      Ended September 30, 2006 Compared to Year Ended September 30,      2005***

|   | · | a                $5.0 million increase in fund management fees, primarily from the                following: |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | - | a                $4.8 million increase in collateral management fees principally caused                by                the completion of eight new CDOs coupled with a full year of collateral                management fees for two previously completed                CDOs; |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $1.1 million increase in management fees as a result of four                company-sponsored unconsolidated partnerships that commenced operations                between June 2005 and February                2006; |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $205,000 increase in the Company’s share of expenses for Trapeza Capital                Management LLC; |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $335,000 decrease in reimbursed expenses. Fiscal 2005 included a                reimbursement received in connection with the formation of Trapeza                CDO                VII. No such expense reimbursements were received in fiscal 2006;                and |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $379,000 decrease related to a fee paid in connection with the assignment                of securities on a related warehouse facility during fiscal 2005.                No such                fees were earned during fiscal                2006; |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $6.2 million increase in interest income on loans held for investment                resulting from the consolidation of four Apidos CDO issuers while                they                were accumulating assets on warehouse facilities.  In December 2005                and September 2006, the assets and liabilities of these issuers were                removed from our consolidated financial statements upon the execution                of                the CDO transactions;  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | a                $2.3 million increase in RCC management fees and equity compensation,                consisting of a $1.8 million increase in management fees and a $557,000                increase in equity compensation. RCC commenced operations in March                2005; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $579,000 increase in revenues from our limited and general partner                interests, primarily from the                following: |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $1.2 million increase in our earnings from unconsolidated partnerships                we                have sponsored; offset in part by |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $644,000 decrease in net unrealized appreciation in the book value                of                securities and swap agreements to reflect current market                value; |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $576,000 increase in our earnings in unconsolidated CDOs primarily                as a                result of our investment in six new CDO issuers we sponsored during                fiscal                2006; and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $283,000 increase in interest income on ABS resulting from the interest                spread earned on assets accumulating with a third party through a                warehouse facility based on the terms of the warehousing                agreement. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $1.4 million increase in general and administrative expenses, primarily                from the following: |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $4.3 million increase in wages and benefits as a result of the addition                of                personnel in response to the growth in our assets under                management; |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $551,000 increase in financial software programs and publications                as a                result of the growth of our assets under management;                and |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $703,000 increase in other operating expenses, including insurance,                rent                allocations and other expenses related to the additional                personnel. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $2.6 million increase in reimbursed expenses from our Trapeza, Ischus,                and                Apidos operations; |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $1.1 million decrease in RCC start-up costs, which commenced operations                in                the second quarter of fiscal 2005; and |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $446,000 decrease in professional and recruiting fees principally                due to                the expiration of a consulting                agreement. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $893,000 increase in equity compensation expense related to the 344,079                restricted shares of RCC and 649,500 stock options of RCC that were                held                by RCM which were transferred to members of management;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $259,000 decrease in expenses of consolidated partnerships, primarily                professional fees.  There were no such expenses in fiscal                2006. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Year      Ended September 30, 2005 Compared to Year Ended September 30,      2004***

|   | · | a                $2.4 million increase in fund management fees resulting primarily                from a                $2.1 million increase in collateral management fees principally caused                by                the completion of two new CDOs coupled with a full year of collateral                management fees for three previously completed CDOs; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $744,000 increase in interest income on loans resulting from the                consolidation of an Apidos CDO issuer in our financial statements                while it                accumulated assets through a warehouse facility; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $3.2 million increase in income from RCC as follows: |
|--------|--------|-----------------------------------------------------------------------|

|   | - | a                $1.4 million increase in management fees;                and |
|--------|---|-------------------------------------------------------------------------------|

----

|   | - | a                $1.8 million increase in equity compensation as a result of the formation                of RCC, for which we were granted 345,000 shares of RCC restricted                common                stock and options to purchase 651,666 common shares of RCC at an                exercise                price of $15.00 per share.  |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $2.2 million increase in our earnings from the SFF partnerships related                to                interest income on CDO investments; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $161,000 increase in interest income on CDO investments;                and |
|--------|--------|----------------------------------------------------------------------------------------------|

|   | · | a                $417,000 decrease in other revenue resulting primarily from the                following: |
|--------|--------|------------------------------------------------------------------------------------------------------------|

|   | - | a                $1.0 million decrease in net reimbursement fees.  Fees were accrued                in fiscal 2004 in anticipation of the completion of two Trapeza                CDOs.  No such fees were accrued in fiscal 2005.  This decrease                was partially offset by |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $5.7 million increase in general and administrative expenses.  The                increase resulted primarily from the                following: |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $4.5 million increase in wages and benefits as a result of the addition                of                personnel to manage our expanding portfolio of trust preferred securities,                ABS, bank loans, and private equity                investments; |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $1.1 million increase in start-up costs relating to RCC, which commenced                operations on March 8, 2005. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $525,000 increase in financial software programs and publications                as a                result of the implementation of new asset management systems in response                to our growing assets under                management; |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $444,000 increase in other operating expenses, primarily from increased                insurance costs, rent allocations and other general and administrative                expenses related to the addition of personnel;                and |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $372,000 increase in professional fees; partially offset                by |
|--------|---|---------------------------------------------------------------------------------------------|

|   | - | a                $1.3 million increase in reimbursed expenses, including $631,000                from                RCC. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $757,000 increase in equity compensation expense related to the transfer                of 289,000 restricted shares of RCC held by RCM to members of management;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $266,000 increase in expenses, primarily professional services.  |
|--------|--------|----------------------------------------------------------------------------------------|

**Results      of Operations: Real Estate**

|   | · | commercial                real estate debt, principally first mortgage debt, whole loans, mortgage                participations, subordinated notes, mezzanine debt and related commercial                real estate securities; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | real                estate investment limited partnerships, limited liability company                and TIC                property interests; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | real                estate loans, owned assets and ventures, known collectively as our                legacy                portfolio. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                  |   | **September                30,** |   |
|---------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                  |   | **2006**                         |   | **2005** |   |
|                                                                                  |   | (in                millions)     |   |
| **Assets                under management:**                                           |   |                             |   |   |   |
| Commercial                real estate debt                                            |   | $                                | 440    |   | $ | 87 |   |
| Real                estate investment limited partnerships and TIC property interests |   |                             | 345    |   |   | 202 |   |
| Legacy                portfolio                                                       |   |                             | 99     |   |   | 330 |   |
|                                                                                  |   | $                                | 884    |   | $ | 619 |   |

----

|   | · | the                continued development of our commercial real estate debt                platform; |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | growth                in our real estate business through the sponsorship of five real                estate                investment partnerships and the sponsorship of four TIC property                interests; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | our                selective resolution of the loans in our legacy portfolio through                repayments, sales, refinancings and                restructurings. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                         |   | **Years                Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                                         |   | **2006**                                     |   | **2005** |   | **2004** |   |
| Revenues:                                                                                                    |   |                                         |   |   |   |   |   |
| Fee                income from sponsorship of partnerships and TIC property                interests and RCC |   | $                                            | 10,358 |   | $ | 3,690 |   | $ | 941 |   |
| FIN                46 revenues and rental property income                                                    |   |                                         | 4,720  |   |   | 5,375 |   |   | 4,017 |   |
| Property                management                                                                           |   |                                         | 2,248  |   |   | 1,184 |   |   | 525 |   |
| Interest,                including accreted loan discount                                                    |   |                                         | 1,128  |   |   | 1,535 |   |   | 2,893 |   |
| Gains                on resolution of loans, FIN 46 assets and ventures                                 |   |                                         | 4,691  |   |   | 8,213 |   |   | 890 |   |
| (Losses)                earnings of equity investees                                                         |   |                                         | (832   | ) |   | (2,109 | ) |   | 1,253 |   |
| Net                gains (losses) on sale of TIC property interests                                          |   |                                         | 1,363  |   |   | (97 | ) |   | − |   |
|                                                                                                         |   | $                                            | 23,676 |   | $ | 17,791 |   | $ | 10,519 |   |
|                                                                                                         |   |                                         |   |   |   |   |   |   |   |   |
| Cost                and expenses:                                                                            |   |                                         |   |   |   |   |   |   |   |   |
| General                and administrative expenses                                                           |   | $                                            | 9,149  |   | $ | 5,712 |   | $ | 4,571 |   |
| FIN                46 operating and rental property expenses                                            |   |                                         | 2,973  |   |   | 4,191 |   |   | 2,374 |   |
|                                                                                                         |   | $                                            | 12,122 |   | $ | 9,903 |   | $ | 6,945 |   |

----

***Year        Ended September 30, 2006 Compared to Year Ended September 30,        2005***

| ·   | a                $6.7 million increase in fee income related to the purchase and third                party financing of properties through the sponsorship of real estate                investment partnerships and TIC property                interests; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $1.0 million increase in management fees from                RCC; |
|--------------------|------------------------------------------------------------------------------------|
| ·   | a                $1.1 million increase in management fees from the additional properties                acquired subsequent to September 30,                2005; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $1.3 million decrease in our share of the operating losses of our                unconsolidated real estate investments accounted for on the equity                method                due principally to a prepayment penalty on the refinancing of an                investment property recorded in fiscal 2005;                and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $1.4 million increase in net gains (including $1.7 million of previously                recorded losses) recognized on our sale of TIC property interests                in                fiscal 2006. There were no sales of TIC property interests in fiscal                2005. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $655,000 decrease in FIN 46 revenues and rental property income in                fiscal                2006 as compared to fiscal 2005. The decrease is primarily related                to our                foreclosure on a hotel property during fiscal 2005. As a result of                the                foreclosure, we included an additional two months of operating income                in our results for fiscal 2005; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $3.5 million decrease in gains on resolutions of loans, FIN 46 assets                and                real estate assets. In fiscal 2006, we received $4.0 million plus                a                $200,000 note receivable from the sale of 19.99% of our 50% interest                in a                real estate venture, resulting in a gain of $4.2 million. Additionally,                we                resolved one loan with a book value of $2.5 million, recognizing                a gain of                $82,000. During fiscal 2005, a partnership in which we had owned                a 50%                equity interest (a 30% interest in fiscal 2006) refinanced its mortgage.                We received net proceeds from the refinancing of $13.6 million, which                was                $6.3 million in excess of the recorded value of our interest. We                recognized the $6.3 million as a gain. In addition, during fiscal                2005, we                foreclosed on a loan that was classified as a FIN 46 asset. In connection                with the foreclosure, we acquired a note payable for $540,000 that                was                recorded as a FIN 46 liability in the amount of $1.6 million; as                a result,                we recognized a gain of $1.0 million. We also recognized an aggregate                gain                of $792,000 on the sale of two investments in our real estate investment                partnerships during fiscal year 2005; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $407,000 decrease in interest and accreted discount income resulting                from                the cessation of accretion on one loan offset by the interest accrued                on                three new loans acquired during fiscal 2006 as a result of asset                resolutions. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $3.4 million increase in general and administrative expenses primarily                due                to the following: |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
| -   | a                $2.1 million increase in wages and benefits as a result of the addition                of                personnel primarily to support the development of our debt platform                and                the combined growth of our investment partnerships and TIC                programs; |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -   | a                $757,000 net increase in commission expense and offering and                organizational reimbursements due to the higher level of sales of                real                estate investment programs; and |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -   | a                $480,000 increase in both property management expenses related to                real                estate investment partnerships and $300,000 of travel costs due to                the                increased acquisition activity associated with managing our real                estate                investment programs. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| *·  * | a                $1.2 million decrease in FIN 46 operating expenses primarily related                to                the foreclosed hotel property and the resulting additional two months                of                operating expenses in fiscal 2005. |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Year        Ended September 30, 2005 Compared to Year Ended September 30,        2004***

| ·   | a                $1.4 million increase in FIN 46 revenues, primarily the additional                two                months of operating income related to the foreclosed hotel property                in                fiscal 2005; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | $659,000                increase in management fees due to additional properties                acquired; |
|--------------------|-----------------------------------------------------------------------------------------------------------|
| ·   | a                $2.7 million increase in fee income related to the purchase and third                party financing of properties through the sponsorship of investment                partnerships and TIC property interests;                and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $7.3 million increase in gains on resolutions of loans, FIN 46 assets                and                real estate assets. A partnership in which we owned a 50% equity                interest                refinanced its mortgage. We received net proceeds of $13.6 million                from                this refinancing and recorded a $6.3 million gain representing the                excess                of the recorded value of our interest. In addition, during fiscal                2005, we                foreclosed on a loan that was classified as a FIN 46 asset on our                consolidated balance sheet. In connection with the foreclosure, we                acquired a note payable for $540,000 that was recorded on our books                as a                FIN 46 liability in the amount of $1.6 million; as a result we recognized                a gain of $1.0 million. The foreclosed asset is recorded as an investment                in real estate at September 30, 2005. We recognized an aggregate                gain of                $792,000 on the sale of two investments in our real estate investment                partnerships during fiscal 2005. In fiscal 2004, we resolved five                loans                having an aggregate book value of $5.0 million for $5.1 million,                recognizing a net gain of $49,000. We also received $3.4 million                for the                sale of our investment in one venture resulting in a gain of                $841,000. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $1.4 million decrease in interest and accreted discount income resulting                from the resolution of six loans since fiscal 2004 and the cessation                of                accretion on one loan as of July 2005. Approximately $1.0 million                of the                decrease related to one loan resolved during fiscal 2004; $226,000                of the                decrease related to the cessation of accretion;                and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $3.4 million decrease in our share of the operating results of our                unconsolidated real estate investments accounted for on the equity                method.                The majority of the decrease was due to costs of approximately $1.8                million associated with the refinancing of a first mortgage on a                property                in which we had a 50% interest. Additionally, $663,000 of the decrease                related to losses incurred through equity investments in our real                estate                investment partnerships made subsequent to fiscal 2004. The loss                from an                equity investment which was converted from a loan during fiscal 2004                contributed another $626,000 of the                decrease. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | an                increase of $1.1 million in real estate general and administrative                expenses primarily from an increase in wages and benefits as a result                of                the addition of personnel in our real estate subsidiary to manage                our                existing portfolio of commercial loans and real estate and to expand                our                real estate operations through the sponsorship of real estate investment                programs; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | a                $1.8 million increase in FIN 46 operating expenses primarily related                to                the foreclosed hotel property and the adjustment to current reporting,                resulting in an additional two months of operating expenses in fiscal                2005. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Results      of Operations: Commercial Finance**

|                                            |   | **September                30,** |   |
|-------------------------------------------------|--------|----------------------------------|--------|
|                                            |   | **2006**                         |   | **2005** |   |
| LEAF                Financial Corporation  |   | $                                | 109    |   | $ | 41 |   |
| LEAF                Fund I                 |   |                             | 87     |   |   | 85 |   |
| LEAF                Fund II                |   |                             | 315    |   |   | 28 |   |
| Merrill                Lynch               |   |                             | 10     |   |   | 161 |   |
| RCC                                        |   |                             | 92     |   |   | 25 |   |
|                                            |   | $                                | 613    |   | $ | 340 |   |

| **Lessee                business**    |   |   |   |   | **Equipment                under management** |                                     |   |
|---------------------------------------|--------|--------|--------|--------|-----------------------------------------------|-------------------------------------|--------|
| Services                              |   |   | 49     | %      |                                          | Medical                             |   |   | 26 | % |
| Finance/Insurance                     |   |   | 15     | %      |                                          | Computers                           |   |   | 18 | % |
| Retail                trade services  |   |   | 9      | %      |                                          | Industrial                          |   |   | 15 | % |
| Manufacturing                services |   |   | 8      | %      |                                          | Asset                based lending  |   |   | 14 | % |
| Transportation/Communication          |   |   | 5      | %      |                                          | Office                equipment     |   |   | 5 | % |
| Wholesaler                trade       |   |   | 3      | %      |                                          | Garment                care         |   |   | 4 | % |
| Construction                          |   |   | 3      | %      |                                          | Restaurant                equipment |   |   | 4 | % |
| Agriculture                           |   |   | 3      | %      |                                          | Software                            |   |   | 3 | % |
| Other                                 |   |   | 5      | %      |                                          | Communication                       |   |   | 3 | % |
|                                  |   |   | 100    | %      |                                          | Other                               |   |   | 8 | % |
|                                  |   |   |   |   |                                          |                                |   |   | 100 | % |

----

|                                             |   | **Years                Ended September 30,** |   |
|--------------------------------------------------|--------|----------------------------------------------|--------|
|                                             |   | **2006**                                     |   | **2005** |   | **2004** |   |
| Revenues:                                        |   |                                         |   |   |   |   |   |
| Finance                revenues                  |   | $                                            | 9,006  |   | $ | 4,970 |   | $ | 2,597 |   |
| Fund                management fees              |   |                                         | 7,071  |   |   | 3,403 |   |   | 1,335 |   |
| RCC                management and servicing fees |   |                                         | 1,607  |   |   | 247 |   |   | − |   |
| Acquisition                fees                  |   |                                         | 4,817  |   |   | 4,069 |   |   | 2,543 |   |
| Other                                            |   |                                         | 1,339  |   |   | 692 |   |   | 660 |   |
|                                             |   | $                                            | 23,840 |   | $ | 13,381 |   | $ | 7,135 |   |
|                                             |   |                                         |   |   |   |   |   |   |   |   |
| Costs                and expenses           |   | $                                            | 14,443 |   | $ | 8,884 |   | $ | 7,763 |   |

***Year      Ended September 30, 2006 Compared to Year Ended September 30,      2005***

|   | · | a                $4.0 million increase in finance revenues primarily due to an increase                of                $172.8 million in lease and note originations and the increase in                our                revolving credit facility which allowed us to hold more finance assets                on                our balance sheet; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $5.0 million increase in fund and RCC management fees directly related                to                our increase in assets under management;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $748,000 increase in asset acquisition fees. Our increase in lease                originations supported our increased sales to our affiliated partnerships,                RCC and ML for which we receive acquisition                fees. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $3.9 million increase in wages and benefits. Our full-time employees                increased to 117 as of September 30, 2006 from 81 as of September                30, 2005                to support the expansion of our operations; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $1.6 million increase in general and administrative expenses principally                due to the following: |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $710,000 increase in professional fees directly related to the overall                expansion of our operations; |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $410,000 increase in rent due to the relocation of our new 30,000                square                foot headquarters in November 2005;                and |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $307,000 increase in travel and entertainment expenses resulting                from the                expansion of our business development                activities. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Year      Ended September 30, 2005 Compared to Year Ended September 30,      2004***

|   | · | a                $2.4 million increase in finance revenues primarily due to an increase                of                $101.3 million in lease originations; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $2.3 million increase in fund and RCC management fees directly related                to                our increase in assets under management;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $1.5 million increase in asset acquisition fees. The increase in                lease                originations supported our increased sales to our affiliated partnerships                and ML for which we receive acquisition                fees. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | a                $2.4 million increase in wages and benefits due to additional personnel                for the further expansion of our operations;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $1.3 million decrease in general and administrative expenses due                to the                following: |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $1.1 million decrease in offering and organization expenses related                to our                affiliated partnerships; |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $287,000 decrease in liquidation expense as a result of a one time                charge                in 2004 relating to the dissolution of other affiliated partnerships; |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $628,000 decrease in allocated corporate                expenses; |
|--------|---|------------------------------------------------------------------------------------|

|   | - | a                $340,000 decrease in expenses reimbursed to us by our investment                partnerships; and |
|--------|---|--------------------------------------------------------------------------------------------------------------------|

|   | - | a                $565,000 increase in other expenses resulting from the expansion                of our                business development activities and the overall expansion of our                operations. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Results      of Operations: Other Costs and Expenses and Other Income (Expense)**

***Year      Ended September 30, 2006 Compared to Year Ended September 30,      2005***

|   | · | a                $870,000 increase in wages and benefits due principally to the                following: |
|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | - | a                $1.1 million increase in stock-based compensation expense due to                our                implementation of FAS 123R. Effective                October 1, 2005, we adopted Statement of Financial Accounting                Standards (“SFAS”) 123R, “Accounting                for Stock-Based Compensation,” as revised (“SFAS 123R”), resulting                in a change in our method of recognizing share-based compensation                expense.                Specifically, we now record compensation expense for our employee                stock                options. Had we expensed employee stock options for fiscal 2005,                we                estimate that share-based compensation expense would have increased                by                $3.2 million. For additional information, see Note 2 to notes to                consolidated financial statements;                and |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $380,000 increase in wages and benefits due to increased headcount                to                service our increased asset management operations; partially offset                by |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | a                $720,000 reduction of expense based on an annual actuarial adjustment                to                the supplemental employment retirement plan for our retired Chief                Executive Officer (and current Chairman) to reflect the increase                in                investment values in the plan compared to the remaining liability;                and |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $308,000 increase in accounting and auditing fees in conjunction                with our                expanded operations. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | in                fiscal 2002, we charged operations $1.0 million, which was the amount                of                our maximum exposure relating to the settlement of a lawsuit, in                which one                of our insurance carriers refused to participate. We thereafter filed                an                action seeking recovery on our policy with that carrier. In the second                quarter of fiscal 2006, we prevailed in our action against the carrier,                received a $200,000 reimbursement and reversed the $1.0 million                accrual; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | during                fiscal 2006, we recorded a gain of $668,000 from the sale of 50,000                shares                of The Bancorp, Inc; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we                recorded $2.7 million and $213,000 of dividends received from RCC                in                fiscal 2006 and 2005, respectively. RCC was formed by us in March                2005; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | in                the first quarter of fiscal 2005, we received a $1.4 million settlement                on                a claim against one of our directors’ and officers’ liability insurance                carriers; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | during                fiscal 2005, we recorded gains totaling $1.5 million from the sale                of the                remaining RAIT Investment Trust, or RAIT, shares that we                held. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Year      Ended September 30, 2005 Compared to Year Ended September 30,      2004***

----

**Discontinued      Operations**

*Spin-off      of Atlas America*

*Resolution      of Real Estate Assets Held for Sale*

|                                              |   | **Years                Ending September 30,** |   |
|---------------------------------------------------|--------|-----------------------------------------------|--------|
|                                              |   | **2006**                                      |   | **2005** |   | **2004** |   |
| Balance,                beginning of period  |   |                                          | 6      |   |   | 4 |   |   | 5 |   |
| Net                additions                 |   |                                          | 1      |   |   | 3 |   |   | 3 |   |
| Resolved                                     |   |                                          | (6     | ) |   | (1 | ) |   | (4 | ) |
| Balance,                end of period        |   |                                          | 1      |   |   | 6 |   |   | 4 |   |

----

|                                                                                |   | **Years                Ended September 30,**  |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                                                |   | **2006**                                           |   | **2005** |   | **2004** |   |
| Operating                income (period prior to disposition)                  |   | $                                                  | 2,674  |   | $ | 3,609 |   | $ | 1,249 |   |
| Write-downs                to expected sales value                             |   |                                               | (431   | ) |   | (2,303 | ) |   | (7,337 | ) |
| (Loss)                gain on disposals                                        |   |                                               | (452   | ) |   | (9,396 | ) |   | 749 |   |
| Income                tax (provision) benefit                                  |   |                                               | (591   | ) |   | 2,875 |   |   | 1,981 |   |
|     Discontinued                income (loss), net of tax  |   | $                                                  | 1,200  |   | $ | (5,215 | ) | $ | (3,358 | ) |

**Cumulative      Effect of Change in Accounting Principle**

**Liquidity      and Capital Resources**

*General.*

|                                                                                              |   | **Years                Ended September 30,**  |    |
|---------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                                              |   | **2006**                                           |    | **2005** |   | **2004** |   |
| Used                in operating activities of continuing operations                              |   | $                                                  | (39,054 | ) | $ | (18,954 | ) | $ | (12,525 | ) |
| (Used                in) provided by investing activities of continuing                operations |   |                                               | (39,626 | ) |   | (28,801 | ) |   | 92,215 |   |
| Provided                by (used in) financing activities of continuing operations                |   |                                               | 50,831  |   |   | 14,635 |   |   | (92,443 | ) |
| Provided                by discontinued operations                                                |   |                                               | 38,943  |   |   | 23,566 |   |   | 35,214 |   |
| Net                cash retained by entities previously consolidated                              |   |                                               | (3,825  | ) |   | − |   |   | − |   |
|                                                                                              |   | $                                                  | 7,269   |   | $ | (9,554 | ) | $ | 22,461 |   |

***Year      Ended September 30, 2006 Compared to Year Ended September 30,      2005***

----

*Cash      Flows from Operating Activities*
** **

|   | · | a                $50.5 million increase in our commercial finance investments, reflecting                the continued expansion of that segment; offset in part                by |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $15.6 million increase in cash provided primarily from operating                assets                and liabilities; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $14.8 million increase in net income generated by our continuing                operations, as adjusted for non-cash items; includes a $9.8 million                decrease in income from discontinued operations, reflecting the nine                months of operations of Atlas America included in fiscal                2005. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Cash      Flows from Investing Activities.*
** **

*Cash      Flows from Financing Activities. *

|   | · | an                increase in our borrowings, net of repayments, of $60.6 million which                principally involved the $45.4 million of additional net borrowings                to                fund our increased investments in our commercial finance operations,                and                $12.5 million in proceeds from the first mortgage we secured on a                foreclosed hotel property. This increase was offset partially                by; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $9.5 million increase in repurchases of our common stock as part                of our                Board-approved stock repurchase program;                and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $5.7 million decrease in proceeds from the exercise of employee stock                options, principally by the employees of Atlas America in conjunction                with                the spin-off of that subsidiary in June                2005. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Cash      Retained by Entities Previously Consolidated.*

*Cash      Flows from Discontinued Operations.*

***Year      Ended September 30, 2005 Compared to Year Ended September 30,      2004***

----

*Cash      Flows from Operating Activities. *

|   | · | $13.7                million was used by operating assets, liabilities and taxes, including                the                $18.1 million of Atlas America net operating liabilities eliminated                with                the spin-off; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $1.2 million increase in our investment in commercial finance; offset                in                part, by the |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $8.5                million of cash generated by the increase in net income, as adjusted                to                reconcile net income to net cash from operating                activities. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Cash      Flows from Investing Activities.*
** **

|   | · | we                received $52.1 million in dividends from Atlas America in fiscal                2004. No                such dividends were received in fiscal                2005; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                proceeds from the resolution and/or refinancing of our legacy real                estate                investment portfolio produced $7.4 million of proceeds in fiscal                2005,                $19.0 million less than the $26.4 million in fiscal 2004; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                proceeds we received from the sale of our RAIT shares were $17.1                million                less in fiscal 2005 than in fiscal                2004; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we                invested $15.0 million in RCC in fiscal 2005; |
|--------|--------|-----------------------------------------------------------------|

|   | · | we                increased our investments in real estate by $10.1 million, including                two                TIC property interests; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | we                placed $5.0 million in escrow as required by our financial fund secured                warehouse credit facility; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $11.7 million reduction in funds provided from the decrease in other                assets; offset, in part, by |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $9.4 million increase in equity                distributions. |
|--------|--------|--------------------------------------------------------------------------------|

*Cash      Flows from Financing Activities. *

|   | · | an                increase of $99.0 million in borrowings, net of repayments. Fiscal                2004                net borrowings were reduced by significant repayments, including                the $54.0                million redemption of the remaining outstanding 12% senior notes                and the                $28.3 million repayment of one FIN 46 mortgage                loan; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $10.4 million increase in investor contributions to our financial                fund                management entities; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $5.2                million of additional proceeds from the exercise of employee stock                options. |
|--------|--------|----------------------------------------------------------------------------------------------------------------|

|   | · | $5.2                million of cash used to repurchase 283,080 of our shares as part                of our                Board-approved stock repurchase                program; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a                $1.4 million increase in distributions paid to minority holders;                and |
|--------|--------|------------------------------------------------------------------------------------------------------|

|   | · | a                $914,000 increase in cash dividends paid to our                shareholders. |
|--------|--------|-----------------------------------------------------------------------------------------------|

*Cash      Flows from Discontinued Operations.*

----

**Capital      Requirements**

**Dividends**

**Contractual      Obligations and Other Commercial Commitments **

|                                                            |   |            |    | **Payments                Due By Period**             |   |
|-----------------------------------------------------------------|--------|-----------------|---------|-------------------------------------------------------|--------|
| **Contractual                obligations:**                     |   |  **Total** |    | **Less                than****1                Year** |   | **1                - 3****Years** |   | **4                - 5****Years** |   | **After                5****Years** |   |
| Long-term                debt (1)                               |   | $               | 16,383  |                                                  | $      | 816 |   | $ | 1,731 |   | $ | 13,154 |   | $ | 682 |   |
| Secured                credit facilities (1)                (2) |   |            | 86,400  |                                                  |   | 86,400 |   |   | − |   |   | - |   |   | - |   |
| Capital                lease obligations (1)                    |   |            | 158     |                                                  |   | 38 |   |   | 84 |   |   | 36 |   |   | − |   |
| Operating                lease obligations                      |   |            | 6,633   |                                                  |   | 1,835 |   |   | 2,188 |   |   | 695 |   |   | 1,915 |   |
| Purchase                obligations                        |   |            | -       |                                                  |   | - |   |   | - |   |   | - |   |   | - |   |
| Other                long-term liabilities                      |   |            | 725     |                                                  |   | 281 |   |   | 444 |   |   | - |   |   | - |   |
| Total                contractual obligations               |   | $               | 110,299 |                                                  | $      | 89,370 |   | $ | 4,447 |   | $ | 13,885 |   | $ | 2,597 |   |

----

| (1)   | Not                  included in the table above are estimated interest payments calculated                  at                  rates in effect at September 30, 2006; Less than 1 year: $5.5 million;                  1-3                  years: $2.0 million; 4-5 years: $1.8 million; and after 5 years:                  $72,000. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   | Excludes                  $69.9 million related to credit facilities that will be transferred                  upon                  the execution of the CDO transactions and will not have to be repaid                  by                  us. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                              |   |            |    | **Amount                of Commitment Expiration Per Period** |   |
|---------------------------------------------------|--------|-----------------|---------|---------------------------------------------------------------|--------|
| **Other                commercial commitments:**  |   |  **Total** |    | **Less                than****1                Year**         |   | **1                - 3****Years** |   | **4                - 5****Years** |   | **After                5****Years** |   |
| Guarantees                                        |   | $               | 33,676  |                                                          | $      | 33,676 |   | $ | − |   | $ | - |   | $ | - |   |
| Standby                replacement commitments    |   |            | 1,130   |                                                          |   | 1,130 |   |   | − |   |   | - |   |   | - |   |
| Other                commercial commitments       |   |            | 395,682 |                                                          |   | 63,617 |   |   | 64,494 |   |   | 6,653 |   |   | 260,918 |   |
| Total                commercial commitments  |   | $               | 430,488 |                                                          | $      | 98,423 |   | $ | 64,494 |   | $ | 6,653 |   | $ | 260,918 |   |

----

----

**Critical      Accounting Policies **

**Loans      Held for Investment**

----

**Revenue      Recognition**

***Resource      Capital Corp.***

|   | · | a                monthly base management fee equal to 1/12th of the amount of RCC’s equity                multiplied by 1.50%. Under the Management Agreement, ‘‘equity’’ is equal                to the net proceeds from any issuance of shares of common stock less                other                offering related costs plus or minus our retained earnings (excluding                non-cash equity compensation incurred in current or prior periods)                less                any amounts RCC paid for common stock repurchases. The calculation                may be                adjusted for one-time events due to changes in generally accepted                accounting principles, or GAAP, as well as other non-cash charges,                upon                approval of the independent directors of RCC; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | incentive                compensation based on the products of (i) 25% of the dollar amount                by                which, (A) RCC’s net income per common share (before non-cash equity                compensation expense and incentive compensation) for a quarter (based                on                the weighted average number of shares outstanding) exceeds, (B) an                amount                equal to (1) the weighted average share price of shares of common                stock in                the offerings of RCC, multiplied by (2) the greater of (a) 2.00%                or (b)                0.50% plus one-fourth of the ten year treasury rate (as defined in                the                Management Agreement for such quarter), multiplied by (ii) the weighted                average number of common shares outstanding for the quarter. The                calculation may be adjusted for one time events due to changes in                GAAP as                well as other non-cash charges upon approval of the independent directors                of RCC; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | out-of-pocket                expenses and certain other costs incurred by us associated with RCC                and                its operations. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

*** ***

|   | · | unsatisfactory                performance; and/or |
|--------|--------|---------------------------------------------------|

|   | · | unfair                compensation payable to the Company and fair compensation cannot                be agreed                upon between two-thirds of the independent directors of RCC and                us. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Financial      Fund Management***

*Loan      Interest Income Recognition*

*Stock-Based      Compensation*

*Investments      in Unconsolidated Entities*

*Investment      Securities Available-for-Sale *

***Real      Estate***

*Investments      in Unconsolidated Entities*

----

*Fee      Income*

*Loan      Interest Income Recognition*

***Commercial      Finance***

*Finance      Revenues*

*Notes      Receivable.*

----

*Direct      Financing Leases*

*Operating      Leases.*

*Acquisition      and Fund Management Fees*

*Investments      in Unconsolidated Entities*

*Other      Revenues*

----

**Recently      Issued Financial Accounting Standards**

*,*

----

----

**ITEM      7A.**
**QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**General**

**Financial      Fund Management**

**Real      Estate**

*Portfolio      Loans and Related Senior Liens.*

|   | · | the                loans are subject to forbearance or other agreements that require                all of                the operating cash flow from the properties underlying the loans,                after                debt service on senior lien interests, to be paid to us and thus                are not                currently being paid based on the stated interest rates of the loans; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                senior lien interests ahead of our interests are at fixed rates and                are                thus not subject to interest rate fluctuation that would affect payments                to us; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | each                loan has significant accrued and unpaid interest and other charges                outstanding to which cash flow from the underlying property would                be                applied even if cash flow were to exceed the interest due, as originally                underwritten. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*FIN      46 Loans.*

**Commercial      Finance**

----

**ITEM      8. **
**FINANCIAL      STATEMENTS AND SUPPLEMENTARY DATA**

**[THE      REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]**

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**RESOURCE      AMERICA, INC.**

**/s/      GRANT THORNTON LLP**

----

**RESOURCE      AMERICA, INC.**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                          |   | **September                30,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                                                          |   | **2006**                         |    | **2005** |   |
| **ASSETS**                                                                                                                                                    |   |                             |    |   |   |
|                    Cash                                                                                                                        |   | $                                | 37,622  |   | $ | 30,353 |   |
| Restricted                cash                                                                                                                                |   |                             | 8,103   |   |   | 5,000 |   |
| Accounts                receivable                                                                                                                            |   |                             | 1,847   |   |   | 10,677 |   |
| Receivables                from managed entities                                                                                                              |   |                             | 8,795   |   |   | 4,280 |   |
| Investments                in commercial finance                                                                                                              |   |                             | 108,850 |   |   | 41,394 |   |
| Assets                held for sale                                                                                                                           |   |                             | 1,312   |   |   | 107,520 |   |
| Loans                held for investment                                                                                                                      |   |                             | 69,314  |   |   | 97,752 |   |
| Investments                in real estate                                                                                                                     |   |                             | 50,104  |   |   | 46,049 |   |
| Investment                securities available-for-sale                                                                                                       |   |                             | 64,857  |   |   | 38,353 |   |
| Investments                in unconsolidated entities                                                                                                         |   |                             | 26,626  |   |   | 24,564 |   |
| Property                and equipment, net                                                                                                                    |   |                             | 9,525   |   |   | 30,521 |   |
| Deferred                income taxes                                                                                                                          |   |                             | 6,408   |   |   | 7,086 |   |
| Other                assets                                                                                                                                   |   |                             | 23,390  |   |   | 15,486 |   |
| Total                assets                                                                                                                                   |   | $                                | 416,753 |   | $ | 459,035 |   |
|                                                                                                                                                          |   |                             |    |   |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**                                                                                                 |   |                             |    |   |   |   |   |
| Accounts                payable                                                                                                                          |   | $                                | 12,448  |   | $ | 7,794 |   |
| Accrued                expenses and other liabilities                                                                                                         |   |                             | 14,341  |   |   | 16,835 |   |
| Payables                to managed entities                                                                                                                   |   |                             | 1,579   |   |   | 591 |   |
| Liabilities                associated with assets held for sale                                                                                          |   |                             | 1,145   |   |   | 74,438 |   |
| Borrowings                                                                                                                                                    |   |                             | 172,238 |   |   | 147,302 |   |
| Deferred                revenue                                                                                                                               |   |                             | 1,592   |   |   | 1,239 |   |
| Deferred                income tax liabilities                                                                                                           |   |                             | 10,746  |   |   | 7,086 |   |
| Minority                interests                                                                                                                        |   |                             | 9,602   |   |   | 16,614 |   |
| Total                liabilities                                                                                                                              |   |                             | 223,691 |   |   | 271,899 |   |
| Commitments                and contingencies                                                                                                             |   |                             | − |   |   | − |   |
|                                                                                                                                                          |   |                             |    |   |   |   |   |
| Stockholders’                equity:                                                                                                                    |   |                             |    |   |   |   |   |
| Preferred                stock, $1.00 par value, 1,000,000 shares authorized; none                outstanding                                                 |   |                             | -       |   |   | - |   |
| Common                stock, $.01 par value, 49,000,000 shares authorized;                26,401,708and                26,371,780 shares issued, respectively |   |                             | 264     |   |   | 264 |   |
| Additional                paid-in capital                                                                                                                |   |                             | 259,882 |   |   | 258,019 |   |
| Retained                earnings                                                                                                                         |   |                             | 25,464  |   |   | 9,845 |   |
| Treasury                stock, at cost; 9,110,290 and 8,312,760 shares, respectively                                                                     |   |                             | (96,960 | ) |   | (82,556 | ) |
| ESOP                loan receivable                                                                                                                      |   |                             | (465    | ) |   | (488 | ) |
| Accumulated                other comprehensive income                                                                                                    |   |                             | 4,877   |   |   | 2,052 |   |
| Total                stockholders’ equity                                                                                                               |   |                             | 193,062 |   |   | 187,136 |   |
|                                                                                                                                                          |   | $                                | 416,753 |   | $ | 459,035 |   |

----

**RESOURCE      AMERICA, INC.**

**CONSOLIDATED      STATEMENTS OF INCOME**

|                                                                                                                                  |   | **Years                Ended September 30,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                                                                                  |   | **2006**                                     |    | **2005** |   | **2004** |   |
| **REVENUES**                                                                                                                          |   |                                         |    |   |   |   |   |
| Financial                fund management                                                                                              |   | $                                            | 30,834  |   | $ | 15,944 |   | $ | 7,585 |   |
| Real                estate                                                                                                            |   |                                         | 23,676  |   |   | 17,791 |   |   | 10,519 |   |
| Commercial                finance                                                                                                     |   |                                         | 23,840  |   |   | 13,381 |   |   | 7,135 |   |
| Resource                Europe                                                                                                        |   |                                         | 474     |   |   | − |   |   | − |   |
|                                                                                                                                  |   |                                         | 78,824  |   |   | 47,116 |   |   | 25,239 |   |
| **COSTS                AND EXPENSES**                                                                                                 |   |                                         |    |   |   |   |   |   |   |   |
| Financial                fund management                                                                                              |   |                                         | 11,104  |   |   | 9,110 |   |   | 2,370 |   |
| Real                estate                                                                                                            |   |                                         | 12,122  |   |   | 9,903 |   |   | 6,945 |   |
| Commercial                finance                                                                                                     |   |                                         | 14,443  |   |   | 8,884 |   |   | 7,763 |   |
| Resource                Europe.                                                                                                       |   |                                         | 995     |   |   | − |   |   | − |   |
| General                and administrative                                                                                             |   |                                         | 9,838   |   |   | 8,367 |   |   | 9,427 |   |
| Depreciation                and amortization                                                                                          |   |                                         | 3,064   |   |   | 2,209 |   |   | 1,188 |   |
|                                                                                                                                  |   |                                         | 51,566  |   |   | 38,473 |   |   | 27,693 |   |
| **OPERATING                INCOME (LOSS)**                                                                                       |   |                                         | 27,258  |   |   | 8,643 |   |   | (2,454 | ) |
| **OTHER                INCOME (EXPENSE**)                                                                                             |   |                                         |    |   |   |   |   |   |   |   |
| Interest                expense                                                                                                       |   |                                         | (10,119 | ) |   | (2,811 | ) |   | (3,974 | ) |
| Minority                interest                                                                                                      |   |                                         | (1,775  | ) |   | (1,403 | ) |   | − |   |
| Other                income, net                                                                                                      |   |                                         | 5,154   |   |   | 4,550 |   |   | 9,165 |   |
|                                                                                                                                  |   |                                         | (6,740  | ) |   | 336 |   |   | 5,191 |   |
| Income                from continuing operations before taxesand                cumulative effect of a change in accounting principle |   |                                         | 20,518  |   |   | 8,979 |   |   | 2,737 |   |
| Provision                for income taxes                                                                                        |   |                                         | 3,236   |   |   | 3,591 |   |   | 1,127 |   |
| Income                from continuing operations before cumulative                effect of a change in accounting principle          |   |                                         | 17,282  |   |   | 5,388 |   |   | 1,610 |   |
| Income                from discontinued operations, net of tax                                                                   |   |                                         | 1,231   |   |   | 11,070 |   |   | 16,799 |   |
| Cumulative                effect of a change in accounting principle, net of tax                                                 |   |                                         | 1,357   |   |   | − |   |   | - |   |
| **NET                INCOME**                                                                                                    |   | $                                            | 19,870  |   | $ | 16,458 |   | $ | 18,409 |   |
| **Basic                earnings per common share:**                                                                                   |   |                                         |    |   |   |   |   |   |   |   |
| Continuing                operations                                                                                             |   | $                                            | 0.98    |   | $ | 0.30 |   | $ | 0.09 |   |
| Discontinued                operations                                                                                           |   |                                         | 0.07    |   |   | 0.63 |   |   | 0.97 |   |
| Cumulative                effect of accounting change                                                                            |   |                                         | 0.08    |   |   | − |   |   | − |   |
| Net                income                                                                                                        |   | $                                            | 1.13    |   | $ | 0.93 |   | $ | 1.06 |   |
| Weighted                average shares outstanding                                                                               |   |                                         | 17,627  |   |   | 17,696 |   |   | 17,417 |   |
| **Diluted                earnings per common share:**                                                                                 |   |                                         |    |   |   |   |   |   |   |   |
| Continuing                operations                                                                                             |   | $                                            | 0.90    |   | $ | 0.28 |   | $ | 0.09 |   |
| Discontinued                operations                                                                                           |   |                                         | 0.07    |   |   | 0.58 |   |   | 0.92 |   |
| Cumulative                effect of accounting change                                                                                 |   |                                         | 0.07    |   |   | − |   |   | − |   |
| Net                income                                                                                                             |   | $                                            | 1.04    |   | $ | 0.86 |   | $ | 1.01 |   |
| Weighted                average shares outstanding                                                                                    |   |                                         | 19,121  |   |   | 19,204 |   |   | 18,309 |   |
|                                                                                                                                  |   |                                         |    |   |   |   |   |   |   |   |
| **Dividends                declared per common share**                                                                           |   | $                                            | 0.24    |   | $ | 0.20 |   | $ | 0.17 |   |

----

**RESOURCE      AMERICA, INC.**

**CONSOLIDATED      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE      INCOME**

**YEARS      ENDED SEPTEMBER 30, 2006, 2005 AND 2004**

|                                                                                                                           |   |       |   |           |   |         |   |         |    |           |   | **Accumulated**   |   |                    |   |              |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|----------------|--------|--------------|--------|--------------|---------|----------------|--------|-------------------|--------|-------------------------|--------|-------------------|--------|
|                                                                                                                           |   |       |   | **Additional** |   |         |   |         |    | **ESOP**       |   | **Other**         |   | **Total**               |   |              |   |
|                                                                                                                           |   | **Common** |   | **Paid-In**    |   | **Retained** |   | **Treasury** |    | **Loan**       |   | **Comprehensive** |   | **Stockholders’** |   | **Comprehensive** |   |
|                                                                                                                           |   | **Stock**  |   | **Capital**    |   | **Earnings** |   | **Stock**    |    | **Receivable** |   | **Income**        |   | **Equity**              |   | **Income**        |   |
| Balance,                September 30, 2003                                                                                     |   | $          | 255    |           | $      | 227,211      |   | $            | 74,374  |           | $      | (78,860           | )      | $                       | (1,137 | )                 | $      | 5,611 |   | $ | 227,454 |   |   |   |   |
| Net                income                                                                                                      |   |       |   |           |   |         |   |         | 18,409  |           |   |              |   |                    |   |              |   |   |   |   | 18,409 |   | $ | 18,409 |   |
| Treasury                shares issued                                                                                          |   |       |   |           |   | (440         | )      |         |    |           |   | 1,193             |   |                    |   |              |   |   |   |   | 753 |   |   |   |   |
| Gain                on sale of Atlas America, Inc.                   shares                                |   |       |   |           |   | 20,360       |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 20,360 |   |   |   |   |
| Issuance                of common stock                                                                                        |   |       |   |           |   | 613          |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 613 |   |   |   |   |
| Tax                benefit from employee stock                    options                                       |   |       |   |           |   | 121          |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 121 |   |   |   |   |
| Other                comprehensive loss                                                                                   |   |       |   |           |   |         |   |         |    |           |   |              |   |                    |   |              |   | (7,186 | ) |   | (7,186 | ) |   | (7,186 | ) |
| Cash                dividends                                                                                                  |   |       |   |           |   |         |   |         | (2,619  | )              |   |              |   |                    |   |              |   |   |   |   | (2,619 | ) |   |   |   |
| Repayment                of ESOP loan                                                                                          |   |       |   |           |   |         |   |         |    |           |   |              |   |                    | 10     |              |   |   |   |   | 10 |   |   |   |   |
| Balance,                September 30, 2004                                                                                     |   |       | 255    |           |   | 247,865      |   |         | 90,164  |           |   | (77,667           | )      |                    | (1,127 | )                 |   | (1,575 | ) |   | 257,915 |   | $ | 11,223 |   |
| Net                income                                                                                                      |   |       |   |           |   |         |   |         | 16,458  |           |   |              |   |                    |   |              |   |   |   |   | 16,458 |   | $ | 16,458 |   |
| Treasury                shares issued                                                                                          |   |       |   |           |   | 144          |   |         |    |           |   | 290               |   |                    |   |              |   |   |   |   | 434 |   |   |   |   |
| Issuance                of common shares                                                                                       |   |       | 9      |           |   | 7,493        |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 7,502 |   |   |   |   |
| Tax                benefit from employee stock                    options                                  |   |       |   |           |   | 2,517        |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 2,517 |   |   |   |   |
| Purchase                of treasury shares                                                                                |   |       |   |           |   |         |   |         |    |           |   | (5,179            | )      |                    |   |              |   |   |   |   | (5,179 | ) |   |   |   |
| Other                comprehensive income                                                                                 |   |       |   |           |   |         |   |         |    |           |   |              |   |                    |   |              |   | 1,762 |   |   | 1,762 |   |   | 1,762 |   |
| Cash                dividends                                                                                                  |   |       |   |           |   |         |   |         | (3,533  | )              |   |              |   |                    |   |              |   |   |   |   | (3,533 | ) |   |   |   |
| Distribution                of shares of                     Atlas America,                Inc.  |   |       |   |           |   |         |   |         | (93,244 | )              |   |              |   |                    |   |              |   | 1,865 |   |   | (91,379 | ) |   |   |   |
| Repayment                of ESOP loan                                                                                          |   |       |   |           |   |         |   |         |    |           |   |              |   |                    | 639    |              |   |   |   |   | 639 |   |   |   |   |
| Balance,                September 30, 2005                                                                                     |   |       | 264    |           |   | 258,019      |   |         | 9,845   |           |   | (82,556           | )      |                    | (488   | )                 |   | 2,052 |   |   | 187,136 |   | $ | 18,220 |   |
| Net                income                                                                                                      |   |       |   |           |   |         |   |         | 19,870  |           |   |              |   |                    |   |              |   |   |   |   | 19,870 |   | $ | 19,870 |   |
| Treasury                shares issued                                                                                          |   |       |   |           |   | 297          |   |         |    |           |   | 238               |   |                    |   |              |   |   |   |   | 535 |   |   |   |   |
| Stock-based                compensation                                                                                        |   |       |   |           |   | 1,137        |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 1,137 |   |   |   |   |
| Issuance                of restricted common                   stock                                       |   |       |   |           |   | 305          |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 305 |   |   |   |   |
| Issuance                of common shares                                                                                  |   |       |   |           |   | 133          |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 133 |   |   |   |   |
| Tax                benefit from employee stock                    options                                  |   |       |   |           |   | 231          |   |         |    |           |   |              |   |                    |   |              |   |   |   |   | 231 |   |   |   |   |
| Purchase                of treasury shares                                                                                |   |       |   |           |   |         |   |         |    |           |   | (14,642           | )      |                    |   |              |   |   |   |   | (14,642 | ) |   |   |   |
| Minority                interest created upon the conversion                of notes                                           |   |       |   |           |   | (240         | )      |         |    |           |   |              |   |                    |   |              |   |   |   |   | (240 | ) |   |   |   |
| Other                comprehensive income                                                                                 |   |       |   |           |   |         |   |         |    |           |   |              |   |                    |   |              |   | 2,825 |   |   | 2,825 |   |   | 2,825 |   |
| Cash                dividends                                                                                             |   |       |   |           |   |         |   |         | (4,251  | )              |   |              |   |                    |   |              |   |   |   |   | (4,251 | ) |   |   |   |
| Repayment                of ESOP loan                                                                                          |   |       |   |           |   |         |   |         |    |           |   |              |   |                    | 23     |              |   |   |   |   | 23 |   |   |   |   |
| Balance,                September 30, 2006                                                                                     |   | $          | 264    |           | $      | 259,882      |   | $            | 25,464  |           | $      | (96,960           | )      | $                       | (465   | )                 | $      | 4,877 |   | $ | 193,062 |   | $ | 22,695 |   |

----

**RESOURCE      AMERICA, INC.**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                    |   | **Years                Ended September 30,** |    |
|-------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                                                                    |   | **2006**                                     |    | **2005****(1)** |   | **2004****(1)** |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                                                |   |                                         |    |   |   |   |   |
| Net                income                                                                                               |   | $                                            | 19,870  |   | $ | 16,458 |   | $ | 18,409 |   |
| Adjustments                to reconcile net income to net cash used in operating                activities:             |   |                                         |    |   |   |   |   |   |   |   |
| Cumulative                effect of a change in accounting principle, net of tax                                        |   |                                         | (1,357  | ) |   | − |   |   | − |   |
| Depreciation                and amortization                                                                            |   |                                         | 3,180   |   |   | 2,247 |   |   | 1,696 |   |
| Equity                in earnings of unconsolidated entities                                                       |   |                                         | (8,747  | ) |   | (7,807 | ) |   | (8,679 | ) |
| Minority                interest earnings                                                                          |   |                                         | 1,775   |   |   | 1,403 |   |   | − |   |
| Distributions                from unconsolidated entities                                                          |   |                                         | 12,570  |   |   | 13,899 |   |   | 7,041 |   |
| Income                from discontinued operations                                                                 |   |                                         | (1,231  | ) |   | (11,070 | ) |   | (16,799 | ) |
| Gain                on sale of investment securities available-for-sale                                            |   |                                         | (668    | ) |   | (1,544 | ) |   | (9,453 | ) |
| (Gain)                loss on asset dispositions                                                                   |   |                                         | (7,715  | ) |   | (7,781 | ) |   | 3,802 |   |
| Deferred                income tax (benefit) provision                                                             |   |                                         | (3,120  | ) |   | 3,591 |   |   | 1,127 |   |
| Non-cash                compensation on long-term incentive plans                                                  |   |                                         | 1,739   |   |   | 1,251 |   |   | 753 |   |
| Non-cash                compensation issued                                                                        |   |                                         | 2,396   |   |   | − |   |   | − |   |
| Non-cash                compensation received                                                                      |   |                                         | (1,844  | ) |   | (1,839 | ) |   | − |   |
| Tax                benefit from exercise of stock options                                                          |   |                                         | − |   |   | 2,517 |   |   | 121 |   |
| Increase                in net assets of FIN 46 entities                                                           |   |                                         | − |   |   | (2,922 | ) |   | (717 | ) |
| Increase                in commercial finance investments                                                          |   |                                         | (68,376 | ) |   | (17,886 | ) |   | (16,720 | ) |
| Changes                in operating assets and liabilities                                                         |   |                                         | 12,474  |   |   | (9,471 | ) |   | 6,894 |   |
| **Net                cash used in operating activities of continuing                operations**                   |   |                                         | (39,054 | ) |   | (18,954 | ) |   | (12,525 | ) |
|                                                                                                                    |   |                                         |    |   |   |   |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES:**                                                                |   |                                         |    |   |   |   |   |   |   |   |
| Capital                expenditures                                                                                |   |                                         | (4,141  | ) |   | (2,414 | ) |   | (1,604 | ) |
| Payments                received on real estate loans and real estate                                              |   |                                         | 42,058  |   |   | 7,417 |   |   | 26,441 |   |
| Investments                in real estate                                                                          |   |                                         | (33,004 | ) |   | (16,753 | ) |   | (6,619 | ) |
| Return                of capital from investments in unconsolidated entities                                       |   |                                         | − |   |   | 9,390 |   |   | − |   |
| Purchases                of investment securities available-for-sale                                               |   |                                         | (34,820 | ) |   | (26,800 | ) |   | (10,372 | ) |
| Proceeds                from sales of investment securities available-for-sale                                     |   |                                         | 7,205   |   |   | 5,038 |   |   | 20,170 |   |
| Increase                in restricted cash                                                                         |   |                                         | (3,103  | ) |   | (5,000 | ) |   | − |   |
| Dividends                received from Atlas America                                                               |   |                                         | − |   |   | − |   |   | 52,133 |   |
| (Increase)                decrease in other assets                                                                 |   |                                         | (13,821 | ) |   | 321 |   |   | 12,066 |   |
| **Net                cash (used in) provided by investing activities of****continuing                operations**  |   |                                         | (39,626 | ) |   | (28,801 | ) |   | 92,215 |   |

----

**RESOURCE      AMERICA, INC.**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS − (Continued)**

|                                                                                                                    |   | **Years                Ended September 30,** |     |
|-------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|----------|
|                                                                                                                    |   | **2006**                                     |     | **2005****(1)** |   | **2004****(1)** |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES:**                                                                |   |                                         |     |   |   |   |   |
| Increase                in borrowings                                                                              |   | $                                            | 570,448  |   | $ | 267,643 |   | $ | 142,857 |   |
| Increase                in principal payments on borrowings                                                        |   |                                         | (501,088 | ) |   | (258,865 | ) |   | (233,097 | ) |
| Investor                contributions to financial fund management investments                                     |   |                                         | −  |   |   | 10,410 |   |   | − |   |
| Dividends                paid                                                                                      |   |                                         | (4,251   | ) |   | (3,533 | ) |   | (2,619 | ) |
| Proceeds                from issuance of stock                                                                     |   |                                         | 133      |   |   | 5,819 |   |   | 613 |   |
| Purchase                of treasury stock                                                                          |   |                                         | (14,642  | ) |   | (5,179 | ) |   | − |   |
| Tax                benefit from exercise of stock options                                                          |   |                                         | 231      |   |   | − |   |   | − |   |
| Other                                                                                                         |   |                                         | −  |   |   | (1,660 | ) |   | (197 | ) |
| **Net                cash provided by (used in) financing activities of****continuing                operations**  |   |                                         | 50,831   |   |   | 14,635 |   |   | (92,443 | ) |
|                                                                                                                    |   |                                         |     |   |   |   |   |   |   |   |
| **CASH                FLOWS FROM DISCONTINUED OPERATIONS:**                                                             |   |                                         |     |   |   |   |   |   |   |   |
| Operating                activities                                                                                |   |                                         | 1,771    |   |   | 23,566 |   |   | 35,214 |   |
| Investing                activities                                                                                |   |                                         | 37,172   |   |   | − |   |   | − |   |
| **Net                cash provided by discontinued operations**                                                    |   |                                         | 38,943   |   |   | 23,566 |   |   | 35,214 |   |
| **Net                cash retained by entities previously consolidated**                                           |   |                                         | (3,825   | ) |   | − |   |   | − |   |
| **Increase                (decrease) in cash**                                                                     |   |                                         | 7,269    |   |   | (9,554 | ) |   | 22,461 |   |
| **Cash                at beginning of period**                                                                     |   |                                         | 30,353   |   |   | 39,907 |   |   | 17,446 |   |
| **Cash                at end of period**                                                                           |   | $                                            | 37,622   |   | $ | 30,353 |   | $ | 39,907 |   |

----

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER      30, 2006**

**NOTE      1 - NATURE OF OPERATIONS**

*Atlas      America Spin-off*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**SEPTEMBER      30, 2006**

**NOTE      1 - NATURE OF OPERATIONS − (Continued)**

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Reclassifications**

The      consolidated balance sheet at September 30, 2005 has been reclassified to      conform with this new presentation.

**Principles      of Consolidation**

**Use      of Estimates**

**Impairment      of Long-Lived Assets**

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES −(Continued)**

**Supplemental      Cash Flow Information**

|                                                                                                     |   | **Years                Ended September 30,** |    |
|----------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                                                     |   | **2006**                                     |    | **2005** |   | **2004** |   |
| **Cash                paid during the years for:**                                                       |   |                                         |    |   |   |   |   |
| Interest                                                                                            |   | $                                            | 12,294  |   | $ | 2,952 |   | $ | 4,434 |   |
| Income                taxes paid                                                                    |   |                                         | 6,106   |   |   | 10,836 |   |   | 92 |   |
|                                                                                                     |   |                                         |    |   |   |   |   |   |   |   |
| **Non-cash                activities include the following:**                                            |   |                                         |    |   |   |   |   |   |   |   |
| Transfer                of loans held for investment (see Note 7):                                       |   |                                         |    |   |   |   |   |   |   |   |
| Reduction                of loans held for investment                                                    |   |                                         | 541,060 |   |   | − |   |   | − |   |
| Termination                of associated warehouse credit facilities                                     |   |                                         | 538,557 |   |   | − |   |   | − |   |
| Distribution                of shares of Atlas America to shareholders                              |   |                                         | − |   |   | 91,379 |   |   | − |   |
| Real                estate received in exchange for notes upon foreclosure on                loans  |   |                                         | − |   |   | 11,011 |   |   | − |   |
| Receipt                of notes upon resolution of real estate investments                          |   |                                         | 5,135   |   |   | 2,240 |   |   | − |   |
| Distribution                of RCC stock-based awards (see Note 9)                                  |   |                                         | 5,621   |   |   | − |   |   | − |   |
| Conversion                of notes (see Note 4):                                                         |   |                                         |    |   |   |   |   |   |   |   |
| Increase                in minority interest                                                             |   |                                         | 240     |   |   | − |   |   | − |   |
| Net                reduction of equity                                                                   |   |                                         | 205     |   |   | − |   |   | − |   |

**Recently      Issued Financial Accounting Standards**

*,*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES −(Continued)**

**Recently      Issued Financial Accounting Standards − (Continued)**

On      July      13, 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes -      An Interpretation of SFAS 109.” FIN 48 clarifies the accounting for uncertainty      in income taxes recognized in an enterprise's financial statements in accordance      with SFAS 109, “Accounting for Income Taxes.” FIN 48 also prescribes a      recognition threshold and measurement attribute for the financial statement      recognition and measurement of a tax position taken or expected to be taken      in a      tax return. The new accounting standard also provides guidance on derecognition,      classification, interest and penalties, accounting in interim periods,      disclosure, and transition. The provisions of FIN 48 are effective as of the      beginning of the first fiscal year beginning after December 15, 2006 with early      adoption permitted if no interim financial statements have been issued. The      Company will not elect for early adoption of FIN 48, thus the provisions of      FIN      48 will be implemented in the quarter ending December 31, 2007. The Company      is      currently determining the effect, if any, the adoption of FIN 48 will have      on      its financial statements.

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES −(Continued)**

**Stock-Based      Compensation**

*Employee      stock options*

|                                           |   | **Years                Ended September 30,** |   |
|------------------------------------------------|--------|----------------------------------------------|--------|
|                                           |   | **2006**                                     |   | **2005** |   | **2004** |   |
| Expected                life (years)      |   |                                         | 6.25   |   |   | 8.0 |   |   | 10.0 |   |
| Expected                stock volatility  |   |                                         | 27.75  | % |   | 28.0 | % |   | 23.0 | % |
| Risk-free                interest rate    |   |                                         | 4.0    | % |   | 4.3 | % |   | 4.1 | % |
| Dividends                                 |   |                                         | 1.2    | % |   | 1.1 | % |   | 0.7 | % |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES −(Continued)**

**Stock-Based      Compensation − **
***Employee      stock options −***
**      (Continued)**

|                                                                                                                     |   | **Years                Ended****September                30,** |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|
|                                                                                                                     |   | **2005**                                                       |   | **2004** |   |
| Net                income                                                                                                |   | $                                                              | 16,458 |   | $ | 18,409 |   |
| Stock-based                employee compensation determined under the fair value-based                method, net of tax |   |                                                           | (3,244 | ) |   | (2,328 | ) |
| Pro                forma net income                                                                                 |   | $                                                              | 13,214 |   | $ | 16,081 |   |
|                                                                                                                     |   |                                                           |   |   |   |   |   |
| Basic                earnings per share:                                                                                 |   |                                                           |   |   |   |   |   |
| As                reported                                                                                          |   | $                                                              | 0.93   |   | $ | 1.06 |   |
| Pro                forma                                                                                            |   | $                                                              | 0.75   |   | $ | 0.92 |   |
|                                                                                                                     |   |                                                           |   |   |   |   |   |
| Diluted                earnings per share:                                                                               |   |                                                           |   |   |   |   |   |
| As                reported                                                                                          |   | $                                                              | 0.86   |   | $ | 1.01 |   |
| Pro                forma                                                                                            |   | $                                                              | 0.69   |   | $ | 0.88 |   |

*Restricted      common stock*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES −(Continued)**

**Concentration      of Credit Risk**

**Investments      in Marketable Securities**

|                                    |   | **Cost                or Amortized Cost** |   | **Unrealized                Gains** |   | **Unrealized                Losses** |   | **Estimated                Fair Value** |    |
|-----------------------------------------|--------|-------------------------------------------|--------|-------------------------------------|--------|--------------------------------------|--------|-----------------------------------------|---------|
| September                30, 2006  |   | $                                         | 61,915 |                                | $      | 8,731                                |   | $                                       | (1,560  | ) | $ | 69,086 |   |
| September                30, 2005  |   | $                                         | 37,963 |                                | $      | 3,421                                |   | $                                       | − |   | $ | 41,384 |   |

|   |   | **Estimated****Fair                Value** |   | **Less                than****12                Months** |   | **Estimated****Fair                Value** |   | **More                than 12 Months** |   |
|--------|--------|--------------------------------------------|--------|----------------------------------------------------------|--------|--------------------------------------------|--------|----------------------------------------|--------|
|   |   | $                                          | 13,383 |                                                     | $      | (735                                       | )      | $                                      | 5,517  |   | $ | (825 | ) |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -      (Continued)**

**Fair      Value of Financial Instruments **

|                                     |   | **September                30, 2006** |    | **September                30, 2005**   |   |
|------------------------------------------|--------|---------------------------------------|---------|-----------------------------------------|--------|
|                                     |   | **Carrying                Amount**    |    | **Estimated                Fair Value** |   | **Carrying                Amount** |   | **Estimated                Fair Value** |   |
| **Assets**                               |   |                                  |    |                                    |   |   |   |   |   |
| Loans                held for investment |   | $                                     | 69,314  |                                    | $      | 69,532 |   | $ | 97,752 |   | $ | 97,752 |   |
| **Borrowings**** ****(1)**          |   |                                  |    |                                    |   |   |   |   |   |   |   |   |   |
| Secured                warehouse debt    |   | $                                     | 69,297  |                                    | $      | 69,297 |   | $ | 97,751 |   | $ | 97,751 |   |
| Real                estate debt          |   |                                  | 14,028  |                                    |   | 14,028 |   |   | 18,519 |   |   | 18,519 |   |
| Commercial                finance debt   |   |                                  | 86,400  |                                    |   | 86,400 |   |   | 30,942 |   |   | 30,942 |   |
| Other                debt                |   |                                  | 2,513   |                                    |   | 2,513 |   |   | 90 |   |   | 90 |   |
|                                     |   | $                                     | 172,238 |                                    | $      | 172,238 |   | $ | 147,302 |   | $ | 147,302 |   |

----

| (1) | The                carrying value of the Company’s floating rate debt approximates its fair                value because of the short-term maturity of these instruments and                the                variable interest rates in the debt agreements. The carrying value                of the                Company’s fixed rate debt approximates its fair value due to its recent                issuance. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Loans      Held for Investment**

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -      (Continued)**

**Loans      Held for Investment − (Continued)**

**Property      and Equipment**

**Revenue      Recognition**

***Resource      Capital Corp.***

|   | · | a                monthly base management fee equal to 1/12th of the amount of RCC’s equity                multiplied by 1.50%. Under the Management Agreement, ‘‘equity’’ is equal                to the net proceeds from any issuance of shares of common stock less                other                offering related costs plus or minus the Company’s retained earnings                (excluding non-cash equity compensation incurred in current or prior                periods) less any amounts RCC paid for common stock repurchases.                The                calculation may be adjusted for one-time events due to changes in                generally accepted accounting principles (“GAAP”) as well as other                non-cash charges, upon approval of the independent directors of RCC; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -      (Continued)**

**Revenue      Recognition −**
***Resource Capital Corp.***
* *
***−      (Continued)***

|   | · | incentive                compensation based on the products of (i) 25% of the dollar amount                by                which, (A) RCC’s net income per common share (before non-cash equity                compensation expense and incentive compensation) for a quarter (based                on                the weighted average number of shares outstanding) exceeds, (B) an                amount                equal to (1) the weighted average share price of shares of common                stock in                the offerings of RCC, multiplied by (2) the greater of (a) 2.00%                or (b)                0.50% plus one-fourth of the ten year treasury rate (as defined in                the                Management Agreement for such quarter), multiplied by (ii) the weighted                average number of common shares outstanding for the quarter. The                calculation may be adjusted for one time events due to changes in                GAAP as                well as other non-cash charges upon approval of the independent directors                of RCC; and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | out-of-pocket                expenses and certain other costs incurred by the Company associated                with                RCC and its operations. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

*** ***

|   | · | unsatisfactory                performance; and/or |
|--------|--------|---------------------------------------------------|

|   | · | unfair                compensation payable to the Company and fair compensation cannot                be agreed                upon between two-thirds of the independent directors of RCC and the                Company. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**RESOURCE        AMERICA, INC.**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER        30, 2006**

**NOTE        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -        (Continued)**

***Revenue        Recognition − Financial Fund Management***

*Loan      Interest Income Recognition*

*Stock-Based      Compensation*

*Investments      in Unconsolidated Entities*

*Investment      Securities Available-for-Sale *

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -      (Continued)**

***Revenue      Recognition − Real Estate***

*Investments        in Unconsolidated Entities*

*Fee      Income*

*Loan      Interest Income Recognition*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -      (Continued)**

***Revenue      Recognition − (Continued)***

***Commercial      Finance***

*Finance      Revenues*

*Notes      Receivable.*

*Direct      Financing Leases*

*Operating      Leases.*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -      (Continued)**

***Revenue      Recognition − Commercial Finance − (Continued)***

*Acquisition      and Fund Management Fees*

*Investments      in Unconsolidated Entities*

*Other      Revenues*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      3 - COMPREHENSIVE INCOME**

|                                                                                                                                                                                                                    |   | **Years                Ended September 30,**  |          |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|---------------|
|                                                                                                                                                                                                                    |   | **2006**                                           |          | **2005** |   | **2004** |   |
| Net                income                                                                                                                                                                                               |   | $                                                  | 19,870        |   | $ | 16,458 |   | $ | 18,409 |   |
| Other                comprehensive income (loss):                                                                                                                                                                       |   |                                               |          |   |   |   |   |   |   |   |
| Unrealized                gains on investment securities available-for-sale net                of tax of $2,003, $1,368                and                $827                                                |   |                                               | 3,225         |   |   | 2,001 |   |   | 1,606 |   |
|                    Less: reclassification for gains realized in net income, net                of tax of                         $255, $618 and $3,214 |   |                                               | (400          | ) |   | (927 | ) |   | (6,239 | ) |
|                                                                                                                                                                                                                    |   |                                               | 2,825         |   |   | 1,074 |   |   | (4,633 | ) |
| Unrealized                gains (losses) on hedging contracts, net of tax of $0,                $122 and ($1,384)                                                                                                       |   |                                               | −       |   |   | 227 |   |   | (2,571 | ) |
| Add:                reclassification for losses realized in net income,net                of tax of $0, $248 and $10                                                                                                    |   |                                               | −       |   |   | 461 |   |   | 18 |   |
|                                                                                                                                                                                                                    |   |                                               | −  |   |   | 688 |   |   | (2,553 | ) |
| Comprehensive                income                                                                                                                                                                                     |   | $                                                  | 22,695        |   | $ | 18,220 |   | $ | 11,223 |   |

**NOTE      4 - EARNINGS (LOSS) PER SHARE**

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      4 - EARNINGS (LOSS) PER SHARE − (Continued)**

|                                                                                           |   | **Years                Ended September 30,** |   |
|------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                           |   | **2006**                                     |   | **2005** |   | **2004** |   |
| **Earnings                − Basic**                                                      |   |                                         |   |   |   |   |   |
| Continuing                operations                                                      |   | $                                            | 17,282 |   | $ | 5,388 |   | $ | 1,610 |   |
| Discontinued                operations                                                    |   |                                         | 1,231  |   |   | 11,070 |   |   | 16,799 |   |
| Cumulative                effect of accounting change (1)                                 |   |                                         | 1,357  |   |   | − |   |   | - |   |
| Net                income                                                                 |   | $                                            | 19,870 |   | $ | 16,458 |   | $ | 18,409 |   |
|                                                                                           |   |                                         |   |   |   |   |   |   |   |   |
| **Earnings                − Diluted**                                                    |   |                                         |   |   |   |   |   |   |   |   |
| Continuing                operations                                                      |   | $                                            | 17,282 |   | $ | 5,388 |   | $ | 1,610 |   |
| Minority                interest from the assumed conversion of notes                (2)  |   |                                         | (35    | ) |   | (29 | ) |   | (4 | ) |
| Income                from continuing operations, as adjusted                             |   |                                         | 17,247 |   |   | 5,359 |   |   | 1,606 |   |
| Discontinued                operations                                                    |   |                                         | 1,231  |   |   | 11,070 |   |   | 16,799 |   |
| Cumulative                effect of accounting change (1)                                 |   |                                         | 1,357  |   |   | − |   |   | − |   |
| Net                income                                                                 |   | $                                            | 19,835 |   | $ | 16,429 |   | $ | 18,405 |   |
|                                                                                           |   |                                         |   |   |   |   |   |   |   |   |
| **Shares**** **(3)                                                                        |   |                                         |   |   |   |   |   |   |   |   |
| Basic                shares outstanding                                                   |   |                                         | 17,627 |   |   | 17,696 |   |   | 17,417 |   |
| Dilutive                effect of stock option and award plans                            |   |                                         | 1,494  |   |   | 1,508 |   |   | 892 |   |
| Dilutive                shares outstanding                                                |   |                                         | 19,121 |   |   | 19,204 |   |   | 18,309 |   |

----

| (1) | The                Company recorded a cumulative adjustment for the elimination of the                one-quarter delay in reporting its equity in earnings of the Trapeza                entities (see Note 10). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The                Company had outstanding convertible notes payable in the amount of                $11,500                to two executive officers of LEAF. These notes were converted (at                the                election of the executives) into 11.5% of LEAF’s common stock on February                1, 2006. The Diluted EPS computation reflects the assumed conversion                of                the notes as of the beginning of the periods presented through the                conversion date and the related minority interest expense, net of                tax, as                a reduction of income from continuing                operations. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | As                of September 30, 2006, there were 30,000 outstanding options that                were                anti-dilutive. As of September 30, 2005, all outstanding options                were                dilutive. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**NOTE      5 -RESTRICTED CASH**

**NOTE      6 - INVESTMENTS IN COMMERCIAL FINANCE**

|                                                                                                                    |   | **September                30,** |    |
|-------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                                    |   | **2006**                         |    | **2005** |   |
| Direct                financing leases, net                                                                        |   | $                                | 32,275  |   | $ | 25,869 |   |
| Notes                receivable                                                                                    |   |                             | 74,864  |   |   | 10,309 |   |
| Assets                subject to operating leases, net of accumulated depreciation                of $46 and $481  |   |                             | 1,711   |   |   | 5,216 |   |
| Investments                in commercial finance                                                              |   | $                                | 108,850 |   | $ | 41,394 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      6 - INVESTMENTS IN COMMERCIAL FINANCE − (Continued)**

|                                                                 |   | **September                30,** |   |
|----------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                 |   | **2006**                         |   | **2005** |   |
| Total                future minimum lease payments receivables  |   | $                                | 37,398 |   | $ | 30,391 |   |
| Initial                direct costs, net of amortization             |   |                             | 598    |   |   | 564 |   |
| Unguaranteed                residuals                                |   |                             | 362    |   |   | 503 |   |
| Unearned                income                                       |   |                             | (6,083 | ) |   | (5,589 | ) |
| Investments                in direct financing leases                |   | $                                | 32,275 |   | $ | 25,869 |   |

|       |   | **Direct                Financing****Leases** |   | **Notes****Receivable** |   | **Operating****Leases****(1)** |   |
|------------|--------|-----------------------------------------------|--------|-------------------------|--------|--------------------------------|--------|
| 2007       |   | $                                             | 11,098 |                    | $      | 26,195                         |   | $ | 565 |   |
| 2008       |   |                                          | 9,658  |                    |   | 17,047                         |   |   | 450 |   |
| 2009       |   |                                          | 7,828  |                    |   | 14,400                         |   |   | 294 |   |
| 2010       |   |                                          | 5,103  |                    |   | 8,595                          |   |   | 205 |   |
| 2011       |   |                                          | 2,866  |                    |   | 4,005                          |   |   | 118 |   |
| Thereafter |   |                                          | 845    |                    |   | 4,622                          |   |   | − |   |
|       |   | $                                             | 37,398 |                    | $      | 74,864                         |   | $ | 1,632 |   |

----

| (1) | Operating                lease amounts as shown are net of the residual value, if any, at                the end                of the lease term. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------|

**NOTE      7 − LOANS HELD FOR INVESTMENT**

|                                                             |   | **September                30,** |   |
|------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                             |   | **2006**                         |   | **2005** |   |
| Principal                                                   |   | $                                | 69,312 |   | $ | 97,477 |   |
| Unamortized                premium                               |   |                             | 18     |   |   | 275 |   |
| Unamortized                discount                              |   |                             | (16    | ) |   | − |   |
|     Loans                held for investment |   | $                                | 69,314 |   | $ | 97,752 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      7 − LOANS HELD FOR INVESTMENT − (Continued)**

**NOTE      8 - INVESTMENTS IN REAL ESTATE**

**Real      Estate Loans and Real Estate**

|                                                                             |   | **September                30,** |   |
|----------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                             |   | **2006**                         |   | **2005** |   |
| Real                estate loans:                                           |   |                             |   |   |   |
| Balance,                beginning of period                                 |   | $                                | 25,923 |   | $ | 24,066 |   |
| New                loans                                                    |   |                             | 5,109  |   |   | 2,240 |   |
| Additions                to existing loans                                  |   |                             | 2,310  |   |   | 1,399 |   |
| Collection                of principal                                      |   |                             | (5,068 | ) |   | (2,273 | ) |
| Other                                                                       |   |                             | 465    |   |   | 491 |   |
| Balance,                end of period                                       |   |                             | 28,739 |   |   | 25,923 |   |
| Real                estate:                                                      |   |                             |   |   |   |   |   |
| Ventures                                                                    |   |                             | 9,519  |   |   | 8,220 |   |
| Owned,                net of accumulated depreciation of $1,736 and $1,346  |   |                             | 12,616 |   |   | 12,676 |   |
| Total                real estate                                            |   |                             | 22,135 |   |   | 20,896 |   |
| Allowance                for possible losses                                |   |                             | (770   | ) |   | (770 | ) |
| Investments                in real estate                                   |   | $                                | 50,104 |   | $ | 46,049 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      8 - INVESTMENTS IN REAL ESTATE − (Continued)**

**Consolidation      of Variable Interest Entities − Real Estate**

|                                                                                                                   |   | **September                30,** |   |
|------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                                                   |   | **2006**                         |   | **2005** |   |
| **Assets:**                                                                                                            |   |                             |   |   |   |
| Cash                                                                                                                   |   | $                                | 85     |   | $ | 643 |   |
| Accounts                receivable                                                                                     |   |                             | 23     |   |   | 59 |   |
| Property                and equipment, net of accumulated depreciation of $404                and $1,345 (see Note 11) |   |                             | 3,496  |   |   | 27,196 |   |
| Other                assets                                                                                       |   |                             | 21     |   |   | 74 |   |
| Total                assets                                                                                            |   | $                                | 3,625  |   | $ | 27,972 |   |
|                                                                                                                   |   |                             |   |   |   |   |   |
| **Liabilities:**                                                                                                       |   |                             |   |   |   |   |   |
| Accounts                payable                                                                                   |   | $                                | 50     |   | $ | 570 |   |
| Accrued                expenses and other liabilities                                                             |   |                             | 59     |   |   | 438 |   |
| Borrowings                                                                                                        |   |                             | 1,536  |   |   | 18,519 |   |
| Total                liabilities                                                                                       |   | $                                | 1,645  |   | $ | 19,527 |   |

|                                                          |   | **Years                Ended September 30,** |   |
|---------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                          |   | **2006**                                     |   | **2005** |   | **2004** |   |
| **Continuing                operations − Real estate:** |   |                                         |   |   |   |   |   |
| Revenues                                                      |   | $                                            | 476    |   | $ | 4,153 |   | $ | 3,500 |   |
|                                                          |   |                                         |   |   |   |   |   |   |   |   |
| Costs                and expenses:                            |   |                                         |   |   |   |   |   |   |   |   |
| Operating                expenses                             |   |                                         | 144    |   |   | 3,501 |   |   | 2,374 |   |
| Depreciation                and amortization                  |   |                                         | 154    |   |   | 382 |   |   | 334 |   |
| Interest                                                      |   |                                         | 140    |   |   | 188 |   |   | 157 |   |
| Total                costs and expenses                       |   |                                         | 438    |   |   | 4,071 |   |   | 2,865 |   |
| Income                from continuing operations         |   | $                                            | 38     |   | $ | 82 |   | $ | 635 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      8 - INVESTMENTS IN REAL ESTATE − (Continued)**

**Consolidation      of Real Estate Entities Held for Sale**

|                                                                        |   | **September                30,** |    |
|-----------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                        |   | **2006**                         |    | **2005** |   |
| **Assets:**                                                                 |   |                             |    |   |   |
| Cash                                                                        |   | $                                | − |   | $ | 2,546 |   |
| Accounts                receivable                                          |   |                             | − |   |   | 569 |   |
| Property                and equipment, net (1)                         |   |                             | 1,293   |   |   | 103,237 |   |
| Other                assets                                                 |   |                             | 19      |   |   | 1,168 |   |
| Total                assets held for sale (1)                               |   | $                                | 1,312   |   | $ | 107,520 |   |
| **Liabilities:**                                                            |   |                             |    |   |   |   |   |
| Mortgage                loans (1)                                      |   | $                                | 1,130   |   | $ | 69,058 |   |
| Other                liabilities                                       |   |                             | 15      |   |   | 5,380 |   |
| Total                liabilities associated with assets held for sale  |   | $                                | 1,145   |   | $ | 74,438 |   |

----

|   | (1) | The                decrease at September 30, 2006 reflects the sale of one owned and                four FIN                46 properties and the resolution of the corresponding mortgage loans                that                had been held for sale at September 30,                2005. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                  |   | **Years                Ended September 30,** |    |
|-----------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                  |   | **2006**                                     |    | **2005** |   | **2004** |   |
| **Discontinued                operations:**                           |   |                                         |    |   |   |   |   |
| Revenues                                                              |   | $                                            | 14,125  |   | $ | 23,283 |   | $ | 21,770 |   |
| Costs                and expenses                                     |   |                                         | (11,451 | ) |   | (19,674 | ) |   | (20,521 | ) |
| Operating                income                                       |   |                                         | 2,674   |   |   | 3,609 |   |   | 1,249 |   |
| Writedown                of properties                                |   |                                         | − |   |   | (2,303 | ) |   | (7,337 | ) |
| (Loss)                gain on disposals                               |   |                                         | (883    | ) |   | (9,396 | ) |   | 749 |   |
| Income                tax (provision) benefit                         |   |                                         | (591    | ) |   | 2,875 |   |   | 1,981 |   |
| Income                (loss) from discontinued operations, net of tax |   | $                                            | 1,200   |   | $ | (5,215 | ) | $ | (3,358 | ) |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      9 − INVESTMENT SECURITIES AVAILABLE-FOR-SALE **

|                                                                                                                         |   | **September                30,** |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                                                         |   | **2006**                         |   | **2005** |   |
| Investment                in RCC, including unrealized gains                of $879 and $0                                   |   | $                                | 29,588 |   | $ | 15,998 |   |
| Investment                in TBBK, including unrealized gains of                $5,696 and $2,592                            |   |                             | 9,132  |   |   | 6,529 |   |
| Investment                in financial fund management entities, including unrealized                losses of $1,471 and $0 |   |                             | 26,137 |   |   | 15,826 |   |
| Total                investment securities available-for-sale                                                                |   | $                                | 64,857 |   | $ | 38,353 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      10 − INVESTMENTS IN UNCONSOLIDATED ENTITIES**

|                                                            |   | **September                30,** |   | **Range                of Combined** |   |
|-----------------------------------------------------------------|--------|----------------------------------|--------|--------------------------------------|--------|
|                                                            |   | **2006**                         |   | **2005**                             |   | **Partnership                Interests** |   |
| Trapeza                entities                            |   | $                                | 15,007 |                                 | $      | 10,457 |   |   | 13%                to 18% |   |
| Financial                fund management partnerships (1)  |   |                             | 5,772  |                                 |   | − |   |   | 10% |   |
| Real                Estate investment partnerships         |   |                             | 3,927  |                                 |   | 2,919 |   |   | 3.9%                to 23.0% |   |
| Commercial                finance investment partnerships  |   |                             | 1,353  |                                 |   | 822 |   |   | 1%                to 5% |   |
| TIC                property interests (2)                  |   |                             | 567    |                                 |   | 10,366 |   |   | N/A |   |
| Total                investments in unconsolidated entities     |   | $                                | 26,626 |                                 | $      | 24,564 |   |   |   |   |

----

| (1) | Due                to a change in the partnership agreements that gave the limited partners                the right to remove the Company as the general partner in fiscal                2006, the                Company no longer consolidates two of these affiliated partnerships                that                had been consolidated at September 30, 2005. These partnerships,                which                invest in regional banks, are included in financial fund management                partnerships at September 30, 2006 at a cost of $3.2 million. In                addition,                the Company has a $2.5 million investment in a hedge fund it                manages. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | As                of September 30, 2005, the Company had sponsored and managed two                TIC                property interests. During the year ended September 30, 2006, these                TIC                interests were sold to third-party investors and two new TIC property                interests were acquired. At September 30, 2006, substantially all                of these                interests have been sold to third-party                investors. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                   |   | **Years                Ended September 30,** |   |
|------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                   |   | **2006**                                     |   | **2005** |   | **2004** |   |
| **Trapeza                Capital Management, LLC**                     |   |                                         |   |   |   |   |   |   |   |   |
| Management                fees                                    |   | $                                            | 6,810  |   | $ | 5,432 |   | $ | 4,816 |   |
| Operating                expenses                                 |   |                                         | (1,746 | ) |   | (1,151 | ) |   | (939 | ) |
| Other                (expense) income                             |   |                                         | (170   | ) |   | (356 | ) |   | 35 |   |
| Net                income                                         |   | $                                            | 4,894  |   | $ | 3,925 |   | $ | 3,912 |   |
| RAI’s                proportionate share of the net income  |   | $                                            | 2,447  |   | $ | 1,963 |   | $ | 1,956 |   |

|                                                                   |   | **Years                Ended September 30,** |   |
|------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                   |   | **2006**                                     |   | **2005** |   | **2004** |   |
| **Trapeza                Capital Group, LLC**                          |   |                                         |   |   |   |   |   |
| Management                fees                                    |   | $                                            | 2,724  |   | $ | 2,342 |   | $ | 276 |   |
| Operating                expenses                                 |   |                                         | (255   | ) |   | (243 | ) |   | (42 | ) |
| Other                (expense) income                             |   |                                         | (69    | ) |   | 909 |   |   | 34 |   |
| Net                income                                         |   | $                                            | 2,400  |   | $ | 3,008 |   | $ | 268 |   |
| RAI’s                proportionate share of the net income  |   | $                                            | 800    |   | $ | 1,003 |   | $ | 89 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      11 − PROPERTY AND EQUIPMENT**

|                                                     |   | **Estimated**                   |                      | **September                30,** |   |
|----------------------------------------------------------|--------|---------------------------------|---------------------------|----------------------------------|--------|
|                                                     |   | **Useful                Lives** |                      | **2006**                         |   | **2005** |   |
| Leasehold                improvements                    |   |                            | 1-15                years |                             | $      | 2,894 |   | $ | 1,134 |   |
| Real                estate assets − FIN 46 (1)     |   |                            | 40                years   |                             |   | 3,900 |   |   | 28,541 |   |
| Furniture                and equipment                   |   |                            | 3-10                years |                             |   | 6,262 |   |   | 4,112 |   |
|                                                     |   |                            |                      |                             |   | 13,056 |   |   | 33,787 |   |
| Accumulated                depreciation and amortization |   |                            |                      |                             |   | (3,531 | ) |   | (3,266 | ) |
| Property                and equipment, net               |   |                            |                      |                             | $      | 9,525 |   | $ | 30,521 |   |

----

| (1) | The                decrease reflects the December 2005 resolution of one loan whose                underlying assets were consolidated with the Company’s assets pursuant to                FIN 46. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**NOTE      12 - BORROWINGS**

|                                                                                |   | **September                30,** |    |
|-------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                |   | **2006**                         |    | **2005** |   |
| Secured                warehouse credit facilities                             |   | $                                | 69,297  |   | $ | 97,751 |   |
| Secured                revolving credit facilities − commercial finance  |   |                             | 86,400  |   |   | 30,942 |   |
| Real                estate − mortgage loan                               |   |                             | 12,492  |   |   | − |   |
| Real                estate − FIN 46 mortgage loans                       |   |                             | 1,536   |   |   | 18,519 |   |
| Other                debt                                                      |   |                             | 2,513   |   |   | 90 |   |
| Total                borrowings                                                     |   | $                                | 172,238 |   | $ | 147,302 |   |

| 2007       |   | $       | 87,254  |  (1) |
|------------|--------|---------|---------|-----------|
| 2008       |   |    | 889     |      |
| 2009       |   |    | 926     |      |
| 2010       |   |    | 955     |      |
| 2011       |   |    | 12,235  |      |
| Thereafter |   |    | 682     |      |
|            |   |  $ | 102,941 |  (1) |

----

| (1) | Excludes                $69.3 million related to credit facilities that will be transferred                upon                the execution of the associated CDO transactions and will not have                to be                repaid by the Company. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Secured      warehouse credit facilities*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      12 - BORROWINGS − (Continued)**

*Secured      warehouse credit facilities − (Continued)*

*Secured      revolving credit facilities − commercial finance*

*Real      estate-mortgage loan*

*Real      estate-FIN 46 mortgage loans*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      12 - BORROWINGS − (Continued)**

*Other      debt*

*Secured      revolving credit facilities. *

*Notes.      *

** **

*Covenants*

**NOTE      13 - INCOME TAXES**

|                                                 |   | **Years                Ended September 30,** |   |
|------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                 |   | **2006**                                     |   | **2005** |   | **2004** |   |
| Provision                (benefit) for income taxes: |   |                                         |   |   |   |   |   |
| Current:                                             |   |                                         |   |   |   |   |   |
| Federal                                              |   | $                                            | 5,238  |   | $ | - |   | $ | - |   |
| State                                                |   |                                         | 1,118  |   |   | - |   |   | - |   |
| Deferred                                        |   |                                         | (3,120 | ) |   | 3,591 |   |   | 1,127 |   |
| Income                tax provision             |   | $                                            | 3,236  |   | $ | 3,591 |   | $ | 1,127 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      13 - INCOME TAXES − (Continued)**

|                                                                                                        |   | **Years                Ended September 30,**  |    |
|-------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                                                        |   | **2006**                                           |    | **2005** |   | **2004** |   |
| Statutory                tax rate                                                                      |   |                                               | 35      | % |   | 35 | % |   | 35 | % |
| Tax-exempt                interest                                                                     |   |                                               | (1      | ) |   | (1 | ) |   | (4 | ) |
| State                and local taxes on income, net of U.S. federal income tax                benefit  |   |                                               | 5       |   |   | 7 |   |   | 9 |   |
| Valuation                allowance for state loss carryforwards                                        |   |                                               | (17     | ) |   | (4 | ) |   | − |   |
| Deferred                tax asset for local net operating losses                                       |   |                                               | (6      | ) |   | − |   |   | − |   |
| Other                items                                                                             |   |                                               | − |   |   | 3 |   |   | 1 |   |
|                                                                                                        |   |                                               | 16      | % |   | 40 | % |   | 41 | % |

|                                                    |   | **September                30,** |    |
|---------------------------------------------------------|--------|----------------------------------|---------|
|                                                    |   | **2006**                         |    | **2005** |   |
| Deferred                tax assets related to:          |   |                             |    |   |   |
| State                and local loss carryforwards       |   | $                                | 7,693   |   | $ | 5,328 |   |
| Accrued                expenses                         |   |                             | − |   |   | 4,054 |   |
| Provision                for possible losses            |   |                             | 191     |   |   | 132 |   |
| Employee                stock option exercises          |   |                             | − |   |   | 2,538 |   |
| Gross                deferred tax assets           |   |                             | 7,884   |   |   | 12,052 |   |
| Valuation                allowance                      |   |                             | (1,476  | ) |   | (4,966 | ) |
| Total                deferred tax assets                |   |                             | 6,408   |   |   | 7,086 |   |
|                                                    |   |                             |    |   |   |   |   |
| Deferred                tax liabilities related to:     |   |                             |    |   |   |   |   |
| Property                and equipment basis differences |   |                             | (828    | ) |   | (603 | ) |
| Accrued                expenses                         |   |                             | (2,282  | ) |   | − |   |
| Investments                in real estate assets        |   |                             | (1,485  | ) |   | (3,555 | ) |
| Investments                in partnership interests     |   |                             | (3,035  | ) |   | (1,572 | ) |
| Unrealized                gains on investments          |   |                             | (3,116  | ) |   | (1,356 | ) |
| Total                deferred tax liabilities           |   |                             | (10,746 | ) |   | (7,086 | ) |
| Net                deferred tax liability          |   | $                                | (4,338  | ) | $ | − |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      13 - INCOME TAXES − (Continued)**

**NOTE      14 - BENEFIT PLANS**

*Employee      Stock Plans. *

| **Plan** |   | **Authorized                Shares** |      | **Shares                Available for Grant as of September 30, 2006** |   |
|----------|--------|--------------------------------------|-----------|------------------------------------------------------------------------|--------|
| 1997     |   |                                 | 1,907,998 |                                                                   |   | − |   |
| 1999     |   |                                 | 2,312,725 |                                                                   |   | − |   |
| 2002     |   |                                 | 1,734,547 |                                                                   |   | − |   |
| 2005     |   |                                 | 1,200,000 |                                                                   |   | 705,853 |   |
|     |   |                                 |           |                                                                   |   | 705,853 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      14 - BENEFIT PLANS − (Continued)**

|                                                                                                                                                    |       | **Years                Ended September 30,** |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
|                                                                                                                                                    |       | **2006**                                     |       | **2005** |   | **2004** |   |
|                                                                                                                                                    |       |                                         | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **                                                                                                                                              | ** ** | ** **                                   | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** |
| ** **                                                                                                                                              | ** ** | ** **                                   | ** ** | **Exercise** | ** ** | ** ** | ** ** | **Exercise** | ** ** | ** ** | ** ** | **Exercise** | ** ** |
| ** **                                                                                                                                              | ** ** | **Shares**                                   | ** ** | **Price** | ** ** | **Shares** | ** ** | **Price** | ** ** | **Shares** | ** ** | **Price** |   |
| Outstanding                - beginning of year                                                                                                          |       |                                         | 3,633,213  |   | $ | 7.61 |   |   | 1,763,495 |   | $ | 10.42 |   |   | 1,849,254 |   | $ | 10.26 |   |
| Adjustment                for spin-off of Atlas                America                                                                                  |       |                                         | −    |   | $ | − |   |   | 2,314,891 |   | $ | (5.91 | ) |   | − |   | $ | − |   |
| Granted                                                                                                                                            |       |                                         | 44,000     |   | $ | 20.06 |   |   | 913,538 |   | $ | 16.33 |   |   | 3,000 |   | $ | 17.35 |   |
| Exercised                                                                                                                                               |       |                                         | (28,867    | ) | $ | 4.34 |   |   | (1,354,396 | ) | $ | 4.13 |   |   | (81,323 | ) | $ | 7.18 |   |
| Forfeited                                                                                                                                               |       |                                         | (7,250     | ) | $ | 17.26 |   |   | (4,315 | ) | $ | 5.68 |   |   | (7,436 | ) | $ | 9.09 |   |
| Outstanding                -                end of year                                                                                            |       |                                         | 3,641,096  |   | $ | 7.77 |   |   | 3,633,213 |   | $ | 7.61 |   |   | 1,763,495 |   | $ | 10.42 |   |
|                                                                                                                                                    |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable,                at end of year                                                                                                         |       |                                         | 3,266,542  |   | $ | 6.77 |   |   | 3,058,026 |   | $ | 6.53 |   |   | 1,297,331 |   | $ | 10.96 |   |
| Available                for grant                                                                                                                 |       |                                         | 705,853    |  (1) |   |   |   |   | 827,183 |   |   |   |   |   | 232,124 |   |   |   |   |
| Weighted                average fair value per                share of                    options granted during                the year |       |                                         |            |   | $ | 9.20 |   |   |  |   | $ | 6.83 |   |   |  |   | $ | 7.65 |   |

----

| (1) | Adjusted                for shares of restricted stock that have been granted under the 2005                plan. |
|-----|-------------------------------------------------------------------------------------------------------------------|

|                                      | ** ** | **Outstanding** | ** ** | **Exercisable**                 | ** ** |
|-------------------------------------------|------------|-----------------|------------|---------------------------------|------------|
| ** **                                | ** ** | ** **      | ** ** | **Weighted**                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                | ** ** | ** **      | ** ** | **Average**                     | ** ** | **Weighted** | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| **Range                of**               | ** ** | ** **      | ** ** | **Contractual**                 | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** |
| **Exercise                Prices**        | ** ** | **Shares**      | ** ** | **Life                (Years)** | ** ** | **Exercise                Price** | ** ** | **Shares** | ** ** | **Exercise                Price** |   |
| $3.23 -                $ 4.04   |       |            | 1,443,090  |                            |       | 5.95 |   | $ | 3.58 |   |   | 1,443,090 |   | $ | 3.58 |   |
| $4.78 -                $ 7.50   |       |            | 1,247,718  |                            |       | 3.24 |   | $ | 6.05 |   |   | 1,247,718 |   | $ | 6.05 |   |
| $14.44 -                $ 17.26 |       |            | 906,288    |                            |       | 8.64 |   | $ | 16.32 |   |   | 575,734 |   | $ | 16.49 |   |
| $18.84 -                $ 21.09 |       |            | 44,000     |                            |       | 9.73 |   | $ | 20.06 |   |   | − |   | $ | − |   |
|                                      |       |            | 3,641,096  |                            |       |  |   |   |  |   |   | 3,266,542 |   |   |  |   |

*Restricted      stock. *

*Deferred      Stock and Deferred Compensation*
*      P*
*lans.      *

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      14 - BENEFIT PLANS − (Continued)**

|                                                                |   | **Years                Ended September 30,** |    |
|---------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                |   | **2006**                                     |    | **2005** |   | **2004** |   |
| Units                outstanding - beginning of year                |   |                                         | 136,787 |   |   | 72,888 |   |   | 72,888 |   |
| Adjustment                for spin-off of Atlas America        |   |                                         | − |   |   | 92,536 |   |   | − |   |
| Granted                                                        |   |                                         | 3,894   |   |   | 5,162 |   |   | − |   |
| Shares                issued upon termination                  |   |                                         | − |   |   | (31,975 | ) |   | − |   |
| Forfeited                                                           |   |                                         | − |   |   | (1,824 | ) |   | − |   |
| Units                outstanding -                end of year  |   |                                         | 140,681 |   |   | 136,787 |   |   | 72,888 |   |
|                                                                |   |                                         |    |   |   |   |   |   |   |   |
| Vested                units                                    |   |                                         | 134,787 |   |   | 131,628 |   |   | 69,732 |   |
| Units                available for grant                       |   |                                         | 115,845 |   |   | 119,739 |   |   | 56,398 |   |

*Employee      Stock Ownership Plan.*

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **
**-**
**      (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      14 - BENEFIT PLANS − (Continued)**

*               Investment Savings Plan.*
**        $**

*             Supplemental Employment Retirement Plan.*

**NOTE      15 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**

|                                                                                |   | **September                30,** |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                                |   | **2006**                         |   | **2005** |   |
| **Receivables                from managed entities and related parties:**           |   |                             |   |   |   |
| Commercial                finance investment partnerships                           |   | $                                | 3,938  |   | $ | 1,178 |   |
| Financial                fund management entities                                   |   |                             | 2,064  |   |   | 272 |   |
| RCC                                                                                 |   |                             | 1,409  |   |   | 750 |   |
| Real                estate investment partnerships and TIC property interests  |   |                             | 952    |   |   | 1,880 |   |
| Atlas                America                                                        |   |                             | 265    |   |   | 111 |   |
| Anthem                Securities                                                    |   |                             | 154    |   |   | − |   |
| Other                                                                               |   |                             | 13     |   |   | 89 |   |
| Receivables                from managed entities                                    |   | $                                | 8,795  |   | $ | 4,280 |   |
| **Payables                due to managed entities and related parties:**            |   |                             |   |   |   |   |   |
| Real                estate investment partnerships and TIC property interests  |   | $                                | 1,325  |   | $ | 591 |   |
| Anthem                Securities                                               |   |                             | 254    |   |   | − |   |
| Payables                to managed entities                                         |   | $                                | 1,579  |   | $ | 591 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **
**-**
**      (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      15 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS −(Continued)**

|                                                                                                                                       |   | **Years                Ended September 30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                                                                       |   | **2006**                                     |   | **2005** |   | **2004** |   |
| **Financial                Fund Management -**                fees from managed entities                                              |   | $                                            | 8,726  |   | $ | 6,385 |   | $ | 5,243 |   |
| **Real                Estate**                -                fees from investment partnerships and TIC                property interests |   |                                         | 11,452 |   |   | 3,554 |   |   | 1,450 |   |
| **Commercial                finance**                -                fees from investment partnerships                               |   |                                         | 5,816  |   |   | 2,871 |   |   | 1,027 |   |
| **RCC:**                                                                                                                                   |   |                                         |   |   |   |   |   |   |   |   |
| Fees                and equity compensation                                                                                           |   |                                         | 8,203  |   |   | 3,925 |   |   | − |   |
| Reimbursement                of expenses from RCC                                                                                          |   |                                         | 718    |   |   | 631 |   |   | − |   |
| Dividends                received                                                                                                          |   |                                         | 2,722  |   |   | 213 |   |   | − |   |
| **Atlas                America**                -                reimbursement of net costs and expenses                              |   |                                         | 1,303  |   |   | 1,015 |   |   | 1,100 |   |
| **Anthem                Securities:**                                                                                                      |   |                                         |   |   |   |   |   |   |   |   |
| Payment                of operating expenses                                                                                          |   |                                         | (1,166 | ) |   | (270 | ) |   | (7 | ) |
| Reimbursement                of costs and expenses from Anthem Securities                                                                  |   |                                         | 2,906  |   |   | 653 |   |   | 156 |   |
| **1845                Walnut Associates Ltd -**payment                of rent and operating                expenses                   |   |                                         | (450   | ) |   | (420 | ) |   | (390 | ) |
| **9                Henmar LLC -**payment                of broker/consulting fees                                                     |   |                                         | (479   | ) |   | (438 | ) |   | (326 | ) |
| **Ledgewood                P.C. -**payment                of legal services                                                           |   |                                         | (472   | ) |   | (1,012 | ) |   | (1,200 | ) |

*Relationship      with Atlas America. *

*Relationship      with Anthem Securities. *

*Relationship      with 1845 Walnut Associates Ltd. *

*Relationship      with 9 Henmar LLC (“9 Henmar”). *

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **
**-**
**      (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      15 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS −(Continued)**

*Relationship      with Ledgewood P.C.*

*Relationship      with RAIT Investment Trust (“RAIT”) (NYSE: RAS).*

*Relationship      with Retirement Trusts. *

*Relationship      with The Bancorp, Inc. *

*Relationship      with Certain Directors, Officers, Employees and Other Related      Parties.*

*       Relationship        with Brandywine Construction & Management, Inc. *

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **
**-**
**      (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      15 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS −(Continued)**

*Relationship      with Certain Borrowers.*

*Relationship      with Lienholder*

**NOTE      16 − OTHER INCOME, NET**

|                                                      |   | **Years                Ended September 30,** |    |
|-----------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                      |   | **2006**                                     |    | **2005** |   | **2004** |   |
| Litigation                settlements                |   | $                                            | 1,188(1 | ) | $ | 1,400(2 | ) | $ | − |   |
| Gain                on sales of RAIT shares          |   |                                         | − |   |   | 1,544 |   |   | 9,453 |   |
| RCC                dividend income                   |   |                                         | 2,722   |   |   | 213 |   |   | − |   |
| Gain                on sale of TBBK shares           |   |                                         | 668     |   |   | − |   |   | − |   |
| Loss                on early extinguishment of debt  |   |                                         | − |   |   | − |   |   | (1,955 | ) |
| Interest,                dividends and other income  |   |                                         | 576     |   |   | 1,393 |   |   | 1,667 |   |
| Other                income, net                          |   | $                                            | 5,154   |   | $ | 4,550 |   | $ | 9,165 |   |

----

| (1) | In                fiscal 2002, the Company had charged operations $1.0 million for                the                amount of its maximum exposure relating to the settlement of a lawsuit.                One of the Company’s insurance carriers refused to participate in the                settlement. The Company thereafter filed an action seeking recovery                on its                policy with that carrier. In the second quarter of fiscal 2006, the                Company prevailed in its action against the carrier, received a $200,000                cost reimbursement and accordingly, reversed the $1.0 million                accrual. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The                Company settled an action filed in the U.S. District Court for the                District of Oregon by the former chairman of TRM Corporation and                his                children. The Company’s Chairman and a former director and officer also                had been named as defendants. The plaintiffs' claims were for breach                of                contract and fraud. The Company recorded a charge of $1.2 million,                including related legal fees, in fiscal 2003. The Company subsequently                filed an action against one of its directors’ and officers’ liability                insurance carriers in connection with this settlement and recovered                $1.4                million in fiscal 2005. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **
**-**
**      (Continued)**

**SEPTEMBER      30, 2006**

**NOTE      17 - COMMITMENTS AND CONTINGENCIES**

| 2007        |   | $      | 1,835 |   |
|------------------|--------|--------|-------|--------|
| 2008        |   |   | 1,265 |   |
| 2009        |   |   | 923   |   |
| 2010        |   |   | 485   |   |
| 2011        |   |   | 210   |   |
| Thereafter  |   |   | 1,915 |   |
|             |   | $      | 6,633 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **
**-**
**      (Continued)**

**SEPTEMBER      30, 2006**

**NOTE        17 - COMMITMENTS AND CONTINGENCIES − (Continued)**

**NOTE      18 - DISCONTINUED OPERATIONS**

*Energy.      *

|                                                                        |   | **Years                Ended September 30,** |    |
|-----------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                        |   | **2006**                                     |    | **2005** |   | **2004** |   |
| Income                from discontinued operations before taxes        |   | $                                            | − |   | $ | 31,451 |   | $ | 29,776 |   |
| Loss                on disposal                                        |   |                                         | (73     | ) |   | (2,652 | ) |   | − |   |
| Benefit                (provision) for income taxes                    |   |                                         | 26      |   |   | (12,322 | ) |   | (10,011 | ) |
| (Loss)                income from discontinued operations, net of tax  |   | $                                            | (47     | ) | $ | 16,477 |   | $ | 19,765 |   |

*Real      Estate. *

|                                                                        |   | **Years                Ended September 30,** |   |
|-----------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                        |   | **2006**                                     |   | **2005** |   | **2004** |   |
| Income                (loss) on discontinued operations before taxes   |   | $                                            | 2,674  |   | $ | 1,306 |   | $ | (6,088 | ) |
| (Loss)                gain on disposals                                |   |                                         | (883   | ) |   | (9,396 | ) |   | 749 |   |
| (Provision)                benefit from income taxes                   |   |                                         | (591   | ) |   | 2,875 |   |   | 1,981 |   |
| Income                (loss) from discontinued operations, net of tax  |   | $                                            | 1,200  |   | $ | (5,215 | ) | $ | (3,358 | ) |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **
**-**
**      (Continued)**

**SEPTEMBER      30, 2005**

**NOTE      18 - DISCONTINUED OPERATIONS − (Continued)**

*Other.      *

|                                                                  |   | **Years                Ended September 30,** |    |
|-----------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                  |   | **2006**                                     |    | **2005** |   | **2004** |   |
| Income                from discontinued operations before taxes  |   | $                                            | − |   | $ | 40 |   | $ | − |   |
| Gain                (loss) on disposals                          |   |                                         | 120     |   |   | (336 | ) |   | 602 |   |
| (Provision)                benefit for income taxes              |   |                                         | (42     | ) |   | 104 |   |   | (210 | ) |
| Income                from discontinued operations, net of tax   |   | $                                            | 78      |   | $ | (192 | ) | $ | 392 |   |

*            Total. *

|                                                                  |   | **Years                Ended September 30,** |   |
|-----------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                  |   | **2006**                                     |   | **2005** |   | **2004** |   |
| Income                from discontinued operations before taxes  |   | $                                            | 2,674  |   | $ | 32,797 |   | $ | 23,688 |   |
| (Loss)                gain on disposals                          |   |                                         | (836   | ) |   | (12,384 | ) |   | 1,351 |   |
| Provision                for income taxes                        |   |                                         | (607   | ) |   | (9,343 | ) |   | (8,240 | ) |
| Income                from discontinued operations, net of tax   |   | $                                            | 1,231  |   | $ | 11,070 |   | $ | 16,799 |   |

**NOTE      19 **
**-**
**      OPERATING SEGMENTS**

| **Year                Ended****September                30, 2006** |   | **Revenues                from External Customers** | ** ** | **Equity                in Earnings (Losses) of Equity Investees** | ** ** | **Interest                Expense** | ** ** | **Depreciation                and Amortization** | ** ** | **Segment****Profit                (Loss) (b)** | ** ** | **Segment                Assets** |   |
|--------------------------------------------------------------------|--------|-----------------------------------------------------|------------|--------------------------------------------------------------------|------------|-------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------|--------|
| Financial                fund management                           |   | $                                                   | 19,565     |                                                               | $          | 11,269                              |       | $                                                | 8,883      |                                            | $          | 28                                |   | $ | 7,271 |   | $ | 100,947 |   |
| Real                estate                                         |   |                                                | 26,214     |                                                               |       | (2,538                              | )          |                                             | 725        |                                            |       | 612                               |   |   | 10,003 |   |   | 144,718 |   |
| Commercial                finance                                  |   |                                                | 23,824     |                                                               |       | 16                                  |       |                                             | 6,064      |                                            |       | 1,749                             |   |   | 1,096 |   |   | 127,235 |   |
| Resource                Europe                                     |   |                                                | 474        |                                                               |       | −                             |       |                                             | 250        |                                            |       | 2                                 |   |   | (787 | ) |   | 67,301 |   |
| All                other(a)                                        |   |                                                | −    |                                                               |       | −                             |       |                                             | 126        |                                            |       | 673                               |   |   | 2,935 |   |   | 67,692 |   |
| Eliminations                                                       |   |                                                | −    |                                                               |       | −                             |       |                                             | (5,929     | )                                               |       | −                           |   |   | − |   |   | (91,140 | ) |
| Totals                                                             |   | $                                                   | 70,077     |                                                               | $          | 8,747                               |       | $                                                | 10,119     |                                            | $          | 3,064                             |   | $ | 20,518 |   | $ | 416,753 |   |
| **Year                Ended****September                30, 2005** |   |                                                |       |                                                               |       |                                |       |                                             |       |                                            |       |                              |   |   |   |   |   |   |   |
| Financial                fund management                           |   | $                                                   | 5,879      |                                                               | $          | 10,065                              |       | $                                                | 443        |                                            | $          | 66                                |   | $ | 2,476 |   | $ | 127,957 |   |
| Real                estate                                         |   |                                                | 19,997     |                                                               |       | (2,206                              | )          |                                             | 347        |                                            |       | 629                               |   |   | 6,558 |   |   | 214,833 |   |
| Commercial                finance                                  |   |                                                | 13,433     |                                                               |       | (52                                 | )          |                                             | 3,088      |                                            |       | 1,262                             |   |   | (79 | ) |   | 56,535 |   |
| Resource                Europe                                     |   |                                                | −    |                                                               |       | −                             |       |                                             | −    |                                            |       | −                           |   |   | − |   |   | − |   |
| All                other(a)                                        |   |                                                | −    |                                                               |       | −                             |       |                                             | 36         |                                            |       | 252                               |   |   | 24 |   |   | 59,710 |   |
| Eliminations                                                       |   |                                                | −    |                                                               |       | −                             |       |                                             | (1,103     | )                                               |       | −                           |   |   | − |   |   | − |   |
| Totals                                                             |   | $                                                   | 39,309     |                                                               | $          | 7,807                               |       | $                                                | 2,811      |                                            | $          | 2,209                             |   | $ | 8,979 |   | $ | 459,035 |   |

----

**RESOURCE      AMERICA, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **
**-**
**      (Continued)**

**SEPTEMBER      30, 2005**

**NOTE      19 **
**-**
**      OPERATING SEGMENTS − (Continued)**

| **Year                Ended****September                30, 2004** |   | **Revenues                from External Customers** | ** ** | **Equity                in Earnings (Losses) of Equity Investees** | ** ** | **Interest                Expense** | ** ** | **Depreciation                and Amortization** | ** ** | **Segment****Profit                (Loss) (b)** | ** ** | **Segment                Assets** |   |
|--------------------------------------------------------------------|--------|-----------------------------------------------------|------------|--------------------------------------------------------------------|------------|-------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------|--------|
| Financial                fund management                           |   | $                                                   | 226        |                                                               | $          | 7,359                               |       | $                                                | −    |                                            | $          | 10                                |   | $ | 5,205 |   | $ | 10,418 |   |
| Real                estate                                         |   |                                                | 9,266      |                                                               |       | 1,253                               |       |                                             | 1,386      |                                            |       | 480                               |   |   | 1,295 |   |   | 210,827 |   |
| Commercial                finance                                  |   |                                                | 7,068      |                                                               |       | 67                                  |       |                                             | 970        |                                            |       | 534                               |   |   | (2,258 | ) |   | 29,298 |   |
| Resource                Europe                                     |   |                                                | −    |                                                               |       | −                             |       |                                             | −    |                                            |       | −                           |   |   | − |   |   | − |   |
| All                other(a)                                        |   |                                                | −    |                                                               |       | −                             |       |                                             | 1,618      |                                            |       | 164                               |   |   | (1,505 | ) |   | 489,843 |   |
| Eliminations                                                       |   |                                                | −    |                                                               |       | −                             |       |                                             | −    |                                            |       | −                           |   |   | − |   |   | − |   |
| Totals                                                             |   | $                                                   | 16,560     |                                                               | $          | 8,679                               |       | $                                                | 3,974      |                                            | $          | 1,188                             |   | $ | 2,737 |   | $ | 740,386 |   |

----

| (a) | Includes                general corporate expenses and assets not allocable to any particular                segment as of September 30, 2006, 2005 and also energy assets in                September                2004. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Segment                profit (loss) represents income from continuing operations before                taxes                and cumulative effect of accounting change. Excluding intercompany                interest charges, segment profit (loss) as adjusted for fiscal 2006                and                2005, would have been as follows (in thousands): financial fund management                - $11,086 and $2,476 respectively; real estate - $10,484 and $6,654,                respectively; and commercial finance - $2,729 and $928, respectively;                and                all other $(2,994) and $(1,079), respectively. Intercompany interest                charges for fiscal 2004 were not                significant. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**RESOURCE        AMERICA, INC.**

**NOTES        TO CONSOLIDATED FINA0NCIAL STATEMENTS **
**-**
**        (Continued)**

**SEPTEMBER        30, 2006**

**NOTE        20 - QUARTERLY RESULTS (Unaudited) **
**(1)**

|                                                                                                                                       |   | **December                  31**                       |   | **March                  31** |   | **June                  30** |   | **September                  30** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|--------|-------------------------------|--------|------------------------------|--------|-----------------------------------|--------|
|                                                                                                                                       |   | (in                  thousands, except per share data) |   |
| **Year                  ended September 30, 2006**                                                                                         |   |                                                   |   |                          |   |                         |   |                              |   |
| Revenues                  (2)                                                                                                              |   | $                                                      | 17,214 |                          | $      | 20,537                       |   | $                                 | 17,761 |   | $ | 23,312 |   |
| Operating                  income (2)                                                                                                      |   | $                                                      | 5,669  |                          | $      | 8,433                        |   | $                                 | 5,056  |   | $ | 8,100 |   |
| Income                  from continuing operations before cumulative  effect                  of a change in accounting principle (2) |   | $                                                      | 5,381  |                          | $      | 4,934                        |   | $                                 | 3,113  |   | $ | 3,854 |   |
| Net                  income                  (2)                                                                                           |   | $                                                      | 7,676  |                          | $      | 5,086                        |   | $                                 | 3,000  |   | $ | 4,108 |   |
|                                                                                                                                       |   |                                                   |   |                          |   |                         |   |                              |   |   |   |   |   |
| Basic                  earnings per common share:                                                                                          |   |                                                   |   |                          |   |                         |   |                              |   |   |   |   |   |
| Continuing                  operations (2)                                                                                            |   | $                                                      | 0.30   |                          | $      | 0.28                         |   | $                                 | 0.18   |   | $ | 0.22 |   |
| Net                  income (2)                                                                                                            |   | $                                                      | 0.43   |                          | $      | 0.29                         |   | $                                 | 0.17   |   | $ | 0.24 |   |
|                                                                                                                                       |   |                                                   |   |                          |   |                         |   |                              |   |   |   |   |   |
| Diluted                  earnings per common share:                                                                                        |   |                                                   |   |                          |   |                         |   |                              |   |   |   |   |   |
| Continuing                  operations (2)                                                                                            |   | $                                                      | 0.27   |                          | $      | 0.26                         |   | $                                 | 0.16   |   | $ | 0.21 |   |
| Net                  income (2)                                                                                                            |   | $                                                      | 0.39   |                          | $      | 0.27                         |   | $                                 | 0.16   |   | $ | 0.22 |   |

| **Year                  ended September 30, 2005**         |   |   |   |   |   |   |   |   |   |
|------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Revenues                                                   |   | $      | 5,893  |   | $      | 11,165 |   | $      | 17,578 |   | $ | 12,480 |   |
| Operating                  (loss) income                   |   | $      | (1,138 | )      | $      | 989    |   | $      | 6,805  |   | $ | 1,987 |   |
| Income                  from continuing operations    |   | $      | 1,077  |   | $      | 7      |   | $      | 3,511  |   | $ | 793 |   |
| Net                  income (loss)                         |   | $      | 8,567  |   | $      | 7,462  |   | $      | 1,610  |   | $ | (1,181 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  earnings (loss) per common share:   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing                  operations           |   | $      | 0.06   |   | $      | 0.00   |   | $      | 0.20   |   | $ | 0.04 |   |
| Net                  income (loss)                         |   | $      | 0.49   |   | $      | 0.43   |   | $      | 0.09   |   | $ | (0.07 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                  earnings (loss) per common share: |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing                  operations           |   | $      | 0.06   |   | $      | 0.00   |   | $      | 0.19   |   | $ | 0.04 |   |
| Net                  income (loss)                         |   | $      | 0.46   |   | $      | 0.40   |   | $      | 0.09   |   | $ | (0.06 | ) |

----

| (1)   | Certain                components of quarterly net income (loss) disclosed above differ                from                those as reported on the Company’s respective quarterly Forms 10-Q. The                spin-off costs and operation results of Atlas America and the gains                and                losses from the disposition of certain real estate assets and their                related historical operating results have been reclassified as                discontinued operations for all periods presented (see Note                18). |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   | Reflects                the cumulative adjustment from the elimination of the quarterly reporting                lag for the Company’s investments in the Trapeza entities (see Note                10). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

**ITEM      9A.**
**CONTROLS      AND PROCEDURES**

**MANAGEMENT’S      REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**

*.*

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**RESOURCE      AMERICA, INC.**

 

 

Because      of its inherent limitations, internal control over financial reporting may      not      prevent or detect misstatements.  Also, projections of any evaluation of      effectiveness to future periods are subject to the risk that controls may become      inadequate because of changes in conditions, or that the degree of compliance      with the policies or procedures may deteriorate.

In      our      opinion, management's assessment that Resource America, Inc. maintained      effective internal control over financial reporting as of September 30, 2006,      is      fairly stated, in all material respects, based on criteria established in      Internal Control-Integrated Framework issued by the Committee of Sponsoring      Organizations of the Treadway Commission (COSO).  Also in our opinion,      Resource America, Inc. maintained, in all material respects, effective internal      control over financial reporting as of September 30, 2006, based on criteria      established in Internal Control-Integrated Framework issued by the Committee      of      Sponsoring Organizations of the Treadway Commission (COSO). 

**/s/      GRANT THORNTON LLP**

----

**ITEM      9B.**
**OTHER      INFORMATION**

----

**PART      III**

**ITEM      10. **
**DIRECTORS      AND EXECUTIVE OFFICERS OF THE REGISTRANT**

**Michael      J. Bradley, **

**Carlos      C. Campbell**

**Edward      E. Cohen**

**Jonathan      Z. Cohen,**

**Kenneth      A. Kind, **

**Andrew      M. Lubin**

----

**John      S. White**

**Non-Director      Executive Officers **

**Thomas      C. Elliott**

**Alan      F. Feldman, **

**Steven      J. Kessler,**

**Michael      S. Yecies, **

**Other      Significant Employees**

**David      E. Bloom, **

**Crit      S. DeMent**

----

**Information      Concerning the Audit Committee **

**Code      of Ethics**

**Section      16(a) Beneficial Ownership Reporting Compliance**

----

**ITEM      11. **
**EXECUTIVE      COMPENSATION **

**Executive      Officer Compensation**

**Summary      Compensation Table **

|                                                                                                                  |   |   |         |  Annual                Compensation |         | Long                Term CompensationAwards |   |   |                     |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------|--------------|------------------------------------------|--------------|---------------------------------------------|--------|--------|--------------------------|
|                                                                                                                  |   |   |         |                                     |         |                                        |   |   |                     | Restricted |   | Securities |   | All                Other |   |
|                                                                                                                  |   | Fiscal |         |                                     |         |                                        |   |   |                     | Stock |   | Underlying |   | Compen- |   |
| Name                and Principal Position                                                                            |   | Year   |         | Salary                                   |         | Bonus                (1)                    |   | Other  |                     | Awards(2) |   | Options |   |     sation                (3)      |   |
| Jonathan                Z. CohenPresident                and ChiefExecutive                Officer                    |   |   | 200620052004 |                                     |    | $600,000623,077457,692                      |   |   | $1,700,000800,000400,000 |   |   | 000 |   |   | $32,6141,4351,900 |   |   | 0275,0000 |   |   |             $      57,6584,255,691564,631 |   |
|                                                                                                                  |   |   |         |                                     |         |                                        |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Steven                J. KesslerExecutive                Vice President and                Chief Financial Officer    |   |   | 200620052004 |                                     |         | 325,000329,808300,000                       |   |   | 400,000235,000235,000    |   |   | 000 |   |   | 33,9461,4351,963 |   |   | 035,0000 |   |   | 14,500143,83045,260 |   |
|                                                                                                                  |   |   |         |                                     |         |                                        |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Alan                F. FeldmanSenior                Vice President                                                    |   |   | 200620052004 |                                     |         | 350,000354,808317,500                       |   |   | 350,000225,000150,000    |   |   | 000 |   |   | 10,7121,4351,900 |   |   | 000 |   |   | 075,0000 |   |
|                                                                                                                  |   |   |         |                                     |         |                                        |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Thomas                C. ElliottSenior                Vice President −Finance                and Operations     |   |   | 200620052004 |                                     |         | 193,269180,932156,539                       |   |   | 300,000140,000115,000    |   |   | 000 |   |   | 12,0641,4351,911 |   |   | 069,3810 |   |   | 10,090326,00037,547 |   |
|                                                                                                                  |   |   |         |                                     |         |                                        |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Michael                S. YeciesSenior                Vice President, Chief                Legal Officer andSecretary |   |   | 200620052004 |                                     |         | 207,308202,692180,756                       |   |   | 200,000100,00072,500     |   |   | 000 |   |   | 26,6861,4351,911 |   |   | 07,5000 |   |   | 12,00061,33025,130 |   |

----

| (1) | Bonuses                in any fiscal year are generally based upon our performance in the                prior                fiscal year and the individual’s contribution to that performance. From                time to time, we may award bonuses in a fiscal year reflecting an                individual’s performance during that fiscal year. Fiscal 2006 bonus                includes restricted stock grants of our common stock that vests 25%                per                year over four years in the following amounts: Mr. Cohen - 11,580                shares                ($200,000); Mr. Feldman - 5,790 shares ($100,000); and Mr. Kessler                - 2,895                shares ($50,000); and restricted stock grants of Resource Capital                Corp.                that vest 33.33% per year over three years in the following amounts:                Mr.                Cohen - 33,333 shares ($500,000) and Mr. Feldman - 1,666 shares                ($25,000). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Reflects                allocations of shares to employee accounts under our Employee Stock                Ownership Plan, or ESOP. Share allocations under the ESOP have been                valued                at the closing price of our common stock at September 30, 2006, 2005                and                2004, respectively. Fiscal 2006 ESOP share allocations include exchanges                of Atlas America, Inc. common stock acquired as a result of our spin-off                of Atlas America in fiscal 2005 for equal values of our common stock.                For                purposes of this table, all ESOP shares are assumed to be fully vested.                As                of September 30, 2006, Messrs. Cohen, Elliott, Kessler and Yecies                were                fully vested and Mr. Feldman was 40% vested. ESOP shares vest 20%                after                three years of service and 20% per year thereafter. At September                30, 2006,                the number of restricted shares held and the value of those restricted                shares (in the aggregate, and valued at the closing market price                of our                common stock on September 30, 2006) were: Mr. Cohen - 2,237 shares                ($46,530); Mr. Kessler - 2,331 shares ($48,485); Mr. Feldman - 677                shares                ($14,082); Mr. Elliott - 773 shares ($16,078); and Mr. Yecies - 1,815                shares ($37,752). Cash dividends, as and when authorized by our Board                of                Directors, have been and will continue to be paid to the ESOP on                the                restricted shares. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Reflects                matching payments we made under our 401(k) Plan, grants in fiscal                2005 and                2004 of phantom units under the Atlas Pipeline Long Term Incentive                Plan,                and stock option grants in fiscal 2006 and restricted stock grants                in 2005                of RCC common stock under the RCC Stock Incentive Plan, as detailed                below.                The amount set forth for Mr. Cohen in fiscal 2005 also includes (i)                the                value of unexercised in-the-money stock options granted under the                Atlas                America, Inc. Stock Incentive Plan, valued by subtracting the total                exercise price from the fair market value of the securities underlying                the                options at September 30, 2005: 200,000 options ($2,128,000) and (ii)                payments of $13,018 to a law firm in connection with its representation                of                Mr. Cohen in reviewing Mr. Cohen’s employment agreement with the |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | Company.              The phantom unit grants under the Atlas Pipeline Long Term Incentive              Plan              entitle              the recipient, upon vesting, to receive one common unit or its then              fair              market value in cash and include distribution equivalent rights. The              number of phantom units held and the value of those phantom units,              valued              at the closing market price of Atlas Pipeline common units on the date              of              the grant, are: Mr. Cohen - 27,500 phantom units ($1,167,150); Mr.              Kessler              - 1,500 phantom units ($61,590); Mr. Elliott - 1,500 phantom units              ($61,590); and Mr. Yecies - 1,000 phantom units ($42,960). The restricted              stock grants under the RCC Stock Incentive Plan vest one-third per              year              over three years and entitle the recipient to all the rights of an              RCC              shareholder, including dividend rights. The number of restricted shares              held and the value of these shares, valued at the price of the shares              sold              in RCC’s March 2005 private offering, are: Mr. Cohen - 100,000 shares              ($1,500,000); Mr. Kessler - 7,500 shares ($112,500); Mr. Feldman -              5,000              shares ($75,000); Mr. Elliott - 20,000 shares ($300,000); and Mr. Yecies              -              2,000 shares ($30,000). The RCC stock options vest one-third per year              over              three years and have an exercise price of $15.00 per share. The value              of              RCC stock options is calculated by subtracting the total exercise price              of              the unexercised in-the-money stock options from the fair market value              of              the securities underlying the options at September 30, 2006: Mr. Cohen              -              100,000 options ($45,000); and Messrs. Kessler, Elliott and Yecies              -              10,000 options each ($4,500              each). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Option/SAR      Grants and Exercises in Last Fiscal Year and Fiscal Year-End Option      Values**

**Aggregated      Option Exercises In Last Fiscal Year**

**and      Fiscal Year-End Option Values**

| Name                             |   | Shares                AcquiredOn                Exercise |   | Value                Realized (1) |   | Number                of Securities                Underlying Unexercised Options                at FY-End Exercisable/                Unexercisable |   |   Value                of Unexercised In-the-Money                Options at FY-End                Exercisable/                Unexercisable (2) |          |
|----------------------------------|--------|----------------------------------------------------------|--------|-----------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|
| Jonathan                Z. Cohen |   |                                                     | 0      |                              |   | 0                                                                                                                                                    |   |                                                                                                                                                       | 1,318,302/0   |   |   | $18,067,313/$0 |   |
| Steven                J. Kessler |   |                                                     | 12,100 |                              | $      | 176,010                                                                                                                                              |   |                                                                                                                                                       | 112,493/0     |   |   | $1,398,519/$0 |   |
| Alan                F. Feldman   |   |                                                     | 0      |                              |   | 0                                                                                                                                                    |   |                                                                                                                                                       | 413,023/0     |   |   | $6,922,889/$0 |   |
| Thomas                C. Elliott |   |                                                     | 0      |                              |   | 0                                                                                                                                                    |   |                                                                                                                                                       | 38,663/48,063 |   |   | $402,447/$232,644 |   |
| Michael                S. Yecies |   |                                                     | 0      |                              |   | 0                                                                                                                                                    |   |                                                                                                                                                       | 94,383/5,625  |   |   | $1,499,635/$19,913 |   |

----

| (1) | Value                is calculated by subtracting the total exercise price from the fair                market                value of the securities underlying the options at the date of exercise. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Value                is calculated by subtracting the total exercise price from the fair                market                value of the securities underlying the options at September 30,                2006. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Employment      Agreements**
** **

----

----

**Director      Compensation**

**Compensation      Committee Interlocks and Insider Participation**

----

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

**                        STOCKHOLDER MATTERS**

|                                                                                             |       | **Common                Stock**         | ** **                      | ** **                    |
|--------------------------------------------------------------------------------------------------|------------|-----------------------------------------|---------------------------------|-------------------------------|
| ** **                                                                                       | ** ** | **Amount                and Nature of** | ** **                      | **Percent                of** |
| **Beneficial                Owner**                                                              | ** ** | **Beneficial                Ownership** | ** **                      | **Class**                     |
| **Directors**** **(16)                                                                      |       |                                    |                            |                          |   |
| Michael                J. Bradley                                                                |       | 10,000                                  |                            |                          | * |
| Carlos                C. Campbell                                                                |       | 47,411                                  | (1)(2)                          |                          | * |
| Edward                E. Cohen                                                                   |       | 2,555,711                               | (4)(6)(7)(8)(9)(10)             |                          | 13.94% |
| Jonathan                Z. Cohen                                                                 |       | 1,655,529                               | (3)(4)(6)(7)(8)(11)             |                          | 8.89% |
| Kenneth                A. Kind                                                                   |       | 8,115                                   |                            |                          | * |
| Andrew                M. Lubin                                                                   |       | 45,771                                  | (1)(2)                          |                          | * |
| John                S. White                                                                     |       | 45,931                                  | (1)(2)                          |                          | * |
|                                                                                             |       |                                    |                            |                          |   |
| **Non-Director                Executive Officers**(16)                                           |       |                                    |                            |                          |   |
| Thomas                C. Elliott                                                                 |       | 45,882                                  | (3)(4)(5)(6)(7)                 |                          | * |
| Alan                F. Feldman                                                                   |       | 436,559                                 | (3)(6)(7)                       |                          | 2.47% |
| Steven                J. Kessler                                                                 |       | 221,499                                 | (3)(4)(6)(7)(8)                 |                          | 1.27% |
| Michael                S. Yecies                                                                 |       | 98,895                                  | (3)(4)(6)(7)                    |                          | * |
| All                named executive officers and directors as a group (11                persons) |       | 5,104,788                               | (1)(2)(3)(4)(5)(6)(7)(8)(9)(10) |                          | 24.98% |
|                                                                                             |       |                                    |                            |                          |   |
| **Other                Owners of More Than****5%                of Outstanding Shares**          |       |                                    |                            |                          |   |
| Cobalt                Capital Management, Inc.                                                   |       | 1,574,542                               | (12)                            |                          | 9.11% |
| Leon                G. Cooperman                                                                 |       | 1,157,700                               | (13)                            |                          | 6.69% |
| Dimensional                Fund Advisors Inc.                                                    |       | 976,744                                 | (14)                            |                          | 5.65% |
| Spencer                Capital Management, LLC                                                   |       | 2,442,872                               | (15)                            |                          | 14.13% |

----

| (1) | Includes                vested units representing the right to receive one share of common                stock                per unit granted under our 1997 Non-Employee Directors Deferred Stock                and                Deferred Compensation Plan in the following amounts: Mr. Campbell                - 34,690                units; Mr. Lubin - 34,690 units; and Mr. White - 34,690 units. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Includes                vested units representing the right to receive one share of common                stock                per unit granted under our 2002 Plan in the following amounts: Mr.                Campbell - 10,241 units; Mr. Lubin - 10,241 units; and Mr. White                - 10,241                units. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes                shares allocated under our ESOP in the following amounts: Mr. J.                Cohen -                2,237 shares; Mr. Elliott - 773 shares; Mr. Feldman -                677 shares; Mr. Kessler - 2,331 shares; and Mr. Yecies - 1,815 shares,                as                to which each has voting power. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Includes                shares allocated under our 401(k) plan in the following amounts:                Mr. E.                Cohen - 21,789 shares; Mr. J. Cohen - 15,030 shares; Mr. Elliott                - 6,446                shares; Mr. Kessler - 15,904 shares; and Mr. Yecies - 2,697 shares,                as to                which each has voting power. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes                2,312 shares issuable on exercise of options granted under our 1997                Key                Employee Stock Option Plan. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Includes                shares issuable on exercise of options granted under our 1999 Key                Employee                Stock Option Plan in the following amounts: Mr. E. Cohen - 637,089                shares;                Mr. J. Cohen - 696,394 shares; Mr. Elliott - 8,767 shares; Mr. Feldman                -                49,519 shares; Mr. Kessler - 49,796 shares; and Mr. Yecies - 69,381                shares. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (7) | Includes                shares issuable on exercise of options granted under our 2002 Key                Employee                Stock Option Plan in the following amounts: Mr. E. Cohen - 392,073                shares;                Mr. J. Cohen - 346,908 shares; Mr. Elliott - 11,564 shares; Mr. Feldman                -                363,504 shares; Mr. Kessler - 27,697 shares; and Mr. Yecies - 23,127                shares. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Includes                shares issuable on exercise of options granted under our 2005 Omnibus                Equity Compensation Plan in the following amounts: Mr. E. Cohen -                4,839                shares; Mr. J. Cohen - 275,000 shares; Mr. Elliott - 16,020 shares;                Mr.                Kessler - 35,000 shares and Mr. Yecies - 1,875                shares. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Includes                449,516 shares held by a private charitable foundation of which Mr.                E.                Cohen serves as a co-trustee. Mr. E. Cohen disclaims beneficial ownership                of these shares**.** |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Includes                92,500 shares held in trusts for the benefit of Mr. E. Cohen’s spouse                and/or children. Mr. E. Cohen disclaims beneficial ownership of these                shares. 46,250 of these shares are also included in the shares referred                to                in footnote 11 below. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Includes                46,250 shares held in a trust of which Mr. J. Cohen is a co-trustee                and                co-beneficiary. These shares are also included in the shares referred                to                in footnote 10 above. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | This                information is based on Schedule 13G/A filed with the SEC on February                9,                2006. Includes 1,574,542 shares as to which shared voting and dispositive                power is claimed. The address for Cobalt Capital Management, Inc.                is 237                Park Avenue, Suite 900, New York, New York                10012. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | This                information is based on Schedule 13G filed with the SEC on February                8,                2006. Includes 626,000 shares as to which sole voting and dispositive                power is claimed and 531,700 shares as to which shared voting and                dispositive power is claimed. Mr. Cooperman’s address is 88 Pine Street,                Wall Street Plaza, 31st                Floor, New York, New York 10005. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | This                information is based on Schedule 13G/A filed with the SEC on February                6,                2006. Dimensional Fund Advisors Inc. (“Dimensional”), an investment                advisor registered under Section 203 of the Investment Advisors Act                of 1940, furnishes investment advice to four investment companies                registered under the Investment Company Act of 1940, and serves as                investment manager to certain other commingled group trusts and separate                accounts. It refers to these investment companies, trusts and accounts                as                the Funds. In its role as investment advisor or manager, Dimensional                possesses investment and/or voting power over 976,744 shares of the                Company’s common stock as of December 31, 2005. The Funds own all of                these securities. Dimensional disclaims beneficial ownership of such                securities. The address for Dimensional Fund Advisors Inc. is 1299                Ocean                Avenue, 11th                Floor, Santa Monica, California                90401. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | This                information is based on a Form 4 filed with the SEC on August 28,                2006.                Includes 1,891,879 shares as to which shared voting power and shared                dispositive power is claimed. The address for Spencer Capital Management,                LLC is 1995 Broadway, Suite 1801, New York, New York                10023. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16) | The                address for all our directors and officers is One Cresent Drive,                Suite                203, Navy Yard Corporate Center, Philadelphia, PA                19112. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Equity      Compensation Plan Information**

|                                                                                 | **(a)**                                                                                                                          | **(b)**                                                                                                          | **(c)**                                                                                                                                                                                                                        |
|--------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Plan                category**                                                     | **Number                of Securities to be Issued Upon Exercise of Outstanding Options,****Warrants                and Rights** | **Weighted-Average                Exercise Price of Outstanding Options,****Warrants                and Rights** | **Number                of Securities Remaining Available**** for                Future Issuance Under Equity Compensation**** Plans                Excluding Securities****Reflected                in Column (a)** |
| Equity                compensation plans approved                by security holders | 3,865,296                                                                                                                        | $7.54                                                                                                            |                     821,698                                                                                                                                                                                |

----

**ITEM      13. **
**CERTAIN      RELATIONSHIPS AND RELATED TRANSACTIONS**

|                                                                                |   | **September                30, 2006** |   |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
| **Receivables                from managed entities and related parties:**           |   |                                  |   |
| Commercial                finance investment partnerships                           |   | $                                     | 3,938  |   |
| Financial                fund management entities                                   |   |                                  | 2,064  |   |
| RCC                                                                                 |   |                                  | 1,409  |   |
| Real                estate investment partnerships and TIC property interests  |   |                                  | 952    |   |
| Atlas                America                                                        |   |                                  | 265    |   |
| Anthem                Securities                                                    |   |                                  | 154    |   |
| Other                                                                               |   |                                  | 13     |   |
| Receivables                from managed entities                                    |   | $                                     | 8,795  |   |
| **Payables                due to managed entities and related parties:**            |   |                                  |   |   |
| Real                estate investment partnerships and TIC property interests  |   | $                                     | 1,325  |   |
| Anthem                Securities                                               |   |                                  | 254    |   |
| Payables                to managed entities                                         |   | $                                     | 1,579  |   |

|                                                                                                                              |   | **Year                Ended****September                30, 2006** |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
| **Financial                Fund Management -**                fees from managed entities                                     |   | $                                                                  | 8,726  |   |
| **Real                Estate**                -                fees from investment partnerships and TIC property interests  |   |                                                               | 11,452 |   |
| **Commercial                finance**                -                fees from investment partnerships                      |   |                                                               | 5,816  |   |
| **RCC:**                                                                                                                          |   |                                                               |   |   |
| Fees                and equity compensation                                                                                  |   |                                                               | 8,203  |   |
| Reimbursement                of expenses from RCC                                                                                 |   |                                                               | 718    |   |
| Dividends                received                                                                                                 |   |                                                               | 2,722  |   |
| **Atlas                America**                -                reimbursement of net costs and expenses                     |   |                                                               | 1,303  |   |
| **Anthem                Securities:**                                                                                             |   |                                                               |   |   |
| Payment                of operating expenses                                                                                 |   |                                                               | (1,166 | ) |
| Reimbursement                of costs and expenses from Anthem Securities                                                         |   |                                                               | 2,906  |   |
| **1845                Walnut Associates Ltd -**payment                of rent and operating expenses                         |   |                                                               | (450   | ) |
| **9                Henmar LLC -**payment                of broker/consulting fees                                            |   |                                                               | (479   | ) |
| **Ledgewood                P.C. -**payment                of legal services                                                  |   |                                                               | (472   | ) |

*Relationship      with Atlas America. *

*Relationship      with Anthem Securities. *

----

*Relationship      with 1845 Walnut Associates Ltd. *

*Relationship      with 9 Henmar. *

*Relationship      with Ledgewood P.C. *

*Relationship      with Retirement Trusts. *

*Relationship      with The Bancorp, Inc., or TBBK. *

*Relationship      with Certain Directors, Officers, Employees and Other Related      Parties.*

*            Relationship with Brandywine Construction & Management,      Inc.*

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**ITEM        14.**
**PRINCIPAL        ACCOUNTING FEES AND SERVICES**

**Audit        Fees **

**Audit−Related        Fees**

**Tax        Fees**

**All        Other Fees**

**Audit        Committee Pre-Approval Policies and Procedures**

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**PART        IV**

**ITEM        15.**
**EXHIBITS        AND FINANCIAL STATEMENT SCHEDULES **

| **1.  ** | **Financial                Statements** |
|--------------------|-----------------------------------------|
| **2.  ** | **Financial                Statement Schedules** |
|--------------------|--------------------------------------------------|
|                 a)   | Trapeza                Capital Manager, LLC Audited Financial Statements for the years ended                December 31, 2006 and 2005 * |
|----------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|
|         b)   | Trapeza                Management Group, LLC Audited Financial Statements for the years                ended                December 31, 2006 and 2005 * |
|----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **a)  ** | **Exhibits** |
|--------------------|--------------|

**           Exhibit No.**
**Description**

|   | 3.1     | Restated                  Certificate of Incorporation of Resource America. (1)                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 3.2     | Amended                  and Restated Bylaws of Resource America, Inc. (1)                                                                                                                                                                                                                                                                                                                                                                                   |
|   | 10.1    | Master                  Separation and Distribution Agreement between Atlas America, Inc.                  and                  Resource America, Inc. dated May 14, 2004. (2)                                                                                                                                                                                                                                                                               |
|   | 10.2    | Registration                  Rights Agreement between Atlas America, Inc. and Resource America,                  Inc.                  dated May 14, 2004. (2)                                                                                                                                                                                                                                                                                              |
|   | 10.3    | Tax                  Matters Agreement between Atlas America, Inc. and Resource America,                  Inc.                  dated May 14, 2004. (2)                                                                                                                                                                                                                                                                                                      |
|   | 10.4    | Transition                  Services Agreement between Atlas America, Inc. and Resource America,                  Inc.                  dated May 14, 2004. (2)                                                                                                                                                                                                                                                                                              |
|   | 10.5    | Employment                  Agreement between Steven J. Kessler and Resource America, Inc.,                  dated                  October 5, 1999. (1)                                                                                                                                                                                                                                                                                                     |
|   | 10.5(a) | Employment                  Agreement between Jonathan Z. Cohen and Resource America, Inc.,                  dated                  October 5, 1999. (9)                                                                                                                                                                                                                                                                                                     |
|   | 10.6(a) | Fourth                  Modification, dated June 30, 2005, of Revolving Credit Agreement,                  Revolving Credit Loan and Security Agreement dated July 27, 1999                  by and                  between Resource America, Inc., Resource Properties XXXIV, Inc.,                  Resource                  Properties XL, Inc., Resource Properties XXX, Inc., Resource Properties                  XXXI, Inc. and Sovereign Bank. (3) |
|   | 10.6(b) | Fifth                  Modification, dated September 29, 2005, of Revolving Credit Loan                  and                  Security Agreement dated July 27, 1999 by and between Resource                  America,                  Inc., Resource Properties XXXIV, Inc., Resource Properties XL,                  Inc.,                  Resource Properties XXX, Inc., Resource Properties XXXI, Inc. and                  Sovereign Bank. (4)        |
|   | 10.6(c) | Seventh                  Modification, dated July 2006, of Revolving Credit Loan and Security                  Agreement dated July 27, 1999 by and between Resource America,                  Inc.,                  Resource Properties XXX, Inc., Resource Properties XLI, Inc., Resource                  Capital Investor, Inc. and Sovereign Bank.                                                                                                     |
|   | 10.7(a) | Credit                  Agreement dated July 31, 2006 between LEAF Financial Corporation,                  LEAF                  Funding, Inc. and National City Bank and between Resource America,                  Inc.                  and National City Bank. (7)                                                                                                                                                                                       |

----

|   | 10.7(b)                    | Guaranty                  and Suretyship Agreement dated July 31, 2006 between Resource America,                  Inc., Resource Leasing, Inc. and National City Bank. (7)                                                                                                                                                |
|--------|----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10.7(c)                    | First                  Amendment to Credit Agreement dated August 14, 2006 between LEAF                  Financial                  Corporation, LEAF Funding, Inc. and National City Bank. (8)                                                                                                                           |
|   | 10.8                       | First                  Amendment to Guaranty of Payment dated June 18, 2004 between Resource                  America, Inc. and Commerce Bank, National Association. (2)                                                                                                                                                  |
|   | 10.9                       | Revolving                  Credit Agreement and Assignment dated as of May 27, 2004 among                  Lease                  Equity Appreciation Fund I, L.P., LEAF Financial Corporation and                  Sovereign                  Bank. (2)                                                                  |
|   | 10.10                      | Pooling                  and Servicing Agreement, dated July 13, 2005, among LEAF Funding,                  Inc.,                  LEAF Financial Corporation, Merrill Lynch, Pierce, Fenner & Smith                  Incorporated and The Bank of New York.                  (4)                                     |
|   | 10.10                  (a) | Assignment,                  Assumption and Amendment Agreement, dated September 29, 2006, among                  LEAF                  Funding, Inc., Merrill                  Lynch Equipment Finance LLC, Merrill Lynch Commercial Finance                  Corp.                  and U.S. Bank National Association. |
|   | 10.11                      | 2005                  Omnibus Equity Compensation Plan. (3)                                                                                                                                                                                                                                                               |
|   | 10.12                      | Grant                  of Incentive Stock Option Pursuant to the Resource America, Inc.                  2005                  Omnibus Equity Compensation Plan. (6)                                                                                                                                                      |
|   | 10.13                      | Grant                  of Non-Qualified Stock Option Pursuant to the Resource America,                  Inc. 2005                  Omnibus Equity Compensation Plan. (6)                                                                                                                                                  |
|   | 10.14                      | 2005                  Omnibus Equity Compensation Plan - Form of Stock Award Agreement                  (5)                                                                                                                                                                                                               |
|   | 10.15                      | Loan                  and Security Agreement, dated July 2006, among Resource America,                  Inc. and                  Commerce Bank, N.A.                                                                                                                                                                     |
|   | 21.1                       | Subsidiaries                  of Resource America, Inc.                                                                                                                                                                                                                                                                   |
|   | 23.1                       | Consent                  of Grant Thornton LLP.                                                                                                                                                                                                                                                                           |
|   | 31.1                       | Certification                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley                  Act of 2002.                                                                                                                                                                                     |
|   | 31.2                       | Certification                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley                  Act of 2002.                                                                                                                                                                                     |
|   | 32.1                       | Certification                  of Chief Executive Officer pursuant to Section 1350 18 U.S.C.,                  as adopted                  pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002.                                                                                                    |
|   | 32.2                       | Certification                  of Chief Financial Officer pursuant to Section 1350 18 U.S.C.,                  as adopted                  pursuant to Section 906 of the Sarbanes-Oxley Act of                  2002.                                                                                                    |

----

| (1)   | Filed                previously as an exhibit to our Quarterly Report on Form 10-Q for                the                quarter ended December 31, 1999 and by this reference incorporated                herein. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   | Filed                previously as an exhibit to our Quarterly Report on Form 10-Q for                the                quarter ended June 30, 2004 and by this reference incorporated                herein. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)   | Filed                previously as an exhibit to our Quarterly Report on Form 10-Q for                the                quarter ended June 30, 2005 and by this reference incorporated                herein. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)   | Filed                previously as an exhibit to our Annual Report on Form 10K for the                fiscal                year ended September 30, 2005 and by this reference incorporated                herein. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5)   | Filed                previously as an exhibit to our Report on Form 8-K filed on February                15,                2006 and by this reference incorporated                herein. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6)   | Filed                previously as an exhibit to our Annual Report on Form 10K/A for the                fiscal                year ended September 30, 2005 and by this reference incorporated                herein. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7)   | Filed                previously as an exhibit to our Report on Form 8-K filed on August                4, 2006                and by this reference incorporated                herein. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8)   | Filed                previously as an exhibit to our Report on Form 8-K filed on August                17,                2006 and by this reference incorporated                herein. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (9)   | Filed                previously as an exhibit to our Annual Report on Form 10K for the                fiscal                year ended September 30, 2000 and by this reference incorporated                herein. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|  /s/ Edward E. Cohen                                         |  Chairman of the Board                        |  December              14, 2006                   |
|-----------------------------------------------------------------------------|---------------------------------------------------------|--------------------------------------------------------|
|  EDWARD E. COHEN          |                                                    |                                                   |
|                                |                                                    |           |
|  /s/ Jonathan Z.              Cohen                          |  Director, President                          |  December              14, 2006                   |
|  JONATHAN Z. COHEN                                                |  and Chief Executive Officer                       |                                                   |
|                                                                        |                                                    |                                                   |
|  /s/ Carlos C.              Campbell                         |  Director                                          |  December              14, 2006                   |
|  CARLOS C. CAMPBELL                                                    |                                                    |                                                   |
|                                                                        |                                                    |                                                   |
|  /s/ Andrew M. Lubin                                         |  Director                                          |  December 14, 2006                                |
|  ANDREW M. LUBIN                                                       |                                                    |                                                   |
|                                                                        |                                                    |                                                   |
|  /s/ Michael J.              Bradley                         |  Director                                          |  December              14, 2006                   |
|  MICHAEL J. BRADLEY                                     |                                                    |                                                   |
|                                                                        |                                                    |                                                   |
|  /s/ Kenneth A. Kind                                         |  Director                                          |  December 14, 2006                                |
|  KENNETH A. KIND                                                       |                                                    |                                                   |
|                                                                        |                                                    |                                                   |
|  /s/ John S. White                                                     |  Director                                          |  December              14, 2006                   |
|  JOHN S. WHITE                                                         |                                                    |                                                   |
|                                                                        |                                                    |                                                   |
|  /s/ Steven J.              Kessler                          |  Executive Vice              President   |  December 14, 2006                                |
|  STEVEN J. KESSLER                                                     |  and Chief Financial Officer                       |                                                   |

----

**Resource      America, Inc. & Subsidiaries**

**SCHEDULE      III**

**Real      Estate and Accumulated Depreciation**

**September      30, 2006**

**(in      thousands)**

| **Column**                                                                                           |       | **Column**       |       | **Column**                                           |       | **Column**                                                                          |       | **Column**                                                                                |       | **Column**                                    |       | **Column**                                |       | **Column**                         |       | **Column**                                                                                    |       |
|------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|-------------------------------------------|------------|------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|
| **A**                                                                                                |       | **B**            |       | **C**                                                |       | **D**                                                                               |       | **E**                                                                                     |       | **F**                                         |       | **G**                                     |       | **H**                              |       | **I**                                                                                         |       |
| Description                                                                                          | ** ** | **Encumbrances** | ** ** | **Initial                  cost to Company**         | ** ** | **Cost                  Capitalized****Subsequent                  to Acquisition** | ** ** | **Gross                  Amount at which Carried at Close****of                  Period** | ** ** | **Accumulated                  Depreciation** | ** ** | **Date                  of Construction** | ** ** | **Date                  Acquired** | ** ** | **Life                  on which Depreciation in Latest Income is                  Computed** | ** ** |
| ** **                                                                                           | ** ** | ** **       | ** ** | **Buildings                  and Land Improvements** | ** ** | **Improvements****Carrying                  Costs**                                 | ** ** | **Buildings                  and Land Improvements Total**                                | ** ** | ** **                                    | ** ** | ** **                                | ** ** | ** **                         | ** ** | ** **                                                                                    |       |
| **Real                  estate owned - held for sale**                                               |       |             |       |                                                 |       |                                                                                |       |                                                                                      |       |                                          |       |                                      |       |                               |       |
| Vacant                  Commercial Retail                  Space, Richmond,                  VA |       | $                | 1,130      |                                                 | $          | 2,402                                                                               |       | $                                                                                         | −    |                                          | $          | 1,293                                     |       | $                                  | −    |                                                                                          |       | 1980 |   |   | 9/30/2003 | (b) |   | n/a |   |
|                                                                                                 |       |             |       |                                                 |       |                                                                                |       |                                                                                      |       |                                          |       |                                      |       |                               |       |                                                                                          |       |   |   |   |   |   |   |   |   |
| **Real                  estate owned**                                                               |       |             |       |                                                 |       |                                                                                |       |                                                                                      |       |                                          |       |                                      |       |                               |       |                                                                                          |       |   |   |   |   |   |   |   |   |
| Hotel,                  Savannah, GA                                                                 |       |             | 12,492     |                                                 |       | 10,187                                                                              |       |                                                                                      | −    |                                          |       | 14,352                                    |       |                               | 1,736      |                                                                                          |       | 1853 |   |   | 7/01/2003 | (a) |   | 40                  years |   |
|                                                                                                 |       |             |       |                                                 |       |                                                                                |       |                                                                                      |       |                                          |       |                                      |       |                               |       |                                                                                          |       |   |   |   |   |   |   |   |   |
| **FIN                  46 Assets**                                                                   |       |             |       |                                                 |       |                                                                                |       |                                                                                      |       |                                          |       |                                      |       |                               |       |                                                                                          |       |   |   |   |   |   |   |   |   |
| Commercial                  Retail, (c)St.                  Cloud, MI                                |       |             | 1,536      |                                                 |       | 2,300                                                                               |       |                                                                                      | −    |                                          |       | 2,300                                     |       |                               | 288        |                                                                                          |       | 1970 |   |   | 7/01/2003 | (a) |   | 40                  years |   |
|                                                                                                 |       |             |       |                                                 |       |                                                                                |       |                                                                                      |       |                                          |       |                                      |       |                               |       |                                                                                          |       |   |   |   |   |   |   |   |   |
| Commercial                  Retail, (c)    Elkins                  West, WV      |       |             | −    |                                                 |       | 1,600                                                                               |       |                                                                                      | −    |                                          |       | 1,600                                     |       |                               | 116        |                                                                                          |       | 1963 |   |   | 7/01/2003 | (a) |   | 40                  years |   |
|                                                                                                 |       | $                | 15,158     |                                                 | $          | 16,489                                                                              |       | $                                                                                         | −    |                                          | $          | 19,545                                    |       | $                                  | 2,140      |                                                                                          |       |   |   |   |   |   |   |   |   |

----

| (a) | Date                of FIN 46R adoption |
|-----|-----------------------------------------|

| (b) | Date                of foreclosure |
|-----|------------------------------------|

| (c) | Balances                as of June 30, 2006 due to one-quarter lag in reporting FIN 46-R                results |
|-----|-----------------------------------------------------------------------------------------------------------------|

----

**Resource      America, Inc. & Subsidiaries**

**SCHEDULE      III - (Continued)**

**Real      Estate and Accumulated Depreciation**

**September      30, 2006**

**(in      thousands)**

|                                                   |   | **Years                Ended September 30,** |    |
|--------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                   |   | **2006**                                     |    | **2005** |   | **2004** |   |
| Balance                at the beginning of the period  |   | $                                            | 141,127 |   | $ | 163,321 |   | $ | 301,111 |   |
| Additions                during period:                |   |                                         |    |   |   |   |   |   |   |   |
| Acquisitions                through foreclosure        |   |                                         | − |   |   | − |   |   | − |   |
| Other                acquisitions                      |   |                                         | − |   |   | − |   |   | − |   |
| Improvements,                etc.                      |   |                                         | − |   |   | 499 |   |   | 1,305 |   |
| Other                - basis adjustments               |   |                                         | 323     |   |   | − |   |   | − |   |
| Other                − reclass from other assets |   |                                         | 4,678   |   |   | − |   |   | − |   |
|                                                   |   |                                         | 146,128 |   |   | 163,820 |   |   | 302,416 |   |
|                                                   |   |                                         |    |   |   |   |   |   |   |   |
| Deductions                during the period:           |   |                                         |    |   |   |   |   |   |   |   |
| Cost                of real estate sold                |   |                                         | 126,177 |   |   | 3,372 |   |   | 35,330 |   |
| Other                − write down                |   |                                         | 406     |   |   | 19,321 |   |   | 3,423 |   |
| Other                − reclass to loans          |   |                                         | − |   |   | − |   |   | 100,342 |   |
| Balance                at close of period         |   | $                                            | 19,545  |   | $ | 141,127 |   | $ | 163,321 |   |

----

**Resource      America, Inc. & Subsidiaries**

**SCHEDULE      IV**

**Mortgage      Loans on Real Estate**

**September      30, 2006**

**(in      thousands)**

| **Column                A**                                           |   | **Column                B**      |                                       | **Column                C**            |   | **Column                D**              |   | **Column                E**    |   | **Column                F**                 |   | **Column                G**                     |   | **Column                H**                                                                             |   |
|-----------------------------------------------------------------------|--------|----------------------------------|--------------------------------------------|----------------------------------------|--------|------------------------------------------|--------|--------------------------------|--------|---------------------------------------------|--------|-------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|
| **Description**                                                       |   | **Interest                rate** |                                       | **Final                maturity date** |   | **Periodic                payment term** |   | **Prior                liens** |   | **Face                amount of mortgages** |   | **Carrying                amount of mortgages** |   | **Principal                amount of loans subject to delinquent principal or                interest** |   |
| **Second                Lien Loans**                                  |   |                             |                                       |                                   |   |                                     |   |                           |   |                                        |   |                                            |   |                                                                                                    |   |
| Office                building, Philadelphia,                PA       |   |                             | Fixed                interest rate of 9%   |                                   |   | 9/25/2002                                | (c)    |                           | (a)    |                                        | $      | −                                         |   | $                                                                                                       | 3,239  |   | $ | 2,627 |   | $ | − |   |
|                                                                  |   |                             |                                       |                                   |   |                                     |   |                           |   |                                        |   |                                            |   |                                                                                                    |   |   |   |   |   |   |   |   |
| Apartment                building, Hartford,                CT        |   |                             | Fixed                interest rate of 7.5% |                                   |   | 1/1/2009                                 |   |                           | (a)    |                                        |   | 12,993                                          |   |                                                                                                    | 21,194 |   |   | 7,967 |   |   | − |   |
|                                                                  |   |                             |                                       |                                   |   |                                     |   |                           |   |                                        |   |                                            |   |                                                                                                    |   |   |   |   |   |   |   |   |
| Office                building, Washington,                DC         |   |                             | Fixed                interest rate of 8%   |                                   |   | 8/1/2008                                 |   |                           | (b)    |                                        |   | −                                         |   |                                                                                                    | 37,527 |   |   | 13,232 |   |   | − |   |
|                                                                  |   |                             |                                       |                                   |   |                                     |   |                           |   |                                        |   |                                            |   |                                                                                                    |   |   |   |   |   |   |   |   |
| Office                building, Omaha,                NE              |   |                             | Fixed                interest rate of 8%   |                                   |   | 8/31/2011                                |   |                           |   |                                        |   | −                                         |   |                                                                                                    | 136    |   |   | 109 |   |   | − |   |
|                                                                  |   |                             |                                       |                                   |   |                                     |   |                           |   |                                        |   |                                            |   |                                                                                                    |   |   |   |   |   |   |   |   |
| Office                building, Philadelphia,                PA       |   |                             | Fixed                interest rate of 6%   |                                   |   | 4/27/2008                                |   |                           |   |                                        |   | −                                         |   |                                                                                                    | 2,814  |   |   | 2,814 |   |   | − |   |
|                                                                  |   |                             |                                       |                                   |   |                                     |   |                           |   |                                        |   |                                            |   |                                                                                                    |   |   |   |   |   |   |   |   |
| Multi-family                unit, Seabrook                Village, NJ |   |                             | Fixed                interest rate of 6%   |                                   |   | 11/30/2012                               |   |                           |   |                                        |   | −                                         |   |                                                                                                    | 1,835  |   |   | 1,835 |   |   | − |   |
|                                                                  |   |                             |                                       |                                   |   |                                     |   |                           |   |                                        | $      | 12,993                                          |   | $                                                                                                       | 66,745 |   | $ | 28,584 |   | $ | − |   |

----

| (a) | All                  net cash flows from related                  property. |
|-----|-----------------------------------------------------------------------------|

| (b) | No                  current payments. |
|-----|---------------------------------------|

| (c) | We                  have not foreclosed on the property and continue to forbear, because                  we                  receive all of the economic benefit from the underlying                  property. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Resource        America, Inc. & Subsidiaries**

**SCHEDULE        IV − (Continued)**

**Mortgage        Loans on Real Estate**

**September        30, 2006**

**(in        thousands)**

|                                                     |   | **Years                  Ended September 30,** |    |
|----------------------------------------------------------|--------|------------------------------------------------|---------|
|                                                     |   | **2006**                                       |    | **2005** |   | **2004** |   |
| Balance                  at the beginning of the period  |   | $                                              | 25,923  |   | $ | 24,066 |   | $ | 40,416 |   |
| Additions                  during period:                |   |                                           |    |   |   |   |   |   |   |   |
| New                  loans                               |   |                                           | 4,909   |   |   | 2,240 |   |   | 9,848 |   |
| Additions                  to existing loans             |   |                                           | 2,310   |   |   | 1,399 |   |   | 2,069 |   |
| Other                                                    |   |                                           | 465     |   |   | 860 |   |   | 1,958 |   |
|                                                     |   |                                           | 33,607  |   |   | 28,565 |   |   | 54,291 |   |
|                                                     |   |                                           |    |   |   |   |   |   |   |   |
| Deductions                  during the period:           |   |                                           |    |   |   |   |   |   |   |   |
| Loan                  converted to equity interest       |   |                                           | − |   |   | 369 |   |   | 7,442 |   |
| Collections                  of principal                |   |                                           | 5,023   |   |   | 2,273 |   |   | 22,783 |   |
|                                                     |   |                                           | 5,023   |   |   | 2,642 |   |   | 30,225 |   |
| Balance                  at end of fiscal year (d)  |   | $                                              | 28,584  |   | $ | 25,923 |   | $ | 24,066 |   |

----

| (d)   | This                balance does not include a note receivable which is not a mortgage                relating to a partial sale of our interest in a real estate                venture. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|