SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                   FORM 10-QSB


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

                For the quarterly period ended September 30, 1997

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

                  For the transition period from _____ to _____


                        Commission file number 000-27086

                             THE THAXTON GROUP, INC.
        (Exact name of small business issuer as specified in its charter)


       South Carolina                                            57-0669498
(State or other jurisdiction of                             (IRS Employer
incorporation or organization)                               Identification No.)


              1524 Pageland Highway, Lancaster South Carolina 29271
                    (Address of principal executive offices)

           Issuers telephone number including area code: 803-285-4336


Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange  Act during the past 12 months(or  for such shorter
period  that the issuer was  required  to file such  reports),  and (2) has been
subject to such filing requirement for the past 90 days.

Yes __X__ No _____

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.



                                                        Outstanding at
         Class                                         October 28, 1997
         -----                                         ----------------
     Common Stock                                          3,911,682



<PAGE>



                             The Thaxton Group, Inc.

                                   Form 10-QSB

                               September 30, 1997

                                Table of Contents

                                                                        Page No.
                                                                        --------

Part I Financial Information

    Item 1. Financial Statements (Unaudited, except December 31, 1996)

         Consolidated Balance Sheets as of September 30, 1997
          and December 31, 1996                                              3
                                                                           
         Consolidated Statements of Income for the three months            
         ended September 30, 1997 and 1996                                   4
                                                                           
         Consolidated Statements of Income for the nine months             
         ended September 30, 1997 and 1996                                   5
                                                                           
         Consolidated Statements of Cash Flows for the nine months         
         ended September 30, 1997 and 1996                                   6
                                                                           
         Notes to Consolidated Financial Statements                          7
                                                                           
    Item 2. Management's Discussion and Analysis of Financial Condition     13
            and Results of Operations                                      
                                                                           
Part II Other Information                                                  
                                                                           
    Item 4. Submission of Matters to a vote of Security Holders             17
                                                                           
    Item 6. Exhibits and Reports on Form 8-K                                17
                                                                           
                                                                         
                                        2

<PAGE>



Part I

Item 1. Financial Statements

                             THE THAXTON GROUP, INC.

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets                                                       September 30,    December 31,
-----                                                            1997            1996
                                                             (Unaudited)
<S>                                                          <C>             <C>         
Cash                                                         $    683,522    $    421,465

Finance receivables, net                                       52,174,806      46,546,087

Premises and equipment, net                                     2,003,245       1,947,210
Accounts receivable                                             2,461,565       1,269,384
Repossessed automobiles                                           877,603       1,166,495
Goodwill and other intangible assets                            4,128,432       3,463,814
Other assets                                                    1,770,595       1,867,112
                                                             ------------    ------------

          Total assets                                       $ 64,099,768    $ 56,681,567
                                                             ============    ============

Liabilities and Stockholders' Equity
------------------------------------

Notes payable                                                $ 53,066,540    $ 46,345,883
Accrued interest payable                                          416,374         387,237
Notes payable to affiliates                                     1,022,879         743,621
Accounts payable                                                1,240,901       1,350,306
Employee savings plan                                           1,382,679       1,098,457
Other liabilities                                                 891,451         384,758
                                                             ------------    ------------

          Total liabilities                                    58,020,824      50,310,262

Common  stock,  $.01 par  value;  authorized 50,000,000
  shares,  issued and outstanding 3,911,682 shares at
  September 1997 and 3,932,178 at December 1996                    39,117          39,322
Additional paid-in-capital                                      3,339,677       3,504,027
Retained earnings                                               3,365,150       3,547,956
Deferred stock award                                             (665,000)       (720,000)
                                                             ------------    ------------

          Total stockholders' equity                            6,078,944       6,371,305
                                                             ------------    ------------

          Total liabilities and 
          stockholders' equity                               $ 64,099,768    $ 56,681,567
                                                             ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.



                                        3
<PAGE>



                             THE THAXTON GROUP, INC.

                        Consolidated Statements of Income
                                   (Unaudited)
                         Three Months Ended September 30


                                                     1997               1996
                                                  -----------        -----------
                                                
Interest and fee income                           $ 4,068,983        $ 3,550,869
Interest expense                                    1,312,430          1,039,114
                                                  -----------        -----------
                                                                     
     Net interest income                            2,756,553          2,511,755
                                                                     
Provision for credit losses                         2,346,592            577,414
                                                  -----------        -----------
                                                                     
     Net interest income after provision                             
        for credit losses                             409,961          1,934,341
                                                                     
Other income:                                                        
     Insurance premiums and                                          
          commissions, net                          1,432,139          1,466,075
     Other income                                     194,245            240,962
                                                  -----------        -----------
                                                                     
          Total other income                        1,626,384          1,707,037
                                                                     
Operating expenses:                                                  
     Compensation and employee benefits             1,516,063          1,460,358
     Telephone, postage, and supplies                 395,246            272,138
     Net occupancy                                    398,541            324,284
     Insurance                                         73,856             53,358
     Collection expense                                64,331             48,072
     Travel                                            43,416             33,954
     Professional fees                                 79,782             55,054
     Reinsurance claims expense                        60,995            141,954
     Other                                            614,875            567,176
                                                  -----------        -----------
                                                                     
          Total operating expenses                  3,247,105          2,956,348
                                                  -----------        -----------
                                                                     
     Net income (loss) before income tax
         expense                                   (1,210,760)           685,030
                                                                     
Income tax expense (benefit)                         (441,215)           261,091
                                                  -----------        -----------
                                                                     
     Net income (loss)                            $  (769,545)       $   423,939
                                                  ===========        ===========
                                                                     
Dividends on preferred stock                              -0-        $     8,500
                                                  ===========        ===========
                                                                     
     Net income (loss) applicable to                                 
     common shareholders                          $  (769,545)       $   415,439
                                                  ===========        ===========
                                                                     
     Net income (loss) per common share           $      (.20)       $       .11
                                                  ===========        ===========
                                                                
     Weighted average shares outstanding            3,923,632          3,934,178
                                                  ===========        ===========
                                          
See accompanying notes to consolidated financial statements.



                                       4
<PAGE>



                             THE THAXTON GROUP, INC.

                        Consolidated Statements of Income
                                   (Unaudited)
                         Nine Months Ended September 30


                                                       1997             1996
                                                   ------------     ------------

Interest and fee income                            $ 11,837,182     $ 10,104,327
Interest expense                                      3,706,770        3,046,164
                                                   ------------     ------------

     Net interest income                              8,130,412        7,058,163

Provision for credit losses                           3,885,424        1,423,355
                                                   ------------     ------------

     Net interest income after provision
        for credit losses                             4,244,988        5,634,808

Other income:
     Insurance premiums and
          commissions, net                            3,961,939        4,158,173
     Other income                                       843,797          795,598
                                                   ------------     ------------

          Total other income                          4,805,736        4,953,771

Operating expenses:
     Compensation and employee benefits               4,538,859        4,203,585
     Telephone, postage, and supplies                 1,056,751          823,545
     Net occupancy                                    1,113,405          919,806
     Insurance                                          211,148          141,063
     Collection expense                                 146,724          142,490
     Travel                                             103,681          100,268
     Professional fees                                  166,188          111,517
     Reinsurance claims expense                         276,952          371,851
     Other                                            1,731,864        1,845,342
                                                   ------------     ------------

          Total operating expenses                    9,345,572        8,659,467
                                                   ------------     ------------

     Net income (loss) before income
         tax expense                                   (294,848)       1,929,112

Income tax expense (benefit)                           (112,042)         727,715
                                                   ------------     ------------

     Net income (loss)                             $   (182,806)    $  1,201,397
                                                   ============     ============

     Dividends on preferred stock                           -0-     $     25,500
                                                   ============     ============

     Net income (loss) applicable to
     common shareholders                           $   (182,806)    $  1,175,897
                                                   ============     ============

      Net income (loss) per common share           $       (.05)    $        .30
                                                   ============     ============

     Weighted average shares outstanding              3,925,973        3,938,236
                                                   ============     ============

See accompanying notes to consolidated financial statements.



                                       5
<PAGE>



                             THE THAXTON GROUP, INC.

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                         Nine months ended September 30

                                                     1997              1996
                                                 ------------      ------------

Cash flows from operating activities             $  4,286,969      $    703,119
Cash flows from investing activities              (10,886,844)      (12,104,087)
Cash flows from financing activities                6,861,932         8,441,977
                                                 ------------      ------------

Net (decrease) increase in cash                       262,057        (2,958,991)

Cash at beginning of period                           421,465         3,214,977
                                                 ------------      ------------

Cash at end of period                            $    683,522      $    255,986
                                                 ============      ============



See accompanying notes to consolidated financial statements.




                                       6
<PAGE>



                             THE THAXTON GROUP, INC.

                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                           September 30, 1997 and 1996


(1)  Summary of Significant Accounting Policies

     The Thaxton Group,  Inc. (the "Company") is incorporated  under the laws of
     the state of South Carolina and operates branches in South Carolina,  North
     Carolina,  Georgia,  Virginia and  Tennessee.  The Company is a diversified
     consumer  finance  company  that is engaged  primarily  in  purchasing  and
     servicing retail installment  contracts purchased from independent used car
     dealers and making and servicing  personal  loans to borrowers with limited
     credit  histories,  low incomes or past credit  problems.  The Company also
     offers  insurance  premium  financing  to  such  borrowers,  and  with  the
     acquisition of Thaxton  Insurance Group,  Inc.("TIG") in 1996 began selling
     on an agency basis various lines of automobile, property and casualty, life
     and accident and health insurance. The Company provides reinsurance through
     a wholly-owned subsidiary, TICO Reinsurance,  Ltd. ("TRL"). All significant
     inter-company   accounts  and   transactions   have  been   eliminated   in
     consolidation.

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

     Prior year consolidated  financial statements have been restated to include
     the   balances   of   companies    combined    and    accounted    for   as
     poolings-of-interest.  Certain  amounts for 1996 have been  reclassified to
     conform to the 1997 presentation. These reclassifications have no effect on
     shareholders' equity or net income as previously reported.

     The  following is a  description  of the more  significant  accounting  and
     reporting  policies  which the Company  follows in preparing and presenting
     its financial statements.

     (a)  Interest and Fee Income

          Interest  income from  finance  receivables  is  recognized  using the
          interest  (actuarial) method on an accrual basis. Accrual of income on
          finance receivables  continues until the receivable is either paid off
          in full or is charged off. Fee income consists  primarily of late fees
          which are credited to income when they become due from borrowers.  For
          receivables  which are renewed,  interest income is recognized using a
          method similar to the interest method.



                                       7
<PAGE>



     (b)  Allowance for Credit Losses

          Additions to the allowance for credit losses are based on management's
          evaluation of the finance  receivables  portfolio  considering current
          economic conditions, overall portfolio quality, charge-off experience,
          and such  other  factors  which,  in  management's  judgment,  deserve
          recognition in estimating  credit losses.  Loans are charged-off when,
          in  the   opinion  of   management,   such  loans  are  deemed  to  be
          uncollectible  or six  months has  elapsed  since the date of the last
          payment,  whichever  occurs  first.  While  management  uses  the best
          information available to make such evaluations,  future adjustments to
          the allowance may be necessary if conditions differ substantially from
          the assumptions used in making the evaluations.

     (c)  Non-file Insurance

          Non-file  insurance is written in lieu of recording and perfecting the
          Company's  security  interest in the assets  pledged to secure certain
          loans.  Non-file insurance premiums are collected from the borrower on
          certain loans at inception and renewal and are remitted directly to an
          unaffiliated insurance company.  Certain losses related to such loans,
          which are not  recoverable  through  life,  accident  and  health,  or
          property  insurance claims,  are reimbursed through non-file insurance
          claims subject to policy limitations. Any remaining losses are charged
          to the allowance for credit losses.

     (d)  Premises and Equipment

          Premises  and  equipment   are  reported  at  cost  less   accumulated
          depreciation  which is  computed  using the  straight-line  method for
          financial   reporting  and  accelerated   methods  for  tax  purposes.
          Maintenance  and  repairs  are  charged  to expense  as  incurred  and
          improvements are capitalized.

     (e)  Insurance

          The  Company  remits a portion of credit  life,  accident  and health,
          property  and auto  insurance  premiums  written  in  connection  with
          certain  loans to an  unaffiliated  insurance  company  at the time of
          origination.  Any portion of the premiums  remitted to this  insurance
          company which are not required to cover their  administrative  fees or
          to pay reinsurance  claims expense are returned to the Company through
          its  reinsurance  subsidiary,  TRL,  and  are  included  in  insurance
          premiums and commissions in the accompanying  consolidated  statements
          of income.  Unearned insurance commissions are accreted to income over
          the life of the related insurance  contracts using a method similar to
          that used for the recognition of finance charges.

          Insurance  commissions  earned by TIG are  recognized  as services are
          performed in accordance with TIG's  contractual  obligations  with the
          underwriters, but not before protection is placed with insurers.



                                       8
<PAGE>



     (f)  Employee Savings Plan

          The  Company  offers  a  payroll  deduction  savings  plan  to all its
          employees.  The Company pays interest monthly at an annual rate of 10%
          on the prior month's ending balance. Employees may withdraw savings on
          demand.

     (g)  Income Taxes

          The  Financial  Accounting  Standards  Board's  Statement of Financial
          Accounting   Standards   No.  109,   "Accounting   for  Income  Taxes"
          ("Statement  109"),  requires  a change  from the  deferred  method of
          accounting  for income taxes of  Accounting  Principles  Board ("APB")
          Opinion 11 to the asset and liability  method of accounting for income
          taxes. Under the asset and liability method of Statement 109, deferred
          tax  assets  and   liabilities  are  recognized  for  the  future  tax
          consequences   attributable  to  differences   between  the  financial
          statement  carrying  amounts of existing  assets and  liabilities  and
          their  respective tax bases.  Deferred tax assets and  liabilities are
          measured  using the  enacted  tax rates  expected  to apply to taxable
          income in the years in which those temporary  differences are expected
          to be  recovered  or  settled.  Under  Statement  109,  the  effect on
          deferred  tax  assets  and  liabilities  of a change  in tax  rates is
          recognized in income in the period that includes the enactment date.

     (h)  Earnings Per Share

          Earnings per share is  calculated  using the weighted  average  shares
          outstanding   of   3,925,973   and   3,938,236   for the nine months
          ended September 30, 1997  and  1996, and 3,923,632 and 3,934,178 for
          the three months ended September 30, 1997 and 1996 respectively.  The
          effect of common stock equivalent shares applicable to stock option
          plans has not been included in the  calculation of net income per
          share because such effect is not materially dilutive.

     (i)  Intangible Assets

          Intangible  assets include  goodwill,  expiration lists, and covenants
          not to compete related to the purchase of insurance agencies. Goodwill
          represents the excess of the cost of insurance  agencies over the fair
          value of its assets at the date of acquisition.  Goodwill is amortized
          on a  straight-line  basis over a fifteen to twenty year  period.  The
          expiration  lists are amortized  over their  estimated  useful life of
          twenty years on a  straight-line  basis . Covenants not to compete are
          amortized according to the purchase contract over five to six years on
          a straight-line basis. Intangible assets also include the premium paid
          to acquire Eagle Premium Finance Company,  which is being amortized on
          a  straight-line  basis over ten  years.  Recoverability  of  recorded
          intangibles is evaluated by using undiscounted cash flows.



                                       9
<PAGE>



     (j)  Stock Options

          Effective  January 1, 1996, the Company adopted Statement of Financial
          Accounting    Standard   No.   123,    "Accounting   for   Stock-Based
          Compensation,"   which  requires  that  the  fair  value  of  employee
          stock-based   compensation   plans  be  recorded  as  a  component  of
          compensation  expense in the statement of income or the impact of such
          fair value on net income and  earnings per share be disclosed on a pro
          forma basis in a footnote to the  financial  statements  in accordance
          with APB 25. The  Company  will  continue  such  accounting  under the
          provisions of APB 25.

     (k)  Fair Value of Financial Instruments

          All  financial  assets of the Company are short term in nature and all
          liabilities are substantially at variable rates of interest.  As such,
          the  carrying  values  of  these  financial   assets  and  liabilities
          approximate their fair value.

     (l)  Repossessed Assets

          Repossessed  assets are  recorded at their  estimated  fair value less
          costs to dispose. Any difference between the loan balance and the fair
          value of the collateral on the date of  repossession is charged to the
          allowance for credit losses.

     (m)  Interim Unaudited Financial Statements

          Information  with  respect to  September  30,  1997 and 1996,  and the
          periods then ended, have not been audited by the Company's independent
          auditors,  but in the opinion of management,  reflect all  adjustments
          (which include only normal  recurring  adjustments)  necessary for the
          fair presentation of the operations of Company.

          Users of  financial  information  produced  for  interim  periods  are
          encouraged to refer to the footnotes contained in the Company's Annual
          Report on Form 10-KSB when reviewing interim financial statements. The
          results  of  operations  for the three and nine  month  periods  ended
          September 30, 1997 are not necessarily indicative of the results which
          may be expected for the entire fiscal year.



                                       10
<PAGE>



(2)  Finance Receivables

     Finance receivables consisted of the following at September 30, 1997.


          Automobile sales contracts                       $53,609,889
          Direct loans                                      13,298,184
          Premium finance contracts                          4,082,631
                                                           -----------

               Total finance receivables                    70,990,704

          Unearned interest                                (13,922,921)
          Unearned insurance premiums, net                    (143,930)
          Allowance for credit losses                       (3,440,680)
          Bulk purchase discount                              (571,683)
          Dealer holdback                                     (736,684)
                                                           -----------

               Finance receivables, net                    $52,174,806
                                                           ===========


     Finance receivables include bulk purchases of receivables, automobile sales
     contracts under holdback arrangements, and small consumer loan receivables.
     With bulk purchase arrangements, the Company typically purchases a group of
     receivables  from an  automobile  dealer  at a  discount  to par  based  on
     management's  review and assessment of the portfolio to be purchased.  This
     discount  amount is then  maintained in an unearned income account to which
     losses on these  loans are  charged.  To the extent that losses from a bulk
     purchase exceed the purchase discount, the allowance for credit losses will
     be charged.  To the extent  losses  experienced  are less than the purchase
     discount,  the remaining  discount is accreted  into income.  The amount of
     bulk purchased receivables, net of unearned interest and insurance, and the
     related purchase  discount  outstanding were  approximately  $8,297,508 and
     $571,683, respectively, at September 30, 1997.

     With holdback arrangements, an automobile dealer will assign receivables to
     the Company on a  loan-by-loan  basis,  typically  at par. The Company will
     withhold a certain  percentage of the  proceeds,  generally 5% to 10%, as a
     dealer  reserve to be used to cover any losses  which occur on these loans.
     The agreements are structured  such that all or a portion of these holdback
     amounts can be  reclaimed  by the dealer  based on the  performance  of the
     receivables.  To the extent  that losses  from these  holdback  receivables
     exceed the total  remaining  holdback amount for a particular  dealer,  the
     allowance  for  credit  losses  will be  charged.  The  amount of  holdback
     receivables,  net of  unearned  interest  and  insurance,  and the  related
     holdback amount  outstanding were  approximately  $32,259,308 and $736,684,
     respectively, at September 30, 1997.

     At  September  30,  1997,  there  were  no  significant  concentrations  of
     receivables in any type of property or to one borrower.



                                       11
<PAGE>



     These receivables are pledged as collateral for a line of credit agreement.
     (See note 3)

     Changes in the  allowance  for  credit  losses  for the nine  months  ended
     September 30, 1997 and 1996 were as follows:

                                                       1997             1996
                                                   -----------      -----------
      Beginning balance                            $ 2,195,000      $   783,200
      Valuation allowance for acquired loans                 0           28,842
      Provision for credit losses                    3,885,424        1,423,355
      Charge-offs                                   (2,767,660)      (1,390,424)
      Recoveries                                       127,916          234,597
                                                   -----------      -----------
      Net charge-offs                               (2,639,744)      (1,155,827)
                                                   -----------      -----------
      Ending balance                               $ 3,440,680      $ 1,079,570
                                                   ===========      ===========

(3)  Indebtedness

     On September 3, 1997 the Company restructured its Revolving Credit Facility
     (the  "Facility")  with its primary lender.  The restructure  increased the
     maximum borrowings available from $80 million to $100 million. The Facility
     matures on August 31,  1999,  and  consists  of six  tranches.  The primary
     tranche is used to finance  consumer  receivables and provides for advances
     up to $100 million, less any amounts advanced under the secondary tranches.
     Tranche B is also used to  finance  consumer  receivables  and  allows  the
     Company  to borrow up to $10  million  against a higher  percentage  of the
     stated collateral than under the primary tranche. The Company borrows under
     Tranche B only if it has exhausted  available  borrowings under the primary
     tranche.  As of September 30, 1997 $49.1 million was outstanding  under the
     Facility,  $46.5  million  of which had been  advanced  under  the  primary
     tranche  and $2.6  million  of  which  had been  advanced  under  secondary
     tranches.  At September 30, 1997,  there were no advances  under Tranche B.
     Under  the  terms  of  the  Facility,   the  Company's  receivables  at
     September 30, 1997  would  have  allowed  it to borrow an  additional  $4.9
     million against  existing  collateral with $50.9 million of total potential
     borrowing capacity available under the $100 million limit in effect on such
     date. The  interest  rate for  borrowings  is the prime rate plus one 
     percent per annum for the primary tranche and plus five  percent 
     per annum for Tranche B. Interest  rates for  borrowings  under the other 
     tranches range from prime plus one percent  per annum to prime plus two 
     percent per annum.  The Facility imposes several financial and other 
     covenants which may be amended from time to time,  including leverage 
     tests,  dividend  restrictions,  and minimum net worth requirements. The
     restructured facility limits dividends on common stock to 25% of net
     income. There are no restrictions on payment of preferred stock dividends.
     The Company is presently in compliance with each of these covenants.

     At September 30, the Company had notes payable to other  non-affiliates  in
     the amount of $3,942,216 and affiliates in the amount of $1,022,879.


(4)  Deferred Stock Awards

     One of the Company's executive officers has notified the Company that he
     does not intend to accept 10,000 shares of common stock previously granted
     under the Company's deferred stock compensation plan which was scheduled
     to vest on December 30, 1997. Accordingly, no compensation expense related
     to the vesting of those shares has been recorded for the nine months ended
     September 30, 1997. The common stock, paid-in-capital, and deferred stock
     award accounts have been adjusted to reflect cancellation of those shares.


                                       12
<PAGE>



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

Profitability

     The  following  table sets forth  certain  data  relating to the  Company's
profitability during the periods presented.

<TABLE>
<CAPTION>
                                         For the Three Months          For the Nine Months
                                          Ended September 30           Ended September 30
                                     --------------------------    --------------------------
                                         1997           1996           1997          1996
                                     -----------    -----------    -----------    -----------

<S>                                  <C>            <C>            <C>            <C>        
Average net finance receivables(1)   $55,348,806    $45,875,230    $52,478,778    $42,598,449
Average notes payable(1)              47,026,029     39,019,732     45,038,305     36,272,503

Interest and fee income(2)             4,004,367      3,547,909     11,779,303     10,096,204
Interest expense(2)                    1,181,139        929,799      3,315,055      2,720,758
                                     -----------    -----------    -----------    -----------
Net interest income                    2,823,228      2,618,110      8,464,248      7,375,446
                                     ===========    ===========    ===========    ===========

Average interest rate earned(1)            28.94%         30.94%         29.93%         31.60%
Average interest rate paid(1)              10.05           9.53           9.81          10.00
                                     -----------    -----------    -----------    -----------
Net interest spread                        18.89%         21.41%         20.12%         21.60%
                                     ===========    ===========    ===========    ===========

Net interest margin(3)                     20.40%         22.83%         21.51%         23.09%
                                     ===========    ===========    ===========    ===========
</TABLE>

----------
(1)  Averages are computed using month-end balances during the periods presented
     and are annualized for periods of less than one year
(2)  Excludes  Thaxton  Insurance  fee  income and  interest  expense on Thaxton
     Insurance related debt.
(3)  Net interest  margin  represents net interest income divided by average Net
     Finance Receivables.

Results of Operations for the Nine Months Ended September 30, 1997 and 1996

     Finance   receivables  at  September  30,  1997  were  $70,990,704   versus
$63,574,776 at September 30, 1996, a 12% increase. The primary component of this
increase was Automobile  Sales  Contracts,  which increased from  $48,522,580 at
September  30, 1996 to  $53,609,889  at September  30, 1997, or 10%. The Company
opened  two  branch  offices  in 1996 and one in  early  1997,  which  generated
significant  additional  volume of Automobile  Sales Contracts  during the first
nine months of 1997.

     Unearned income at September 30, 1997 was $14,066,851 versus $13,461,332 at
September  30,  1996,  a 5% increase  which was  directly  related to the higher
volume of Automobile Sales Contract originations during the first nine months of
1997.  The  provision for credit  losses  established  for the nine months ended
September 30, 1997 was $3,885,424  versus $1,423,355 for 1996, and the allowance
for credit losses  increased from $1,079,570 at September 30, 1996 to $3,440,680
at September 30, 1997.  The allowance for credit losses as a percentages  of Net
Finance  Receivables  increased  from 2.13% at  September  30,  1996 to 6.04% at
September 30, 1997.  The allowance for credit losses  predicted by the Company's
reserve model increased significantly from the end of the second quarter of 1997
to the end of the third quarter of 1997 due to three factors. First, the Company
experienced  a high  level of  charge-offs  during the third  quarter  that were
roughly equal to those experienced  during the first half of the year. When this
data was included in the reserve model,  the historical loss factors utilized by
the model increased significantly. Second, losses on the relatively large number
of repossessed  vehicles  disposed of during the third quarter caused dealer and
bulk  purchase  reserves  to  decline  below  required  levels  for a number  of
individual dealers and bulk purchases.  Third, the finance receivable  portfolio
experienced  moderate  growth during the quarter,  resulting in a  corresponding
increase in the allowance to provide for losses expected on the newly originated
finance receivables.

     The growth in finance  receivables  during the nine months ended  September
30,  1997 versus the  comparable  period in 1996  resulted  in higher  levels of
interest  and fee  income.  Interest  and fee income for the nine  months  ended
September 30, 1997 was $11,837,182,  compared to $10,104,327 for the nine months
ended  September  30, 1996, a 17%  increase.  Interest  expense also was higher,
increasing  to  $3,706,770  for the nine months ended  September 30, 1997 versus
$3,046,164  for the comparable  period of 1996, a 22% increase.  The increase in
interest  expense  was due to the  higher  levels of  borrowings  needed to fund
finance receivable  originations and the working capital requirements of Thaxton
Insurance.



                                       13
<PAGE>



     Net interest  income for the nine months ended September 30, 1997 increased
to $8,130,412 from $7,058,163 for the comparable period of 1996, a 15% increase.
The  increase in net  interest  income is  attributable  to the higher  level of
finance  receivables,  the interest  income and fees from which more than offset
the 7% decrease in net interest  spread for the nine months ended  September 30,
1997 versus the comparable period of 1996.

     Insurance commissions net of insurance cost decreased to $3,961,939 for the
nine months ended September 30, 1997 from  $4,158,173 for the comparable  period
of 1996, due to reduced sales of insurance  products to borrowers.  Other income
increased from $795,598 for the nine months ended September 30, 1996 to $843,797
for the comparable  period of 1997 due to increased  profit sharing  payments to
Thaxton Insurance from various insurance carriers.

     Total  operating  expenses  increased  from  $8,659,467 for the nine months
ended September 30, 1996 to $9,345,572 for the comparable  period of 1997, an 8%
increase.  The  increase in expenses  was due to opening new finance  offices in
addition to a general increase in costs  associated with  administering a larger
finance receivable portfolio.

     The Company  generated a net loss from operations for the nine months ended
September 30, 1997 of $182,806 as compared to a net income of $1,201,397 for the
comparable  period of 1996.  The  decrease  in net  income was due to the higher
levels of net interest and  insurance  commission  income being offset by higher
operating expenses and increased provisions for credit losses.

     Stockholders'  equity  decreased  from  $6,371,305  at December 31, 1996 to
$6,078,944  at  September  30, 1997 as a result of the  Company's  net loss form
operations during the period.

Results of Operations for the Three Months Ended September 30, 1997 and 1996

     The growth in finance  receivables  during the three months ended September
30,  1997 versus the  comparable  period of 1996  resulted  in higher  levels of
interest  and fee income.  Interest  and fee income for the three  months  ended
September 30, 1997 was $4,068,983,  versus $3,550,869 for the three months ended
September 30, 1996, a 15% increase. Interest expense also was higher, increasing
to $1,312,430  for the three months ended  September 30, 1997 versus  $1,039,114
for the three months ended  September 30, 1996, a 26% increase.  The increase in
interest  expense  was due to the  higher  levels of  borrowings  needed to fund
finance receivable originations.

     Net interest income for the three months ended September 30, 1997 increased
to $2,756,553 from $2,511,755 for the comparable period of 1996, a 10% increase.
The increases in net interest  income are  attributable  to the higher levels of
finance  receivables,  the interest  income and fees from which more than offset
the 12% decrease in net interest spread for the three months ended September 30,
1997 versus the comparable period of 1996.

     Insurance commissions net of insurance cost decreased to $1,432,139 for the
three months ended September 30, 1997 from $1,466,075 for the comparable  period
of 1996, due to reduced sales of insurance  products to borrowers.  Other income
decreased  from  $240,962  for the three  months  ended  September  30,  1996 to
$194,245 for 1997 due to a reduction in profit  sharing  payments  received from
insurance carriers in the quarter.

     Operating  expenses  increased  from  $2,956,348 for the three months ended
September  30,  1996 to  $3,247,105  for the  comparable  period of 1997,  a 10%
increase. The increase in expenses was due to the opening of new finance offices
in addition to a general increase in costs associated with administering a
larger finance receivable portfolio.



                                       14
<PAGE>



     The Company  generated a net loss from operations of $769,545 for the three
months  ended  September  30, 1997 as compared to a net income of $423,939  for
the comparable period of 1996.  The  decrease  in net  income was due to the
higher levels of net interest and  insurance  commission  income being offset by
higher operating expenses and increased provisions for credit losses.


Credit Loss Experience

     The following table sets forth the Company's allowance for credit losses at
September  30, 1997,  and 1996 and the credit loss  experience  over the periods
presented.

<TABLE>
<CAPTION>
                                                         For the Three Months           For the Nine Months
                                                         Ended September 30,            Ended September 30,
                                                         1997             1996          1997           1996
                                                         ----             ----          ----           ----
                                                         
<S>                                                   <C>            <C>            <C>            <C>        
Net finance receivables (1)                           $56,923,853    $50,113,444    $56,923,853    $50,113,444
Allowance for credit losses                             3,440,680      1,079,570      3,440,680      1,079,570
Allowance for credit losses as a percentage of  net          6.04%          2.15%          6.04%          2.15%
finance receivables
Dealer reserves and discounts on bulk purchases       $ 1,308,367    $ 1,913,558    $ 1,308,367    $ 1,913,558
Dealer reserves and discounts on bulk purchases as           3.08%          5.35%          3.08%          5.35%
percentage of Automobile Sales Contracts at period
end (2)
Allowance for credit losses and dealer reserves and          8.34%          5.97%          8.34%          5.97%
discount on bulk purchases as a percentage of net
finance receivables
Provision for credit losses                           $ 2,346,592    $   577,414    $ 3,885,424    $ 1,423,355
Charge-offs (net of recoveries)                         1,295,683        503,181      2,639,745      1,155,827
Charge-offs (net of recoveries) as a percentage of           9.36%          4.39%          6.71%          3.62%
average net finance receivables (3)
</TABLE>

----------
(1)  Finance receivable balances are presented net of unearned finance charges.
(2)  Percentages are computed using Automobile Sales Contracts,  net of unearned
     finance charges only.
(3)  Averages are computed using month-end  balances of net finance  receivables
     during the period presented.

     The higher  than  expected  loss  experience  during the third  quarter was
attributable  primarily  to two  factors in  addition  to some degree of general
deterioration in loan performance during the quarter.  First,  during the second
quarter  management  decided to alter the  Company's  strategy  for dealing with
repossessed  vehicles.  Specifically,  in order to reduce the amount of time the
vehicles are  typically  held for sale,  the Company  began selling the vehicles
sooner than it had in prior periods by lowering sales prices. As a direct result
of this change in  strategy,  the number of  vehicles  held for sale was reduced
from 525 at April 30,  1997 to 300 at  August  30,  1997.  While  this  decision
resulted in a temporary increase in charge-offs  due to the loss
recognition  associated  with the  sale of  repossessed  collateral,  management
expects  the new sales  strategy to reduce  interest  and other  carrying  costs
associated  with  repossessed  vehicles  in future  periods.  The second  factor
affecting  charge-offs  during the third  quarter of 1997 was a decision made in
connection  with an internal  reorganization  to reduce  delinquency  levels at
several  offices where  delinquencies  had  increased to higher than  acceptable
levels.   Management   estimates  that  approximately   $40,000  in  charge-offs
attributable to the accelerated disposition of repossessed vehicles and $350,000
attributable to accelerated repossessions of automobiles was charged against the
Company's allowance for credit losses during the third quarter of 1997.



                                       15
<PAGE>



     The following  table  presents an allocation of the Company's  reserves and
allowances  for credit losses,  by type of receivable.  The allowance for credit
losses has been  allocated  on an  approximate  basis  between  Direct Loans and
Premium  Finance  Contracts  because  losses on Automobile  Sales  Contracts are
charged  against dealer reserves if the originating  dealer's  specific  reserve
account  is  adequate  to cover the loss.  The  entire  allowance  is,  however,
available  to absorb  losses  occurring on any type of finance  receivable.  The
allocation is not indicative of future losses.

                                                            At September 30,
                                                            ----------------
                                                          1997           1996
                                                          ----           ----
Dealer reserves and discounts on bulk
 purchases on Automobile                               $1,308,367     $1,913,558
Sales Contracts Allowance for credit losses:
  Direct Loans                                          3,213,696        875,888
  Premium Finance Contracts                               226,984        203,682
                                                       ----------     ----------
      Subtotal                                          3,440,680      1,079,570
                                                       ----------     ----------
      Total                                            $4,749,047     $2,993,128
                                                       ==========     ==========

     The following table sets forth certain  information  concerning  Automobile
Sales Contracts and Direct Loans at the end of the periods indicated:

                                                          At September 30,
                                                          ----------------
                                                         1996          1997
                                                         ----          ----
Automobile Sales Contracts and Direct Loans
contractually past due 90 days or more(1)            $   484,772    $   396,999
Automobile Sales Contracts and Direct Loans (1)       51,692,115     44,129,221
Automobile Sales Contracts and Direct Loans
contractually past due 90 days or more as a
percentage of Automobile
Sales  Contracts and Direct Loans                            .94%           .90%

----------
     (1) Finance  receivable  balances  are  presented  net of unearned  finance
charges,  dealer  reserves on Automobile  Sales  Contracts and discounts on bulk
purchases.




                                       16
<PAGE>



     The  following  table sets forth  certain  information  concerning  Premium
Finance Contracts at the end of the periods indicated:

                                                          At September 30,
                                                          ----------------
                                                        1997            1996
                                                        ----            ----
Premium finance contracts contractually
past due 60 days or more(1)                          $   60,154      $   89,543
Premium finance contracts outstanding(1)              3,923,371       3,500,913
Premium finance contracts contractually
past due 60 days or more as a percentage
of premium finance contracts                               1.53%            2.6%

----------
(1) Finance  receivable  balances are presented net of unearned  finance charges
and discounts on bulk purchases



Part II

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

     A Special Meeting of Shareholders was held on July 24, 1997 to consider and
     act upon the following matter:

     To approve a plan of internal  reorganization pursuant to which the Company
     will transfer substantially all of the assets and operations related to its
     consumer  finance  business to a newly  formed  subsidiary  corporation  in
     exchange for the issuance to the Company of all of the outstanding  capital
     stock of that subsidiary  corporation and the assumption by that subsidiary
     corporation of certain liabilities of the Company.

     The plan of reorganization was adopted as follows:

     Votes in favor           3,352,005
     Votes against                 -0-

     No other matters were voted upon at the meeting.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

     Information in response to this item is  incorporated by reference from the
     attached Index to Exhibits.

(b)  Reports on Form 8-K

     There were no reports on Form 8-K during the quarter  ended  September  30,
     1997.



                                       17
<PAGE>



                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                        The Thaxton Group, Inc.
                                             (Registrant)


Date:  November 12, 1997                /s/James D. Thaxton
                                        -------------------
                                           James D. Thaxton
                                        President and Chief Executive Officer

Date:  November 12, 1997                /s/Kenneth H. James
                                        -------------------
                                        Kenneth H. James
                                        Vice President, Secretary, Treasurer and
                                        Chief Financial Officer






                                       18
<PAGE>



                                INDEX TO EXHIBITS

Exhibit No.         Description                                         Page No.

4.1           Certificate of Designation, Preferences and Rights
              of the Series A Preferred Stock
              
4.2           Form of Certificate for Series A Preferred Stock
              
4.3           Certificate  of  Designation,   Preferences,   and
              Rights of the Series B Preferred Stock
              
4.4           Forms of Certificate for Series B Preferred Stock
              
10.17         Form of Share  Exchange  Agreement  by and between
              the Company and Jack W. Robinson and affiliates*
              
10.18         First  Amended  and  Restated  Loan  and  Security
              Agreement  dated  September 3, 1997 between Finova
              Capital Corporation and the Company*
              
10.19         Schedule to First  Amended and  Restated  Loan and
              Security Agreement*
              
10.20         Fourth Amended and Restated Promissory Note*
                                                                              
27            Financial Data Schedule                                       21 
                                                                           


-------
*    Incorporated  by  reference  from  Registration   Statement  on  Form  S-4,
     Commission File No. 333-28719.
                                                                                

                                                                                
                                                                                
                                       19