<PAGE>
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

                                   FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 1996

                                       OR

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

                        Commission file number    0-4408
                                                  ------

                              RESOURCE AMERICA, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                     72-0654145
    (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                    Identification Number)

           1521 Locust Street
       Philadelphia, Pennsylvania                              19102
 (Address of principal executive offices)                   (Zip Code)

       Registrant's telephone number, including area code:  (215) 546-5005

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

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

                              Title of each class
                     Common Stock, par value $.01 per share
                     --------------------------------------

                  Name of each exchange on which registered:
     The Company's Common Stock trades on the NASDAQ National Market System
     ----------------------------------------------------------------------
                          under the symbol "REXI"
                          -----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes [X]   No [ ]

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

The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based upon the closing price of such stock on December 20, 1996 was
approximately $51,881,974.

The number of outstanding shares of the registrant's Common Stock on December
20, 1996 was 3,550,928.

                    DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for registrant's 1997 Annual Meeting of
Shareholders to be held on March 17, 1997 are incorporated by reference in Part
III of this Form 10-K.
<PAGE>

                     RESOURCE AMERICA, INC. AND SUBSIDIARIES
                             INDEX TO ANNUAL REPORT
                                  ON FORM 10-K
                                                                           Page
                                                                           ----
PART I
       Item 1:   Business. . . . . . . . . . . . . . . . . . . . . . . .     1 
       Item 2:   Properties. . . . . . . . . . . . . . . . . . . . . . .    21
       Item 3:   Legal Proceedings . . . . . . . . . . . . . . . . . . .    21
       Item 4:   Submission of Matters to a Vote of Security Holders . .    22

PART II
       Item 5:   Market for the Registrant's Common Equity and Related
                 Stockholder Matters . . . . . . . . . . . . . . . . . .    22
       Item 6:   Selected Financial Data . . . . . . . . . . . . . . . .    23
       Item 7:   Management's Discussion and Analysis of Financial
                 Condition and Results of Operations . . . . . . . . . .    24
       Item 8:   Financial Statements and Supplementary Data . . . . . .    31
       Item 9:   Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure . . . . . . . . . .    60

PART III
      Item 10:   Directors, Executive Officers, Promoters, and
                 Control Persons of the Registrant . . . . . . . . . . .    61
      Item 11:   Executive Compensation. . . . . . . . . . . . . . . . .    61
      Item 12:   Security Ownership of Certain Beneficial Owners
                 and Management  . . . . . . . . . . . . . . . . . . . .    61
      Item 13:   Certain Relationships and Related Transactions. . . . .    61

PART IV
      Item 14:   Exhibits, Financial Statement Schedules and
                 Reports on Form 8-K . . . . . . . . . . . . . . . . . .    62

    Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    65


<PAGE 1>

                                     PART I

ITEM 1.  BUSINESS

GENERAL

       Resource America, Inc. and its subsidiaries (the "Company" or the
"Registrant") are Delaware corporations.  Registrant maintains its principal
executive office and headquarters for its asset acquisition and resolution
operations at 1521 Locust Street, Philadelphia, Pennsylvania, 19102, its energy
and accounting operations are centered at 2876 South Arlington Road, Akron,
Ohio, 44312, and its equipment leasing operations are located at 7 East Skippack
Pike, Ambler, Pennsylvania, 19002.  The Company's telephone number is (215)
546-5005.

       The Company is a specialty finance company engaged in three lines of
business: the acquisition and resolution of commercial real estate loans, "small
ticket" commercial equipment leasing, and energy operations, including natural
gas and oil production.

DESCRIPTION OF BUSINESS

       The Company's asset acquisition and resolution business involves the
purchase at a discount of relatively small (generally $1 million to $5 million
in purchase price), troubled commercial real estate loans from private market
sellers (primarily financial institutions), and the restructuring and
refinancing of those loans.  These loans typically involve legal and other
disputes among the lender, the borrower and/or other parties in interest, and
generally are secured by properties which are unable to produce sufficient cash
flow to fully service the loans in accordance with the original lender's loan
terms.  Since entering this business in 1991, the Company's loan portfolio has
grown to $100.5 million (before discounts) at September 30, 1996.  During the
fiscal years ended September 30, 1994, 1995 and 1996, the Company's yield on its
net investment in loans acquired (including gains on refinancings and sales of
participations) equalled 30.8%, 34.6% and 36.2%, respectively, while its gross
profits from its loan activities for fiscal 1994, 1995 and 1996 were $2.3
million, $5.3 million and $6.7 million, respectively.

       The Company seeks to reduce the amount of its own capital invested in
loans after their acquisition, and to enhance its returns, through prompt
refinancing of the properties underlying its loans, or through sale at a profit
of senior participations in its loans (typically on a recourse basis).  At
September 30, 1996, senior lenders held outstanding obligations of $38.7
million, secured by properties with an aggregate appraised value of $68.2
million, resulting in a ratio of senior lien obligations-to-appraised value of
property of 56.7%.  Currently, the operating cash flow coverage on the required
debt service on refinancings and participations (exclusive of proceeds from such
refinancings and participations) is 160.8%.  The balance of operating cash flow
is, pursuant to agreements with the borrowers, retained by the Company as debt
service on the outstanding balance of the Company's loans.

       In September 1995, the Company entered the commercial leasing business
through its acquisition of the leasing subsidiary of a regional insurance
company.  This acquisition provided the Company with a servicing portfolio of
approximately 520 individual leases held by six leasing partnerships which
provided the Company with a servicing revenue stream of $1.1



                                     1


<PAGE 2>

million during fiscal 1996.  More importantly, through this acquisition the
Company acquired an infrastructure of operating systems, computer hardware and
proprietary software (generally referred to as a "platform"), as well as
personnel, which the Company is utilizing to develop its commercial leasing
business for its own account.

       In order to develop this business, in early 1996 the Company hired a team
of four experienced leasing executives, including the former chief executive
officer of the U.S. leasing subsidiary of Tokai Bank, a major Japanese banking
institution.  The Company's strategy in developing its leasing business is to
focus on leases with equipment costs of between $5,000 to $100,000 (with a
targeted average transaction of approximately $15,000 per lease) ("small ticket"
leasing) and to market its equipment leasing product through vendor programs
with equipment manufacturers likely to generate $10 million or less annually in
equipment leases, regional distributors and other vendors. The Company has
currently entered into vendor program relationships with five vendors: Minolta
Corporation (copiers), Celsis Incorporated (microbial testing systems), American
Marabacom Communications (Teleco) (telephone systems), CSi (test equipemnt) and
ATI Communications (telephone systems). In addition, Lucent Technologies
(telecommunications equipment) has designated the Company as an authorized
lessor for its dealer distribution channel.  The Company believes that this
market is under-served by equipment lessors, banks and other financial
institutions, affording the Company a niche market with significant growth
potential.  From the inception of leasing activity for its own account in June
1996 through September 30, 1996, the Company has received 271 lease proposals
involving equipment with an aggregate cost of $6.5  million, approved 118 such
proposals involving equipment with an aggregate cost of $2.5 million, entered
into 39 transactions involving equipment with an aggregate cost of $711,000 and,
had 21 such proposals pending involving equipment with an aggregate cost of $1.3
million.  

       According to the Equipment Leasing Association of America ("ELA"), a
leading industry trade association, approximately 80% of all United States
businesses lease some portion of their equipment.  Leasing enables a company to
obtain the equipment it needs, while preserving cash flos and often receiving
favorable accounting and tax treatment.  The Company believes that small
businesses are becoming more aware of the economic benefits offered by equipment
leasing, and that small business leasing will therefore become an increasingly
important segment of the leasing market.

       The Company produces natural gas and, to a lesser extent, oil from
locations principally in Ohio, Pennsylvania and New York.  At September 30,
1996, the Company had a net investment of $11.3 million in its energy
operations, including interests in 769 individual wells owned directly by the
Company or through 52 partnerships and joint ventures managed by the Company. 
While the Company has focused its business development efforts on its specialty
finance operations over the past several years, its energy operations
historically have provided a steady source of revenues and tax benefits.


                                      2


<PAGE 3>

ASSET ACQUISITION AND RESOLUTION

STRATEGY

       Identification and Acquisition of Troubled Commercial Real Estate Loans. 
The Company believes that the success to date of its asset acquisition and
resolution business has been due in large part to its ability to identify and
acquire troubled commercial real estate loans which, due to legal or factual
disputes, operational difficulties or other problems, can be acquired at a
discount from the unpaid principal and interest amounts of the loan and the
estimated value of the underlying property.  A principal part of this strategy
is the Company's focus on relatively small commercial loans (generally $1
million to $5 million in purchase price) held by large private sector financial
institutions.  Due to the small size of these loans relative to a large
institution's total portfolio, the lender is often not able, or willing, to
devote the managerial and other resources necessary to resolve the problems to
which the loans are subject, and thus is sometimes willing to dispose of these
loans at prices favorable to the Company.  The Company, which offers to acquire
a loan quickly and for immediate cash, provides a convenient way for an
institution to dispose of these loans and to eliminate future work-out costs. 
The Company believes that the trend of consolidation in the banking industry may
cause an increase in the amount of smaller loans available for sale and provide
the Company significant opportunities for growth.

       Efficient Resolution of Loans.  The Company believes that a further
aspect of its success to date has been its ability to resolve problems
surrounding loans it has identified for acquisition.  The principal element of
this strategy is the cost-effective use of management and third-party resources
to negotiate and resolve disputes concerning a troubled loan or the property
securing it, and to identify and resolve any existing operational or other
problems at the property.  To implement this strategy, the Company has taken
advantage of the background and expertise of its management and has identified
third-party subcontractors (such as property managers and legal counsel)
familiar with the type of problems to which smaller commercial properties may
be subject and who have, in the past, provided effective services to the
Company.

       Refinancing or Sale of Participations in Portfolio Loans.  The Company
seeks to reduce its invested capital and enhance its returns through prompt
refinancing of the properties underlying its loans or through sales, at a
profit, of senior participations in its loans.  In so doing, the Company has in
the past obtained a return of a substantial portion (and in some cases all) of
its invested capital, which it will typically seek to reinvest in further loans,
while maintaining a significant continuing position in the original loan.  The
Company's strategic plan contemplates a continued growth in its loan portfolio,
in part through the liquidity provided by such sales or refinancings.

       DISPOSITION OF LOANS.  In the event a borrower does not repay a loan when
due (whether upon expiration of the Forbearance Agreement or otherwise), the
Company will seek to sell the property underlying the loan or otherwise
liquidate the loan.  In appropriate cases and for appropriate consideration, the
Company may agree to further forbearance.


                                       3


<PAGE 4>

MARKET FOR ASSET ACQUISITION AND RESOLUTION SERVICES

       The discounted loans acquired by the Company to date are secured by
commercial properties (multi-family housing, small office buildings or single-
user retail properties) which, while income producing, are unable to fully meet
debt service requirements set forth in their initial underwriting.  All of the
loans have been acquired from private sector entities (banks and other financial
institutions or institutional sellers) except for one loan purchased from the
United States Department of Housing and Urban Development.  Typically, the loans
identified by the Company for acquisition (and the properties securing them)
have been the subjects of complex and/or contentious factual and legal disputes,
operational difficulties or other problems demanding commitments of managerial
and other resources that are perceived by the selling institutions to be
inordinate relative to the comparatively small asset value of these loans.

       The market for asset acquisition and resolution services of the type
provided by the Company is, the Company believes, relatively new.  A major
impetus to this market has been the sales of packages of under-performing and
non-performing loans by government agencies, in particular the Resolution Trust
Corporation ("RTC") and Federal Deposit Insurance Corporation ("FDIC").  While
the need for asset acquisition and resolution services by governmental agencies
has declined in recent years (the RTC terminated its loan pool packaging and
sales operations on December 31, 1995, and any RTC assets remaining to be sold
at that time were transferred to the FDIC for sale), the Company believes (based
upon its operations to date) that a permanent market for these services is
emerging in the private sector as financial institutions realize that outside
specialists may be able to resolve troubled loan assets more cost-efficiently
than the institution's internal staff. Moreover, the sale of loan assets
provides the institutions with a means of disposing of under-performing loans,
thereby obtaining liquidity and improving the institution's balance sheet.  The
trend has been reinforced, management believes, by consolidation within the
banking industry and, within the insurance industry, by the implementation of
risk-based capital rules.

ACQUISITION AND ADMINISTRATION

       Prior to acquiring any loan, the Company conducts an acquisition review. 
This review includes an evaluation of the adequacy of the loan documentation
(for example, the existence and adequacy of notes, mortgages, collateral
assignments of rents and leases, and title policies insuring first or other lien
positions) and other available information (such as credit and collateral
files).  The value of the property securing the loan is estimated by the Company
based upon a recent independent appraisal obtained by the borrower, an
independent appraisal obtained by the Company, or upon valuation information
obtained by the Company and thereafter confirmed by independent appraisal.  One
or more members of the Company's management makes an on-site inspection of the
property; where appropriate, the Company will require further inspections by
engineers, architects or property management consultants.   The Company may also
retain environmental consultants to review potential environmental issues.  The
Company obtains and reviews available rental, expense, maintenance and other
operational information regarding the property, prepares cash flow and debt
service analyses and reviews all pertinent information relating to any legal or
factual disputes to which the property is subject.  The amount of the Company's
offer to purchase is based upon the foregoing evaluations and analyses.  The
Company generally will not acquire a loan unless (i) current net cash flow from


                                     4


<PAGE 5>

the property securing the loan is sufficient to yield an immediate cash return
on the Company's investment of not less than 10% per annum, (ii) the ratio of
the Company's investment to the appraised value of the property underlying the
loan is less than 80%, (iii) there is the possibility of either prompt
refinancing of the loan by the borrower after acquisition, or sale by the
Company of a participation, that will result in an enhanced yield to the Company
on its (reduced) funds still outstanding and (iv) there is the possibility of
substantial increase in the value of the property underlying the loan over its
appraised value, increasing the potential amount of the loan discount
recoverable by the Company at loan termination.  On occasion the Company will
acquire a loan that does not meet one or more of the criteria specified above
if in the Company's judgment other factors make the loan an appropriate
investment opportunity.  The Company currently has in its portfolio six
in which the initial investment-to-appraised value of underlying property
exceeded 80%.  Also, the Company has acquired loans outside of its targeted
range of $1 million to $5 million (5 loans were acquired at a lesser cost, while
one loan was acquired at a greater cost), and as opportunities arise, may do so
in the future.  The Company is not limited by regulation or contractual
obligation as to the types of properties securing the loans it may seek to
acquire, the nature or priority of any lien or other encumbrance it may accept
with respect to a property, whether, after sale of a participation or a
refinancing, its interest in a loan must continue to be secured, the amount it
may invest in any one loan or the ratio of initial investment-to-appraised value
of the underlying property.

       As part of the acquisition process, the Company typically resolves
disputes relating to the loans or the underlying properties.  Through
negotiations with the borrower and, as appropriate or necessary, with other
creditors or parties in interest, the Company seeks to arrive at arrangements
that reflect more closely the current operating conditions of the property and
the present strategic position of the various interested parties.  Where
appropriate, the Company will offer concessions to assure the Company's future
control of the property's cash flow free from dispute.  These arrangements are
normally reflected in a Forbearance Agreement, pursuant to which the Company
agrees to defer foreclosure or other action so long as the arrangements
reflected in the Forbearance Agreement are met.  The Company also seeks to
resolve operational problems of the properties by appointment of a property
manager acceptable to it and may advance funds for purposes of paying property
improvement costs, unpaid taxes and similar items.  Prior to loan acquisition
the Company includes in its pre-acquisition analysis of loan costs and yields
an estimate of such advances.

       After acquiring a loan, the Company follows specified procedures to
monitor loan performance and compliance.  In particular, the Company requires
that all revenues from the property underlying the loan be paid into an
operating account on which the Company is the sole signatory.  All expenditures
with respect to a property (including debt service, taxes, operational expenses
and maintenance costs) are paid from that account and are reviewed and approved
by a senior officer of the Company prior to payment.  The Company further
requires that its approval be obtained before any material contract or
commercial lease with respect to a property is executed.  To assist it in
monitoring the loan, the Company requires that the borrower prepare a budget for
the property not less than sixty days prior to the beginning of a year, which
must be reviewed and approved by the Company, and submit both a monthly cash
flow statement and a monthly occupancy report.  The Company analyzes these
reports in comparison with each other and with account activity in the operating
account referred to above.


                                       5


<PAGE 6>

SALE OF PARTICIPATIONS AND REFINANCINGS

       In evaluating a potential loan, the Company places significant emphasis
on the likelihood of its being able to sell a participation on favorable terms
after the acquisition and/or the borrower's likely ability, with or without the
Company's assistance, to secure favorable refinancing.  When a loan is
refinanced, or a participation sold, the Company will obtain net refinance or
participation proceeds in an amount representing a major portion of (and
sometimes exceeding) the amount of its investment in the loan.  After such
refinancing or sale of a participation, the Company will typically retain an
interest in the loan, which is usually subordinated to the interest of the
refinance lender or loan participant.  

       Where a participation interest is sold, the balance of the Company's loan
outstanding at the time of sale remains outstanding, including as a part of that
balance the amount of the participation.  Thus, the Company's remaining interest
effectively "wraps around" the participation interest.  Typically, the interest
rate on the participation interest is less than the stated rate on the Company's
loan.  From debt service payments received by the Company, the Company remits
to the participant the debt service applicable to its interest, retaining the
balance.  Participations sold during 1994 and 1995 to PICO also obligated the
Company, in the event of a default on the related loan, to replace it with a
performing loan.

       Where a refinancing is effectuated, the Company reduces the amount
outstanding on its loan by the amount of net refinancing proceeds received by
it and either converts the outstanding balance of the original note (both
principal and accrued interest, as well as accrued penalties) into the stated
principal amount of an amended note on the same terms as the original note or
retains the original loan obligation as paid down by the amount of refinance
proceeds received by the Company.  As with participations, the interest rate on
the refinancing is less than the interest rate on the Company's retained
interest.  After sale of a participation or a refinancing, the Company's
retained interest may not be formally secured by a mortgage (because of
conditions imposed by the refinance lender), although it may be protected by a
judgment lien, an unrecorded deed-in-lieu of foreclosure, the borrower's
covenant not to further encumber the property without the Company's consent, or
a similar device.

FORBEARANCE AGREEMENTS

       On substantially all of its portfolio loans, the Company has entered into
Forbearance Agreements with borrowers pursuant to which (i) the Company agrees,
subject to receipt of minimum monthly payments, to defer the exercise of
existing rights to proceed on the defaulted loan (including the right to
foreclose), (ii) the Company directly receives the rents from the underlying
property and (iii) the borrower agrees to retain a property management firm
acceptable to the Company.   As a result of provision (iii), an affiliated
company, Brandywine Construction and Management, Inc. ("BCMI") has assumed
responsibility for supervisory and, in many cases, day to day management of the
underlying properties with respect to substantially all of the loans the Company
currently owns.  In five instances, the President of BCMI has also acted
as the general partner of the borrower.  The minimum payments required under a
Forbearance Agreement (generally related to anticipated cash flow from the
property after operating expenses) are normally materially less than the debt
service payments called for by the original terms of the loan.  The difference
between the minimum required payments under the Forbearance Agreement and the
payments called for by the original loan terms continues to


                                       6


<PAGE 7>

accrue, but (except for amounts recognized as an accretion of discount) are not
recognized as revenue to the Company until actually paid.  

       At the end of the term of a Forbearance Agreement, the borrower is
required to pay the loan in full.  The borrower's ability to do so, however,
will be dependent upon a number of factors, including prevailing conditions at
the underlying property, the state of real estate and financial markets
(generally and as regards the particular property), and general economic
conditions.  In the event the borrower does not or cannot do so, the Company
anticipates that it will seek to sell the property underlying the loan or
otherwise liquidate the loan.  Alternately, the Company anticipates that it
might, in appropriate cases, and for appropriate additional consideration,
agree to further forbearance.  

       An existing Forbearance Agreement remains in effect with no modifications
when the Company sells a participation in a loan.  In such instance, the
participant's interest is in the loan as modified by the terms of the
Forbearance Agreement.  However, when a borrower refinances a loan, the
Forbearance Agreement is thereby amended to (i) reflect the pay down of the loan
balance, (ii) acknowledge the existence of the refinancings and (iii) provide
for the continued effectiveness of all provisions of the Forbearance Agreement
for the term specified therein, except that where specific provisions of the
Forbearance Agreements are inconsistent with the terms of the refinancing, the
terms of the refinancing have priority.  In some refinancings, the refinance
lender may require that the borrower issue an amended note (a "retained interest
note") to reflect the reduction of the borrower's indebtedness to the Company
and, where applicable, any other revised terms (such as extension of the
forbearance period).

Loan Status

     Of the twenty-four loans in the Company's portfolio, eighteen were acquired
as first mortgage loans and six were acquired as junior lien obligations.  In
accordance with the Company's emphasis on acquiring loans in anticipation of
refinancing, borrowers on six of the Company's loans have obtained refinancing,
and the Company has sold participations in twelve loans.  After such
refinancings and sales of participation interests, the Company holds
subordinated interests in twenty-three loans, of which six interests are not
collateralized by recorded mortgages.  The following table sets forth the
Company's acquisition and refinancing activity from 1991 (the year the Company
commenced its asset acquisition and resolution operations) through
September 30, 1996:





                                     7


<PAGE 8>

<TABLE>
<CAPTION>

                                                                              Outstanding    Appraised Value 
Property    Type of                                                   Loan    Loan             of Property         Cost of
Number      Property        Location                Seller          Acquired  Receivable(1)  Securing Loan(2)   Investment(3)
--------  -----------     ------------       ---------------------  --------  -------------  ----------------   -------------
  <C>     <S>             <S>                <S>                     <C>    <C>                <C>               <C>
  001     Multifamily     Pennsylvania       Alpha Petroleum         1991     $8,276,838        $5,300,000        $4,597,849 
                                               Pension Fund                                                         
  002     Multifamily     Pennsylvania       CoreStates Bank(9)      1992      1,465,714           800,000           548,995 
  003     Multifamily     New Jersey         RAM Enterprises/        1993      2,512,965         1,350,000         1,307,962
                                               Glenn Industries                                                     
                                               Pension Plan                                                         
  004     Multifamily     Pennsylvania       St. Paul Federal Bank                                                  
                                               for Savings(12)       1993      1,431,763         1,125,000           842,445 
  005     Office          Pennsylvania       Shawmut Bank(9)         1993      5,665,620         1,600,000         1,207,197 
  006     Office/Retail   Virginia           Nationsbank(9)          1993      5,426,783         2,425,000         2,294,988 
  007     Single User     Minnesota          Prudential Insurance,   1993      4,294,167         2,515,000         1,362,421 
                                               Alpha Petroleum                                                      
          (Retail)                             Pension Fund                                                        
  008     Multifamily     Pennsylvania       Nomura/Cargill/         1994      5,261,804         1,950,000         1,612,674
                                               Eastdil Realty(13)                                                  
  009     Multifamily     Pennsylvania       Mellon Bank(9)          1995      1,558,308         1,730,000         1,358,884 
  010     Multifamily     Pennsylvania       RIVA Financial          1994      1,491,446           800,000           454,856 
  011     Office          Washington, D.C.   First Union Bank(9)     1995      1,060,532         2,000,000           927,986 
  012     Multifamily     Pennsylvania       CoreStates Bank(9)(12)  1995      2,999,874         1,825,000         1,272,809 
  013     Single User     California         California Federal      1995      2,997,375         2,400,000         1,671,695 
          (Commercial)                         Bank, FSB                                               
  014     Office          Washington, D.C.   Nomura/Cargill/                                        
                                               Eastdil Realty(13)    1995     14,702,547        11,000,000         8,546,218 
  015     Condo/          North Carolina     First Bank, South       1995      3,794,708         3,501,000         2,721,661 
          Multifamily                          Trust Bank (14)                                    
  016     Single User     California         Mass Mutual, Alpha      1995      6,695,368         3,000,000         2,073,470 
          (Retail)                             Petroleum                                              
                                               Pension Fund                                          
  017     Single User     West Virginia      Triester                1996      1,655,757         1,900,000           929,280 
          (Retail)                             Investments (9)                                        
  018     Single User     California         Emigrant Savings Bank,  1996      2,887,362         4,555,000         2,148,205 
          (Retail)                             Walter R. Samuels                                      
                                               and Jay Furman(16)                                     
  019     Multifamily     Pennsylvania       Summit Bancorp(9)       1996      4,851,557         4,600,000         3,756,201 
  020     Office          New Jersey         Cargill/Eastdil         1996      5,977,762         4,100,000         2,799,392 
                                               Realty(13)                                            
  021     Multifamily     Pennsylvania       Bruin Holdings/         1996      8,158,461         2,700,000         1,518,193 
                                               Berkeley Federal                                       
                                               Savings Bank                                           
  022     Multifamily     Pennsylvania       FirsTrust FSB           1996      3,269,049         3,250,000         2,284,775 
  023     Multifamily     Pennsylvania       Jefferson Bank          1996        606,225           510,000           412,206
  024     Multifamily     Pennsylvania       U.S. Dept. of Housing                                     
                                               & Urban Development   1996      3,477,631         3,300,000         2,528,976
                                                                                                      
                                                         Totals             $100,519,616       $68,236,000       $49,179,338

<CAPTION>
                                        8


<PAGE 9> 

           Proceeds from                                          Company's Net    Maturity of Loan/
           Refinancing or                                           Interest In       Expiration of
Property   Participations          Net           Carried Cost    Outstanding Loan     Forbearance 
 Number         Sold           Investment(4)   of Investment(5)    Receivables(6)      Agreement(7) 
--------   --------------      -------------   ----------------  ----------------  -----------------
  <C>       <C>         <C>      <C>              <C>            <C>                 <C>
  001        $2,570,000  (8)      $2,027,849       $2,410,664     $ 5,711,836         12/31/02
  002           575,000  (10)         26,005          179,980         865,714         10/31/98
  003           627,000              482,963          694,850       1,882,965           1/1/03
  004           871,000  (10)         28,555          226,968         535,763         10/31/98
  005           940,000  (10)        267,197        1,086,709       4,825,620         02/07/01
  006           840,000            1,454,988        1,537,546       4,537,883          7/31/98
  007         2,099,000             (736,579)         527,846       2,095,167         12/31/14
  008           934,300              678,374          721,212       4,148,809         07/31/98
  009           654,600              704,284          510,608         664,761          11/1/99
  010           575,000  (10)       (120,144)         112,467         891,446           9/2/99
  011           660,000  (10)        267,986          414,360         375,532         09/30/99
  012           954,000              153,460          747,640       1,731,874          12/2/99
  013         1,975,000  (10)       (303,305)         302,354         997,375           5/1/01
  014         6,487,000            2,059,218        3,170,843       7,825,020         11/30/98
  015         2,475,000  (8)         246,660          356,147       1,365,705         08/25/00
  016         2,375,000  (10)       (301,550)         428,703       4,295,368         12/31/19
  017           524,000  (8)         394,280          961,756       1,122,557         12/31/18 (15)
  018         1,969,000  (10)        179,783          782,973         918,362          11/1/98
  019         3,020,000              736,177          900,017       1,644,145         12/29/00
  020         2,562,000  (11)        237,392        1,536,729       3,377,762           2/7/01
  021         2,010,000  (10)       (491,807)         516,036       6,148,461  (17)     7/1/16 (17)
  022         1,250,000  (8)       1,034,775        1,060,176       2,019,049         10/31/98 (18)
  023           303,000  (8)         109,206          110,559         303,225         03/28/01 (19)
  024               -              2,528,976        2,500,624       3,477,631         11/01/22 (20)

  Totals    $37,249,900          $11,664,743      $21,797,768     $61,762,030

</TABLE>

                                       9


<PAGE 10>

(1)  Consists of the stated, or face value of the obligations plus accrued
     interest and penalties and the amount of senior secured interests at
     September 30, 1996.
(2)  The Company obtains appraisals on each of its properties at least once
     every three years.  Accordingly (with the exception of one appraisal for 
     property 5, which was completed in July 1993), appraisal dates range from
     1994 to 1996.
(3)  Consists of the original cost of the investment to the Company (including
     acquisition costs and the amount of any senior lien obligation to which the
     property remained subject) plus subsequent advances, but excludes the
     proceeds to the Company of the sale of participations or borrower
     refinancings.
(4)  Represents the unrecovered costs of the Company's investment (calculated
     as the cash investment made in acquiring the loan plus subsequent advances
     less cash received from sale of a participation in or borrower refinancing
     of the loan).  Negative amounts represent the receipt by the Company of
     proceeds from the sale of participations or borrower refinancings in excess
     of the Company's investment. 
(5)  Represents the cost of the investment carried on the books of the Company
     after accretion of discount and allocation of gains from the sale of a
     participation in or borrower refinancing of the loan. 
(6)  Consists of the amount set forth in the column "Outstanding Loan
     Receivable" less senior secured interests.
(7)  With respect to properties 6, 7, 8, 9, 14 and 19, the date given is for the
     maturity of the subordinated note for the residual loan balance received
     by the Company in connection with the refinancing.  For the remaining
     properties, the date given is the expiration date of the related
     Forbearance Agreement. 
(8)  Represents the amount of the senior lien in place on date of acquisition.
(9)  Successor by merger to the Seller.
(10) Participation sold to PICO.
(11) Participation sold to Commerce Bank, N.A.  The Company has the obligation
     to repurchase this participation on or after September 27, 2011 if the
     participation is not repaid in accordance with its terms.
(12) Seller was a wholly-owned subsidiary of this institution. 
(13) Seller was a partnership of these entities.
(14) The positions of these institutions are currently held by Gene M. and Anne
     S. Holbrooks, the guarantors thereof, who acquired these positions as part
     of the transaction in which the Company made its loan.
(15) The loan acquired consists of a series of notes becoming due yearly through
     October 31, 2018.  The notes are being paid in accordance with their terms
     and, accordingly, a Forbearance Agreement was not required.
(16) Amounts advanced by the Company were used in part to directly repay the
     loan of Emigrant Savings Bank; the balance was applied to purchase a note
     held by Messrs. Samuels and Furman. 
(17) The loan acquired consists of twenty-eight separate mortgage loans on
     thirty-two individual condominium units in a single building.  Nine of such
     loans are due on July 1, 2016, eighteen are due January 1, 2015 and one is
     due March 1, 2001.
(18) The senior lienor has the right to sell its interest to the Company on or
     after June 30, 2001 for an amount equal to the outstanding balance of such
     interest. 
(19) Includes a note for $14,948 which is payable to the Company on demand.
(20) Loan maturity date pursuant to a Provisional Workout Arrangement entered
     into betwee between borrower and the U.S. Department of Housing and Urban
     Development. Borrower is currect under these arrangements as of the date of
     this Prospectus.


                                      10

<PAGE 11>

         The following table sets forth the current monthly cash flow from each
of the properties underlying the Company's portfolio loans, the monthly debt
service payable to participants and refinance lenders and the current monthly
payment with respect to the Company's retained interest:

                                           Monthly Debt           Monthly 
                       Monthly Cash        Service on            Payment to
           Property     Flow from          Refinancing         the Company's  
            Number    Property (1)(2)   or Participations(3)    Interest (2) 
           --------   ---------------   --------------------   -------------

              001       $  30,533         $  17,626             $  12,907
              002           5,964             4,875                 1,089
              003           7,000             6,058                   942
              004           8,107             7,280                   827
              005          12,158             6,825                 5,333
              006          21,176             8,021                13,155
              007          20,400            20,400                   -
              008          23,971            10,670                13,301
              009          19,829             7,359                12,470
              010           6,750             4,875                 1,875
              011           8,000             5,566                 2,434
              012          15,833            10,317                 5,516
              013          19,000            15,833                 3,167
              014         107,218            58,551                48,667
              015          29,278            27,330                 1,948
              016          20,557            19,500                 1,057
              017           9,068             5,415                 3,653
              018          24,827  (4)       15,998                 8,829
              019          36,000            25,300                10,700
              020          22,667            20,884                 1,783
              021          16,577            16,331                   246
              022          25,408             8,075                17,333
              023           6,206             2,273                 3,933
              024          26,777               -                  26,777
                         --------          --------              --------
                         $496,527          $303,586              $192,941
                         ========          ========              ========

(1) "Cash Flow" as used herein is that amount equal to the operating revenues
    from property operations less operating expenses, including real estate and
    other taxes pertaining to the property and its operations, and before
    depreciation, amortization and capital expenditures. 
(2) Except as set forth in note (4), monthly cash flow from each of the
    properties has been calculated as the average monthly amount during the
    three months ended September 30, 1996.
(3) Monthly debt service consists of required payments of principal, interest
    and other regularly recurring charges payable to the holder of the
    refinancing loan or participation. 
(4) Includes one-fourth of an annual payment of $110,000 received in December
    of each year.

         All of the Company's portfolio loans are currently performing in
accordance with the terms set forth in their respective Forbearance Agreements
or remainder interest notes.


                                     11


<PAGE 12>

ACCOUNTING FOR DISCOUNTED LOANS 

         The difference between the Company's cost basis in a loan and the sum
of projected cash flows from, and the appraised value of, the underlying
property is accreted into interest income over the estimated life of the loan
using a method which approximates the level interest method.  The projected cash
flows from the property are reviewed on a regular basis and changes to the
projected amounts reduce or increase the amounts accreted into interest income
over the remaining life of the loan on a method approximating the level interest
method.

         The Company records the investments in its loan portfolio at cost,
which is significantly discounted from the face value of, and accrued interest
and penalties on, the notes.  This discount totaled $9.8 million, $16.1 and
$40.0 at September 30, 1994, 1995 and 1996, respectively.  The cost basis in the
various loans is periodically reviewed to determine that it is not greater than
the sum of the projected cash flows and the appraised value of the underlying
properties.  If the cost basis were found to be greater, the Company would
provide, through a charge to operations, an appropriate allowance.  For the
years ended September 30, 1994, 1995 and 1996, no such provision was required.

         Gains on the sale of a participation in or refinancings of a portfolio
loan are allocated between the portion of the loan sold or refinanced and the
portion retained based upon the fair value of those respective portions on the
date of sale or refinance.  The fair value of the loan is the current appraised
values of the property underlying the loan.  Any gain recognized on a sale of a
participation or a refinancing is brought into income on the date of such sale
or refinancing.

COMPETITION

         Although the asset acquisition and resolution business is intensely
competitive in virtually all of its aspects, the Company's focus on the
acquisition of relatively small troubled commercial real estate loans subject
to complex and/or contentious situations is a niche in which the Company's
believes there are relatively few, specialized investors.  In the overall market
for the acquisition of real estate obligations, however, there are a substantial
number of competitors (including investment partnerships, financial
institutions, investment companies, public and private mortgage funds and other
entities), many of which possess far greater financial resources than the
Company.  The Company's ability to add to its loan portfolio will depend on its
success in obtaining funding for the acquisition of additional mortgages.  In
raising such funds in the financial capital markets, the Company will have to
compete for capital based largely on the Company's overall financial performance
and, more specifically, the performance of the Company's loan portfolio.


EQUIPMENT LEASING

GENERAL

         The Company conducts its leasing operations through three separate
corporate divisions:  Fidelity Leasing, Inc. ("FLI"), which conducts the
Company's small ticket leasing operations; F.L. Partnership Management, Inc.
("FLPM"), which manages six public leasing partnerships formerly managed by
Fidelity; and FL Financial Services, Inc. ("FLFS"), which provides lease finance
placement and advisory services.  The Company's primary focus is on the
development of FLI and its small ticket leasing operation, which has only
recently commenced operations.


                                    12


<PAGE 13>

FLPM's operations will be reduced over the next several years as partnership
assets are sold and cash is distributed back to the investors.  FLPM does not
anticipate forming new limited partnerships in the future.  FLFS will continue
to operate its lease finance placement and advisory business which, while
profitable, is not expected to constitute a material source of revenues for the
Company.

STRATEGY

         FOCUS ON SMALL TICKET LEASING.  The Company focuses on leasing
equipment costing between $5,000 and $100,000.  By so doing, the Company takes
advantage not only of the background and expertise of its leasing management
team (which previously had managed the United States small ticket leasing
operations of Tokai Bank), but also of the servicing platform the Company has
acquired and developed, which has the capacity to monitor the large amounts of
equipment and related assets involved in a small-ticket leasing operation.  In
addition, small ticket items represent a substantial portion of the equipment
sought by small business, a segment of the end-user market the Company believes
is under-served by equipment lessors, banks and other financial institutions,
which affords the Company a niche market with significant growth potential. 
Moreover, the small size of a typical transaction relative to the Company's
total lease portfolio reduces the Company's credit risk exposure from any
particular transaction.

         FOCUS ON VENDOR PROGRAMS, PARTICULARLY WITH SMALLER MANUFACTURERS.  The
significant majority of equipment leased to end-user customers by the Company
will be purchased from manufacturers or regional distributors with whom the
Company is establishing vendor programs.  In so doing, the Company utilizes the
manufacturer's or distributor's sales organization to gain access to the
manufacturer's end-user base without incurring the costs of establishing
independent customer relationships.  The vendor relationship will typically
provide for the upgrade, refurbishment and remarketing of equipment purchased
and leased by the Company.  Through these relationships, and particularly with
respect to the vendor's involvement in remarketing the equipment, the Company's
profit opportunity from residual sales or re-leasing of equipment is enhanced. 
The Company is actively pursuing the establishment of multiple vendor programs
in an effort to reduce its reliance on any one vendor and, thus, to reduce the
risk of tying the success of the Company's leasing operations to the
continuation of a relationship with one (or a small group) of vendors.  The
Company has currently established programs with five manufacturers or
distributors.  The Company emphasizes the establishment of vendor programs with
smaller manufacturers (those likely to generate $10 million or less annually in
equipment leases) and regional distributors.  Historically, the Company's
primary competitors, most of whom are far larger than the Company, target
vendors with substantially larger leasing volumes.  As a result, the Company's
targeted group of vendors often do not have a relationship with an equipment
finance provider, again offering the Company a market niche with significant
growth potential.

         FOCUS ON LEASING TO SMALL BUSINESSES.  The Company focuses its
marketing programs and resources on lease programs for small business end-users
(generally those with 500 or fewer employees).  Because small business end-users
frequently are unable to provide standardized financial information for credit
analysis (for example, audited financial statements), the Company believes that
these end-users may be perceived by the Company's larger competitors as less
desirable credit risks thereby reducing competition for their business and
creating a niche market the Company believes it can profitably serve.  The
Company has acquired and developed credit evaluation and scoring systems (based
upon credit evaluation services provided by Dun & Bradstreet) which it believes
significantly reduce the perceived credit risk.  The Company also believes that
small business end-users, while sensitive to the size of a monthly lease
payment,


                                     13


<PAGE 14>

are less sensitive than large end-users to the interest rate structure of a
lease, allowing the Company to increase its yield by lengthening lease terms to
lower monthly rent.  The Company currently offers lease terms of from two to
five years to meet the needs of its end-users.

         FOCUS ON FULL-PAYOUT LEASES.  The Company seeks to reduce the financial
risk associated with the lease transactions it originates through the use of
full payout leases.  The principal benefit from this lease format is the
repayment to the Company during the lease term of its invested capital plus an
amount sufficient to cover its transaction costs and, typically, a return on its
invested capital.  The Company seeks to substantially increase this return
through amounts received upon remarketing the equipment or through continued
leasing of the equipment after expiration of the initial lease term.

         FOCUS ON PROVIDING SERVICE.  The Company provides service and support
to its small business customers and vendors by seeking to minimize the time
required to respond to customer applications for lease financing and by
providing sales training programs to its vendors and their sales staff (which
it customizes to their particular needs) regarding the use of lease financing
for marketing purposes to increase a vendor's equipment sales and market share. 
The Company has acquired and developed proprietary management systems to assist
it in providing lease quotes and application decisions to its customers,
generally within 24 hours after receipt of a request.

INDUSTRY OVERVIEW

         Equipment leasing is a significant factor in the financing of
productive assets by United States businesses.  According to the ELA, a leading
industry trade association, of the estimated $571.1 billion of such capital
expenditures in 1995 (up from $296.2 billion in 1986), $160.7 billion (up from
$85.0 billion in 1986) represented lease financing.  The ELA further estimates
that total capital expenditures will increase to $582.1 billion in 1996, of
which $169.1 billion (or 29%) will be acquired through leasing, a leasing growth
rate of 5.6%, slightly less than the average annual rate of 6.5%.

         The Company's targeted market is businesses with less than 500
employees and leases involving equipment with a cost of under $100,000. 
According to studies conducted by the U.S. Small Business Administration, in
1991 there were 5.7 million such businesses and an additional 8.9 million sole
proprietorships.  A 1995 survey conducted by the Federal Reserve Board found
that, in 1993, 9.2% of all small businesses used equipment
leasing services (not including vehicle leases), 14.0% used credit lines or
loans to acquire equipment and 7.5% obtained one or more leases from a leasing
company.  Moreover, in a 1995 survey of its membership, the ELA found that 30%
of all new leasing volume (by dollar amount) was for equipment costing under
$100,000, while 47.8 % of all new leasing volume (by number of transactions) was
for equipment costing under $100,000.  

         According to the ELA, approximately 80% of all United States businesses
lease some portion of their equipment.  Leasing enables a company to obtain
equipment it needs, while preserving cash flow and often receiving favorable
accounting and tax treatment.  Leasing, particularly with shorter term leases,
also provides a lessee with greater flexibility than ownership in the event it
outgrows its equipment or requires equipment upgrades.  The Company believes
that small businesses are becoming more aware of the economic benefits offered
by equipment leasing, and that small business leasing will therefore become an
increasingly important segment of the leasing market.


                                     14


<PAGE 15>

SMALL TICKET LEASING  

         The Company offers full pay-out leases with options, exercisable by the
lessee at the end of the lease term, either to purchase the equipment at fair
market value, to purchase the equipment for a fixed price negotiated at the time
the lease is signed, or to continue as a lessee on a month-to-month basis.  A
"full pay-out lease" is a lease under which the non-cancelable rental payments
due during the initial lease term are at least sufficient to recover the
purchase price of the equipment under the lease and related acquisition fees. 
The Company's leases have a provision which requires the lessee to make all
lease payments under all circumstances.  The leases are also net leases,
requiring the lessee to pay (in addition to rent) any other expenses associated
with the use of equipment, such as maintenance, casualty and liability
insurance, sales or use taxes and personal property taxes.  The Company also
offers lease terms of between two to five years and will consider other lease
terms in appropriate circumstances.  

         Equipment types initially being financed include telecommunication
systems, medical diagnostic and treatment equipment, document processing and
storage equipment, small manufacturing machines and office furniture.  The
Company will vary the equipment categories in which it is willing to lease based
upon the demands of its small business customers.

         The Company has developed credit evaluation and lease administration
systems based upon systems the Company acquired from Fidelity.  The credit
evaluation system, known as the "Small Business Credit Scoring System," is
intended to respond to the inability of small businesses to supply standardized
financial information for credit analysis (for example, audited financial
statements).  The system operates by assigning point amounts, or "scores," to
various factors (such as business longevity, type of business, payment history,
bank account balances and credit ratings) deemed relevant by the Company in
determining whether an end-user is a creditworthy lessee.  The scoring system
declines approval of end-users with low scores, approves end-users with high
scores and refers mid-range scores to credit analysts for further consideration
and decision.  Information is obtained from the end-user, from reports by
standard credit reporting firms and from reports provided by consumer credit
bureaus.  The credit scoring system is also based upon industry data and the
past experience of the Company and will be reviewed and modified as required in
response to actual portfolio performance.  Financial statements may be required
for larger transactions (in the $30,000 to $100,000 range) as a complement to
the scoring system.  

         The Company oversees its leasing program through a lease administration
and management system, known as the "Fidelity Asset Tracking System."  The
system currently administers 520 leases with respect to more than 12,500 pieces
of equipment for six public leasing partnerships managed by FLPM and has the
capacity to administer leases with respect to more than 200,000 pieces of
equipment.  The system controls invoicing, collection, sales and property taxes
and financial and other reporting to management (including reports regarding
regular payments, payment shortages, advance payments, security deposits,
insurance payments and late or finance charges).  The Company will supplement
the system with an internal audit department (which will evaluate the
safeguarding of assets, reliability of financial information and compliance with
the Company's credit policies) and a collection department.  

         The Company is marketing its leasing services primarily through the
establishment of vendor programs.  The Company has currently entered into vendor
program relationships with five vendors: Minolta Corporation (copiers), Celsis
Incorporated (microbial testing systems), American Marabacom Communications
(Teleco) (telephone systems), CSi (test equipment) and ATI Communications
(telephone systems).  In addition, Lucent Technologies


                                     15


<PAGE 16>

(telecommunications equipment) has designated the Company as an authorized
lessor for its dealer distribution channel.  Under a typical vendor program,
the Company will work with the vendor and the lessee to structure the lease,
finance the lease, purchase the related equipment and administer the lease,
including providing all billing and collection services (except for private-
label leasing, referred to below). At the end of the initial lease term, the
Company and the vendor will typically coordinate the re-marketing of the
equipment.  The Company seeks to establish vendor relationships by (i) obtaining
manufacturers' endorsements of the Company's finance programs, (ii) offering
inventory financing credit lines to a manufacturer's vendors, (iii) developing
customized sales training programs to offer to vendors and (iv) assisting the
manufacturers and their vendors in establishing a sales package including the
lease financing provided by the Company.  The Company anticipates that it will
also compete by establishing private-label leasing programs with its vendors.
Private-label leasing involves the lease by a vendor of its own equipment on a
lease form bearing the vendor's name as lessor (but otherwise identical to the
Company's lease form), the sale of the lease and equipment to the Company, and
the provision of basic administrative services by the vendor (such as billing
and collecting rent).  The Company will provide assistance, particularized
rental payment structures and other customized lease terms, remarketing,
customized invoicing and management information reports.  The Company also
seeks to develop programs marketing directly to end-user groups, primarily
through small business affinity groups or associations, participation in trade
shows and conventions, and media advertising.

         It is anticipated that a significant portion of the Company's revenues
from leasing operations will be derived from residuals.  The Company anticipates
that residuals will principally involve the original end-users; however,
equipment not sold or re-leased to end-users will be disposed of in the
secondary market.  While residual realization is generally higher with original
end-users than in the secondary market, the secondary market (essentially,
networks of distributors and dealers in various equipment categories) is well
developed in the product categories the Company intends to pursue and
transactions in these product categories have historically resulted in residual
recoveries, on average, equal to the book value of the equipment.  Equipment
reacquired by the Company prior to lease termination (through lease default or
otherwise) will be sold in the secondary market.  

PARTNERSHIP MANAGEMENT  

         The Company acts as the general partner and manager of six public
limited partnerships formed between 1985 and 1990 with total assets at September
30, 1996 of $39.9 million, including $24.2 million (book value) of equipment
with an original cost of $71.0 million.  A seventh partnership completed its
operations in the first quarter of fiscal 1996.  The partnerships lease computer
and related peripheral equipment to investment grade, middle market, capital
intensive companies.  The principal stated objective of each of the limited
partnerships is to generate leasing revenues for distribution to the investors
in the partnerships.

         For its services as general partner, the Company receives management
fees, an interest in partnership cash distributions and a reimbursement of
specified expenses related to administration of the partnerships (including
costs of non-executive personnel, legal, accounting and third-party contractor
fees and costs, and costs of equipment used in a partnership's behalf). 
Management fees range from 3% to 6% of gross rents except that, if leases are
full payout leases, management fees range from 1% to 3% of gross rents.  In four
of the partnerships, management fees are subordinated to the receipt by limited
partners of a cumulative annual cash distribution of 11% (two partnerships) or
12% (two partnerships) of the limited partners' aggregate investment.  The
Company's interest, as general partner, in cash distributions from the


                                           16


<PAGE 17>

partnerships is 5% (one partnership), 3.5% (one partnership) and 1% (four
partnerships). 


FINANCE PLACEMENT AND ADVISORY  

         The Company also operates a lease finance placement and advisory
business which focuses on two related types of leasing transactions:  the
origination of leases by others and the identification of third-party lease
funding sources.  Lease transactions generated by the division are generally
full payout leases.  The Company generally receives between 1% and 4% of the
equipment cost at the time the transaction is closed for its services in
arranging a transaction.  In some of the transactions it generates, the Company
also enters into a remarketing agreement that entitles it to fees upon residual
sale.  During fiscal 1996 lease finance and placement generated revenues of
$650,000.

COMPETITION  

         The Company believes that, although the small ticket leasing business
has experienced substantial consolidation in the past few years, the business
of equipment leasing remains highly competitive.  The Company believes, however,
that small ticket leasing, to be viable, requires the financing and monitoring
of large amounts of equipment and related assets.  Because of the complexity and
cost of developing and maintaining the platforms and vendor programs to handle
such high volumes, the Company believes that there are substantial barriers to
others entering into this business.  Accordingly, the Company believes that its
principal competitors are and will be primarily major financial institutions and
their affiliates.  The Company also believes that the scale on which these
competitors generally operate inhibits their attention to the needs of the
Company's targeted market of small manufacturers and regional distributors and
provides the Company with an under-served market niche.

ENERGY OPERATIONS

GENERAL  

         The Company produces natural gas and, to a lesser extent, oil from
locations principally in Ohio, Pennsylvania and New York.  At September 30,
1996, the Company had (either directly or through partnerships and joint
ventures managed by it) interests in 769 wells (of which the Company operates
579 wells), 310 miles of natural gas pipelines and 66,000 acres of mineral
rights.  Natural gas produced from wells operated by the Company is collected
in gas gathering pipeline systems owned by partnerships managed by the Company
(and in which the Company also has an interest) and by systems directly owned
by the Company, and is sold to a number of customers, such as gas brokers and
local utilities, under a variety of contractual arrangements.  Oil produced from
wells operated by the Company is sold at the well site to regional oil refining
companies at the prevailing spot price for Appalachian crude oil.


                                      17


<PAGE 18>

WELL OPERATIONS  

         The following table sets forth information as of September 30, 1996
regarding productive oil and gas wells operated by the Company for the
partnerships it manages as well as its own account both in gross and net to the
Company's interest:

                                           Number of Productive Wells
                                           --------------------------
                                            Gross(1)           Net(1)
                                            --------           ------

         Oil Wells. . . . . . . . . . . .      186                37
         Gas Wells. . . . . . . . . . . .      583               397
                                               ---               ---
            Total . . . . . . . . . . . .      769               435 
                                               ===               ===

---------------------------------                          
(1)  Includes the Company's equity interest in wells owned by 52 partnerships
and joint ventures.  Does not include royalty or overriding interests held by
the Company.

         The following table sets forth net quantities of oil and natural gas
produced, average sales prices, and average production (lifting) costs per
equivalent unit of production, for the periods indicated, including the
Company's equity interests in the production of 52 partnerships and joint
ventures, for the periods indicated.  

                  Production        Average Sales Price   Average Lifting Cost
             ---------------------  -------------------   --------------------
Fiscal Year  Oil (bbls)  Gas (mcf)   per bbl   per mcf    per Equivalent mcf(1)
-----------  ----------  ---------   -------   -------    ---------------------

   1996        33,862    1,165,477    $18.53    $2.34            $1.04 
   1995        36,420    1,198,245    $16.74    $2.31            $1.06 
   1994        34,002    1,161,685    $15.74    $2.45            $1.00 
   1993        30,788    1,178,727    $18.64    $2.39            $1.08       
                            
-----------------------------------
(1)  Oil production is converted to mcf equivalents at the rate of six mcf per
barrel.

         Neither the Company nor the partnerships and joint ventures it manages
are obligated to provide any fixed quantities of oil or gas in the future under
existing contracts.

EXPLORATION AND DEVELOPMENT  

         The following table sets forth information with respect to the number
of wells completed in Ohio and New York (the only areas in which Company
drilling activities occurred) at any time during fiscal 1993, 1994, 1995, and
1996, regardless of when drilling was initiated.  

              Exploratory Wells              Development Wells
              -----------------              -----------------
         Productive         Dry         Productive         Dry           
         ----------        -----        ----------        -----
        Gross    Net   Gross    Net    Gross    Net    Gross    Net
        -----    ---   -----    ---    -----    ---    -----    ---    
1996     3.0     .52    1.0     .29     2.0     1.50     -       -
1995     3.0     .36    2.0     .36     1.0      .87    2.0     1.75
1994     2.0     .18    2.0    1.18      -       -       -       -
1993      -      -       -      -        -       -       -       -


All drilling has been on acreage held by the Company.  The Company does not own
its own


                                    18

<PAGE 19>

drilling equipment; rather, it acts as a general contractor for well operations
and subcontracts drilling and certain other work to third parties.  

OIL AND GAS RESERVE INFORMATION  

         An evaluation of the Company's estimated proved developed oil and gas
reserves as of September 30, 1996, was verified by E.E. Templeton & Associates,
Inc., an independent petroleum engineering firm.  Such study showed, subject to
the qualifications and reservations therein set forth, reserves of 12.9 million
mcf of gas and 310,000 barrels of oil at September 30, 1996.  See Note 13 to the
Consolidated Financial Statements.

         The following table sets forth information with respect to the
Company's developed and undeveloped oil and gas acreage as of September 30,
1996.  The information in this table includes the Company's equity interest in
acreage owned by 52 partnerships and joint ventures.

                                   Developed Acreage        Undeveloped Acreage
                                  -------------------      --------------------
                                   Gross          Net       Gross         Net
                                  ------       ------      ------       ------

         Arkansas . . . . . . . .  2,560          403         -            - 
         Kansas . . . . . . . . .    160           20         -            - 
         Louisiana. . . . . . . .  1,819          206         -            - 
         Mississippi. . . . . . .     40            3         -            - 
         New York . . . . . . . . 12,861       10,738      14,599       13,558 
         Ohio . . . . . . . . . . 34,961       28,111      11,335       10,296 
         Oklahoma . . . . . . . .  4,243          635         -            - 
         Pennsylvania . . . . . .  2,365        1,742         -            - 
         Texas. . . . . . . . . .  4,520          209         -            - 
                                  ------       ------      ------       ------
                                  63,529       42,067      25,934       23,854
                                  ======       ======      ======       ======

         The terms of the oil and gas leases held by the Company's managed
partnerships and by the Company for its own account vary, depending upon the
location of the leased premises and the minimum remaining terms of undeveloped
leases, from less than one year to five years.  Rentals of approximately $7,600
were paid in fiscal 1996 to maintain leases on such acreage in force.

         The Company believes that the partnership, joint venture and Company
properties have satisfactory title.  The developed oil and gas properties are
subject to customary royalty interests generally contracted for in connection
with the acquisition of the properties, burdens incident to operating
agreements, current taxes and easements and restrictions (collectively,
"Burdens").  Presently, the partnerships and the Company are current with
respect to all such Burdens.  

         At September 30, 1996, the Company had no individual interests in any
oil and gas property that accounted for more than 10% of the Company's proved
developed oil and gas reserves, including the Company's interest in reserves
owned by 52 partnerships and joint ventures.


                                      19


<PAGE 20>

PIPELINE OPERATION  

         The Company operates, on behalf of three limited partnerships of which
it is both a general and limited partner (in which it owns 13%, 46% and 22%
interests), and for its own account, various gas gathering pipeline systems
totaling approximately 310 miles in length.  Such pipeline systems are located
in Ohio, New York and Pennsylvania.

WELL SERVICES  

         The Company provides a variety of well services to wells of which it
is the operator and to wells operated by independent third party operators. 
These services include well operations, petroleum engineering, well maintenance
and well workover and are provided at rates in conformity with general industry
standards.

SOURCES AND AVAILABILITY OF RAW MATERIALS  

         The Company contracts for drilling rigs and purchases tubular goods
necessary for the drilling and completion of wells from a substantial number of
drillers and suppliers, no one of which supplies a significant portion of the
Company's annual needs.  During fiscal 1995 and fiscal 1996 to date, the Company
faced no shortage of such goods and services.  The duration of the current
supply and demand situation cannot be predicted with any degree of certainty due
to numerous factors affecting the oil and gas industry, including selling
prices, demand for oil and gas, and governmental regulations.

MAJOR CUSTOMERS  

         The Company's natural gas is sold under contract to various purchasers.
For the year ended September 30, 1996, gas sales to two purchasers accounted for
13% and 29% of the Company's total production revenues.  Gas sales to one
purchaser individually accounted for approximately 16% and 15% of total revenues
from energy production for fiscal 1994 and 1995, respectively.

COMPETITION


         The oil and gas business is intensely competitive in all of its
aspects.  The oil and gas industry also competes with other industries in
supplying the energy and fuel requirements of industrial, commercial and
individual customers.  Domestic oil and gas sales are also subject to
competition from foreign sources.  Moreover, competition is intense for the
acquisition of leases considered favorable for the development of oil and gas
in commercial quantities.  The Company's competitors include other independent
oil and gas companies, individual proprietors and partnerships.  Many of these
entities possess greater financial resources than the Company.  While it is
impossible for the Company to accurately determine its comparative industry
position with respect to its provision of products and services, the Company
does not consider its oil and gas operations to be a significant factor in the
industry.  


                                     20


<PAGE 21>

MARKETS  

         The availability of a ready market for oil and gas produced by the
Company, and the price obtained therefor, will depend upon numerous factors
beyond the Company's control including the extent of domestic production, import
of foreign natural gas and/or oil, political instability in oil and gas
producing countries and regions, market demands, the effect of federal
regulation on the sale of natural gas and/or oil in interstate commerce, other
governmental regulation of the production and transportation of natural gas
and/or oil and the proximity, availability and capacity of pipelines and other
required facilities.  Currently, the supply of both crude oil and natural gas
is more than sufficient to meet projected demand in the United States.  These
conditions have had, and may continue to have, a negative impact on the Company
through depressed prices for its oil and gas reserves.

GOVERNMENTAL REGULATION  

         The exploration, production and sale of oil and natural gas are subject
to numerous state and federal laws and regulations.  Compliance with the laws
and regulations affecting the oil and gas industry generally increases the
Company's costs of doing business and consequently affects its profitability. 
Inasmuch as such regulations are frequently changing, the Company is unable to
predict the future cost or impact of complying with such regulations.  The
Company is not aware of any pending or threatened matter involving a claim that
it has violated environmental regulations which would have a material effect on
its operations or financial position.  


EMPLOYEES

         As of September 30, 1996, the Company employed 65 persons.


ITEM 2.  PROPERTIES

         The Company's executive office and headquarters for asset acquisition
and resolution operations is in Philadelphia, and is leased under an agreement
providing for rents of $49,600 per year through May 2000.  The Company's
equipment leasing headquarters is located in Ambler, Pennsylvania, and is leased
under agreements providing for rents of $125,000 per year through November 2000.
The Company owns a 9,600 square foot office building and related land in Akron,
Ohio, housing its energy and accounting operations.  The Company also maintains
two energy field offices in Ohio and New York and an equipment lease brokerage
office in California.  Rents paid for fiscal 1996 for these offices totalled
$188,900.


ITEM 3.  LEGAL PROCEEDINGS

       The Company and its subsidiaries are party to various routine legal
proceedings arising out of the ordinary course of its business.  Management
believes that none of these actions, individually or in the aggregate, will have
a material adverse effect on the financial condition or operations of the
Company.


                                     21


<PAGE 22>

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

       On September 9, 1996, the Company held a special shareholders' meeting
seeking approval of a proposed amendment to the Certificate of Incorporation of
the Company to increase the total number of shares of capital stock authorized
to 9 million shares of which 6.5 million shares were to be Class A Common Stock,
1.5 million shares were to be Class B Common Stock and 1 million shares were to
be Preferred Stock.  The tabulation of votes was as follows:

         In Favor         Against          Abstain          Broker Non-Votes
         --------         -------          -------          -----------------

         1,531,825        32,741           10,870                 0  



                                     PART II


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

       The Company's Common Stock is quoted on Nasdaq under the symbol "REXI." 
The following table sets forth the high and low sale prices, as reported by
Nasdaq, on a quarterly basis for the Company's last two full fiscal years.

         1996 (fiscal)                         High              Low
         --------------                       ------            ------

         Fourth Quarter . . . . . . . . .     $17.50            $12.00
         Third Quarter. . . . . . . . . .      21.19             12.83 
         Second Quarter . . . . . . . . .      16.23              7.43 
         First Quarter. . . . . . . . . .       8.63              6.58


         1995 (fiscal)                         High              Low
         --------------                       ------            ------

         Fourth Quarter . . . . . . . . .      $8.68             $4.80 
         Third Quarter. . . . . . . . . .       5.43              4.18 
         Second Quarter . . . . . . . . .       4.80              4.18 
         First Quarter. . . . . . . . . .       4.90              4.18


       As of December 20, 1996, there were 3,550,928 shares of Common Stock
outstanding held of record by 785 persons.  


                                       22


<PAGE 23>

       The Company has paid regular quarterly cash dividends since August 31,
1995, as follows:

         Dividend Payment Date            Per Share Dividends
         ---------------------            -------------------
         August 30, 1996                         $.10 
         May 31, 1996                            $.10 
         February 29, 1996                      $.094 
         November 30, 1995                      $.089 
         August 31, 1995                        $.089


       The Board of Directors, at a meeting held September 24, 1996, authorized
payment on November 29, 1996 of a dividend of $.10 per share to shareholders of
record on November 15, 1996.

       The Company declared and paid 6% stock dividends in January 1996 and
April 1996, and effected a five-for-two stock split in the form of a 150% stock
dividend in May 1996.  Under the terms of a senior secured note payable, the
payment of dividends on the Company's common stock is restricted unless certain
financial tests are met.

ITEM 6.       SELECTED FINANCIAL DATA

       Selected financial data as of and for the five years ended September 30,
1996 are as follows (all amounts in thousand except per share data):

                                         Fiscal Year Ended September 30, 
                                 --------------------------------------------
                                 1996      1995      1994      1993      1992 
                                 ----      ----      ----      ----      ---- 
Revenues
   Asset acquisition and
      resolution               $ 7,171   $ 6,114   $ 2,522   $   606   $   182 
   Equipment leasing             4,466       -         -         -         -
   Energy production             3,421     3,452     3,442     3,409     3,474
   Energy services               1,736     1,880     2,080     2,445     2,676
   Interest                        197       148       136       106       231 
                               -------   -------   -------   -------   -------
     Total Revenues             16,991    11,594     8,180     6,566     6,563

Income (loss) from continuing
   operations before
   income taxes                  7,353     3,344     1,209       634      (506)
Provision (benefit) for
   income taxes                  2,206       630      (100)       44      (100)
Income (loss) from continuing
   operations                    5,147     2,714     1,309       590      (406)

Net income (loss) per share
   (primary)                      1.88      1.23       .64       .30      (.21)
Cash dividends per common share    .38       .09       -         -         .13


Balance Sheet Data
   Total assets                 43,959    37,550    34,796    25,231    24,940
   Long-term debt less
      current portion            8,966     8,523     8,627       813       972
   Stockholders' equity         31,123    26,551    24,140    22,861    22,563


                                         23


<PAGE 24>

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


GENERAL

       The Company's operating results and financial condition over the past
several years reflects its shift in focus from its pre-existing energy
businesses to the development of specialty finance businesses. Between the
fiscal years 1994 and 1996, the Company's asset acquisition and resolution
operations grew from 31% of the Company's gross revenues and 30% of its total
assets to 42% of gross revenues and 50% of total assets. Equipment leasing
expanded in the year ended September 30, 1996 from 0% of gross revenues and
2% of its total assets to 26% of gross revenues and 5% of its total assets.
Oil and gas revenues (including energy services) declined from 68% of the
Company's gross revenues in fiscal 1994 to 30% of gross revenues in fiscal
1996, while related assets declined from 37% of total assets to 26% in the
same period, as the Company focused its efforts on expanding its asset
acquisition and resolution operations and on the development of its equipment
leasing operation. While the Company has generated only a small amount of
revenue from its leasing operations (as distinguished from its lease servicing
and partnership management revenues), it anticipates that both revenues from,
and assets used in, its leasing operations will grow significantly during
fiscal 1997 (although there can be no assurance that this will be the case).

RESULTS OF OPERATIONS: ASSET ACQUISITION AND RESOLUTION
       The following table sets forth certain information relating to the income
recognized on the Company's commercial real estate loan portfolio during the
periods indicated:

                                                 Years Ended September 30,
                                                1996        1995        1994
(Dollars in thousands)                          ----        ----        ----

Interest. . . . . . . . . . . . . . . . . .  $   1,899   $   2,246   $     799
Accreted discount . . . . . . . . . . . . .        954       1,176         602
Fees. . . . . . . . . . . . . . . . . . . .        675         963          25
Gains on refinancings and
  sale of participations  . . . . . . . . .      3,643       1,729       1,096
                                             ---------   ---------   ---------
Total . . . . . . . . . . . . . . . . . . .  $   7,171   $   6,114   $   2,522
                                             =========   =========   =========

Average balance of
     investment, net  . . . . . . . . . . .  $  19,804   $  17,683   $   8,179

Yield on net average balance  . . . . . . .      36.2%       34.6%       30.8%

       Revenues from asset acquisition and resolution operations increased to
$7.2 million in fiscal 1996 from $6.1 million in fiscal 1995 and $2.5 million in
fiscal 1994. These increases were attributable to increases of 111% (1996) and
58% (1995) in gains recognized on the refinancing of loans and sale of
participations in loans held by the Company. Fees decreased 30% in 1996


                                      24


<PAGE 25>

as compared to 1995 and increased significantly in 1995 as compared to 1994, due
to a reduction in the number of refinancings of, and sales of participations in,
certain of the Company's portfolio loans occurring during 1996 as compared to
1995, and an increase in the number of such refinancings and sales of
participations in 1995 as compared to 1994. The Company sold participation
interests in or refinanced eight and eleven loans during fiscal years 1996 and
1995 (representing an aggregated Company investment of $21.6 and $13.2 million),
respectively, as compared to $1.1 million on the refinancing of one loan
(representing an aggregate Company investment of $943,000) in fiscal 1994.

       During fiscal 1996, the Company purchased or originated nine real estate
loans, for a total cost of $15.1 million, as compared to seven loans for a total
of $13.6 million in fiscal 1995 and two loans for a total of $2.5 million in
fiscal 1994. In addition, the Company increased its investment in certain
existing loans by $1.7 million in fiscal 1996, $1.3 million in fiscal 1995 and
$717,000 in fiscal 1994 for purposes of paying for property improvement costs,
unpaid taxes and similar items relating to properties underlying portfolio
loans. All such items had been anticipated by the Company at the time of loan
acquisition and included in its analysis of loan costs and yields. In addition,
in fiscal 1996 the Company increased its investment in loans by $535,000 in
connection with its repurchase of PICO loan participations to facilitate 
borrower refinancings and received a note for $317,000 (thus increasing its
investment in loans) in connection with granting its consent to the sale
(subject to the Company's existing mortgage loan) of another property by a
borrower. Asset acquisition and resolution expenses decreased 35% in fiscal 1996
and rose significantly in 1995 compared to fiscal 1994. The decrease from fiscal
1995 to fiscal 1996 was a result of lower legal costs, which were in turn due to
a lesser number of refinancings of, and participations sold in, the Company's
portfolio loans. The increase from fiscal 1994 to fiscal 1995 was primarily a
result of higher legal and personnel costs associated with the expansion of
these operations. As a consequence of the foregoing, the Company's gross profit
(asset acquisition and resolution revenues less related expenses including
depreciation and amortization but without allocation of corporate overhead)
from asset acquisition and resolution operations increased from $2.3 million
for fiscal 1994 to $5.3 million for fiscal 1995 (134%) and to $6.7 million for
fiscal 1996 (25%).

RESULTS OF OPERATIONS: EQUIPMENT LEASING

       Equipment leasing revenues recognized to date represent fees (including
reimbursement of administrative costs) associated with managing portfolios of
equipment leases owned by limited partnerships in which a subsidiary of the
Company is a general partner, as well as the Company's pro rata share of income
from these partnerships and lease brokerage fees. The Company acquired this
business in September 1995 and accordingly, did not recognize revenues from this
sector until after the completion of fiscal 1995. At September 30, 1996, the
Company acted as general partner for six limited partnerships which held a total
of $24.2 million (book value) in lease assets. For the year ended September 30,
1996, the Company's servicing revenues from these equipment leasing partnerships
were $1.1 million and its reimbursement of administrative costs was $1.4
million. The Company also received revenues in the period of $1.3 million from
its interests in the equipment leasing partnerships and $650,000 from its lease
brokerage operations.

       Equipment leasing expenses include costs incurred in the management of
equipment leasing


                                      25


<PAGE 26>

partnerships in which the Company is a general partner. In accordance with the
terms of the related partnership agreements, the Company is reimbursed by the
partnerships for certain general and administrative expenses incurred and
allocable, directly or indirectly, to the partnerships. Such reimbursements are
included in equipment leasing revenue.

       Expenses associated with the start-up of the Company's "small ticket"
equipment leasing operation amounted to $411,000 for the year ended September
30, 1996. This new business segment is expected to grow significantly during
fiscal 1997 although there can be no assurance that this will be the case.

RESULTS OF OPERATIONS: ENERGY

       Oil and gas revenues from production sales remained essentially constant
for fiscal years 1994, 1995 and 1996.

       A comparison of oil and gas sales revenue, daily production volumes, and
average sales prices for the years indicated is as follows:
                                                                         
                                            Year Ended September 30,
                                       1996           1995          1994   
Sales (in thousands)                   ----           ----          ----

   Gas(1) . . . . . . . . . . . . .  $ 2,722        $ 2,762       $ 2,851    
   Oil. . . . . . . . . . . . . . .      627            610           535 
Production volumes
   Gas (mcf/day)(1) . . . . . . . .    3,184          3,283         3,183
   Oil (bbls/day) . . . . . . . . .       93            100            93
Average sales prices
   Gas (per mcf). . . . . . . . . .  $  2.34        $  2.31       $  2.45
   Oil (per bbl). . . . . . . . . .    18.53          16.74         15.74

(1) Excludes sales of residue gas and sales to landowners.

       Natural gas revenues from production sales decreased 1% in fiscal 1996
from fiscal 1995 due to a 3% decrease in production volumes partially offset by
a 1% increase in the average price per mcf of natural gas. In fiscal 1995,
natural gas revenues decreased 3% as a result of a 6% decrease in the average
price per mcf of natural gas partially offset by a 3% increase in production
volumes. Oil revenues increased by 3% in fiscal 1996 from fiscal 1995 due to an
11% increase in the average price per barrel which was partially offset by a 7%
decrease in production volumes. In fiscal 1995, oil revenues increased by 14%
over fiscal 1994 due to a 6% increase in the average price per barrel and a 7%
increase in production volumes. Primarily as a result of these changes, the
Company's gross profit from energy production (energy production revenues less
energy production and exploration costs) increased from $1.4 million for fiscal
1994 to $1.7 million for fiscal 1995 (20%) and to $1.8 million for fiscal 1996
(7%).

       The Company continues to experience normally declining production from
its properties located in New York State. This decline has been almost totally
offset by the acquisition of additional well interests in Ohio. The Company
participated in the drilling of three successful exploratory wells and two
successful developmental wells during fiscal 1996. The impact on


                                       26


<PAGE 27>

revenues from these wells, however, will not be fully realized or reflected on
the Company's financial statements until fiscal 1997. In fiscal 1995, the
Company participated in the drilling of three successful exploratory wells and
recompleted one successful development well whose impact on revenues began to
be realized in fiscal 1996.

       Energy services revenues decreased 8% in fiscal 1996 from fiscal 1995 and
10% in fiscal 1995 from fiscal 1994. These decreases resulted from a decrease in
the number of wells operated for limited partnerships managed by the Company.

       A comparison of the Company's production costs as a percentage of oil and
gas sales, and the production cost per equivalent unit for oil and gas for
fiscal years 1994, 1995 and 1996, is as follows:

Production Costs                           1996           1995           1994 
                                           ----           ----           ----
As a percent of sales . . . . . . . .       42%            44%            40%
Gas (mcf) . . . . . . . . . . . . . .    $ 1.04         $ 1.06         $ 1.00
Oil (bbl) . . . . . . . . . . . . . .    $ 6.23         $ 6.36         $ 6.01

       Production costs decreased 5% ($81,000) from fiscal 1995 to fiscal 1996
as a result of a decrease in the number of wells requiring cleanout and workover
operations. These operations are conducted on an as-needed basis and,
accordingly, costs incurred by the Company may vary from year to year.
Production costs increased 10% ($133,000) from fiscal 1994 to fiscal 1995, a
result of the acquisition of limited partnership interests in certain oil and
gas partnerships for which the Company serves as general partner and increased
workover costs in the Company's Ohio fields of operation.

       Exploration costs decreased 30% ($69,000) in fiscal 1996 from fiscal 1995
and 64% ($405,000) in fiscal 1995 from fiscal 1994. The 1996 decrease resulted
from a decrease in delay rentals and impairment of lease costs which resulted
from a termination of certain leases in New York State in fiscal 1995 and
reduced costs relating to dry holes. The 1995 decrease was due to decreases in
impairment costs, costs relating to abandonment of non-producing properties and
dry hole costs. During fiscal 1996 the Company participated in one exploratory
dry hole and had lease impairments totalling $50,000. During fiscal 1995, the
Company's participation in two exploratory dry holes and lease impairments and
delay rentals totalled $145,000. During fiscal 1994, the Company's participation
in two exploratory dry holes and the determination that an exploratory well
drilled in a previous year was not capable of economic production along with
lease impairments, totalled $547,000.

       Energy service expenses decreased $157,000 (15%) in fiscal 1996 from
fiscal 1995 and $105,000 (9%) in fiscal 1995 from fiscal 1994. These decreases
resulted from a decrease in the number of wells operated for third parties as a
result of normal production declines and well repurchases by the Company.

       Depreciation, depletion and amortization consist primarily of
amortization of costs relating to oil and gas properties. Amortization of oil
and gas property costs as a percentage of oil and gas revenues was 23% in fiscal
1996, 27% in fiscal 1995 and 28% in fiscal 1994. The variance from year to year
is directly attributable to changes in the Company's oil and gas reserve


                                       27


<PAGE 28>

quantities, product prices and fluctuations in the depletable cost basis of oil
and gas properties.  See Note 2 to the Consolidated Financial Statements.

       As a result of the foregoing, gross profit from energy services decreased
from $653,000 for fiscal 1994 to $515,000 for fiscal 1995 and increased to
$585,000 for fiscal 1996.

RESULTS OF OPERATIONS: OTHER INCOME (EXPENSE)

       General and administrative expense decreased 8% ($178,000) for the year
ended September 30, 1996 as compared to the same period in 1995 primarily as a
result of a decrease in executive compensation due to the death of a senior
officer in July 1995. General and administrative expense increased 19% from
fiscal 1994 to fiscal 1995. The increase in 1995 was a result of the payment of
incentive compensation to executive officers.

       Interest expense decreased $219,000 from fiscal 1995 to fiscal 1996, and
increased $781,000 from fiscal 1994 to fiscal 1995, reflecting the changes in
borrowings to fund the growth of the Company's asset acquisition and resolution
operations. In May 1994, the Company privately placed an $8.0 million Senior
Note. In December 1994, the Company borrowed $2.5 million from Jefferson Bank
and $2.0 million from PICO. The $2.5 million was repaid in June 1995 and the
$2.0 million was repaid in September 1995.

       The Company's effective tax rate increased from (8%) in fiscal 1994 to
19% in fiscal 1995 and 30% in fiscal 1996. Both the 1996 and 1995 increases were
the result of a continuing decrease in the generation of depletion (for tax
purposes) and tax credits in relation to net income. The increase for fiscal
1995 also resulted, in part, from the one-time effect in 1994 of the reversal of
a previously established valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

       Sources and (uses) of cash for the three years ended September 30, 1996,
are as follows:

(Dollars in thousands)                       1996       1995    1994   
                                             ----       ----    ----
Provided by operations. . . . . . . . . .   $ 2,959   $1,578   $2,258  
Used in investing activities. . . . . . .    (1,060)  (6,113)  (2,518) 
Provided by (used in) financing activities     (202)   4,395    2,096
                                            -------   ------   ------
                                            $ 1,697   $ (140)  $1,836 
                                            =======   ======   ======

       The Company had $4.2 million in cash and cash equivalents on hand at
September 30, 1996, as compared to $2.5 million at September 30, 1995 and $2.6
million at September 30, 1994. The Company's ratio of current assets to current
liabilities was 3.7:1 at September 30, 1996 and 2.9:1 on each of September 30,
1995 and 1994. Working capital at September 30, 1996 was $4.4 million as
compared to $2.6 million at both September 30, 1995 and September 30, 1994.

       Cash provided by operating activities increased $1.4 million, or 88%,
during fiscal 1996, as compared to fiscal 1995, and decreased $681,000, or 30%,
during fiscal 1995, as compared to fiscal 1994. The 1996 increase was primarily
the result of an increase in operating income in the asset acquisition and
resolution and equipment leasing businesses. The decrease in fiscal


                                      28


<PAGE 29>

1995 was primarily the result of decreases in accounts payable and other accrued
liabilities.

       The Company's cash used in investing activities decreased $5.1 million or
88% in fiscal 1996 as compared to fiscal 1995, and increased $3.6 million, or
143%, during fiscal 1995, as compared to 1994. The changes resulted primarily
from changes in the amount of cash used to fund asset acquisition and resolution
activities. The Company invested $15.1 million, $13.6 million and $2.5 million
in the acquisition of nine, seven and two loans in fiscal years 1996, 1995 and
1994, respectively. In addition, the Company advanced funds on existing loans
of $1.7 million, $1.3 million and $717,000 in fiscal years 1996, 1995 and 1994,
respectively, and in fiscal 1996 increased its investment in certain existing
loans by $852,000.

       Proceeds received upon refinancings or the sale of participations
amounted to $18.5 million, $10.2 million and $2.1 million in fiscal years 1996,
1995 and 1994, respectively. Cash used for capital expenditures increased
$280,000, or 34%, and decreased $219,000 or 21%, during fiscal years 1996 and
1995 over the previous periods. The 1996 increase includes $506,000 in capital
expenditures relating to start-up of small ticket leasing operations. The 1995
decrease was due to a decrease in purchases of additional working interests in
wells operated by the Company. During fiscal 1995 the Company also invested
$877,000 in the acquisition of a leasing company (see Note 10 to the
Consolidated Financial Statements). Cost of equipment acquired for lease
represents the equipment cost and initial direct costs associated with the start
up of small ticket leasing operations. The Company commenced leasing operations
for its own account in June 1996 and began to write leases in August 1996.

       The Company's cash flow provided by financing activities decreased $4.6
million during fiscal 1996, as compared to fiscal 1995, and increased $2.3
million in fiscal 1995 as compared to fiscal 1994. During fiscal 1994, the
Company issued the Senior Note in the amount of $8.0 million, of which $5.2
million was pledged, along with seven of the Company's portfolio loans, as
collateral and restricted as to its usage. The Company was, however, free to
use such restricted cash for the purpose of purchasing additional loans provided
such purchased loans were immediately pledged in place of the utilized cash.
During fiscal 1995, the Company (i) sold a $2.0 million loan participation,
(ii) borrowed $2.5 million and (iii) was able to release for corporate
investment purposes $4.9 million of the restricted cash as a result of the
purchase of loans for the Company's portfolio.

       In fiscal years 1996 and 1995, $756,000 and $161,000 were paid in
dividends, respectively. The determination of the amount of future cash
dividends, if any, to be declared and paid is in the sole discretion of the
Company's Board of Directors (subject to loan covenants) and will depend on the
various factors affecting the Company's financial condition and other matters
the Board of Directors deems relevant.

INFLATION AND CHANGES IN PRICES
  
       Inflation affects the Company's operating expenses and increases in those
expenses may not be recoverable by increases in finance rates chargeable by the
Company. Inflation also affects interest rates and movements in rates may
adversely affect the Company's profitability.

       The Company's revenues and the value of its oil and gas properties have
been and will


                                     29


<PAGE 30>

continue to be affected by changes in oil and gas prices. Oil and gas prices
are subject to fluctuations which the Company is unable to control or
accurately predict.

ENVIRONMENTAL REGULATION

       A continued trend to greater environmental and safety awareness and
increasing environmental regulation has resulted in higher operating costs for
the oil and gas industry and the Company. The Company believes environmental
and safety costs will continue to increase in the future. To date, compliance
with environmental laws and regulations has not had a material impact on the
Company's capital expenditures, earnings or competitive position. The Company
monitors environmental laws and believes it is in compliance with applicable
environmental regulations. The Company is unable to predict the impact of future
laws and regulations on the Company's operations.


                                    30


<PAGE 31>

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX
                                                                              
                                                                          PAGE
                                                                        NUMBER
                                                                        ------
RESOURCE AMERICA, INC.
  Report of Independent Certified Public Accountants. . . . . . . . . . . . 32 
  Consolidated balance sheets at September 30, 1996 and 1995. . . . . . . . 33 
  Consolidated statements of income for the years ended
     September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . .34 
  Consolidated statements of changes in stockholders' equity
     for the years ended September 30, 1996, 1995 and 1994. . . . . . . . . 35 
  Consolidated statements of cash flows for the years ended
     September 30, 1996, 1995 and 1994. . . . . . . . . . . . . . . . . . . 36 
  Notes to consolidated financial statements. . . . . . . . . . . . . . . . 37 


                                      31


<PAGE 32>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




Stockholders and Board of Directors

RESOURCE AMERICA, INC.

We have audited the accompanying consolidated balance sheets of Resource
America, Inc. and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended September 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. 

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Resource America,
Inc., and subsidiaries as of September 30, 1996 and 1995, and the consolidated
results of their operations and cash flows for each of the three years in the
period ended September 30, 1996, in conformity with generally accepted
accounting principles.

 /s/ Grant Thornton LLP

Cleveland, Ohio
October 25, 1996, except for Note 14, for which the date is November 26, 1996.


                                   32
<PAGE>
<PAGE 33>

Resource America, Inc.
Consolidated Balance Sheets
September 30, 1996 and 1995
                                                                              
                                                    1996              1995
ASSETS                                              ----              ----
  Current Assets
    Cash and cash equivalents. . . . . . . . .  $   4,154,516   $   2,457,432 
    Accounts and notes receivable. . . . . . .      1,478,702       1,303,556 

    Prepaid expenses and other current assets.        472,673         163,045 

    Total current assets . . . . . . . . . . .      6,105,891       3,924,033 
                                                -------------   -------------

  Net Investment in Direct Financing Leases
    (less provision for possible losses
    of $7,167) . . . . . . . . . . . . . . . .        729,446             -   

Property and Equipment
    Oil and gas properties and equipment
    (successful efforts) . . . . . . . . . . .     24,034,987      24,039,762 

    Gas gathering and transmission facilities.      1,535,781       1,514,127 

    Other. . . . . . . . . . . . . . . . . . .      1,666,085       1,072,243 
                                                -------------   -------------
                                                   27,236,853      26,626,132 
 
    Less accumulated depreciation, depletion,
       and amortization . . . . . . . . . . . .   (14,856,874)    (14,043,455) 
                                                -------------   -------------
                                                   12,379,979      12,582,677 

Investments in Real Estate Loans . . . . . . .     21,797,768      17,991,415 

Restricted Cash. . . . . . . . . . . . . . . .        935,346         904,409 

Other Assets (less accumulated amortization
    of $884,636 and $907,722). . . . . . . . .      2,010,498       2,147,430
                                                -------------   -------------
                                                 $ 43,958,928   $  37,549,964 
                                                =============   =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Accounts payable . . . . . . . . . . . . .   $    584,985   $     721,673
    Accrued liabilities. . . . . . . . . . . .        596,783         516,066
    Accrued income taxes . . . . . . . . . . .        376,946             -
    Current portion of long-term debt. . . . .        105,000          91,000
                                                 ------------   -------------
    Total current liabilities. . . . . . . . .      1,663,714       1,328,739

Long-term Debt, net of current portion . . . .      8,966,524       8,522,682
Deferred Income Taxes. . . . . . . . . . . . .      2,206,000       1,147,000
Commitments and Contingencies. . . . . . . . .            -               -

STOCKHOLDERS' EQUITY
    Preferred Stock, $1.00 par value,
    1,000,000 authorized shares. . . . . . . .            -               -
    Common Stock, $.01 par value,
    8,000,000 authorized shares. . . . . . . .         20,472           8,179
    Additional paid-in capital . . . . . . . .     21,760,695      19,214,210
    Retained earnings. . . . . . . . . . . . .     12,458,344      10,532,719
    Less treasury stock, at cost . . . . . . .     (2,698,985)     (2,721,437)
    Less loan receivable from ESOP . . . . . .       (417,836)       (482,128)
                                                -------------   -------------
    Total stockholders' equity . . . . . . . .     31,122,690      26,551,543
                                                -------------   -------------
                                                $  43,958,928   $  37,549,964 
                                                =============   =============

           See accompanying notes to consolidated financial statements.


                                        33
<PAGE>
<PAGE 34>

Resource America, Inc.
Consolidated Statements of Income 
Years Ended September 30, 1996, 1995 and 1994



                                         1996           1995            1994
    REVENUES
    Real estate finance. . . . . . . $  7,171,232   $  6,114,258   $  2,522,472 
    Equipment leasing. . . . . . . .    4,465,918            -              -
    Energy : production. . . . . . .    3,420,762      3,452,327      3,441,752
           : services. . . . . . . .    1,735,791      1,879,001      2,079,800
    Interest . . . . . . . . . . . .      197,410        148,331        135,546
                                     ------------   ------------   ------------
                                       16,991,113     11,593,917      8,179,570

COSTS AND EXPENSES
    Energy : exploration and
       production. . . . . . . . . .    1,581,901      1,732,388      2,003,745
           : services. . . . . . . .      869,435      1,026,136      1,131,457
    Real estate. . . . . . . . . . .      520,714        800,970        248,000
    Equipment leasing. . . . . . . .    2,339,141            -              -
    General and administrative . . .    2,087,265      2,265,036      1,900,917
    Depreciation, depletion and
       amortization  . . . . . . . .    1,368,555      1,334,956      1,346,602
    Interest   . . . . . . . . . . .      871,674      1,091,027        310,332
    Other - net. . . . . . . . . . .        6,842         (2,028)        22,274
                                     ------------   ------------   ------------
                                        9,645,527      8,248,485      6,963,327
                                     ------------   ------------   ------------
      Income from operations . . . .    7,345,586      3,345,432      1,216,243

OTHER INCOME (EXPENSE)
    Gain (loss) on sale of
       property. . . . . . . . . . .        7,165         (1,305)        (7,610)
                                     ------------   ------------   ------------

      Income before income taxes . .    7,352,751      3,344,127      1,208,633

      Provision (benefit) for
       income taxes . . . . . . . . .   2,206,000        630,000       (100,000)
                                     ------------   ------------   ------------
    Net income . . . . . . . . . .   $  5,146,751   $  2,714,127   $  1,308,633
                                     ============   ============   ============ 

Net income per common
   share - primary. . . . . . . . . .    $ 1.88          $ 1.23          $ .64
                                     ============   ============   ============
Weighted average common
   shares outstanding . . . . . . . .  2,756,900      2,235,400      2,076,100
                                     ============   ============   ============ 
 

Net income per common share - 
  fully diluted. . . . . . . . . . .     $ 1.87          $ 1.18          $ .62
                                     ============   ============   ============
Weighted average common shares
  outstanding . . . . . . . . .         2,763,000      2,292,700      2,117,100
                                     ============   ============   ============
  



           See accompanying notes to consolidated financial statements.


                                       34
<PAGE>
<PAGE 35>

Resource America, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Years Ended September 30, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                           Common Stock        Additional                      Treasury Stock          ESOP       Total 
                           ------------          Paid-in       Retained        --------------         Share    Stockholders'
                        Shares      Amount       Capital       Earnings     Shares       Amount       Amount      Equity
                       --------------------   -------------  ------------  ----------------------     ------   -------------
                       <C>         <C>        <C>           <C>            <C>        <C>           <C>         <C>
Balance, 
  September 30, 1993     817,912   $  8,179   $ 19,036,420  $  6,670,876   (115,545)  $(2,243,374)  $(610,711)  $ 22,861,390 
Treasury shares
   acquired                                                                 (15,857)     (194,063)                  (194,063)
Warrants issued                                    100,000                                                           100,000 
Repayment of 
   ESOP loan                                                                                           64,291         64,291
Net income                                                     1,308,633                                           1,308,633 
                       ---------   --------   ------------   -----------   --------   -----------   ---------   ------------
Balance, 
  September 30, 1994     817,912      8,179     19,136,420     7,979,509   (131,402)   (2,437,437)   (546,420)    24,140,251 
Treasury shares
   acquired                                                                 (21,298)     (284,000)                  (284,000)
Cash dividends                                                  (160,917)                                           (160,917)
Warrants issued                                     77,790                                                            77,790 
Repayment of
   ESOP loan                                                                                           64,292         64,292 

Net income                                                     2,714,127                                           2,714,127 
                       ---------   --------   ------------   -----------   --------   -----------   ---------   ------------
Balance, 
  September 30, 1995     817,912      8,179     19,214,210    10,532,719   (152,700)   (2,721,437)   (482,128)    26,551,543 
Treasury shares
   issued                                          (24,350)                   1,889        39,650                     15,300 
6% stock dividends        82,688        826      2,452,476    (2,453,302)                                               -
150% stock dividend    1,136,609     11,367                      (11,367)                                               - 
Issuance of stock
   under stock 
   option plan            10,000        100         77,400                                                            77,500 
Treasury shares
   acquired                                                                  (1,637)      (17,198)                   (17,198)

Cash dividends                                                  (756,457)                                           (756,457)
Warrants issued                                     40,959                                                            40,959 
Repayment of
   ESOP loan                                                                                           64,292         64,292 

Net income                                                     5,146,751                                           5,146,751 
                       ---------   --------   ------------   -----------   --------   -----------   ---------   ------------
Balance, 
  September 30, 1996   2,047,209   $ 20,472   $ 21,760,695   $12,458,344   (152,448)  $(2,698,985)  $(417,836)  $ 31,122,690 
                       =========   ========   ============   ===========   ========   ===========   =========   ============

</TABLE>

            See accompanying notes to consolidated financial statements


                                     35
<PAGE>
<PAGE 36>

Resource America, Inc.
Consolidated Statements of Cash Flows 
Years Ended September 30, 1996, 1995 and 1994 

<TABLE>
<CAPTION>
                                                                       1996           1995           1994
                                                                  -------------   ------------   ------------
<S>                                                               <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . .      $   5,146,751   $  2,714,127   $  1,308,633  
Adjustments to reconcile net income to net
    cash provided by operating activities:
        Depreciation, depletion, and amortization. . . . . .          1,368,555      1,334,956      1,346,602 
        Amortization of discount on senior note
            and deferred finance costs . . . . . . . . . . .             74,650         74,020         21,684  
        Provision for losses . . . . . . . . . . . . . . . .              7,167            -              -   
        Deferred income taxes. . . . . . . . . . . . . . . .          1,059,000        473,000       (160,000)   
        Accretion of discount. . . . . . . . . . . . . . . .           (953,776)    (1,175,887)      (346,151)  
        Gain on dispositions and investments . . . . . . . .         (3,649,714)    (1,727,227)    (1,088,159)   
        Property impairments and abandonments. . . . . . . .             70,562         56,497        547,342   
        Change in operating assets and liabilities:
            (Increase) decrease in accounts receivable                 (175,146)        81,084        (46,439)    
        (Increase) decrease in prepaid expenses and
                other current assets . . . . . . . . . . . .           (309,628)        87,914         46,658    
        Increase (decrease) in accounts payable                        (136,688)      (291,272)       227,492     
        Increase (decrease) in accrued income taxes                     376,946       (100,000)       100,000    
        Increase in other current liabilities  . . . . .                 80,717         50,494        300,804 
                                                                  -------------   ------------   ------------
        Net cash provided by operating activities. . . . . .          2,959,396      1,577,706      2,258,466 


CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisition of business, less cash acquired. . . . . . .                -         (876,535)           -    
    Capital expenditures . . . . . . . . . . . . . . . . . .         (1,097,122)      (817,139)    (1,036,545)  
    Cost of equipment acquired for lease . . . . . . . . . .           (731,483)           -              -   
    Proceeds from sale of assets . . . . . . . . . . . . . .         18,577,374     10,348,220      2,156,881   
    Increase in other assets . . . . . . . . . . . . . . . .           (151,914)       (59,452)      (540,774)    
    Increase in investments in real estate loans . . . . . .        (17,650,139)   (14,708,125)    (3,097,812)   
    Revenue recognized in excess of cash
        received on leases . . . . . . . . . . . . . . . . .             (6,869)           -              -   
                                                                    ------------   -----------   -------------
    Net cash used in investing activities. . . . . . . . . .         (1,060,153)    (6,113,031)    (2,518,250)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Long-term borrowings . . . . . . . . . . . . . . . . . .            536,201      2,000,000      8,000,000   
    Dividends paid . . . . . . . . . . . . . . . . . . . . .           (756,457)      (160,917)           -    
    (Increase) decrease in restricted cash . . . . . . . . .            (30,937)     4,864,030     (5,046,728)   
    Increase in other assets . . . . . . . . . . . . . . . .                -              -         (642,425)    
    Principal payments on debt . . . . . . . . . . . . . . .            (26,568)    (4,523,912)       (21,248)  
    Purchase of treasury stock . . . . . . . . . . . . . . .            (17,198)      (284,000)      (194,063) 
    Short-term borrowings. . . . . . . . . . . . . . . . . .                - 
    2,500,000            -   
    Proceeds from issuance of stock  . . . . . . . . . . . .             92,800           -              -    
                                                                   -------------   -----------   -------------
    Net cash provided by (used in) financing activities                (202,159)     4,395,201      2,095,536  
    Increase (decrease) in cash and cash equivalents                  1,697,084       (140,124)     1,835,752 
    Cash and cash equivalents at beginning of year                    2,457,432      2,597,556        761,804  
                                                                  -------------  -------------   ------------
    Cash and cash equivalents at end of year . . . . . . . .      $   4,154,516    $ 2,457,432   $  2,597,556 
                                                                  =============  ============   ============
</TABLE>

            See accompanying notes to consolidated financial statements


                                            36
<PAGE>
<PAGE 37>

Resource America, Inc.
Notes to Consolidated Financial Statements


NOTE 1 - NATURE OF OPERATIONS

       Resource America, Inc. ("The Company") is a specialty finance company
engaged in three lines of business: the acquisition and resolution of commercial
real estate loans, commercial equipment leasing, and energy operations,
including natural gas and oil production. Based on net assets and net income,
the asset acquisition and resolution of commercial real estate loans is the
dominant business line at the current time. It is anticipated that the
commercial equipment leasing business line will grow substantially in relation
to the other two business lines over the next several years. The markets for the
Company's business lines are as follows: in energy, gas is sold to a number of
customers such as gas brokers and local utilities; oil is sold at the well site
to regional oil refining companies in the Appalachian basin; in asset
acquisition and resolution, the Company obtains its real estate loans on
properties located throughout the United States from commercial banks and other
financial institutions; and in commercial equipment leasing, the Company will
market its equipment leasing product nationwide through vendor programs with
equipment manufacturers who are likely to generate $10 million or less annually
in equipment leases, regional distributors and other vendors.

       The Company's ability to acquire and resolve commercial real estate loans
and to fund equipment lease transactions will be dependent on the continued
availability of funds. The availability of third-party financing for each of
these specialty finance businesses will be dependent upon a number of factors
over which the Company has limited or no control, including general conditions
in the credit markets, the size and liquidity of the market for the types of
real estate loans or equipment leases in the Company's portfolio and the
respective financial performance of the loans and equipment leases in the
Company's portfolio.

       The Company's growth will also depend on its continued ability to
generate attractive opportunities for acquiring commercial real estate loans at
a discount and to originate equipment leases. The availability of loans for
acquisition on terms acceptable to the Company will be dependent upon a number
of factors over which the Company has no control, including economic conditions,
interest rates, the market for and value of properties securing loans which the
Company may seek to acquire, and the willingness of financial institutions to
dispose of troubled or under-performing loans in their portfolios.

       Mortgage loans and equipment leases are subject to the risk of default in
payment by borrowers and lessees. Mortgage loans are further subject to the risk
that declines in real estate values could result in the Company being unable to
realize the property values projected.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

       The consolidated financial statements include the accounts of Resource
America, Inc., and its wholly owned subsidiaries and its pro rata share of the
assets, liabilities, income, and


                                      37


<PAGE 38>

Resource America, Inc.
Notes to Consolidated Financial Statements

expenses of the oil and gas partnerships in which the Company has an interest.
All material intercompany transactions have been eliminated. All per share
amounts and references to numbers of shares have been restated to give effect
to 6% stock dividends paid in January 1996 and April 1996 and a five-for-two
stock split (effected in the form of a 150% stock dividend) in May 1996.

OIL AND GAS PROPERTIES

       The Company follows the successful efforts method of accounting.
Accordingly, property acquisition costs, costs of successful exploratory wells,
all development costs, and the cost of support equipment and facilities are
capitalized. Costs of unsuccessful exploratory wells are expensed when
determined to be nonproductive. The costs associated with drilling and equipping
wells not yet completed are capitalized as uncompleted wells, equipment, and
facilities. Geological and geophysical costs and the costs of carrying and
retaining undeveloped properties, including delay rentals, are expensed as
incurred. Production costs, overhead, and all exploration costs other than costs
of exploratory drilling are charged to expense as incurred.

       Unproved properties are assessed periodically to determine whether there
has been a decline in value, and if such decline is indicated, a loss is
recognized. The Company compares the carrying value of its oil and gas producing
properties to the estimated future cash flow from such properties, less
applicable income taxes in order to determine whether the carrying value of such
properties should be reduced. No adjustment was necessary as of September 30,
1996, 1995, or 1994.

       On an annual basis, the Company estimates the costs of future
dismantlement, restoration, reclamation, and abandonment of its gas and oil
producing properties. Additionally, the Company evaluates the estimated salvage
value of equipment recoverable upon abandonment. At September 30, 1996 and 1995,
the Company's evaluation of equipment salvage values was greater than or equal
to the costs of future dismantlement, restoration, reclamation, and abandonment.


DEPRECIATION, DEPLETION AND AMORTIZATION

        Proved developed oil and gas properties, which include intangible
drilling and development costs, tangible well equipment, and leasehold costs,
are amortized on the unit-of-production method using the ratio of current
production to the estimated aggregate proved developed oil and gas reserves. The
net book value of producing properties is limited to the value of their future
net cash flow based on unescalated prices and costs less a provision for
estimated income taxes.

       Depreciation of property and equipment, other than oil and gas
properties, is computed using the straight-line method over the estimated
economic lives, which range from 3 to 25 years.

       Intangible assets consist primarily of contracts acquired through
acquisitions recorded at fair


                                   38


<PAGE 39>

Resource America, Inc.
Notes to Consolidated Financial Statements

value on their acquisition dates and the excess of the acquisition cost over
the fair value of the net assets of a business acquired (goodwill). The
contracts are being amortized on a declining balance method over their
respective estimated lives, ranging from 5 to 13 years. Goodwill is being
amortized on a straight-line basis over 15 years.

FAIR VALUE OF FINANCIAL INSTRUMENTS

       The following methods and assumptions were used by the Company in
estimating the fair value of each class of financial instruments for which it is
practicable to estimate that value.

       For cash and cash equivalents, receivables and payables, the carrying
amounts approximate fair value because of the short maturity of these
instruments. For long-term debt, including current maturities, the fair value of
the Company's long-term debt approximates historically recorded cost since
interest rates approximate market.

       The carrying cost of investments in direct financing leases approximates
fair value.

       For investments in real estate loans, the Company believes the carrying
amounts of the loans are reasonable estimates of their fair value considering
the nature of the loans and the estimated yield relative to the risks involved.

USE OF ESTIMATES

       Preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.


REVENUE RECOGNITION

Real Estate Finance Revenues

       The difference between the Company's cost basis in a loan and the sum of
projected cash flows from, and the appraised value of, the underlying property
is accreted into interest income over the estimated life of the loan using a
method which approximates the level interest method. Projected cash flows from
the property are reviewed on a regular basis and changes to the projected
amounts reduce or increase the amounts accreted into interest income over the
remaining life of the loan.

       Gains on the sale of a participation in or refinancings of a portfolio
loan are allocated between the portion of the loan sold or refinanced and the
portion retained based upon the fair value of those respective portions on the
date of sale or refinance. The fair value of the loan is


                                          39


<PAGE 40>

Resource America, Inc.
Notes to Consolidated Financial Statements

the current appraised value of the property underlying the loan. Any gain
recognized on a sale of a participation or a refinancing is brought into income
on the date of such sale or refinancing.

Equipment Leasing

       Equipment leasing is comprised of management fees, brokerage fees and a
share of net income from partnerships in which a subsidiary of the Company
serves as general partner as well as finance income on direct financing leases.
Management fees are earned for management services provided to the funds. Such
fees are recognized as earned.

       Direct finance leases as defined by Statement of Financial Accounting
Standards ("SFAS") No. 13 "Accounting for Leases," are accounted for by
recording on the balance sheet the total future minimum lease payments
receivable plus the estimated unguaranteed residual value of leased equipment
less the unearned lease income. Unearned lease income represents the excess of
the total future minimum lease payments plus the estimated unguaranteed residual
value expected to be realized at the end of the lease term over the cost of the
related equipment. Unearned lease income is recognized as revenue over the term
of the lease by the effective interest method. Initial direct costs incurred in
consummating a lease are capitalized as part of the investment in direct finance
leases and amortized over the lease term as a reduction in the yield.

Energy

       Working interest, royalties and override revenues are recognized based on
production. Well service income is recognized as revenue as services are
performed.

ACCOUNTING STANDARDS

       In March 1995, the Financial Standards Board (FASB) issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of." This standard requires the review of long-lived assets for
impairment. SFAS No. 121 is required to be adopted for financial statements with
fiscal years beginning after December 15, 1995 and requires the cumulative
effect of the accounting change to be reported in net income in the year of
adoption. The Company believes adoption of this standard will not have a
material adverse impact on the Company's financial position or results of
operation.

       In October 1995, FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation." The Company recognizes compensation expense with respect to stock
option grants to employees using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25. The Company does not intend to elect
the fair value method of accounting for employee stock-based compensation
encouraged, but not required, by Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation."

       In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of


                                     40


<PAGE 41>

Resource America, Inc.
Notes to Consolidated Financial Statements

Financial Assets and Extinguishments of Liabilities." This statement is
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996, and is to be applied
prospectively. Earlier or retroactive application is not permitted. Management
has not completed an analysis of the impact of applying this new statement,
however, the Company intends to begin applying this new standard, effective
January 1, 1997.

CASH FLOW STATEMENTS

       The Company considers temporary investments with a maturity at the date
of acquisition of 90 days or less to be cash equivalents.

       Supplemental disclosure of cash flow information:

                                              1996          1995         1994 
                                              ----          ----         ----
Cash paid (refunded) during the year for:
  Interest. . . . . . . . . . . . . . . .   $ 796,911   $ 1,103,527   $  22,812 
  Income Taxes. . . . . . . . . . . . . .     770,000       254,981     (40,000)

RESTRICTED CASH

       The Company's restricted cash is invested in short-term highly-liquid
investments. Classified as a noncurrent asset, it represents collateral for a
portion of the Company's long-term debt.

LIMITED PARTNERSHIPS

       A substantial portion of the Company's activities and revenues are
attributable to limited partnerships ("Partnerships") in which it serves as
general partner and assumes the customary rights and obligations for the
Partnerships. As the general partner in these various limited partnerships, the
Company is liable for partnership liabilities and can be liable to limited
partners if it breaches its responsibilities with respect to the operations of
the limited partnerships. Investments in leasing partnerships are accounted for
on the equity basis.

       The Company is entitled to receive management fees, reimbursement for
administrative costs, and to share in the Partnerships' revenue and costs and
expenses according to the respective Partnership agreements. Such fees and
reimbursements are recognized as income and are included in energy services and
equipment leasing revenue. Amounts reimbursed for costs incurred as operator of
certain oil and gas partnership properties and the general partner of certain
equipment leasing partnerships for the years ended September 30, 1996, 1995 and
1994 were $1,558,000, $525,000, and $722,000, respectively. The Company includes
in its operations the portion of the oil and gas Partnerships' revenues and
expenses applicable to its interests therein.


                                       41


<PAGE 42>

Resource America, Inc.
Notes to Consolidated Financial Statements

INCOME TAXES

       The Company recognizes deferred tax assets and liabilities for the
estimated future tax effects attributable to temporary differences between the
financial statement and tax bases of assets and liabilities and carryforwards
utilizing enacted rates. Deferred tax provision or benefit represents the
change during the period in the deferred tax asset and liability balances.

EARNINGS PER SHARE

       Earnings per common share - primary are determined by dividing net income
by the weighted average number of common shares and common share equivalents
outstanding during each period. Common share equivalents include shares issuable
under the terms of various stock option and warrant agreements (see Notes 5 and
8). Fully diluted earnings per share reflect additional dilution related to
stock options and warrants due to the use in that computation of the market
price of the Company's shares at the end of the period, which price is higher
than the average price for the period.

RECLASSIFICATIONS

       Certain reclassifications have been made to the 1994 and 1995
consolidated financial statements to conform with the 1996 presentation.


NOTE 3 - TRANSACTIONS WITH RELATED PARTIES

       The Company administers the activities of certain partnerships that it
sponsors (see Note 2). Energy service revenues primarily represent services
provided to Partnerships and joint ventures managed by the Company.

       In accordance with industry practice, the Company charges each producing
well in the Partnerships and joint ventures a fixed monthly overhead fee and a
proportionate share of certain lease operating expenses. These charges are to
reimburse the Company for certain operating and general and administrative
expenses.

       Until April 1996, the Chairman of the Company was of counsel to Ledgewood
Law Firm, P.C., a law firm which provides legal services to the Company. The
firm was paid $402,000 and $562,000 during fiscal 1996 and 1995, respectively,
for legal services, primarily related to the purchase and restructuring of real
estate mortgages. Additionally, during fiscal year 1994, at which time the
Chairman was a principal of the firm, the firm was paid $464,000 for legal
services primarily related to the purchase of real estate mortgages and the
placement of the senior note referred to in Note 5.

       In addition, during 1994 the Company retained an individual who is
associated with the Chairman of the Company in other business ventures, to
perform due diligence services in


                                     42


<PAGE 43>

Resource America, Inc.
Notes to Consolidated Financial Statements

connection with the placement of the $8,000,000 senior secured note referred to
in Note 5. The Company paid approximately $76,000 to this individual during
1994.

       The Company holds commercial real estate loans of borrowers whose
underlying properties are managed by Brandywine Construction and Management,
Inc. ("BCMI"). The Company has advanced funds to certain of these borrowers for
improvements on their properties which have been performed by BCMI. In five
instances, the President of BCMI has also acted as the general partner of the
borrower. The Chairman of the Company is Chairman of the Board of Directors and
a minority shareholder (approximately 8%) of BCMI. BCMI has agreed to
subordinate its management fees to receipt by the Company of minimum required
debt service payments under the obligations held by the Company.

       The Company also maintains normal banking and borrowing relationships
with Jefferson Bank, a subsidiary of JeffBanks, Inc. The Chairman of the Company
and his spouse are officers and directors of JeffBanks, Inc. (and his spouse is
Chairman and Chief Executive Officer of Jefferson Bank and JeffBanks, Inc.), and
are principal shareholders thereof. The Company borrowed $2.5 million from
Jefferson Bank in the first quarter of fiscal 1995 under terms which the Company
believes were no less favorable to it than those available from independent
third parties. The loan was repaid within fiscal 1995. The Company anticipates
that it may effect other borrowings in the future from Jefferson Bank; it
anticipates that any such borrowings will be on terms similar to those which
could be obtained by an unrelated borrower.

       In December 1994, the Company acquired a loan with a face amount of
$3,000,000 from California Federal Bank, FSB, at a cost of $1,671,695. The loan
is secured by a property owned by a borrower whose general partner is the
President of BCMI. The Chairman of the Company is a limited partner in such
partnership. The borrower refinanced the Company's loan in September 1995,
applying $1,975,000 of the proceeds to the repayment of the Company's loan. As a
result, the Company obtained a gain on its investment of $303,305, while
maintaining a continuing interest in the loan of approximately $1 million. In
August 1994, the Company acquired from third parties a loan, in the original
principal amount of $3,550,000 (and with a then-outstanding balance of
$4,388,644), for an investment of $1,612,674. The borrower is a limited
partnership of which a director of the Company is currently the general partner.
A director of the Company assumed such position after the Company's acquisition
of the loan. Previously, the general partner had been the President of BCMI.
The borrower subsequently refinanced the loan with another third party, and
repaid the Company $934,000, leaving the Company with a net investment of
$419,039. In April 1996, the Company provided $114,948 of mortgage financing to
a partnership controlled by the President of BCMI for the purchase by such
partnership of a property owned, through foreclosure, by Jefferson Bank. After
first mortgage financing, the Company had net investment of $109,206. The 
Company leases its executive offices and asset acquisition and resolution
headquarters in Philadelphia from a partnership of which an officer of the
Company is the general partner and the Chairman of the Company is a limited
partner.


                                       43


<PAGE 44>

Resource America, Inc.
Notes to Consolidated Financial Statements

NOTE 4 - INVESTMENT IN DIRECT FINANCING LEASES

       Components of the net investment in direct financing leases as of
September 30, 1996, as well as future minimum lease payments receivable,
including residual values, are as follows:

            1997 . . . . . . . . . . . . . . . . .    $     306,779           
            1998 . . . . . . . . . . . . . . . . .          176,145           
            1999 . . . . . . . . . . . . . . . . .          168,548           
            2000 . . . . . . . . . . . . . . . . .          107,034           
            2001 . . . . . . . . . . . . . . . . .           88,869 
                                                      -------------

            Total minimum lease
                payments receivable. . . . . . . .    $     847,375 

            Initial direct costs, net of
                amortization . . . . . . . . . . .           66,769           
            Unguaranteed residual. . . . . . . . .           75,633           
            Unearned lease income. . . . . . . . .         (253,164)          
            Provision for possible losses. . . . .           (7,167)
                                                      -------------
            Net investment in direct
                financing leases . . . . . . . . .    $     729,446
                                                      ============= 

       A summary of activity in the Company's allowance for possible losses
related to direct financing leases for the seven months ended September 30, 1996
is as follows:

                Balance, beginning of period . . . . .    $         -         
                Provision charged to expense . . . . .            7,167       
                Write offs . . . . . . . . . . . . . .              -  
                                                          -------------       
                Balance, end of period . . . . . . . .    $       7,167
                                                          ============= 

       Unguaranteed residual value represents the estimated amount to be
received at contract termination from the disposition of equipment financed
under direct financing leases. Amounts to be realized at contract termination
depend on fair market value of the related equipment and may vary from the
recorded estimate. Residual values are reviewed periodically to determine if the
equipment's fair market is below its recorded value.

       Certain of the leases have options to purchase the underlying equipment
at the end of the lease term at fair value or the stated residual which is not
less than the book value at termination.


                                       44


<PAGE 45>

Resource America, Inc.
Notes to Consolidated Financial Statements

NOTE 5 - LONG-TERM DEBT

       Long-term debt consists of the following:                              
                                                            September 30,
                                                        1996           1995 
                                                        ----           ----
Mortgage note payable to a bank, secured by real 
estate, monthly installments of approximately 
$4,000 including interest at 3/4% above the prime 
rate through May 2002 (rate of 9.5% at
September 30, 1996) . . . . . . . . . . . . . . .   $   214,779   $   241,347

Loan payable to a bank, secured by a certificate 
of deposit, 20 equal semiannual installments of 
$32,143 through February, 2003, and quarterly 
payments of interest at 1/2% above the prime rate 
through 2003 (See Note 8). . . . . . . . . . . . .      417,836       482,128

9.5% senior secured note payable, interest due 
semi-annually, principal due May 2004. . . . . . .    7,902,708     7,890,207

Unsecured loan payable, monthly installments of 
approximately $5,200 including interest at 2.25% 
above the prime rate (but not less than 7% nor 
greater than 14.25%) through April 2004 at which 
time the unpaid balance shall be due. . . . . . . .     536,201           -
                                                    -----------   -----------
                                                      9,071,524     8,613,682

Less amounts payable in one year                        105,000        91,000
                                                    -----------   -----------
                                                    $ 8,966,524   $ 8,522,682
                                                    ===========   ===========

       The long-term debt maturing over the next five years is as follows:
1997 - $105,000; 1998 -$109,000; 1999 - $114,000; 2000 - $120,000 and
2001 - $126,000.

       In May 1994, the Company privately placed with an insurance company at
9.5%, a senior secured note in the principal amount of $8,000,000 together with
an immediately exercisable detachable warrant to purchase, at any time through
May 24, 2004, 449,440 shares, subject to adjustment, of the Company's common
stock at an exercise price of $3.38 per share. The value assigned to the
warrant ($100,000) has been accounted for as paid-in capital, resulting in a
discount which is being amortized on a straight-line basis over the life of the
note. The senior note is collateralized by substantially all of the Company's
oil and gas properties and certain of the Company's real estate loans (see Note
12). Among other restrictions, the note agreement limits the payment of
dividends, requires the insurance company's consent to mergers and the sale of
substantial assets, limits the Company's incurring additional indebtedness, and
requires the maintenance of certain financial ratios. At September 30, 1996 and
1995, the Company was in compliance with such covenants.


                                       45


<PAGE 46>

Resource America, Inc.
Notes to Consolidated Financial Statements

NOTE 6 - INCOME TAXES

       The following table details the components of the Company's income tax
expense for the years 1996, 1995 and 1994.

                                                1996         1995        1994 
                                                ----         ----        ---- 
Provision (benefit) for federal income tax
       Current. . . . . . . . . . . . . .   $ 1,147,000   $ 157,000   $  60,000 
       Deferred . . . . . . . . . . . . .     1,059,000     473,000    (160,000)
                                            -----------   ---------   ---------
                                            $ 2,206,000   $ 630,000   $(100,000)
                                            ===========   =========   =========

       A reconciliation between the statutory federal income tax rate and the
Company's effective federal income tax rate is as follows:

                                                  1996        1995       1994 
                                                  ----        ----       ---- 
 
Statutory tax rate. . . . . . . . . . . . .          34%         34%        34% 
Statutory depletion . . . . . . . . . . . .          (4)         (4)       (18) 
Non-conventional fuel credits . . . . . . .           -          (1)        (4) 
Adjustment of prior year's accruals . . . .           -          (3)        (7) 
Adjustment to valuation allowance 
    for deferred tax assets . . . . . . . .           -          (7)        (9) 
Other                 . . . . . . . . . . .           -           -         (4)
                                                  -----        -----      ----- 
                                                     30%         19%        (8)%
                                                  =====        =====      =====

       The components of the net deferred tax liability are as follows:

                                                       1996            1995
Deferred tax assets:                                   ----            ----
    Statutory depletion carryforward. . . . . . .   $     -        $   634,000 
    Investment tax credit carryforwards . . . . .         -            122,000 
    Alternative minimum tax credit carryforwards.      61,000          221,000 
    Interest receivable . . . . . . . . . . . . .      45,000          120,000 
                                                    ---------      -----------
                                                      106,000        1,097,000 
                                      
Deferred tax liabilities:
    Interest receivable -
    Excess of tax over book depreciation,
        depletion, and amortization . . . . .      (2,160,000)      (2,138,000) 
    ESOP benefits . . . . . . . . . . . . . . . .    (140,000)        (106,000) 
    Other items, net. . . . . . . . . . . . . . .     (12,000)             - 
                                                  -----------      -----------
                                                   (2,312,000)      (2,244,000)
                                                  -----------      -----------
    Net deferred tax liability. . . . . . . . . . $(2,206,000)     $(1,147,000)
                                                  ===========      ===========


                                      46


<PAGE 47>

Resource America, Inc.
Notes to Consolidated Financial Statements

NOTE 7 - STOCKHOLDERS' EQUITY

       On October 16, 1995, the Company's shareholders authorized an amendment
to the Certificate of Incorporation of the Company to effect a division of the
Company's Common Stock into two classes, Class A Common Stock and Class B Common
Stock. The Company's existing Common Stock is designated as Class A Common
Stock. Class B Common Stock is currently reserved for issuance upon the exercise
of certain warrants held by Physician's Insurance Company of Ohio. This action
did not affect the number of authorized or outstanding shares of Common or
Preferred Stock. Class A Common Stock and Class B Common Stock have the same
relative rights in all matters except for the election of directors.

       Subsequent to the date of this report, upon the effective date of the
filing of a registration statement, the Class B Common Stock will merge
automatically into the Class A Common Stock and the merged class will be
designated as Common Stock.

       On December 20, 1995 and March 12, 1996, the Board of Directors declared
6% stock dividends of the Company's Class A common stock payable on January 31,
1996 and April 30, 1996, to shareholders of record on January 17, 1996 and
April 16, 1996, respectively. On May 9, 1996, the Board of Directors authorized
a five-for-two stock split effected in the form of a 150% stock dividend payable
on May 31, 1996 to shareholders of record on May 20, 1996. These dividends
resulted in the issuance of 1,219,297 additional shares of Class A common stock.
Earnings per share and weighted average shares outstanding have been restated to
reflect the above transactions.


       On September 9, 1996, the Company's shareholders authorized an amendment
to the Certificate of Incorporation of the Company to increase the total number
of shares of capital stock authorized to 9 million, of which 6.5 million are
Class A Common Stock, 1.5 million are Class B Common Stock and 1 million are
Preferred Stock.


NOTE 8 - EMPLOYEE BENEFIT PLANS

EMPLOYEE STOCK OWNERSHIP PLAN

       During 1989, the Company established an Employee Stock Ownership Plan
("ESOP"), to which it sold 168,540 newly-issued shares for $1,200,000. The ESOP
is a qualified non-contributory retirement plan to acquire shares of the
Company's common stock for the benefit of all employees 21 years of age or
older and who have completed 1,000 hours of service for the Company.
Contributions to the ESOP are made at the discretion of the Board of Directors.
The ESOP borrowed the funds to purchase the shares under a seven year bank term
loan that was guaranteed by the Company. In February 1993, this loan was retired
and refinanced by a loan from the Company, which borrowed the funds for such
loan from another bank (see Note 5).


                                    47


<PAGE 48>

Resource America, Inc.
Notes to Consolidated Financial Statements

       The stock purchased by the ESOP with the money borrowed is held by the
ESOP trustee in a "suspense account." On an annual basis, a portion of the
common stock is released from the "suspense account" and allocated to
participating employees. Any dividends on ESOP shares are used to pay principal
and interest on the loan. As of September 30, 1996, there were 122,412 shares
allocated to participants. Compensation expense related to the plan is based
upon principal and interest payments to the bank less dividends paid to ESOP
shares, such expense amounted to $50,300, $91,000 and $94,800 for the years
ended September 30, 1996, 1995 and 1994, respectively.

       The loan from the bank to the Company is payable in semiannual
installments through February 1, 2003. The loan from the Company to the ESOP
was payable on a quarterly basis through August 1, 1996. Both the loan
obligation and the unearned benefits expense (a reduction in shareholders'
equity) will be reduced by the amount of any loan principal payments made by
the Company.

EMPLOYEE SAVINGS PLAN

       The Company has an Employee Retirement Savings Plan and Trust under
Section 401(k) of the Internal Revenue Code which allows employees to defer up
to 10% of their income on a pretax basis through contributions to the savings
plan. The Company matches up to 100% of each employee's contribution. Included
in general and administrative expenses are $44,700, $28,100 and $20,000 for the
Company's contributions for the years ended September 30, 1996, 1995, and 1994,
respectively.

STOCK OPTIONS

        Under the Company's 1984 Key Employee Stock Option Plan, officers and
certain key employees may be granted options to purchase shares of stock at an
option price of not less than the fair market value on the date of the grant.
The plan also provides for the grant of Stock Appreciation Rights ("SAR's") to
accompany the grant of options. A right entitles the holder to benefit from
market appreciation in the Company's stock subject to the right between the date
of grant and the date of exercise without requiring any payment on the part of
the holder. Upon exercise of a right, the holder is entitled to receive an
amount of stock (or, at the election of the Board of Directors, cash) equal in
value to the amount of such appreciation.

       A total of 56,180 shares were originally reserved for issuance under the
plan. The exercise of SAR's on 44,944 shares has reduced the number of shares
reserved to 11,236 for which options were outstanding at September 30, 1996, at
an exercise price of $2.76 per share. To exercise any part of an option, an
optionee must remain in the continuous employment of the Company for one year
after the date of grant.

       In January 1990, the stockholders approved the Resource America, Inc.,
1989 Key Employee Stock Option Plan ("Plan"). The Plan, for which 196,630 shares
were originally reserved, provides for the issuance of Incentive Stock Options
and Non-qualified Stock Options


                                      48


<PAGE 49>

Resource America, Inc.
Notes to Consolidated Financial Statements

("Options") and SAR's. In October 1995, the Company's shareholders approved an
amendment to the Plan increasing the number of shares reserved to 393,260. In
fiscal 1996, options for 28,090 shares were exercised and options for 28,090
shares were cancelled. The Plan is administered by a Compensation Committee
("Committee") of the Board of Directors consisting of at least two members of
the Board, neither of whom can receive Options or SAR's under the Plan. The
Committee may grant to eligible employees Options to purchase shares or SAR's
and, at its discretion, may set terms and conditions required of a recipient as
a condition to his exercise of the Option or SAR. At September 30, 1996,
Options for a total of 337,080 shares were outstanding at a weighted-average
exercise price of $6.32 per share.

       Options under either plan become exercisable as to 25% of the optioned
shares each year after the date of grant, and expire not later than ten years
after grant.

       A summary of the changes in shares under option for both plans follows:

                                                                     
                                                       (number of shares)
                                                       ------------------   
                                                   1996      1995      1994   
Years ended September 30,                          ----      ----      ----

Outstanding, October 1 . . . . . . . . . . . . .  202,248   202,248   202,248 
Exercised at $2.76 per share . . . . . . . . . .  (28,090)        
Canceled at $2.76 per share. . . . . . . . . . .  (28,090)        
Granted at $8.19 and $9.01 per share . . . . . .  202,248         
                                                  -------   -------   -------
Outstanding, September 30. . . . . . . . . . . .  348,316   202,248   202,248
                                                  =======   =======   =======  
Exercisable, September 30. . . . . . . . . . . .  109,551   101,124    50,562 
Available for grant, September 30. . . . . . . .      -       5,618     5,618 

       In addition, a key employee of Fidelity Leasing, Inc. ("FLI," a wholly
owned subsidiary of the Company), has received options to purchase 10% of the
common stock of FLI (1 million shares) at an aggregate price of $220,000 and,
should FLI declare a dividend, will receive payments on the options in an amount
equal to the dividends that would have been paid on the shares subject to the
options had they been issued.  FLI has also established another option plan, in
the amount of 500,000 shares of common stock, for grant (at the discretion of
FLI's board of directors) to other employees of FLI. In the event that, prior to
becoming a public company, FLI issues stock to anyone other than the Company or
the key employee, the key employee is entitled to receive such additional
options as will allow him to maintain his 10% equity position in FLI (excluding
shares issuable pursuant to the employee option plan referred to above), at an
exercise price equal to the price paid or value received in the additional
issuance. FLI does not anticipate making any such issuances.

       The options issued to the key employee vest 25% per year beginning in
March 1997 (becoming fully vested in March 2000), and terminate in March 2005,
provided that no more than $100,000 of shares (measured by "fair market value")
may be purchased in any year pursuant to option exercises. The options become
fully vested and immediately exercisable in the event of a change in control of
FLI. The key employee has certain rights, commencing after March 5, 2000, to
require FLI to register his option shares under the Securities Act. In the event


                                     49


<PAGE 50>

Resource America, Inc.
Notes to Consolidated Financial Statements

FLI does not become a public company by March 5, 2001, the key employee may 
require that the Company thereafter buy, for cash, FLI shares subject to such
employee's options at a price equal to ten times FLI's after-tax earnings per
share for the fiscal year ended immediately prior to the giving of notice by
such employee of his exercise of this right. FLI is required to purchase 25% of
such employee's shares in each year following such employee's exercise of this
right.


NOTE 9 - COMMITMENTS

       The Company leases office space with varying expiration dates through
2001. Rental expense was $188,900, $60,500 and $47,000 for the years ended
September 30, 1996, 1995 and 1994, respectively. Future minimum rental
commitments at September 30, 1996 and thereafter are as follows:


            1997 . . . . . . . . . . . . . . . . .    $ 199,000 
            1998 . . . . . . . . . . . . . . . . .      200,000 
            1999 . . . . . . . . . . . . . . . . .      196,000 
            2000 . . . . . . . . . . . . . . . . .      175,000 
            2001 . . . . . . . . . . . . . . . . .       54,000

       As of September 30, 1996, the Company had outstanding commitments to fund
the purchase of equipment which it intends to lease, with an aggregate cost of
$441,000.


NOTE 10 - ACQUISITION

       Effective September 1, 1995, the Company acquired F.L. Partnership
Management, Inc. ("FLPM"), (formerly Fidelity Leasing Corporation), an equipment
leasing company, for $1,456,000 in cash (including related expenses) and the
assumption of $312,000 in liabilities. The acquisition was accounted for as a
purchase and, accordingly, FLPM's assets and liabilities have been recorded at
their estimated fair values at the date of acquisition. The purchase price
resulted in an excess of costs over net assets acquired (goodwill) of
approximately $558,000, which is being amortized on a straight line basis over
15 years. FLPM currently manages six equipment leasing partnerships.

       The following pro forma results of operations give effect to the above
acquisition as though it had occurred on October 1, 1993:

(in thousand except per share amounts)              1995              1994    
                                                    ----              ----    
Revenue. . . . . . . . . . . . . . . . . .        $ 13,473          $ 10,342 
Net Income . . . . . . . . . . . . . . . .           2,865             1,664 
Net Income per common share. . . . . . . .           1.28               .83

       The pro forma results of operations have been prepared for comparative
purposes only and do not purport to present actual operating results had the
acquisition been made at the beginning


                                    50


<PAGE 51>

Resource America, Inc.
Notes to Consolidated Financial Statements

of each year, or of results which may occur in the future.


NOTE 11 - INDUSTRY SEGMENT INFORMATION AND MAJOR CUSTOMERS

       The Company operates in three principal industry segments - real estate,
energy and leasing. Segment data for the years ended September 30, 1996, 1995,
and 1994 are as follows:

(in thousands of $)                            1996       1995       1994    
                                               ----       ----       ----
Revenue:
    Real estate . . . . . . . . . . . . . . .$  7,171   $  6,114   $  2,522   
    Energy      . . . . . . . . . . . . . . .   5,157      5,332      5,522   
    Leasing     . . . . . . . . . . . . . . .   4,466        -          -     
    Corporate . . . . . . . . . . . . . . . .     197        148        136
                                             --------   --------   --------
                                               16,991     11,594      8,180 
                                             ========   ========   ========

Depreciation, Depletion and Amortization:
    Real estate . . . . . . . . . . . . . . .      38         37         37   
    Energy      . . . . . . . . . . . . . . .   1,062      1,254      1,268   
    Leasing     . . . . . . . . . . . . . . .     204        -          -     
    Corporate . . . . . . . . . . . . . . . .      65         44         41
                                             --------   --------   --------
                                                1,369      1,335      1,346
                                             ========   ========   ======== 

Operating Profit (Loss):
    Real estate . . . . . . . . . . . . . . .   6,259      4,444      1,819   
    Energy      . . . . . . . . . . . . . . .   1,437      1,085        488  
    Leasing     . . . . . . . . . . . . . . .   1,916        -          -     
    Corporate . . . . . . . . . . . . . . . .  (2,266)    (2,184)    (1,091)
                                             --------   --------   --------
                                                7,346      3,345      1,216 
                                             ========   ========   ========

Identifiable Assets:
    Energy      . . . . . . . . . . . . . . .  12,675     13,790     14,570  
    Real estate . . . . . . . . . . . . . . .  22,087     18,225     10,489  
    Leasing     . . . . . . . . . . . . . . .   3,019        991        -    
    Corporate . . . . . . . . . . . . . . . .   6,178      4,544      9,737   
                                             --------   --------   --------
                                               43,959     37,550     34,796  
                                             ========   ========   ========

Capital Expenditures:
    Real Estate . . . . . . . . . . . . . . .      17        172          2  
    Energy      . . . . . . . . . . . . . . .     501        637        982 
    Leasing     . . . . . . . . . . . . . . .     531        -          -   
    Corporate . . . . . . . . . . . . . . . .      48          8         53   
                                             --------   --------   --------
                                             $  1,097     $  817   $  1,037 
                                             ========   ========   ========


                                          51


<PAGE 52>

Resource America, Inc.
Notes to Consolidated Financial Statements

       Operating profit (loss) represents total revenue less operating expenses,
excluding interest and general corporate expenses. A portion of executive
salaries, included in their entirety in general and administrative expenses on
the Company's Consolidated Statements of Operations, have been allocated to each
segment based on the time spent in each area of the business.

       The Company's natural gas is sold under contract to various purchasers.
For the year ended September 30, 1996, gas sales to two purchasers accounted for
13% and 29% of the Company's total production revenues. Gas sales to one
purchaser individually accounted for 15% and 16% of total revenues for the
years ended September 30, 1995 and 1994, respectively. Interest and fees earned
from one borrower approximated 24% of total real estate revenues for the year
ended September 30, 1995. 


NOTE 12 - INVESTMENTS IN REAL ESTATE LOANS

       The Company has focused its real estate activities on the purchase of
income producing mortgages at a discount to the face value of such mortgages and
also to the appraised value of the property underlying the mortgage. Cash
received by the Company for payment on each mortgage is allocated between
principal and interest - the interest portion of the cash received is recorded
as income to the Company. Additionally, the Company records as income the
accrual of a portion of the discount to the underlying collateral value. This
"accretion of discount" amounted to $953,774 during the year ended September 30,
1996. As the Company sells participations or receives funds from refinancings in
such mortgages, a portion of the cash received is employed to reduce the
cumulative accretion of discount included in the carrying value of the
Company's investment in real estate loans.

       At September 30, 1996 and 1995,the Company held real estate loans having
aggregate face values of $79,101,000 and $51,690,000, respectively, which were
being carried at aggregate costs of $21,798,000 and $17,991,000, including
cumulative accretion of $2,066,000 and $1,168,000, respectively. The following
is a summary of the changes in the carrying value of the Company's investments
in real estate loans for the years ended September 30, 1996 and 1995:

                                           1996            1995    
                                           ----            ----

Balance, beginning of period            $ 17,991,415   $ 10,385,587  
New real estate loans                     15,126,777     13,588,000  
Additions to existing loans                2,564,319      1,299,696  
Accretion of discount                        953,774      1,175,886  
Collections of principal                  (9,377,017)    (2,555,285) 
Cost of mortgages sold                    (5,461,500)    (5,902,469) 
                                        ------------   ------------
Balance, end of period                  $ 21,797,768   $ 17,991,415
                                        ============   ============ 


                                      52


<PAGE 53>

Resource America, Inc.
Notes to Consolidated Financial Statements

       Investments in Real Estate Loans at September 30 consists of:
 
                                                           September 30,      
                                                          1996          1995
                                                          ----          ----   
Property 001  Subordinated wraparound note, face
              value of $4,500,000, secured by
              residential real estate located in
              Pittsburgh, PA, interest at 14.5%,
              due December 31, 2002 . . . . . . . .  $  2,410,665   $  2,334,850

Property 002  Note, face value of $1,080,000, 
              secured by residential real estate 
              located in Philadelphia, PA,
              interest at 12%, due October 31,
              1998. . . . . . . . . . . . . . . . .       179,980        147,972

Property 003  Mortgage note, face value of 
              $1,798,000, secured by residential 
              real estate located in Margate, NJ, 
              interest at the Chase Manhattan Bank 
              prime rate (but not less than 9% nor 
              greater than 15.5%), due January 1, 
              2003. In August 1996, the owner of 
              the property refinanced the mortgage 
              note with an unaffiliated party, 
              simultaneously paying the Company 
              $627,200 toward principal and 
              interest leaving a remaining face 
              value due the Company of 
              $1,633,000  . . . . . . . . . . . . .      694,850        424,749

Property 004  Note, face value of $1,312,000, 
              secured by residential real estate 
              located in Philadelphia, PA, interest 
              at 2 1/2% over the monthly national 
              median annualized cost of funds for 
              SAIF-insured institutions as announced 
              by the Federal Deposit Insurance
              Corporation, due October 31, 1998. . .     226,968        189,347

Property 005  Note, face value of $4,234,000 by
              commercial real estate located in 
              Pittsburgh, PA, interest at 10.6%, due 
              February 7, 2001 . . . . . . . . . . .   1,086,709        675,805


                                       53


<PAGE 54>

Resource America, Inc.
Notes to Consolidated Financial Statements

Property 006  Subordinated note, face value of
              $4,165,000, interest at 1/2% over the
              Maryland National Bank prime rate, due
              July 31, 1998  . . . . . . . . . . . .   1,537,546      1,469,899

Property 007  Note, face value of $1,776,000, 
              secured by a judgment lien, relating 
              to real estate located in St. Cloud, 
              MN, interest at 10%, due December 31, 
              2014 . . . . . . . . . . . . . . . . .     527,846        489,196

Property 008  Subordinated note, face value of
              $3,559,000, secured by an unrecorded 
              deed relating to real estate located 
              in Philadelphia, PA, interest at 2% 
              over the yield of one-year United 
              States Treasury securities, due July 
              31, 1998. . . . . . . . . . . . . . .      721,212        724,422

Property 009  Subordinated notes, face value of
              $1,495,000 secured by residential 
              real estate located in Philadelphia, 
              PA, interest at 2% over the Mellon 
              Bank prime rate, due October 31, 
              1999. . . . . . . . . . . . . . . . .      510,608        545,077

Property 010  Mortgage note, face value of  
              $1,211,000, secured by residential 
              real estate located in Philadelphia, 
              PA, interest at 3% over the Federal 
              Home Loan Bank of Pittsburgh rate,
              due September 2, 1999 . . . . . . . .      112,467        107,450

Property 011  Mortgage note, face value of $900,000,
              secured by commercial real estate 
              located in Washington, D.C., interest 
              at 1 1/2% over the First Union 
              National Bank rate, due September 30, 
              1999 . . . . . . . . . . . . . . . .       414,360        289,504

Property 012  Mortgage notes, face value of 
              $1,962,000, secured by residential 
              real estate located in Philadelphia, 
              PA, varying interest rates from 
              9 1/2% to 14 1/2%, due December 2, 
              1999. In August 1996, the owner of 
              the property refinanced the mortgage 
              note with an unaffiliated party, 
              simultaneously paying the Company 
              $1,079,300 toward principal and 
              interest on these loans . . . . . . .      747,640        195,092


                                       54


<PAGE 55>

Resource America, Inc.
Notes to Consolidated Financial Statements

Property 013  Mortgage note, face value of 
              $3,000,000, secured by commercial 
              real estate located in Pasadena, CA, 
              interest at 2.75% over the average 
              cost of funds to FSLIC-insured 
              savings and loan associations, 11th 
              District (but not less than 5.5% nor 
              greater than 15.5%), due May 1, 
              2001 . . . . . . . . . . . . . . . .       302,354        295,608

Property 014  Wraparound note, face value of 
              $12,000,000 consisting of a first 
              mortgage held by the Company of 
              $9,000,000 secured by commercial real 
              estate located in Washington, D.C., 
              a note and a $3,000,000 second 
              mortgage held by an unrelated party,
              interest at 12%, due November 30, 
              1998. In October 1995, the owner of 
              the property refinanced the mortgage 
              note with an unaffiliated party, 
              simultaneously paying the Company 
              $6,487,000 toward principal and
              interest on this loan . . . . . . . .    3,170,843      9,252,716

Property 015  Subordinated wraparound note, face 
              value of $3,500,000, secured by 
              residential real estate located in 
              New Concord, NC, interest at 12%, 
              due August 25, 2000. . . . . . . . .       356,147        146,765

Property 016  Wraparound note, face value of 
              $5,198,000, secured by real estate 
              located in Rancho Cordova, CA, 
              interest at 8.5%, due December 31, 
              2019. In November 1995, the Company 
              bought the underlying first mortgage 
              for $1,328,000 and sold a senior
              participation in this mortgage for
              $2,400,000, resulting in a gain of 
              $799,000 and a remaining face value 
              due the Company of $4,143,000.. . . .        428,703       702,963

Property 017  Subordinated wraparound note, face 
              value of $3,300,000 secured by 
              commercial real estate located in 
              Elkins, WV, interest at 13.6%, due in 
              equal installments through December 
              31, 2018.. . . . . . . . . . . . . .         961,756           - 


                                        55


<PAGE 56>

Resource America, Inc.
Notes to Consolidated Financial Statements

Property 018  Mortgage note, face value of 
              $2,271,000, secured by commercial 
              real estate located in Northridge, 
              CA, interest at 9%, due December 27, 
              2000. In December 1995, the Company 
              sold a senior participation in this
              mortgage for $1,969,000 resulting 
              in a gain of $538,000 and a remaining 
              face value due the Company of 
              $743,000 . . . . . . . . . . . . . .         782,973           - 

Property 019  Mortgage note, face value of 
              $4,627,000, secured by residential 
              real estate located in Philadelphia, 
              PA, interest at 7.75%, due December 
              31, 2000. In April 1996, the owner 
              of the property refinanced the
              mortgage note property with an 
              unaffiliated party, simultaneously 
              paying the Company $3,020,000 toward 
              principal and interest on this 
              loan.. . . . . . . . . . . . . . . . .       900,017           - 

Property 020  Mortgage note, face value of $4,800,000
              secured by real estate located in Cherry
              Hill, NJ, interest at 10%, due February 7,
              2001. In September 1996, the Company sold
              a senior participation in this mortgage for
              $2,000,000, resulting in a gain of $625,000
              and a remaining face value due the
              Company of $3,072,000 . . . . . . . .      1,536,729           - 

Property 021  Mortgage notes, face value of $3,269,000,
              secured by real estate located in
              Philadelphia, PA, interest at 12%, due
              March and April, 2001. In June 1996, the
              Company sold a senior participation in this
              mortgage for $2,010,000, resulting in a gain                   
              of $916,759 and a face value due the
              Company of $1,259,000 . . . . . . . .        516,036           - 

Property 022  Subordinated participation loan, face
              value of $2,038,000, secured by real
              estate located in Philadelphia, PA,
              interest at 85% of the 30-day rate on
              $100,000 Certificates of Deposit as
              published by the Wall Street
              Journal plus 2.75%, due October 31,
              1998. . . . . . . . . . . . . . . . . .    1,060,176           - 


                                       56


<PAGE 57>

Resource America, Inc.
Notes to Consolidated Financial Statements

Property 023  Subordinated mortgage note, face value
              of $600,000, secured by real estate
              located in Philadelphia, PA, interest
              at 12%, due March 28, 2001 . . . . . .       110,559           - 

Property 024  Mortgage note, face value of $3,500,000,
              secured by residential real estate
              located in Sharon Hill, PA, interest at
              10.5%, due December 31, 2002. . . . . .    2,500,624           - 
                                                      ------------  ------------
                                                      $ 21,797,768  $ 17,991,415
                                                      ============  ============

       As referenced above, during fiscal years 1995 and 1996 the Company sold
senior participations in seven and three real estate loans, respectively, to an
insurance company and, in fiscal 1996, one loan to a financial institution. Both
the insurance company and the financial institution have certain recourse rights
against the Company should the loans not perform under the terms of the
participation agreements. In addition, the Company issued to the insurance
company warrants to purchase 421,350 shares and 112,360 shares of the Company's
common stock at $4.18 and $3.38 per share, respectively. The total value
assigned to the warrants ($118,800) has been accounted for as paid-in capital.

       Further, as referenced above, in 1996 the owners of two properties on
which the Company held mortgage notes refinanced those Notes with unaffiliated
parties. The Company received payments of principal and interest on these notes
and now holds positions which are subordinated to the new first mortgage notes
placed on the properties by the unaffiliated parties.


NOTE 13 - SUPPLEMENTAL OIL AND GAS INFORMATION

       Results of operations for oil and gas producing activities:

                                                   Year Ended September 30,
(in thousands of $)                                 1996      1995      1994 
                                                    ----      ----      ----
Revenues. . . . . . . . . . . . . . . . . . . . . $ 3,421   $ 3,452   $ 3,442 
Production costs. . . . . . . . . . . . . . . . .  (1,421)   (1,502)   (1,369) 
Exploration expenses. . . . . . . . . . . . . . .    (161)     (230)     (635) 
Depreciation, depletion, and amortization . . . .    (781)     (922)     (977)
Income taxes  . . . . . . . . . . . . . . . . . .     (96)      -         - 
                                                  -------   -------   ------- 
Results of operations for producing activities. . $   962   $   798   $   461 
                                                  =======   =======   =======


CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES

       The components of capitalized costs related to the Company's oil and gas
producing activities (less impairment reserve of $21,947 in 1996 and $30,000 in
1995) are as follows:


                                      57


<PAGE 58>

Resource America, Inc.
Notes to Consolidated Financial Statements

                                         1996           1995           1994   
                                         ----           ----           ----
 
Proved properties . . . . . . . . .  $ 22,549,241   $ 22,416,419   $ 26,903,003 
Unproved properties . . . . . . . .       481,477        649,962        703,317 
Pipelines, equipment, and
   other interests                      2,540,050      2,487,508      2,561,500 
                                     ------------   ------------   ------------
Total . . . . . . . . . . . . . . .    25,570,768     25,553,889     30,167,820 
Accumulated depreciation,
   depletion and amortization . . .   (14,305,928)   (13,589,493)   (17,381,995)
                                     ------------   ------------   ------------
Net capitalized costs . . . . . . .  $ 11,264,840   $ 11,964,396   $ 12,785,825 
                                     ============   ============   ============


COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES

       The costs incurred by the Company in its oil and gas activities during
1996, 1995 and 1994 are as follows:
                                                1996       1995         1994  
                                                ----       ----         ----
Property acquisition costs:
Unproved properties . . . . . . . . . . . .  $   2,421   $   5,373   $     220 
Proved properties . . . . . . . . . . . . .    156,751     388,392     794,585 
Exploration costs . . . . . . . . . . . . .    316,961     317,239     702,588 
Development costs . . . . . . . . . . . . .    176,290     211,313     214,747

OIL AND GAS RESERVE INFORMATION (UNAUDITED)

       The Company's estimates of net proved developed oil and gas reserves and
the present value thereof have been verified by E.E. Templeton & Associates,
Inc., an independent petroleum engineering firm. The Company has no proven
undeveloped reserves.

       The Company's oil and gas reserves are located within the United States.
There are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future net revenues and the timing of development
expenditures. The reserve data presented represent estimates only and should not
be construed as being exact. In addition, the standardized measures of
discounted future net cash flows may not represent the fair market value of the
Company's oil and gas reserves or the present value of future cash flows of
equivalent reserves, due to anticipated future changes in oil and gas prices and
in production and development costs and other factors for which effects have not
been provided.

       The standardized measure of discounted future net cash flows is merely
information provided for the financial statement user as a common base for
comparing oil and gas reserves of enterprises in the industry.


                                      58


<PAGE 59>

Resource America, Inc.
Notes to Consolidated Financial Statements

                                                            Gas         Oil
                                                           (mcf)       (bbls) 
                                                           -----       ------ 

Balance-September 30, 1993. . . . . . . . . . . . .     10,465,818    261,824 
Purchases of reserves in-place. . . . . . . . . . .      2,835,913     53,111 
Current additions . . . . . . . . . . . . . . . . .            -          -   
Sales of reserves in-place. . . . . . . . . . . . .         (1,865)       (66) 
Revisions to previous estimates . . . . . . . . . .        (26,065)    15,992 
Production. . . . . . . . . . . . . . . . . . . . .     (1,161,685)   (34,002) 
                                                        ----------   --------
Balance-September 30, 1994. . . . . . . . . . . . .     12,112,116    296,859 

Purchases of reserves in-place. . . . . . . . . . .        893,104     23,284 
Current additions . . . . . . . . . . . . . . . . .        430,330      3,641 
Sales of reserves in-place. . . . . . . . . . . . .        (79,294)      (628) 
Revisions to previous estimates . . . . . . . . . .        624,471     14,423 
Production. . . . . . . . . . . . . . . . . . . . .     (1,198,245)   (36,420) 
                                                        ----------   --------
Balance-September 30, 1995. . . . . . . . . . . . .     12,782,482     01,159 

Purchase of reserves in-place . . . . . . . . . . .        293,602      8,880 
Current additions . . . . . . . . . . . . . . . . .        237,070        726 
Sales of reserves in-place. . . . . . . . . . . . .        (18,645)    (1,885) 
Revision to previous estimates  . . . . . . . . . .        723,24     235,002 
Production. . . . . . . . . . . . . . . . . . . . .     (1,165,477)   (33,862) 
                                                        ----------   --------
Balance-September 30, 1996. . . . . . . . . . . . .     12,852,274    310,020
                                                        ==========   ======== 

       Presented below is the standardized measure of discounted future net cash
flows and changes therein relating to proved developed oil and gas reserves. The
estimated future production is priced at year-end prices. The resulting
estimated future cash inflows are reduced by estimated future costs to develop
and produce the proved developed reserves based on year-end cost levels. The
future net cash flows are reduced to present value amounts by applying a 10%
discount factor.

                                        1996           1995           1994
                                        ----           ----           ----   

Future cash inflows . . . . . . . . $ 34,516,625   $ 30,257,454   $ 30,334,494 
Future production and 
   development costs  . . . . . . .  (16,764,409)   (15,199,823)   (15,071,229) 
Future income tax expense . . . . .   (2,731,883)    (1,260,450)      (961,919)
                                    ------------   ------------   ------------ 
Future net cash flows . . . . . . .   15,020,333     13,797,181     14,301,346 
Less 10% annual discount for 
   estimated timing of cash flows .   (6,671,674)    (5,987,477)    (6,340,083)
                                    ------------   ------------   ------------ 
Standardized measure of discounted
   future net cash flows. . . . . . $  8,348,659   $  7,809,704   $  7,961,263
                                    ============   ============   ============ 


                                         59


<PAGE 60>

Resource America, Inc.
Notes to Consolidated Financial Statements

       The following table summarizes the changes in the standardized measure of
discounted future net cash flows from estimated production of proved developed
oil and gas reserves after income taxes.

                                         1996          1995           1994
                                         ----          ----           ----

Balance, beginning of period. . . . $  7,809,704   $  7,961,263   $  7,281,849 
Increase (decrease) in discounted 
   future net cash flows:
Sales and transfers of oil and
   gas, net of related costs  . . .   (1,927,865)    (1,869,399)    (1,344,839) 
Net changes in prices and 
    production costs  . . . . . . .    1,391,506       (186,722)      (239,502) 
Revisions of previous quantity 
    estimates . . . . . . . . . . .      696,880        417,560         69,501 
Extensions, discoveries, and
    improved recovery less
    related costs . . . . . . . . .      145,255        252,604            -  
Purchases of reserves in-place. . .      241,657        612,008      1,916,920 
Sales of reserves in-place, 
    net of tax effect . . . . . . .      (25,570)       (46,306)        (1,425) 
Accretion of discount . . . . . . .      850,640        841,775        760,714 
Net change in future income taxes .     (924,022)      (240,218)      (131,190) 
Other . . . . . . . . . . . . . . .       90,474         67,139       (350,765) 
                                    ------------   ------------   ------------
Balance, end of period. . . . . . . $  8,348,659   $  7,809,704   $  7,961,263
                                    ============   ============   ============ 


NOTE 14 - SUBSEQUENT EVENT

     On November 26, 1996, the Company issued an additional 1,656,000 shares of
common stock through a public offering.  Proceeds from the offering, net of
commissions and related expenses, were approximately $19.6 million.  The
proceeds will be used for general corporate purposes including the acquisition
of additional commerical real estate loans and expansion of the Company's
equipment leasing operations.


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

       None.


                                      60


<PAGE 61>

                                    PART III


ITEM 10.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS OF
              THE REGISTRANT

       In response to the information called for by this item, the material is
set forth under the caption "Directors and Executive Officers" of the Company's
definitive proxy statement, with respect to its 1997 annual meeting of
shareholders, to be filed on or before January 28, 1997 (the "Proxy Statement")
and is incorporated herein by reference.  



ITEM 11.      EXECUTIVE COMPENSATION

       In response to the information called for by this item, the material set
forth under the caption "Compensation of Executive Officers and Directors" in
the Proxy Statement is incorporated herein by reference.



ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       In response to the information called for by this item, the material set
forth under the caption "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement is incorporated herein by reference.



ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       In response to the information called for by this item, the material is
set forth under the caption "Security Ownership of Certain Beneficial Owners and
Management" of the Proxy Statement, and is incorporated herein by reference.


                                     61


<PAGE 62>

                                PART IV


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

(a) The following documents are filed as part of this Form 10-K:

 1. Financial Statement Schedules

        (a) Inapplicable
        (b) Schedule IV - Mortgage Loans on Real Estate (1)


       All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements and the notes thereto.

 3. Exhibit No.   Description
    -----------   -----------
            1     Form of Underwriting Agreement between the Underwriters and
                  Registrant.  (1)

            3.1   Restated Certificate of Incorporation of the
                  Registrant. (1)

            3.2   Bylaws of the Registrant, as amended. (1)

           10.1   1984 Key Employee Stock Option Plan, as amended. (2)

           10.2   1989 Key Employee Stock Option Plan, as amended. (2)

           10.3   Employee Stock Ownership Plan. (3)

           10.7   Incentive Stock Option Agreement with Michael L. Staines dated
                  April 20, 1993. (4)

           10.8   Incentive Stock Option Agreement with Scott Schaeffer dated
                  April 20, 1993. (4)

           10.10  Incentive Stock Option Agreement with Edward E. Cohen dated
                  April 20, 1993. (4)

           10.11  Incentive Stock Option Agreement with Nancy J. McGurk dated
                  April 20, 1993. (4)

           10.12  Incentive Stock Option Agreement with Michael L. Staines dated
                  April 20, 1993. (4)




                                       62


<PAGE 63>

           10.13  Promissory Note effective February 1, 1993, between Society
                  National Bank and Resource America, Inc. (4)

           10.14  Note Purchase Agreement Between Resource America, Inc., and 
                  Physicians Insurance Company of Ohio dated May 25, 1994. (5)

           10.15  Warrant Agreement Between Resource America, Inc., and
                  Physicians Insurance Company of Ohio dated May 25, 1994. (5)

           10.16  Wrap-Around Deed of Trust Note between Washington Properties 
                  Limited Partnership and RAI Financial, Inc dated January 18,
                  1995. (6)

           10.17  Warrant to Purchase 40,000 shares of Common Stock of Resource 
                  America, Inc., issued to Physicians' Insurance Company of Ohio
                  dated December 21, 1994. (6)

           10.18  Warrant to Purchase 49,275 shares of Common Stock of Resource 
                  America, Inc., issued to Physicians' Insurance Company of Ohio
                  dated June 1, 1995. (6)

           10.19  Warrant to Purchase 35,190 shares of Common Stock of Resource 
                  America, Inc., issued to Physicians' Insurance Company of Ohio
                  dated June 20, 1995. (6)

           10.20  Stock Purchase Agreement between Resource Leasing, Inc. and
                  FML Leasehold, Inc. and Fidelity Leasing Corp. dated August
                  30, 1995. (6)

           10.21  Grant of Incentive Stock Option Pursuant to Resource America,
                  Inc. 1989 Key Employee Stock Option Plan between Daniel G.
                  Cohen and Resource America, Inc. dated December 18, 1995. (7)

           10.22  Grant of Incentive Stock Option Pursuant to Resource America,
                  Inc. 1989 Key Employee Stock Option Plan between Freddie M. 
                  Kotek and Resource America, Inc. dated December 18, 1995. (7)

           10.23  Grant of Incentive Stock Option Pursuant to Resource America,
                  Inc. 1989 Key Employee Stock Option Plan between Michael L.
                  Staines and Resource America, Inc. dated December 18,
                  1995. (7)

           10.24  Grant of Incentive Stock Option Pursuant to Resource America,
                  Inc. 1989 Key Employee Stock Option Plan between Scott F.
                  Schaeffer and Resource America, Inc. dated December 18,
                  1995.  (7)                 

           10.25  Grant of Incentive Stock Option Pursuant to Resource America,
                  Inc. 1989 Key Employee Stock Option Plan between Edward E.
                  Cohen and Resource America, Inc. dated December 18, 1995.  (7)

           10.26  Grant of Incentive Stock Option Pursuant to Resource America,
                  Inc. 1989 Key Employee Stock Option Plan between Jeffrey C.
                  Simmons and Resource America, Inc. dated December 18,
                  1995. (7)

              
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<PAGE 64>

           10.27  Grant of Incentive Stock Option Pursuant to Resource America,
                  Inc. 1989 Key Employee Stock Option Plan between Nancy J.
                  McGurk and Resource America, Inc. dated December 18, 1995. (7)

           10.29  Warrant to purchase 36,000 shares of Class B Common stock of
                  Resource America, Inc., issued to Physicians' Insurance 
                  Company of Ohio, dated December 26, 1995. (7)

           10.30  Warrant to purchase 29,535 shares of Class B Common stock of
                  Resource America, Inc., issued to Physicians' Insurance
                  Company of Ohio, dated December 27, 1995. (7)

           10.31  Contribution Agreement between Resource Leasing, Inc. and
                  Abraham Bernstein. (1)

           10.32  Employment Agreement between Fidelity Leasing, Inc. and
                  Abraham Bernstein. (1)

           11.1   Calculation of Primary and Fully Diluted Earnings
                  per Share. (1)

           22.1*  List of Subsidiaries.

           23.1   Consent of E. E. Templeton & Associates, Inc. (1)

           27     Financial Data Schedule (1)

                               
------------------------------------------------
(b)         Reports on Form 8-K:

            There were no reports on Form 8-K filed during the fourth quarter
of fiscal 1996.

(1)  Filed previously as an Exhibit to the Company's Registration Statement on
     Form S-1 (Registration No. 333-13905) and by this reference incorporated
     herein.
(2)  Filed previously as an Exhibit to the Company's Registration Statement on
     Form S-8 dated May 2, 1996 and by this reference incorporated herein.
(3)  Filed previously as an Exhibit to the Company's Form 10-K for the year
     ended September 30, 1989 and by this reference incorporated herein.
(4)  Filed previously as an Exhibit to the Company's Form 10-KSB for the year
     ended September 30, 1993 and by this reference incorporated herein.
(5)  Filed previously as an Exhibit to the Company's Form 10-KSB for the year
     ended September 30, 1994 and by this reference incorporated herein.
(6)  Filed previously as an Exhibit to the Company's Form 10-KSB for the year
     ended September 30, 1995 and by this reference incorporated herein.
(7)  Filed previously as an Exhibit to the Company's Form 10-QSB for the quarter
     ended December 31, 1995.


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<PAGE 65>

                                SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                                         RESOURCE AMERICA, INC.
(Registrant)              
                                          By:  /s/ Edward E. Cohen
                                              --------------------------------
December 30, 1996                                  President            

       Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities indicated as of December __, 1996.

             Signature                                        Title
             ---------                                        -----

   /s/ Edward E. Cohen                                   Chairman of the Board
 ---------------------------                             and President of
       Edward E. Cohen                                   Resource America, Inc.


   /s/ Michael L. Staines                                Senior Vice President,
 ---------------------------                             Secretary, and
       Michael L. Staines                                Director of Resource
                                                         America, Inc.     

   /s/ Carlos C. Campbell                                Director of Resource
 ---------------------------                             America, Inc.
       Carlos C. Campbell


   /s/ John R. Hart                                      Director of Resource
 ---------------------------                             America, Inc.
       John R. Hart       


   /s/ Andrew M. Lubin                                   Director of Resource
 ---------------------------                             America, Inc.
       Andrew M. Lubin     


   /s/ Alan D. Schreiber                                 Director of Resource
 ---------------------------                             America, Inc.
       Alan D. Schreiber   


   /s/ John S. White                                     Director of Resource
 ---------------------------                             America, Inc.
       John S. White     


   /s/ Nancy J. McGurk                                   Vice President -
 ---------------------------                             Finance and Treasurer 
       Nancy J. McGurk                                   (Chief Accounting
                                                         Officer) of Resource 
                                                         America, Inc.


                                      65