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 quarter ended September 30, 1996

(  )  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 33-97130-A

                             THE THAXTON GROUP, INC.
                 (Name of small business issuer 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: 803-285-4336


Indicate by check mark whether the issuer (1) has filed all reports  required to
by 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 issuer was required
to file such reports),  and (2) has been subject to such filing  requirement for
the past 90 days. Yes X No ____

Indicate 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 31, 1996
  Common Stock                                            3,778,563

                                       1
<PAGE>


                             The Thaxton Group, Inc.

                                   Form 10-QSB

                               September 30, 1996

                                Table of Contents

                                                                       Page No.

Part I   Financial Information

   Item 1.  Financial Statements

            Consolidated Balance Sheet as of September 30, 1996           3

            Consolidated Statements of Income for the three months
            ended September 30, 1996 and 1995                             4

            Consolidated Statements of Income for the nine months
            ended September 30, 1996   and 1995                           5

            Consolidated Statements of Cash Flows for the nine months
            ended September 30, 1996 and 1995                             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 6.  Exhibits and Reports on Form 8-K                              19




                                       2
<PAGE>

Part I

Item 1.  Financial Statements

                             THE THAXTON GROUP, INC.

                           Consolidated Balance Sheet

                               September 30, 1996
<TABLE>
<CAPTION>


<S>                                                                        <C>
Assets

Cash                                                                       $      254,286

Finance receivables                                                            63,574,776
  Less: Unearned income                                                       (15,374,891)
        Allowance for credit losses                                            (1,205,170)
                                                                            -------------
Finance receivables, net (notes 2 and 3)                                       46,994,715

Premises and equipment, net                                                     1,403,950
Other assets (note 4)                                                           2,232,102
                                                                            -------------
                  Total assets                                             $   50,885,053
                                                                            =============

Liabilities and Stockholders' Equity

Notes payable (note 3)                                                     $   41,604,196
Accrued interest payable                                                          311,907
Other liabilities                                                                 510,108
                                                                            -------------
                  Total liabilities                                            42,426,212

Common stock, $.01 par value; authorized
  50,000,000 shares, issued 3,778,863
  shares; outstanding,3,778,563 shares                                             37,789
Additional paid-in-capital                                                      5,185,389
Retained earnings                                                               3,980,863
Deferred stock award                                                             (742,500)
Less: Treasury stock (300 shares of
                  common stock at cost)                                            (2,700)
                                                                            -------------
                  Total stockholders' equity                                    8,458,841
                                                                            -------------

                  Total liabilities and stockholders' equity               $   50,885,053
                                                                            =============
</TABLE>


                                       3
<PAGE>



                             THE THAXTON GROUP, INC.

                        Consolidated Statements of Income

                         Three Months Ended September 30

<TABLE>
<CAPTION>
                                                                          1996                             1995
                                                                          ----                             ----

<S>                                                                      <C>                              <C>
Interest and fee income                                                  $3,547,909                       $2,430,977
Interest expense                                                            929,799                          724,869
                                                                  ------------------              -------------------
     Net interest income                                                  2,618,111                        1,706,107

Provision for credit losses                                                 577,414                          197,754
                                                                  ------------------              -------------------


                             THE THAXTON GROUP, INC.

                        Consolidated Statements of Income

                         Three Months Ended September 30


</TABLE>
<TABLE>
<CAPTION>
                                                                          1996                             1995
                                                                          ----                             ----


<S>                                                                       <C>                              <C> 

     Net interest income after provision                                  2,040,696                        1,508,353
        for credit losses

Other income:
     Insurance premiums and                                                 297,916                          189,573
          commissions, net
     Other income                                                               700                            6,205
                                                                  ------------------              -------------------
          Total other income                                                298,616                          195,778

Operating expenses:
     Compensation                                                           954,840                          616,183
     Telephone, postage, and supplies                                       172,545                          132,839
     Net occupancy                                                          170,938                          121,059
     Insurance                                                               53,358                           26,767
     Collection expense                                                      48,072                           32,542
     Travel                                                                  32,414                           27,735
     Professional fees                                                       55,054                           17,505
     Goodwill amortization                                                   14,514                              -0-
     Other                                                                  178,754                          133,980
                                                                  ------------------              -------------------
          Total operating expenses                                        1,680,488                        1,108,610
                                                                  ------------------              -------------------

     Net income before taxes                                                658,824                          595,522

Income tax expense (benefit)
     Current                                                                347,269                          233,450
     Deferred                                                              (99,354)                           50,989
                                                                  ------------------              -------------------
          Total income tax expense                                          247,915                          284,439
                                                                  -------------------              ------------------

     Net income                                                         $   410,909                       $  311,083
                                                                  ===================              ==================

     Earnings per share                                                        $.11                             $.10
                                                                  ==================              ===================

</TABLE>

                                       4
<PAGE>


                             THE THAXTON GROUP, INC.

                        Consolidated Statements of Income

                         Nine Months Ended September 30

<TABLE>
<CAPTION>
                                                                            1996                             1995
                                                                            ----                             ----

<S>                                                                     <C>                               <C>
Interest and fee income                                                 $10,096,204                       $6,026,229
Interest expense                                                          2,720,758                        1,704,558
                                                                  ------------------              -------------------
     Net interest income                                                  7,375,446                        4,321,670

Provision for credit losses                                               1,423,355                          622,743
                                                                  ------------------              -------------------

     Net interest income after provision                                  5,952,091                        3,698,927
        for credit losses

Other income:
     Insurance premiums and                                                 811,631                          458,025
          commissions, net
     Other income                                                             2,000                           15,592
                                                                  ------------------              -------------------
          Total other income                                                813,631                          473,617

Operating expenses:
     Compensation                                                         2,646,622                        1,703,237
     Telephone, postage, and supplies                                       524,744                          361,585
     Net occupancy                                                          459,824                          319,633
     Insurance                                                              141,063                           81,622
     Collection expense                                                     142,490                           91,051
     Travel                                                                  91,931                           55,671
     Professional fees                                                      111,517                           38,473
     Goodwill amortization                                                   47,895                              -0-
     Other                                                                  687,917                          333,583
                                                                  ------------------              -------------------
          Total operating expenses                                        4,854,001                        2,984,855
                                                                  ------------------              -------------------

     Net income before taxes                                              1,911,721                        1,187,690

Income tax expense (benefit)
     Current                                                                840,423                          534,460
     Deferred                                                              (121,452)                         (69,421)
                                                                  ------------------              -------------------

          Total income tax expense                                          718,971                          465,039
                                                                  -------------------              ------------------

     Net income                                                        $  1,192,750                       $  722,651
                                                                  ===================              ==================

     Earnings per share                                                        $.31                             $.23
                                                                  ==================              ===================




</TABLE>
                                       5

<PAGE>

                             THE THAXTON GROUP, INC.

                      Consolidated Statements of Cash Flows

                         Nine months ended September 30



<TABLE>
<CAPTION>
                                                                     1996                    1995
                                                                     ----                    ----

<S>                                                             <C>                    <C>
Cash flows from operating activities                            $  1,838,100           $ 1,162,540
Cash flows from investing activities                             (12,519,039)          (16,791,518)
Cash flows from financing activities                               9,106,741            15,725,431
                                                                   ---------            ----------

Net (decrease) increase in cash                                   (1,574,198)               96,453

Cash at beginning of period                                        1,828,484               248,842
                                                                  ----------               -------

Cash at end of period                                           $    254,286            $  345,295
                                                                 ============           ==========

</TABLE>
                                       6

<PAGE>

                             THE THAXTON GROUP, INC.

                   Notes to Consolidated Financial Statements

                           September 30, 1996 and 1995


(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,  Virginia,  Georgia  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.  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.

       Management of the Company has made a number of estimates and  assumptions
       relating to the reporting of assets and liabilities and the disclosure of
       contingent assets and liabilities to prepare these consolidated financial
       statements in conformity with generally accepted  accounting  principles.
       Actual results could differ from those estimates.

       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,  is charged off,  or, in the case of  Automobile
              Sales  Contracts,  the  collateral  is  repossessed.   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 (actuarial) method.

       (b)    Allowance for Credit Losses

              Additions  to  the  allowance  for  credit  losses  are  based  on
              management's  evaluation of the finance receivable portfolio based
              on  current  economic   conditions,   overall  portfolio  quality,
              charge-off   experience,   and  such   other

                                       7

<PAGE>
              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  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 on certain
              loans. Non-file insurance premiums are collected from the borrower
              on  certain  loans  at  inception  and  renewal  and are  remitted
              directly to an 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.

       (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 months  ending  balance.  Employees  may withdraw
              savings on demand.


                                       8
<PAGE>

       (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 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  adjusted  for  the  10,025.48  for  one  stock  split
              declared by the board of directors on September 8, 1995. All share
              and per share data have been retroactively  adjusted for the stock
              split.

       (i)    Intangible Assets

              Intangible  assets  include  the  premium  paid to  acquire  Eagle
              Premium Finance which is amortized on a  straight-line  basis over
              10 years.

       (j)     Interim Unaudited Financial Statements

              Information  with respect to September 30, 1996 and 1995,  and the
              three and nine month 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.



                                       9
<PAGE>


(2)    Finance Receivables

       Finance receivables  consisted of the following at September 30, 1996 and
1995:

                                                1996              1995
                                                ----              -----
       Consumer                             $58,921,933        38,481,789
       Real estate secured                      762,186           800,216
       Insurance premium finance              3,622,198         4,928,913
       Wholesale loans                          268,458           240,807
                                                -------           -------

            Total finance receivables        63,574,776        44,451,725

       Unearned interest                    (14,740,601)      (10,250,782)
       Unearned insurance premiums, net        (634,289)         (706,643)
       Allowance for credit losses           (1,205,170)         (765,172)
                                            -----------         ---------

            Finance receivables, net        $46,994,715        32,729,128
                                            ===========        ==========

       Consumer  loans  include  bulk  purchases  of  receivables,  auto  dealer
       receivables  under  holdback   arrangements,   and  small  consumer  loan
       receivables.  With bulk  purchase  arrangements,  the  Company  typically
       purchases a group of receivables from an auto dealer or other retailer 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  $7,271,088 and $1,267,968,  respectively,
       at  September  30,  1996  and  approximately   $4,266,635  and  $657,522,
       respectively, at September 30, 1995.

        With holdback arrangements, an auto dealer or other retailer 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 holdback  amounts,  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 $30,499,350 and $1,215,340,  respectively,
       at  September  30, 1996 and  approximately  $17,938,835  and  $1,093,117,
       respectively, at September 30, 1995.


                                       10

<PAGE>

       At September 30, 1996,  $1,913,558 of the purchase discounts and holdback
       amounts  were  included in unearned  interest,  and  $569,750 of purchase
       discounts  and holdback  amounts were netted  against  repossessions  and
       included in other  assets.  At  September  30,  1995,  $1,535,639  of the
       purchase  discounts  and  holdback  amounts  were  included  in  unearned
       interest,  and $215,000 of purchase  discounts and holdback  amounts were
       netted against repossessions and included in other assets.

       At  September  30,  1996,  there were no  significant  concentrations  of
receivables in any type of property or from one borrower.

         These  receivables  are  pledged  as  collateral  for a line of  credit
agreement.

       Changes in the  allowance  for credit  losses for the nine  months  ended
September 30, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>

                                                            1996                1995
                                                            ----                ----
           <S>                                        <C>                       <C>
           Beginning balance                         $      908,800             424,425
           Valuation allowance for acquired loans            28,842             135,547
           Provision for credit losses                    1,423,355             622,743
           Charge-offs                                   (1,390,424)           (490,638)
           Recoveries                                       234,597              73,095
                                                       ------------        ------------
           Net charge-off                                (1,155,827)           (417,543)
                                                       ------------        ------------
           Ending balance                            $    1,205,170             765,172
                                                       ============        ============

</TABLE>

       The Company's loan portfolio  primarily consists of short term loans, the
       majority of which are  originated  or renewed  during the  current  year.
       Accordingly,  the  Company  estimates  that  fair  value  of the  finance
       receivables is not materially different from carrying value.

(3)    Indebtedness

       At September 30, 1996, the Company  maintained a line of credit agreement
       with a commercial  finance  company for $80 million  maturing on July 31,
       1998. Of this amount,  approximately  $40.0 million remained at September
       30, 1996. Borrowings under this arrangement bear interest at the lender's
       prime rate plus a specified  percentage,  payable  monthly.  The carrying
       amount of this financial instrument approximates market value.

       The  terms of the  line of  credit  agreement  provide  that the  finance
       receivables  are pledged as collateral  for the amount  outstanding.  The
       agreement  requires the Company to maintain  certain  financial ratios at
       established  levels and comply  with  other  non-financial  requirements.
       Also, the agreement prohibits the company from distributing more than 50%
       of it's net income. As of September 30, 1996, it is management's  opinion
       that the Company met all such ratios and requirements.


                                       11
<PAGE>

       The Company also had borrowings  from credit  insurance  companies  which
       totaled  $750,000 at September  30, 1996 and  $300,000 at  September  30,
       1995.  Borrowings  at September  30, 1996  consisted  of a $500,000  note
       maturing  in May  1998  and  bearing  interest  at  prime  plus 2%  reset
       quarterly,  and a $250,000  note payable upon a sixty day demand  bearing
       interest at prime plus 2% reset  monthly.  The  carrying  amount of these
       financial instruments approximates market value.

(4)      Non-earning Assets

       As  of  June  30,  1996,  the  Company  began  to  classify   repossessed
       automobiles  as  non-earning  assets and include  them in other assets at
       realizable  value.  Previously,  repossessed  units had been  included in
       finance receivables,  adjusted to realizable value by dealer reserves and
       holdback  amounts  included  in  unearned  interest.  Amounts  receivable
       related to  repossessed  automobiles  and  related  dealer  reserves  and
       holdback  amounts included in other assets at September 30, 1996 and 1995
       were as follows:

                                                          1996          1995
                                                          ----          -----
              Amounts receivable related to
                repossessed automobiles               $1,299,138        490,000
              Dealer reserves and holdbacks             (569,750)      (215,000)
                                                     ------------    ----------

              Realizable value                         $ 729,388       275,000
                                                      ===========     ========

       All  September  30,  1995  amounts  have been  restated  to reflect  this
treatment.


                                       12

<PAGE>

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

General

      The Thaxton Group,  Inc.(the "Company") is a diversified  consumer finance
company that, operating in South Carolina, North Carolina, Virginia, Georgia and
Tennessee  under  the name  "TICO  Credit  Company,"  is  engaged  primarily  in
purchasing  and  servicing  retail  installment  contracts   ("Automobile  Sales
Contracts")  originated by independent used automobile  dealers  ("Dealers") and
making and servicing  personal  loans  ("Direct  Loans") to persons with limited
credit histories,  low incomes or past credit problems ("Non-prime  Borrowers").
Under the name  "TICO  Premium  Finance  Company"  in North  Carolina  and South
Carolina the Company finances insurance premiums ("Premium Finance  Contracts"),
primarily  for  personal  lines of insurance  purchased  by Non-prime  Borrowers
through independent agents ("Premium  Finance").  A subsidiary of the Company is
engaged in Premium  Finance in Virginia under the name "Eagle Premium  Finance".
The Company,  as agent, also sells various insurance products  (primarily credit
life and  credit  accident  and  health) in  conjunction  with the  purchase  of
Automobile Sales Contracts or the making of Direct Loans.

      The Company  believes the best  opportunities  for continued growth in its
Automobile  Sales Contract and Direct Loan  portfolios lie in the opening of new
branch offices in small to medium-sized  markets in the states where the Company
presently  operates and contiguous  states that management  believes to be under
served by its  competitors.  The Company  opened an office in  Augusta,  Georgia
during the  second  quarter  of 1996,  and plans to open one or more  additional
branch offices in 1996 and three or more in 1997. The Company estimates that the
capital   expenditure   necessary   for  opening  each  new  branch   office  is
approximately  $21,000.  While  there are  certain  risks  associated  with such
expansion,  the Company  believes that its ability to identify and retain branch
management   personnel  having  established   relationships  with  Dealers,  its
expertise in extending  and  servicing  credit to Non-prime  Borrowers and other
factors will enable it to manage anticipated growth in its branch office network
and in its  Automobile  Sales Contract and Direct Loan  portfolios.  The Company
will continue to expand its Premium Finance  Contract  portfolio by establishing
and broadening  relationships  with insurance  agencies  having a client base in
need of premium financing. The Company also periodically may make bulk purchases
of Automobile  Sales Contracts and Premium  Finance  Contracts if such purchases
are deemed beneficial to the Company's competitive position and portfolio mix.

On October 31,  1996,  the Company  acquired  Thaxton  Insurance  Group (TIG) by
exchanging  common  stock for all of the  outstanding  common stock and series A
preferred stock of TIG. TIG operates nineteen independent  insurance agencies in
North and South Carolina. Based upon unaudited financial information prepared by
the  management  of TIG,  at June 30, 1996 TIG had assets of $6.3  million  with
revenues of $2.1 million for the six months then ended.

                                     13
<PAGE>

Profitability

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

<TABLE>
<CAPTION>

                                               For the Three Months             For the Nine Months
                                               Ended September 30               Ended September 30
                                               ------------------               -------------------
                                             1996              1995             1996              1995
                                             ----              ----             ----              ----

<S>                                       <C>              <C>               <C>              <C>
Average Net Finance Receivables(1)        $45,875,230      $29,011,951       $42,598,449      $23,422,619
Average notes payable                      39,019,732       25,666,639        36,272,503       20,543,444

Interest and fee income                     3,547,909        2,430,977        10,096,204        6,026,229
Interest expense                              929,799          724,869         2,720,758        1,704,558
                                          -----------       ----------        ----------      -----------
Net interest income                         2,618,111        1,706,107         7,375,446        4,321,670

Average interest rate earned(1)               30.94%           33.52%            31.60%           34.30%
Average interest rate paid(1)                  9.53            11.30             10.00            11.06
                                              -----           ------             -----           ------
Net interest spread                           21.41            22.22             21.60            23.24

Net interest margin(2)                        22.83%           23.52%            23.09%           24.60%

</TABLE>

------------
(1)  Averages are computed using month-end balances during the periods
     presented.

(2)  Net interest margin represents net interest income divided by average Net
     Finance Receivables.

Financial Condition at September 30, 1996 and 1995

      Finance   Receivables  at  September  30,  1996  were  $63,574,776  versus
$44,415,725 at September 30, 1995, a 43% increase. The primary component of this
increase was Automobile  Sales  Contracts,  which increased from  $28,816,757 at
September  30, 1995 to  $48,522,580  at September  30, 1996, or 68%. The Company
opened four branch offices in 1995 and one in 1996 dedicated to Automobile Sales
Contract  Origination,  which generated a significant volume of Automobile Sales
Contracts  in 1996.  The Company  also  completed a large bulk loan  acquisition
during the third quarter of 1996.  Premium Finance  Contracts have decreased 27%
since the end of the third quarter of 1995, due to the the Company's decision to
reduce its exposure in Virginia.

      Unearned income at September 30, 1996 was $15,374,891  versus  $10,957,425
at September 30, 1995, a 40% increase  which was directly  related to the higher
volume of  Automobile  Sales  Contract  originations  during 1996 and the dealer
reserves associated therewith.

      The  allowance  for credit  losses as a percentage  of average Net Finance
Receivables decreased from 3.27% at September 30, 1995 to 2.83% at September 30,
1996, due to the increase in the relative  portion of Automobile Sales Contracts
in the portfolio.  Automobile Sales Contracts carry a lower allowance due to the
loss coverage provided by dealer reserves.

      Stockholders'  equity  increased from  $2,623,048 at September 30, 1995 to
$8,458,841 at September 30, 1996, a 222%  increase,  as a result of the proceeds
of the initial public offering,  conversion of subordinated debt to equity,  and
retained earnings from after tax profits during the period.

Results of Operations for the Three Months Ended September 30, 1996 and 1995

      The growth in finance  receivables during the three months ended September
30,  1996 versus the  comparable  period in 1995  resulted  in higher  levels of
interest  and fee income.  Interest  and fee income

                                       14
<PAGE>

for the three  months  ended September 30, 1996 was $3,547,909,  versus
$2,430,977 for the three months ended September 30, 1995, a 46% increase.
Interest expense also was higher, increasing to $929,799 for the three months
ended  September  30, 1996 versus  $724,869 forthe three months ended  September
30,  1995,  a 28%  increase.  The increase in interest  expense  was due to the
higher  levels of  borrowings  needed to fund finance receivable originations,
partially offset by reductions in the Company's cost of funds.

      Net  interest  income  for the  three  months  ended  September  30,  1996
increased to $2,618,111 from $1,706,107 for the comparable period of 1995, a 53%
increase.  The increases in net interest  income are  attributable to the higher
levels of finance  receivables.  Interest  spread for the third  quarter of 1996
declined  slightly  compared  to  third  quarter  of  1995,  due to  the  higher
proportion of Automobile Sales Contracts in the portfolio at September 1996.

      The  provision for credit  losses  established  for the three months ended
September 30, 1996 was $577,414,  versus  $197,754 for 1995. The increase in the
provision  was due to the increase in  receivables  outstanding  as well as more
conservative reserving practices.

      Insurance  commissions net of insurance cost increased to $297,916 for the
three months  ended  September  30, 1996 from  $189,573 for 1995, a 57% increase
primarily due to the higher levels of Automobile  Sales  Contract  originations,
the triggering event for most sales of insurance products to borrowers.

      Operating  expenses  increased from  $1,108,610 for the three months ended
September  30, 1995 to  $1,680,488  for 1996,  a 52%  increase.  The increase in
expenses was due to opening new offices and expenses incurred related to being a
public company,  including one additional  executive  officer,  in addition to a
general increase in costs associated with  administering a significantly  larger
finance receivable portfolio.

      Net income  increased to $410,909 for the three months ended September 30,
1996 from $311,083 for 1995. The increase in net income was due to higher levels
of net interest and insurance income, partially offset by higher loss provisions
and expenses.

Results of Operations for the Nine Months Ended September 30, 1996 and 1995

      The growth in finance  receivables  during the nine months ended September
30,  1996 versus the  comparable  period in 1995  resulted  in higher  levels of
interest  and fee  income.  Interest  and fee income for the nine  months  ended
September 30, 1996 was $10,096,204,  versus $6,026,229 for the nine months ended
September 30, 1995, a 68% increase. Interest expense also was higher, increasing
to $2,270,758 for the nine months ended September 30, 1996 versus $1,704,558 for
the nine months  ended  September  30,  1995,  a 33%  increase.  The increase in
interest  expense  was due to the  higher  levels of  borrowings  needed to fund
finance receivable originations, partially offset by reductions in the Company's
cost of funds.

      Net interest income for the nine months ended September 30, 1996 increased
to $7,375,446 from $4,321,670 for the comparable period of 1995, a 71% 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 6.1% decrease in net interest spread for the nine months ended September 30,
1996 versus 1995.

      The  provision  for credit  losses  established  for the nine months ended
September 30, 1996 was $1,423,355, versus $622,743 for 1995. The increase in the
provision  was due to the increase in  receivables  outstanding  as well as more
conservative reserving practices


                                       15

<PAGE>


    Insurance  commissions net of insurance cost increased to $811,631 for the
nine months  ended  September  30, 1996 from  $458,025  for 1995, a 77% increase
primarily due to the higher levels of Automobile  Sales  Contract  originations,
the triggering event for most sales of insurance products to borrowers.

      Operating  expenses  increased  from  $2,984,855 for the nine months ended
September  30, 1995 to  $4,854,001  for 1996,  a 63%  increase.  The increase in
expenses was due to opening new offices and expenses incurred related to being a
public company,  including one additional  executive  officer,  in addition to a
general increase in costs associated with  administering a significantly  larger
finance receivable portfolio.

      Net income increased to $1,192,750 for the nine months ended September 30,
1996 from  $722,651 for 1995, an increase of 65%. The increase in net income was
due to higher levels of net interest and insurance  income,  partially offset by
higher loss provisions and expenses.

Financial Condition at September 30, 1996 and December 31, 1995

      Cash  decreased  from  $1,828,484  at  December  31,  1995 to  $254,286 at
September  30,  1996,  due to the use of the  proceeds  from the initial  public
offering being used to pay down the Company's Revolving Credit Facility.

      Finance  receivables  at September 30, 1996 were  $63,574,776  compared to
$47,900,235  at December 31, 1995, an increase of 33%. The primary  component of
this increase was Automobile  Sales  Contracts,  which increased  $16,066,926 or
50%. Premium Finance Contracts  outstanding  decreased 27%, due to the Company's
decision to reduce it's exposure in Virginia.

      Unearned  income  increased  from  $11,020,232  at  December  31,  1995 to
$15,574,776  at September  30, 1996, a 40%  increase.  The  allowance for credit
losses  increased  from $908,800 at December 31, 1995 to $1,205,170 at September
30,  1996,  an  increase  of  33%.  The  increase  was  due to the  increase  in
receivables outstanding as well as more conservative reserving practices.

     Stockholders'  equity  increased  from  $7,177,890  at December 31, 1995 to
$8,458,841  at September  30,  1996,  an 18%  increase,  as a result of retained
earnings from after tax profits during the period.

                                       16
<PAGE>


Credit Loss Experience

      Provisions  for credit losses are charged to income in amounts  sufficient
to maintain the allowance for credit  losses at a level  considered  adequate to
cover the  expected  future  losses of  principal  and  interest in the existing
finance receivable portfolio. Credit loss experience, contractual delinquency of
finance  receivables,  the  value  of  underlying  collateral  and  management's
judgment are factors used in assessing the overall adequacy of the allowance and
resulting provision for credit losses. The Company's  charge-off policy is based
on an account by account  review of  delinquent  receivables.  Losses on finance
receivables  secured by automobiles are recognized at the time the collateral is
repossessed.  Other  finance  receivables  are  charged  off  when  they  become
contractually past due 180 days, unless extenuating  circumstances exist leading
management  to believe such finance  receivables  will be  collectible.  Finance
receivables  may be  charged  off  prior  to the  normal  charge-off  period  if
management deems them to be uncollectible.

     The following table sets forth the Company's allowance for credit losses at
September  30, 1996,  and 1995 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,
                                                             1996             1995           1996           1995

<S>                                                       <C>             <C>             <C>            <C>
 Average net finance receivables(1)                       $45,875,230     $29,011,951     $42,598,449    $23,422,619
 Allowance for credit losses                                1,205,170         765,172       1,205,170        765,172
 Allowance for credit losses as a percentage of                 2.63%           2.64%           2.83%          3.27%
 average net finance receivables (1)
 Dealer reserves and discounts on bulk purchases (3)       $2,483,308      $1,750,639      $2,483,308     $1,750,639
 Dealer reserves and discounts on bulk purchases as             6.94%           7.76%           6.94%          7.76%
 percentage of Automobile Sales Contracts at period
 end(2)
 Allowance for credit losses and dealer reserves and            8.04%           8.67%           8.66%         10.74%
 discount on bulk purchases as a percentage of
 average finance receivables (1)
 Provision for credit losses                                 $577,414        $197,754      $1,423,355       $622,743
 Charge-offs (net of recoveries)                              503,181         176,485       1,155,827        417,543
 Charge-offs (net of recoveries) as a percentage of             4.39%           2.43%           3.62%          2.38%
 average net finance receivables (1)

</TABLE>

              ---------------------
         (1)    Averages are computed using month-end balances of Net Finance
                Receivables during   the period   presented.
         (2)    Percentages are computed using Automobile Sales Contracts, net
                of unearned finance charges only.
         (3)    Amount remaining after allocation to repossessed automobiles.

                                       17
<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.


<TABLE>
<CAPTION>
                                                                             At September 30,
                                                                          1996             1995

<S>                                                                       <C>              <C>
 Dealer reserves and discounts on bulk purchases on Automobile            $2,483,308       $1,705,639
 Sales Contracts, after allocation to repossessed automobiles
 Allowance for credit losses:
   Direct Loans                                                            1,001,488          561,280
   Premium Finance Contracts                                                 203,682          140,726
                                                                             -------          -------
       Subtotal                                                            1,205,170          765,172
                                                                           ---------          -------
       Total                                                              $3,614,244       $2,515,811
                                                                          ==========       ========== 
</TABLE>

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

<TABLE>
<CAPTION>

                                                                                  At September 30,
                                                                             1996                1995

<S>                                                                        <C>                  <C>
 Automobile Sales Contracts and Direct Loans contractually                 $516,473             $288,358
 past due 90 days or more(1)
 Automobile Sales Contracts and Direct Loans (1)                         44,129,221           29,566,260
 Automobile Sales Contracts and Direct Loans contractually                    1.17%                 .98%
 past due 90 days or more as a percentage of Automobile
 Sales  Contracts and Direct Loans

</TABLE>

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

                                       18
<PAGE>

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

                                                        At September 30,
                                                   1996                  1995

Premium finance contracts contractually         $89,543              $146,273
 past due 60 days or more(1)
 Premium finance contracts outstanding(1)      3,500,913             4,751,824
 Premium finance contracts contractually            2.6%                  3.1%
 past due 60 days or more as a percentage
 of premium finance contracts

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

Liquidity and Capital Resources

      The Company generally finances its operations and new offices through cash
flow from operations and borrowings under the Revolving Credit Facility. On July
29, 1996 the Company and its primary lender agreed to amend the Revolving Credit
Facility to provide for  borrowings of up to $80 million  through July 31, 1998,
an increase of $30 million. As of September 30, 1996,  approximately $40 million
was  outstanding  under the Revolving  Credit Facility and there was $40 million
available for additional  borrowing.  Funds borrowed under the Revolving  Credit
Facility bear  interest at a rate equal to a designated  prime rate plus a fixed
percentage.  The amended  Revolving  Credit Facility  provides for a lower fixed
percentage over prime than did the previous  agreement.  Amounts outstanding may
not exceed specified percentages of eligible finance receivables.  The Revolving
Credit  Facility  imposes  several  financial  and  other  covenants,  including
leverage tests, dividend restrictions,  and minimum net worth requirements.  The
Company does not believe these covenants will  materially  limit its business or
its expansion strategy.

      Management  believes  that the recent  increase in the maximum  borrowings
under  the  Revolving  Credit  Facility,  in  addition  to cash  expected  to be
generated from  operations,  will provide the resources  necessary to pursue the
Company's  business and growth  strategy  through 1997. The company is currently
investigating  several options for raising additional funds to support growth in
future years.

Part II

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, 1996.

                                       19

<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: October 31, 1996             /s/James D. Thaxton
                                   -------------------
                                   James D. Thaxton
                                   President and Chief Executive Officer

Date: October 31, 1996             /s/Kenneth H. James
                                   -------------------
                                   Kenneth H. James
                                   Vice President, Secretary, and
                                   Chief Financial Officer

                                    20

<PAGE>
<TABLE>
<CAPTION>
                                INDEX TO EXHIBITS

Exhibit No.                   Description                                                  Page No.

<S>       <C>                                                                                <C>
 2        Stock Purchase Agreement, dated as of September 1, 1995 with Eagle Premium          --
          Finance Company, Inc.(1)
 3.1      Amended and Restated Articles of Incorporation of The Thaxton Group, Inc.(1)        --
 3.2      Bylaws of the Thaxton Group,Inc.(1)                                                 --
10.1      Amended and Restated Loan and Security Agreement dated March 27, 1995 between       --
          Finova Capital Corporation and the Company(1)
10.2      Loan Agreement dated May 16, 1994 between the American Bankers Insurance            --
          Company of Florida and the Company(1)
10.3      Promissory note dated April 1, 1995 payable in the amount of $250,000 to            --
          Thaxton Insurance Group(1)
10.4      Promissory note dated April 1, 1995 payable in the amount of $165,000 to C. L.      --
          Thaxton, Sr. (1)
10.5      Promissory note dated April 1, 1995 payable in the amount of $250,000 to            --
          Katherine D. Thaxton(1)
10.6      Promissory note dated April 1, 1995 payable in the amount of $35,000 to             --
          Katherine D. Thaxton (1)
10.7      Promissory note dated May 1, 1995 payable in the amount of $350,000 to Thaxton      --
          Insurance Group(1)
10.8      Promissory note dated August 21, 1995 payable in the amount of $100,000 to          --
          Katherine D. Thaxton(1)
10.9      Security Agreement dated January 19, 1995 between the Company and Oakland Auto      --
          Sales, including Guaranty by Thaxton Insurance Group, Inc.(1)
10.10     Form of Restricted Stock Award between the Company and Robert L Wilson              --
10.11     The Thaxton Group, Inc. 1995 Stock Incentive Plan(1)                                --
10.12     The Thaxton Group, Inc. Employee Stock Purchase Plan(1)                             --
10.13     Form of Note Conversion Agreement(1)                                                --
10.14     Amended and Restated Schedule to Loan and Security Agreement dated February 23,     --
          1996 between Finova Capital Corporation and the Company(2)
10.15     Incentive Stock Option Agreement between  Kenneth H. James and the Company (2)      --
10.16     Incentive Stock Option Agreement between James A. Cantley and the Company(2)        --
10.17     Loan Agreement dated March 18, 1996 between the American Bankers Insurance          --
          Company of Florida and the Company(2)
10.18     Amended and Restated Schedule to Loan and Security Agreement dated February 23,     22
          1996 between Finova Capital Corporation and the Company(2)
10.19     Aircraft Sales Agreement between Corporate Aircraft Marketing and The Company       36
          dated July 16, 1996
11        Statement re: computation of per share earnings                                      9
21        Subsidiaries of The Thaxton Group, Inc. (1)                                         --
27        Financial Data Exhibit                                                              43

</TABLE>
-----------------------------------
 (1)      Incorporated by reference from Registration Statement on Form SB-2,
          Commission File No. 33-97130-A
 (2)      Incorporated by reference from 1995 Annual Report on Form 10-KSB

                                        21

<PAGE>