UNITED STATES
                       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, 1999

(  ) 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 333-42623

                             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
                 ------------------------------------------------
                      29270 (Address of principal executive
                                    offices)

                     Issuers telephone number: 803-285-4337


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 29, 1999
         ----------------                           ---------------------
         COMMON  STOCK                                  3,752,860


<PAGE>






                             THE THAXTON GROUP, INC.

                                   FORM 10-QSB

                               SEPTEMBER 30, 1999

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                         PAGE NO.
                                                                                          -------
<S>                                                                                            <C>

PART I   FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Consolidated Balance Sheets at September 30, 1999 and                          3
                  December 31, 1998

                  Consolidated Statements of Income for the nine months                          4
                  ended September 30, 1999 and 1998

                  Consolidated Statements of Income for the three months
                  ended September 30, 1999 and 1998                                              5

                  Consolidated Statements of Cash Flows for the nine months
                  ended September 30, 1999 and 1998                                              6

                  Notes to Consolidated Financial Statements                                     7

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                                     10

PART II  OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K                                              16
</TABLE>

                                                2

<PAGE>


PART I

ITEM 1.  FINANCIAL STATEMENTS
                                    The Thaxton Group, Inc.
                                  Consolidated Balance Sheet
                                         ( in $000's)
<TABLE>
<CAPTION>



                                                                   September 30,    December 31,
                                                                        1999            1998
                                                                        -----          ------
                                                                   (Unaudited)



<S>                                                                          <C>         <C>
Assets
-------
Cash                                                                    $  4,053     $   781
Finance receivables, net                                                  66,178      61,870
Premises and equipment, net                                                3,429       2,844
Accounts receivable                                                        1,446       1,252
Repossessed automobiles                                                       69         603
Goodwill and other intangible assets                                      10,109       8,305
Other assets                                                               4,947       3,342
                                                                        --------    --------
     Total assets                                                       $ 90,231    $ 78,997
                                                                        ========    ========

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

Accrued interest payable                                                $    574    $    429
Notes payable                                                             75,418      62,144
Notes payable to affiliates                                                  790         779
Accounts payable                                                           1,536         929
Employee savings plan                                                      1,259       1,070
Other liabilities                                                            703         716
                                                                        --------    --------
     Total liabilities                                                    80,280      66,067
     -------------------                                                --------    --------

Stockholders' Equity
--------------------
Preferred Stock $ .01 par value,
Series A:  400,000 shares authorized, issued and
  outstanding 160,640 Shares at September 30, 1999,                            1           2
  175,014 shares issued and outstanding at December 31, 1998
Series C: 50,000 shares authorized, issued and
  outstanding at September 30, 1999 and December 31, 1998                      1           1
Series D:  56,276 shares authorized and issued; no shares outstanding
   September 30, 1999, 56,276 shares outstanding December 31, 1998            --           1
  outstanding at September 30, 1999 and December 31, 1998                      8           8

Common stock, $ .01 par value; authorized 50,000,000 shares;
  issued and outstanding 3,752,970 shares at September 30,1999;
  3,885,218 shares at December 31, 1998                                       38          39
Additional paid-in-capital                                                10,165      12,184
Retained earnings                                                           (262)        695
                                                                        --------    --------
     Total stockholders' equity                                            9,951      12,930
                                                                        --------    --------

     Total liabilities and stockholders' equity                         $ 90,231    $ 78,997
                                                                        ========    ========

</TABLE>

See accompanying notes to consolidated financial statements.
                                       3

<PAGE>

                             The Thaxton Group, Inc.
                  Consolidated Statements of Income (Unaudited)
                        (in $000's except per share data)
<TABLE>
<CAPTION>


                                                                       Nine Months Ended September 30,
                                                                           1999             1998
                                                                           -----            -----

<S>                                                                   <C>              <C>
Interest  and  fee income                                             $   17,959       $   11,266
Interest expense                                                           5,251            3,703
                                                                        --------         --------
     Net interest income                                                  12,708            7,563
     Provision for credit losses                                           2,770            2,952
                                                                        --------         --------

Net interest income after provision for credit losses                      9,938            4,611
                                                                        --------         --------
Other income:
     Insurance premiums and commissions, net                               7,934            4,842
     Other income                                                          1,488              619
                                                                        --------         --------
Total other income                                                         9,422            5,461
                                                                        --------         --------

Operating expenses:
     Compensation and employee benefits                                   11,733            5,256
     Telephone, postage, and supplies                                      2,041            1,302
     Net occupancy                                                         2,124            1,172
     Reinsurance claims expense                                              485              227
     Insurance                                                               516              190
     Collection expense                                                       73              111
     Travel                                                                  280               96
     Professional fees                                                       387              283
     Other                                                                 2,343            2,134
                                                                        --------         --------
     Total operating expenses                                             19,982           10,771
                                                                        --------         --------
     Income (loss) before income tax expense                                (622)            (699)
Income tax expense (benefit)                                                (199)            (227)
                                                                        --------         --------
     Net income (loss)
                                                                            (423)             (472)
                                                                        --------         --------
     Dividends on preferred stock                                            534               162
                                                                        --------         --------


     Net income (loss) applicable to common shareholders              $     (957)      $     (634)
                                                                      ==========       ==========


     Net income (loss) per common share-- basic and diluted           $    (0.25)      $    (0.17)

                                                                      ==========       ==========

     Weighted average shares outstanding - basic and diluted           3,771,687        3,776,146
                                                                      ==========       ==========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       4

<PAGE>



                             The Thaxton Group, Inc.
                  Consolidated Statements of Income (Unaudited)
                        (in $000's except per share data)

<TABLE>
<CAPTION>

                                                                     Three Months Ended September 30,
                                                                           1999             1998
                                                                          ----             ----
<S>                                                                        <C>              <C>
Interest and fee income                                                    6,446            3,744
Interest expense                                                           2,046            1,290
                                                                       ---------        ---------

     Net interest income                                                   4,400            2,454

Provision for credit losses
                                                                             919              985
                                                                       ---------        ---------

Net interest income after provision for credit losses                      3,481            1,469
                                                                       ---------        ---------
Other income:
     Insurance premiums and commissions, net                               2,873            1,989
     Other income                                                            496              146
                                                                       ---------        ---------
Total other income                                                         3,369            2,135
                                                                       ---------        ---------
Operating expenses:
     Compensation and employee benefits                                    4,340            1,884
     Telephone, postage, and supplies                                        735              472
     Net occupancy                                                           986              361
     Reinsurance claims expense                                              142              101
     Insurance                                                               329              124
     Collection expense                                                       19               31
     Travel                                                                   98               33
     Professional fees                                                       172              168
     Other                                                                   428              781
                                                                       ---------        ---------
     Total operating expenses                                              7,249            3,955
                                                                       ---------        ---------
     Income (loss) before income tax expense                                (399)            (351)

Income tax expense (benefit)                                                 (69)            (114)
                                                                       ---------        ---------
     Net income (loss)                                                      (330)            (237)
                                                                       ---------        ---------

     Dividends on preferred stock                                            177               57
                                                                       ---------        ---------

     Net income (loss) applicable to common shareholders               $    (507)       $    (294)
                                                                       =========        =========

     Net income (loss) per common share-- basic and diluted            $   (0.14)       $   (0.08)
                                                                       =========        =========
     Weighted average shares outstanding - basic and diluted           3,755,036        3,756,768
                                                                       =========        =========
</TABLE>
See accompanying notes to consolidated financial statements.

                                       5

<PAGE>

                             The Thaxton Group, Inc.
                Consolidated Statements of Cash Flows (Unaudited)
                  Nine months ended September 30, 1999 and 1998
                                   (in $000's)

<TABLE>
<CAPTION>

                                                                      1999              1998
                                                               ----------------- ----------------
<S>                                                                 <C>               <C>
Cash flows from operating activities                                $  2,457,000      $ 1,328,000
Cash flows from investing activities                                  (9,914,000)      (3,747,000)
Cash flows from financing activities                                  10,729,000        1,725,000
                                                               ----------------- ----------------

Net increase (decrease) in cash                                        3,272,000         (694,000)

Cash at beginning of period                                              781,000        1,163,000
                                                               ----------------- ----------------

Cash at end of Period                                                $ 4,053,000      $   469,000
                                                               ================= ================
</TABLE>


                                       6
<PAGE>



                             The Thaxton Group, Inc.
             Notes to Consolidated Financial Statements (Unaudited)
                           September 30, 1999 and 1998


(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,  primarily through  subsidiaries,  finance
branches in seven  southeastern  states,  and insurance  agency  branches in six
states  located in the  southeast  and  southwest.  The Company is a diversified
financial  services  company that is engaged  primarily in consumer  lending and
consumer  automobile sales financing to borrowers with limited credit histories,
low incomes or past credit problems.  The Company also offers insurance  premium
financing to such  borrowers.  A  substantial  amount of the  Company's  premium
finance  business has been derived from customers of the  independent  insurance
agencies owned by Thaxton Insurance Group, Inc. ("Thaxton Insurance"), which was
acquired by the  Company in 1996.  The Company  provides  reinsurance  through a
wholly owned subsidiary, TICO Reinsurance,  Ltd. ("TRL"). Through a wholly owned
subsidiary,  Paragon,  Inc.,  the Company is also  engaged in  mortgage  banking
originating  mortgage loans to individuals.  The Company sells substantially all
mortgage  loans it originates to  independent  third  parties.  Through  another
wholly owned subsidiary,  Thaxton  Commercial  Lending,  Inc., the Company makes
factoring loans and  collateralized  commercial  loans to small and medium sized
businesses.  All significant  intercompany  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 the 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.

Information  with respect to September  30, 1999 and 1998,  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
the 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 nine months and  quarter  ended  September  30, 1999 are not
necessarily indicative of results to be expected for the entire fiscal year.

                                       7
<PAGE>





(2)      FINANCE RECEIVABLES

Finance  receivables consist of the following at September 30, 1999 and December
31, 1998:
<TABLE>
<CAPTION>

                                                                     September 30,     December 31,
                                                                         1999             1998
                                                                         -----           ------

<S>                                                             <C>                <C>
              Automobile Sales Contracts                        $     31,462,000   $   37,125,000
              Mortgage loans                                           7,931,000       11,096,000
              Commercial loans                                         2,707,000        1,268,000
              Direct Loans                                            33,287,000       27,853,000
              Premium Finance Contracts                                8,516,000        3,343,000
                                                               ================= ================

              Total finance receivables                               83,903,000       80,685,000


              Unearned interest                                      (11,984,000)     (11,914,000)
              Unearned insurance premiums, net                             6,000         (275,000)
              Valuation discount for acquired loans                     (264,000)        (673,000)
              Bulk purchase discount                                     (46,000)        (602,000)
              Dealer hold back                                          (908,000)        (640,000)
              Allowance for credit losses                             (4,529,000)      (4,711,000)
                                                               ================= ================

              Finance receivables, net                          $     66,178,000    $  61,870,000
                                                               ================= ================
</TABLE>

Mortgage  Loans are held for sale in a warehouse  arrangement,  and  outstanding
balances will fluctuate depending upon monthly origination volume and the timing
of  sales to  outside  investors.  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
$3,115,000 and $46,000,  respectively,  at September 30, 1999 and  approximately
$5,659,000 and $602,000, respectively, at December 31, 1998.

With holdback  arrangements,  an automobile 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 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 $20,642,000 and $954,000, respectively, at September 30, 1999
and approximately $24,464,000 and $640,000, respectively, at December 31, 1998.

The valuation  discount for acquired  loans relates to our  acquisition  of four
finance offices from Budget Financial Services,  Inc. ("Budget").  The amount of
finance  receivables,  net of  unearned  interest  and  insurance,  and  related
valuation  discount was  approximately  $1,789,000 and $264,000 at September 30,
1999; and $2,564,000 and $673,000 at December 31, 1998.

At September 30, 1999 there were no significant concentrations of receivables in
any type of property or to one borrower.

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

                                       8
<PAGE>



Changes in the allowance  for credit losses for the nine months ended  September
30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>

                                                                        1999             1998
                                                                 ---------------  ---------------

<S>                                                                  <C>              <C>
                          Beginning balance                          $ 4,711,000      $ 4,809,000
                          Provision for credit losses                  2,769,000        2,952,000

                          Charge-offs                                 (3,175,000)      (3,076,000)
                          Recoveries                                     224,000          133,000
                                                                 ---------------  ---------------
                          Net charge-offs                             (2,951,000)      (2,943,000)
                                                                 ---------------  ---------------

                          Ending balance                             $ 4,529,000      $ 4,818,000


</TABLE>

(3) NOTES PAYABLE

At September 30, 1999 the Company  maintained a line of credit  agreement with a
commercial  finance  company for $92 million,  maturing on October 31, 2003.  At
September 30, 1999 the Company's net finance  receivables  would have allowed it
to  borrow  an  additional  $5.0  million  against  existing   collateral.   The
outstanding  balance under this line of credit was  $64,556,000 at September 30,
1999.  There are five tranches under this  agreement,  Tranche A, B, C, D and F.
Interest  rates range  between  lenders prime rate plus 1% to lenders prime rate
plus 5%.

The borrowing  availability  under  certain  Tranches is also limited by amounts
borrowed  under other  Tranches,  outstanding  receivables,  insurance  premiums
written,  and in some  cases,  additional  restrictions.  As a  result  of these
additional  restrictions,  the  Company  had  approximately  $35  million  total
potential  borrowing  capacity,  and actual borrowing  capacity of approximately
$5.0 million as of September 30, 1999.

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  which may be amended from time to time.
Also,  the Company may pay dividends up to 25% of the current year's net income.
As of September 30, 1999,  the Company met all such ratios and  requirements  or
obtained waivers for any instances of non-compliance.

(4)      SUBSEQUENT EVENTS

On October 1, 1999, the Company  acquired  American  United  Insurance  Agencies
(American  United) a group of retail insurance offices located in North Carolina
American United places primarily non-standard personal automobile insurance risk
in  North  Carolina  The  purchase  price  of the  acquisition  was  $1,515,000,
consisting  of cash of  $915,000  and an 8%,  12-month  note for  $600,000.  The
acquisition was accounted for using purchase accounting, resulting in intangible
assets consisting of insurance expirations,  and goodwill,  totaling $1,490,000.
Intangible assets will be amortized over 15 years.

On  November  8, 1999,  The  Company  acquired  Thaxton  Investment  Corporation
("Thaxton Investment").  Mr James D. Thaxton, President,  Chairman, and majority
shareholder of the Thaxton  Group,  established  Thaxton  Investment in February
1999 to purchase the consumer finance  operations of FirstPlus Consumer Finance,
Inc. As a result of that acquisition,  Thaxton Investment  acquired 144 consumer
finance  offices in seven states.  Under the terms of the Plan of Share Exchange
Agreement, Mr. Thaxton, the sole shareholder of Thaxton Investment,  transferred
all of his shares of common  stock of  Thaxton  Investment  to Thaxton  Group in
exchange for 3,223,000 shares of common stock of Thaxton Group.  Because Thaxton
Investment and Thaxton Group have been under common  ownership and control since
February  1999,  Thaxton  Group's  acquisition  of  Thaxton  Investment  will be
accounted  for at  historical  cost in a manner  similar to pooling of  interest
accounting.

                                       9
<PAGE>



(5)  BUSINESS SEGMENTS

For the year ended December 31, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 ("SFAS No. 131"), "Disclosures about Segments of an
Enterprise and Related  Information."  SFAS No. 131 requires the presentation of
descriptive  information about reportable  segments consistent with that used by
management  of the  Company to assess  performance.  Additionally,  SFAS No. 131
requires disclosure of certain information by geographic region.

The  Company  reports  its  results of  operations  in three  primary  segments;
consumer finance,  mortgage banking and insurance.  The consumer finance segment
provides  financing to consumers with limited credit  histories,  low incomes or
past credit  problems.  Revenues in the  consumer  finance  business are derived
primarily  from  interest  and fees on  loans,  and the sale of  credit  related
insurance  products to its customers.  The Company's mortgage banking operations
are conducted through Paragon,  a wholly-owned  subsidiary  acquired in November
1998. Paragon originates,  closes and funds predominantly B and C credit quality
mortgage loans, which are warehoused until they can be packaged and sold to long
term investors. Paragon receives fee income from originating mortgages and loans
are  generally  sold at a  premium  to the  permanent  investor.  The  Company's
insurance  operations consist of selling,  on an agency basis,  various lines of
automobile,  property and  casualty,  life and  accident  and health  insurance.
Revenue is generated  through fees paid by the insurance  for which  business is
placed.


The following table  summarizes  certain  financial  information  concerning the
Company's  reportable operating segments for the nine months ended September 30,
1999 and 1998:

<TABLE>
<CAPTION>
                                      Consumer             Mortgage
              1999                    Finance              Banking          Insurance                Other                 Total
                            --------------------------------------------------------------------------------------------------------
<S>                          <C>                  <C>                  <C>                  <C>                  <C>
 Total Revenue               $      12,780,000    $      6,314,000     $      7,517,000     $      770,000       $      27,381,000
 Net Income                            635,000             207,000           (1,020,000)          (245,000)               (423,000)
 Total Assets                       73,492,000           2,301,000           12,499,000          1,939,000              90,231,000


                                      Consumer             Mortgage
              1998                    Finance              Banking          Insurance                Other                 Total
                            --------------------------------------------------------------------------------------------------------
 Total Revenue               $      12,100,000    $        195,000     $     4,431,000                  -        $      16,726,000
 Net Income                           (284,000)            130,000            (480,000)                 -                 (634,000)
 Total Assets                       54,486,000             184,000           7,120,000                  -               61,790,000


</TABLE>

(1) Other includes Tico Reinsurance  Limited, a credit life reinsurance company,
Thaxton Commercial Lending Inc., and other Corporate unallocated overhead.

                                       10
<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

The Thaxton Group,  Inc. and its subsidiaries  (the "Company") were organized in
July 1978 as C.L.  Thaxton & Sons,  Inc.,  and from  that  date  until  1991 was
primarily engaged in making and servicing direct consumer loans ("Direct Loans")
and insurance  premium  finance loans ("Premium  Finance  Contracts") to persons
with limited credit histories,  low incomes, or past credit problems ("Non-Prime
Borrowers").   In  1991,  the  Company  made  a  strategic   decision  to  begin
diversifying  its  portfolio  by actively  seeking to finance  purchases of used
automobiles  ("Automobile Sales Contracts") by Non-Prime Borrowers and has since
evolved into a diversified consumer financial services company. The Company also
sells credit related  insurance  products and,  through its subsidiary,  Thaxton
Insurance Group, Inc. ("Thaxton  Insurance"),  on an agency basis, various lines
of property and casualty,  life, and accident and health insurance.  The Company
also entered the mortgage  brokerage  business during 1996, and in 1998 acquired
Paragon,   Inc.,   ("Paragon")  a  mortgage   banking  company  engaged  in  the
origination,  funding,  and whole  loan  sale of  primarily  "B" and "C"  credit
quality residential  mortgages.  In 1998 the Company also began making factoring
and  commercial  loans to  smaller  sized  businesses  through  a  wholly  owned
subsidiary, Thaxton Commercial Lending, Inc. ("Commercial").

THE INDUSTRY

The segment of the  consumer  finance  industry  in which the Company  operates,
which is commonly called the "non-prime  credit market,"  provides  financing to
consumers with limited credit histories,  low incomes,  or past credit problems.
These  consumers  generally do not have access to the same variety of sources of
consumer credit as borrowers with long credit histories, no defaults, and stable
employment,  because they do not meet the stringent  objective  credit standards
imposed by most traditional  lenders.  The Company,  like its competitors in the
same segment of the consumer  finance  industry,  generally  charges interest to
Non-prime  Borrowers at the maximum rate  permitted by law or, in states such as
South  Carolina where there are no legal maximum  rates,  at  competitive  rates
commensurate  with the  increased  default risk and the higher cost of servicing
and  administering  a  portfolio  of  loans  to  such  borrowers.  By  contrast,
commercial banks,  captive financing  subsidiaries of automobile  manufacturers,
and other  traditional  sources of consumer credit to prime borrowers  typically
impose more stringent  credit  requirements  and generally charge lower interest
rates.

The non-prime  consumer credit market is highly  fragmented,  consisting of many
national, regional, and local competitors, and is characterized by relative ease
of entry.  Management  believes that most of these  companies are  concentrating
their  activities  on  providing  financing  to  Non-prime  Borrowers  with less
extensive  credit  problems who are purchasing  late model used cars (coming off
lease or former rental cars) from franchised  automobile  dealers.  By contrast,
the Company  concentrates on providing financing to Non-prime Borrowers who have
more  extensive  credit  problems and are purchasing  lower-priced,  older model
automobiles  from  independent  dealers  and making  direct  loans to  Non-prime
Borrowers to meet short-term cash needs.

The premium  finance  industry  for  personal  lines of insurance is also highly
fragmented.  Insurance  companies  that  engage in direct  writing of  insurance
policies  generally  provide  financing to their customers who need the service.
Numerous small independent  finance companies such as the Company are engaged in
providing  premium  financing  for  personal  lines of  insurance  purchased  by
Non-prime Borrowers through independent insurance agents. Because the rates they
charge are highly  regulated,  these companies compete primarily on the basis of
efficiency in providing  the  financing  and servicing the loans.  A significant
number of  independent  insurance  agents  provide  premium  financing  to their
customers either directly or through affiliated  entities.  As banks are allowed
to enter the  insurance  business,  they also are  increasingly  engaging in the
premium finance business.

Independent  insurance  agencies  represent  numerous  insurance  carriers,  and
typically  place a customer's  business  with the carrier whose  combination  of
features and price best match the customer's needs. In comparison, direct agents
represent only one carrier. Most carriers find use of independent agencies to be
a more cost-effective method of selling their products than using a direct agent
force.  Competition in the  independent  insurance  agency  business is intense.
There are numerous other  independent  agencies in most of the markets where the
Company's  insurance  offices  are  located.  There are also  direct  agents for
various  insurers  operating  in some of these  markets.  The  Company  competes
primarily  on the basis of service  and  convenience.  The  Company  attempts to
develop and  maintain  long-term  customer  relationships  through low  employee
turnover  and  responsive  service  representatives  and offers a broad range of
insurance products underwritten by reputable insurance companies.

                                       11

<PAGE>


NET INTEREST MARGIN

The  following  table sets  forth-certain  data  relating to the  Company's  net
interest margin for the six months and three months ended September 30, 1999 and
1998.
<TABLE>
<CAPTION>

                                                            For the Nine Months                          For the Three Months
                                                            Ended September 30,                          Ended September 30,
                                                        1999                  1998                   1999                   1998
                                                   --------------        -------------          -------------         --------------
<S>                             <C>                <C>                   <C>                    <C>                   <C>
Average Net Finance Receivables (1)                $   59,479,000        $  52,048,000          $  62,500,000         $  52,783,000
Average notes payable                                  69,121,000           44,998,000             75,173,000            45,989,000

Interest and fee income (2)                            11,852,000           11,263,000              4,022,000             3,743,000
Interest expense (2)                                    4,541,000            3,254,000              1,737,000             1,142,000
Net interest income                                     7,311,000            8,009,000              2,285,000             2,601,000

Average interest rate earned (1)                            26.57%               28.85%                 25.74%                28.37%

Average interest rate paid (1)                               8.76%                9.64%                  9.24%                 9.93%
Net interest spread                                         17.81%               19.21%                 16.50%                18.43%

Net interest margin (3)                                     16.39%               20.52%                 14.62%                19.71%

</TABLE>



(1) Averages are computed using month-end  balances during the periods presented
and exclude Paragon Lending Mortgage receivables.
(2)  Excludes  Thaxton  Insurance  Group  interest  income,  expense and Paragon
Lending loan fee income.
(3) Net interest  margin  represents net interest  income divided by average Net
Finance Receivables.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

Finance Receivables at September 30, 1999 were $83,903,000 versus $66,327,000 at
September 30, 1998 a 26% increase.  Approximately  50% of the increase is due to
the acquisition of Paragon,  Inc., and the mortgage  receivables  carried in its
warehouse  line.  The  remaining  increase  is due  primarily  to  growth in our
consumer lending receivables.

Unearned  income at September 30, 1999 was  $12,242,000  versus  $12,226,000  at
September  30,  1998,  a 1% increase  which was  directly  related to the higher
receivable  level.  The  provision for credit  losses  established  for the nine
months ended  September 30, 1999 was $2,770,000  versus  $2,952,000 for the same
period in 1998,  and the allowance for credit losses  decreased to $4,529,000 at
September 30, 1999,  from $4,818,000 at September 30, 1998. The reduction in the
provision is directly  attributable  to reduced credit losses,  due primarily to
the Company's  programs  during 1997 and 1998 to improve the quality of its loan
portfolio.  Accordingly,  the  allowance  for credit  losses has not  required a
significant  increase  in order to  maintain  its level in  accordance  with the
Company's allowance for loan loss model.

Interest  and fee  income  for the nine  months  ended  September  30,  1999 was
$17,959,000,  versus $11,266,000 for the nine months ended September 30, 1998, a
59% increase. This increase is primarily due to our acquisition of Paragon, Inc.
in the fourth  quarter of 1998,  and the fees earned by Paragon in the course of
its mortgage banking  operations.  Interest expense  increased to $5,251,000 for
the nine months ended  September 30, 1999 versus  $3,703,000 for the nine months
ended September 30, 1998, a increase of 42%, the direct result of a higher level
of average outstandings during 1999.

Insurance commissions net of insurance cost increased to $7,934,000 for the nine
months ended September 30, 1999 from $4,842,000 for the same period of 1998, due
primarily to the  acquisition  of an additional 27  non-standard  auto insurance
agency offices  during the fourth  quarter of 1998,  which more than doubled the
number locations selling insurance in Thaxton Insurance Group.

Operating  expenses increased to $19,982,000 for the nine months ended September
30, 1999 from $10,771,000 for the comparable period of 1998, a 86% increase, due
to additional expenses incurred as a result of the 1998 acquisition of insurance
branch  offices,  consumer  finance  offices,  and Paragon,  Inc., the Company's
mortgage banking subsidiary.

As a result of the above,  the company  recognized a $423,000  loss for the nine
months ended September 30, 1999 versus a $472,000 loss for the nine months ended
September 30, 1998.

                                       12
<PAGE>


Stockholders'  equity  decreased from $12,930 at December 31, 1998 to $9,951 for
the nine months ended September 30, 1999, a 23% decrease,  primarily as a result
of the Company's program to repurchase its common stock.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

Interest  and fee income  for the three  months  ended  September  30,  1999 was
$6,446,000,  versus  $3,744,000 for the three months ended September 30, 1998, a
72% increase. This increase is primarily due to our acquisition of Paragon, Inc.
in the fourth  quarter of 1998,  and the fees earned by Paragon in the course of
its mortgage banking  operations.  Interest expense  increased to $2,046,000 for
the three months  ended  September  30, 1999 versus  $1,290 for the three months
ended  September  30, 1998, a 59%  increase,  and the direct  result of a higher
level of average outstandings during 1999.

Stockholders equity decreased for the three months ended September 30, 1999s as
a result of the Company's repurchase of 4,536 shares of common stock, and 400
shares of Series A preferred stock, for a total reduction in relation to these
repurchases of $49,315.

Insurance  commissions  net of insurance  cost  increased to $2,873,000  for the
three months ended September 30, 1999 from $1,989,000 for the three months ended
September  30,  1998,  primarily  due to the  acquisition  of an  additional  27
non-standard  auto  insurance  agency offices during the fourth quarter of 1998,
which more than  doubled the number of  locations  selling  insurance in Thaxton
Insurance Group.

Operating  expenses increased to $7,249,000 for the three months ended September
30, 1999 from $3,955,000 for the comparable period of 1998, a 83% increase,  due
to additional expenses incurred as a result of the 1998 acquisition of insurance
branch  offices,  consumer  finance  offices,  and Paragon  Inc.  the  Company's
mortgage banking subsidiary.

As a result of the above,  the company  recognized  a $330,000  net loss for the
three months ended September 30, 1999, versus a net loss of $237,000 for 1998.

CREDIT LOSS EXPERIENCE

The  following  table sets forth the  Company's  allowance  for credit losses at
September  30, 1999,  and 1998 and the credit loss  experience  over the periods
presented.

<TABLE>
<CAPTION>

                                                                  At or for the nine months Ended   At or for the three months Ended
                                                                          September 30,                     September 30,
                                                                     ---------       ----------      ----------       ---------
                                                                       1999             1998            1999            1998
                                                                     ---------       ----------      ---------        ---------


<S>                             <C>                              <C>             <C>             <C>            <C>
Average Net finance receivables (1)                              $  69,255,000   $   52,048,000  $   69,255,000 $   52,048,000
Allowance for credit losses                                          4,529,000        4,818,000       4,529,000      4,818,000
Allowance for credit losses as a percentage of net finance
     receivables (1)                                                      6.54%            9.26%           6.54%          9.13%
Dealer reserves and discounts on bulk purchases                        954,000        1,485,000         954,000      1,485,000
Dealer reserves and discounts on bulk purchases as percentage
     of Automobile sales Contracts as period end(2)                       3.03%            4.54%           3.03%          4.54%
Allowance for credit losses and dealer reserves and discount on
     bulk purchases as a percentage of net finance receivables (1)        7.92%           12.11%           7.92%         11.94%
Provision for loan losses                                            2,770,000        2,952,000         919,000        985,000
Charge-offs (net of recoveries)                                      2,951,000        2,943,000         912,000        986,000
Charge-offs (net of recoveries) as a percentage of average net
     finance receivables (1)                                              5.68%            7.56%           5.27%          7.47%
</TABLE>

---------------------

     (1)  Finance  Receivable  balances are  presented  net of unearned  finance
          charges. 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.

                                       13
<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,
                                                                           ----------------------------------
                                                                                1999                 1998
                                                                           ---------------   ----------------

<S>                                                                             <C>                    <C>
Dealer reserves and discounts on bulk purchases on
     Automobile Sales Contracts                                            $      954,000       $  1,485,000

Allowance for credit losses
Direct Loans                                                                    4,100,000          4,536,000
Premium Finance Contracts                                                         429,000            282,000
                                                                          ---------------   ----------------
     Subtotal                                                                   4,529,000          4,818,000
                                                                          ---------------   ----------------
     Total                                                                      5,483,000          6,303,000
                                                                          ===============   ================
</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,
                                                                           -----------------------------------
                                                                                1999                 1998
                                                                           ----------------    ---------------


<S>                                                                                <C>                    <C>
Automobile Sales Contracts and Direct Loans contractually
      past due 90 days or more (1)                                         $     959,000       $     479,000
Automobile Sales Contracts and Direct Loans(1)                                63,086,000          49,226,000
Automobile Sales Contracts and Direct Loans contractually
     past due 90 days or more as a percentage of Automobile
     Sales Contracts and Direct Loans                                               1.52%               0.97%
</TABLE>

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

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

                                                                                           At September 30,
                                                                           -------------------------------------------
                                                                                1999                         1998
                                                                           ----------------            ---------------

<S>                                              <C>
Premium finance contracts contractually past due 60 days
     or more (1)                                                            $      97,000               $     220,000
Premium finance contracts outstanding (1)                                       8,163,000                   4,023,000
Premium finance contracts contractually past due 60 days
     or more as a percentage of premium finance contracts                            1.19%                       5.47%
</TABLE>

-------------------------------------------

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


                                       14
<PAGE>



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.  The
Revolving  Credit  Facility is extended by Finova and consists of six  tranches.
The  primary  tranche  provides  for  advances  of up to  $100  million  and the
secondary  tranches  provide for advances from $5 million to $25 million  during
their  respective  terms, all of which expire on October 31, 2003 subject to the
limitation that advances under each tranche of the Revolving Credit Facility may
not exceed an amount equal to specified  percentages of Net Finance Receivables.
As of June 30, 1999,  $62 million was  outstanding  under the  Revolving  Credit
Facility and there was $8.5 million  available  for  additional  borrowing.  The
interest rate for borrowings is the prime rate  published by Citibank,  N.A. (or
other money center bank designated by Finova) plus one percent per annum for the
primary  tranche  and  ranges  from plus one to five  percent  per annum for the
secondary  tranches.  The  Revolving  Credit  Facility  agreement,   amended  on
September 3, 1997,  provides for a lower fixed percentage over prime for certain
secondary  tranches  than  did the  previous  agreement.  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 maximum  borrowings  available under the Revolving
Credit  Facility,  in addition to cash expected to be generated from  operations
and the sale of subordinated notes, will provide the resources necessary to fund
the Company's liquidity and capital needs through the foreseeable future.

IMPACT OF YEAR 2000

The Company recognizes that there is a business risk in computerized  systems as
we move into the next century. If computer systems  misinterpret the date, items
such as  interest  calculations  on loans will be  incorrect.  This is  commonly
called the "Year 2000 Problem." A number of computer systems used by the Company
in its day to day  operations  may be  affected  by this  problem.  The issue is
whether computer systems will properly recognize date-sensitive information when
the  year  changes  to  2000.  Systems  that  do  not  properly  recognize  such
information could fail or generate erroneous data.

In the  ordinary  course of  business,  the Company has  replaced a  significant
portion of its  non-compliant  hardware  and software  with Year 2000  compliant
systems.  The Company has minimal proprietary  processing software virtually all
key  sub-systems,  payroll  system,  and general  ledger were  written,  and are
maintained  by  reputable  outside  vendors.  The  Company  has  confirmed  with
licensors  from which it licenses  software  that all such software is Year 2000
compliant. The majority of vendor licensors have offered or provided the Company
the results of their Year 2000 testing.

With respect to our systems,  networks,  and licensed  software,  management has
established  a  project  team,  which has  identified  affected  systems  and is
currently  working to ensure  that the advent of the year 2000 will not  disrupt
operations.  This project team reports  periodically to senior  management.  The
company is also working closely with outside computer vendors to ensure that all
software corrections and warranty  commitments are obtained.  The estimated cost
to the Company for these corrective  actions,  and the related hardware required
to run the  upgraded  software was  originally  estimated  at  approximately  $1
million. A significant portion of this budget has already been spent, much of it
on upgrading hardware throughout our branch network. The remaining amounts to be
incurred are included in the  Company's  capital and  operating  budgets for the
remainder of 1999.

The Company has taken  significant steps toward insuring that the Year 2000 will
not adversely affect our ability to function.  However,  it should be noted that
incomplete or untimely  compliance  would have a material  adverse impact on the
Company, the dollar amount of which cannot be accurately quantified at this time
because of the inherent variables and uncertainties involved.

RECENT ACQUISITION BY AFFILIATE

On  February 1, 1999,  the  Company's  CEO and  majority  shareholder  purchased
approximately  144 consumer  finance  offices from FirstPlus  Consumer  Finance,
Inc., and operates  those offices in Thaxton  Investment  Corporation  ("Thaxton
Investment"),  a corporation  set up for that purpose.  Thaxton  Investment is a
private  corporation,  and Mr.  Thaxton  is the sole  shareholder.  The  Company
provides  management  services  to  Thaxton  Investment,   and  charges  Thaxton
Investment a reasonable fee for those services.  Thaxton Investment  operates in
seven states,  four of which the Company also operates  finance  branch  offices
within.  Additionally,  some of Thaxton  Investment  finance offices do business
using the "TICO" business name.

On November 8, 1999, The Company acquired Thaxton Investment. Under the terms of
the Plan of Share  Exchange  Agreement,  Mr.  Thaxton,  the sole  shareholder of
Thaxton  Investment,  transferred  all of his shares of common  stock of Thaxton
Investment to Thaxton Group in exchange for 3,223,000  shares of common stock of
Thaxton  Group.  Because  Thaxton  Investment  and Thaxton Group have been under
common ownership and control since February 1999, Thaxton Group's acquisition of
Thaxton  Investment will be accounted for at historical cost in a manner similar
to pooling of interests accounting.

                                       15
<PAGE>



PART II

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a)         EXHIBITS

            Exhibit 27         Financial Data Schedule

(b)         REPORTS ON FORM 8-K

            There were no reports  filed on Form 8-K  during the  quarter  ended
September 30, 1999.





                                   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 15, 1999                   /s/JAMES D. THAXTON
                                          -------------------
                        James D. Thaxton
                                          President and Chief Executive Officer

Date: November 15, 1999                   /s/ALLAN F. ROSS
                                          ----------------
                                          Allan F. Ross
                                          Vice President, Treasurer, Secretary,
                                          and Chief Financial Officer


                                       16