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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             -----------------------

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 1996

                                       OR

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


                         Commission file number 1-22262


                             COMMERCIAL ASSETS, INC.
             (Exact name of registrant as specified in its charter)


                     Maryland                                  84-1240911
         (State or other jurisdiction of                    (I.R.S. Employer
          incorporation or organization)                  Identification No.)

      3600 South Yosemite Street, Suite 900                      80237
                 Denver, Colorado                              (Zip Code)
     (Address of Principal Executive Offices)

                                 (303) 773-1221
              (Registrant's telephone number, including area code)

                                 Not Applicable
              (Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report.)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X  No  ___.

            As of October 31, 1996, 10,315,809 shares of Commercial Assets, Inc.
Common Stock were outstanding.

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<PAGE>






                             COMMERCIAL ASSETS, INC.

                                    FORM 10-Q

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996

                               TABLE OF CONTENTS

                                                                            PAGE
PART I.      FINANCIAL INFORMATION:

             Item 1.  Condensed Financial Statements:

                      Balance Sheets as of September 30, 1996
                        (Unaudited) and December 31, 1995..................... 1

                      Statements  of Income  for the three and nine  months
                        ended September 30, 1996 and 1995 (Unaudited)......... 2

                      Statements  of Cash Flows for the nine  months  ended
                        September 30, 1996 and 1995 (Unaudited)............... 3

                      Notes to Financial Statements (Unaudited)............... 4

             Item 2.  Management's Discussion and Analysis of
                         Financial Condition and Results of Operations........ 7

                      Definitions.............................................15

PART II.     OTHER INFORMATION:

             Item 6.  Exhibits and Reports on Form 8-K........................17




                                      (i)
<PAGE>


<TABLE>
<CAPTION>


                             COMMERCIAL ASSETS, INC.
                            CONDENSED BALANCE SHEETS
                          (Dollar amounts in thousands)

                                                                                     September 30,     December 31,
                                                                                          1996             1995
                                                                                          ----             ----
Assets                                                                                (Unaudited)

<S>                                                                                     <C>              <C>       
   Cash and cash equivalents                                                            $   10,407       $      598
   Accrued interest receivable                                                                 597              675
   Restricted cash                                                                           1,872              768
   CMBS bonds                                                                               61,468           69,503
   Other assets, net                                                                            43               46
                                                                                        ----------       ----------

     Total Assets                                                                       $   74,387       $   71,590
                                                                                        ==========       ==========

Liabilities

   Accounts payable and accrued liabilities                                             $       54       $      133
   Management fees payable                                                                       2              292
   Dividends payable                                                                         2,166               --
   Short-term notes payable                                                                     --              700
                                                                                        ----------       ----------

     Total Liabilities                                                                       2,222            1,125
                                                                                        ----------       ----------

Stockholders' Equity

   Preferred Stock, par value $.01 per share, 25,000,000 shares authorized;   no
     shares issued or outstanding                                                               --               --

   Common Stock, par value $.01 per share, 75,000,000 shares authorized;
     10,315,809 and 10,142,034 shares issued and outstanding, respectively                     103              102

   Additional paid-in capital                                                               76,559           75,523

   Cumulative dividends declared                                                           (18,541)         (12,897)
   Cumulative net income                                                                    17,346           11,982
                                                                                        ----------       ----------
      Dividends in excess of net income                                                     (1,195)            (915)
                                                                                        ----------       ----------

   Net unrealized holding losses on CMBS bonds                                              (3,302)          (4,245)
                                                                                        ----------       ----------

     Total Stockholders' Equity                                                             72,165           70,465
                                                                                        ----------       ----------

     Total Liabilities and Stockholders' Equity                                         $   74,387       $   71,590
                                                                                        ==========       ==========
</TABLE>

                  See Notes to Condensed Financial Statements.


                                  


                                     - 1 -
<PAGE>



<TABLE>
<CAPTION>

                             COMMERCIAL ASSETS, INC.
                         CONDENSED STATEMENTS OF INCOME
                      (In thousands, except per share data)
                                   (Unaudited)

                                                             Three Months Ended                  Nine Months Ended
                                                                September 30,                      September 30,
                                                           1996              1995             1996             1995
                                                           ----              ----             ----             ----
Revenues

<S>                                                      <C>               <C>              <C>              <C>    
   CMBS bonds                                            $  2,038          $  2,243         $  7,811         $ 6,662
   Interest                                                   129                12              200             182
                                                         --------          --------         --------         -------

     Total Revenues                                         2,167             2,255            8,011           6,844
                                                         --------          --------         --------         -------

Expenses

   Management fees                                            297               343            1,127             859
   General and administrative                                 105               212              549             878
   Elimination of DERs                                         --                --              966              --
   Interest                                                    --                14                5             239
                                                         --------          --------         --------         -------

     Total Expenses                                           402               569            2,647           1,976
                                                         --------          --------         --------        --------


Net Income                                               $  1,765          $  1,686         $  5,364        $  4,868
                                                         ========          ========         ========        ========


Net income per share                                     $    .17          $    .17         $    .52        $    .48

Weighted-average shares outstanding                        10,316            10,114           10,224          10,095

Dividends per share:
     Regular dividends                                   $    .17          $    .17         $    .51        $    .51
     Special dividends                                        .04                --              .04              --
                                                         --------          --------         --------        --------
                                                         $    .21          $    .17         $    .55        $    .51
                                                         ========          ========         ========        ========

</TABLE>


                  See Notes to Condensed Financial Statements.



                                     - 2 -
<PAGE>



<TABLE>
<CAPTION>

                             COMMERCIAL ASSETS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

                                                                                              Nine Months Ended
                                                                                                September 30,
                                                                                             1996           1995
                                                                                             ----           ----

Cash Flows From Operating Activities

<S>                                                                                       <C>             <C>      
   Net income                                                                             $ 5,364         $   4,868
   Adjustments to reconcile net income to net cash flows from operating
     activities:
        Amortization of discount on CMBS bonds and other assets                            (1,970)             (398)
        Issuance of Common Stock for elimination of DERs                                      941                --
   Decrease in accrued interest receivable                                                     78                 4
   Increase in other assets                                                                    (9)             (132)
   (Decrease) increase in accounts payable and accrued liabilities                           (274)              213
                                                                                          -------         ---------

Net Cash Provided By Operating Activities                                                   4,130             4,555
                                                                                          -------         ---------

Cash Flows From Investing Activities

   Principal collections from CMBS bonds                                                    9,857               413
                                                                                          -------         ---------

Cash Flows From Financing Activities

   Dividends paid                                                                          (3,478)           (7,158)
   Repayments of short-term notes payable                                                    (700)           (9,895)
                                                                                         --------         ---------

Net Cash Used In Financing Activities                                                      (4,178)          (17,053)
                                                                                         --------         ---------

Cash and Cash Equivalents

   Increase (decrease)                                                                      9,809           (12,085)
   Beginning of period                                                                        598            12,367
                                                                                          -------         ---------

   End of period                                                                         $ 10,407         $     282
                                                                                         ========         =========
</TABLE>


                  See Notes to Condensed Financial Statements.



                                     - 3 -
<PAGE>





                                                     
                             COMMERCIAL ASSETS, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

             Capitalized  terms not  otherwise  defined in the  narrative  below
shall have the meaning indicated in the "Definitions"  which may be found at the
end of this report.

A.           Organization

             Commercial  Assets,  Inc. was  incorporated  under  Maryland law on
August 11, 1993 by Asset Investors.  The Company commenced operations on October
12, 1993. Asset Investors contributed  $75,000,000 to the capital of the Company
and  distributed  approximately  70% of the shares of Common Stock of Commercial
Assets,  Inc. to Asset  Investors'  shareowners.  The Company's  Common Stock is
listed on the American Stock Exchange under the symbol "CAX."

B.           Presentation of Financial Statements

             The  Condensed  Financial  Statements  of  the  Company  have  been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange  Commission.  These Condensed  Financial  Statements
reflect all adjustments, consisting of only normal recurring accruals, which, in
the  opinion  of  management,  are  necessary  to present  fairly the  financial
position and results of  operations  of the Company as of September 30, 1996 and
for the three and nine  months then ended and for all prior  periods  presented.
These  statements are condensed and do not include all the information  required
by GAAP in a full set of financial  statements.  These statements should be read
in  conjunction  with the  Company's  Financial  Statements  and  notes  thereto
included in the  Company's  Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.

C.           Statements of Cash Flows

             For  purposes of  reporting  cash flows,  cash  maintained  in bank
accounts, money market funds and overnight cash investments are considered to be
cash and cash  equivalents.  The Company paid interest expense in cash of $5,000
and  $280,000  for  the  nine  months  ended   September   30,  1996  and  1995,
respectively.

             For the nine months ended  September 30, 1996 and 1995, the Company
had non-cash investing activities of: (i) $1,104,000 and $294,000, respectively,
from  principal  collections on CMBS bonds  transferred to restricted  cash; and
(ii) $943,000 and $0, respectively,  from the change in unrealized losses on the
CMBS  bonds.  During the nine months  ended  September  30,  1996 and 1995,  the
Company  had  non-cash  financing  activities  of:  (i)  $96,000  and  $432,000,
respectively, from distributions of Common Stock pursuant to DERs; (ii) $941,000
and $0,  respectively,  from the issuance of Common Stock for the elimination of
the DERs; and (iii)  $2,166,000 and $0,  respectively,  from the  declaration of
dividends not paid until subsequent periods.

D.           CMBS Bonds

             As of September  30, 1996 and December  31, 1995,  the  outstanding
balance  of  the  Company's  CMBS  bonds  was  $89,407,000   and   $100,368,000,
respectively,  while  unamortized  purchase  discounts,  acquisition  costs  and
allowance for credit losses totaled  $24,637,000 and $26,620,000,  respectively.
Additionally,  unrealized  holding  losses on the CMBS bonds as of September 30,
1996 and December 31, 1995 were $3,302,000 and $4,245,000, respectively.




                                     - 4 -
<PAGE>




             In May 1996, two CMBS bonds (Aspen MHC, Series 1994-1 Classes C and
D-1) with an outstanding  principal balance of $9,664,000 and net carrying value
of $8,723,000 were redeemed eight years earlier than anticipated. The bonds were
acquired  on March  8,  1994,  for  $9,088,000,  or  84.3% of their  outstanding
principal balance.  Since the bonds were redeemed at par, $1,426,000 of discount
amortization was included in earnings during the nine months ended September 30,
1996.

             At September 30, 1996,  the  outstanding  principal  balance of the
mortgage  loans   collateralizing  the  CMBS  bonds  was  $976,804,000  and  the
outstanding principal balance of the CMBS bonds that are senior to the Company's
CMBS bonds was $882,106,000. The Company's aggregate allowance for credit losses
on its CMBS bonds was  $12,720,000  at both  September 30, 1996 and December 31,
1995.  At September  30, 1996, a mortgage  loan with an  outstanding  balance of
$788,000,  which  collateralizes  the Company's CMBS bonds,  was in foreclosure.
There have been no credit losses  charged to operations or  write-downs  charged
against the allowance for credit losses.

             Pursuant to the  provisions of certain of the Company's CMBS bonds,
principal  payments  attributable to the Company's  interests are required to be
set aside in reserve  accounts for credit  support of the more senior classes of
CMBS bonds.  At  September  30,  1996 and  December  31,  1995,  $1,872,000  and
$768,000,  respectively,  were set aside in  reserve  accounts  and are shown as
restricted cash on the balance sheet.

E.           Short-Term Notes Payable

             The Company has a loan and  security  agreement  which is currently
collateralized by four CMBS bonds (FNMA 94-M2C,  FNMA 94-M2D,  Kidder 94-M1C and
Kidder 94-M1D),  pursuant to which the Company can borrow amounts based upon the
value of the collateral pledged. Advances bear interest based upon a spread over
the LIBOR with a term that most  closely  approximates  the term of the advance.
The loan and  security  agreement  contains  certain  covenants  with  which the
Company was in  compliance  at December  31, 1995 and  September  30,  1996.  At
December 31, 1995 and September 30, 1996, no borrowings were outstanding.

             On July 19, 1996, the Company renewed a one-year, unsecured line of
credit with a bank for  $1,000,000.  Advances  under this line bear  interest at
prime.  Two of the Company's  Independent  Directors are members of the Board of
Directors of the bank. At September 30, 1996, no borrowings were  outstanding on
this line of credit. At December 31, 1995, $700,000 was outstanding on this line
of credit, which was repaid in January 1996.

F.           Management Fees

             Prior to April 1, 1996,  the Company  was  managed by an  indirect,
wholly  owned  subsidiary  of MDC.  Effective  April 1,  1996,  Financial  Asset
Management  LLC assumed the  obligations  of the  Manager  under the  Management
Agreement.  From April 1, 1996,  through  September  30, 1996,  Financial  Asset
Management  LLC was 80% owned by two wholly  owned  subsidiaries  of MDC and 20%
owned by Spencer I. Browne who was the  President and a Director of the Company.
On September 30, 1996, MDC acquired Mr. Browne's 20% interest in Financial Asset
Management  LLC and then sold 100% of the  Manager to an  investor  group led by
Terry  Considine  and Thomas L. Rhodes.  In connection  with the sale,  Larry A.
Mizel  resigned  as  Chairman  of the Board of  Directors  and Spencer I. Browne
resigned as President,  Chief  Executive  Officer and a Director of the Company.
Terry  Considine  was elected as Chairman of the Board of Directors and Co-Chief
Executive  Officer,  Thomas L. Rhodes as Vice Chairman of the Board and Co-Chief
Executive  Officer and Leslie B. Fox as President of the Company.  No change has
been made to the Management  Agreement,  and Financial Asset Management LLC will
continue its obligations under the Management Agreement.

             During the nine  months  ended  September  30,  1996 and 1995,  the
Company's  total  management  fees  pursuant to the  Management  Agreement  were
$1,127,000 and $859,000,  respectively.  Management  fees during the nine months





                                     - 5 -
<PAGE>



ended  September  30,  1996 and 1995  included:  (i) Base Fees of  $494,000  and
$563,000,  respectively;  (ii)  Administrative  Fees  of  $45,000  and  $49,000,
respectively;  and (iii) Incentive Fees of $588,000 and $247,000,  respectively.
No  Acquisition  Fees were incurred  during the nine months ended  September 30,
1996 or 1995.

G.           Stock Option Plan

             On May 30, 1996, the Company's shareowners approved an amendment to
the Stock  Option  Plan  which  provided  for the  issuance  of Common  Stock in
exchange for the  elimination  of the accrual of DERs for options  granted under
the Stock  Option  Plan.  Pursuant  to the  amendment,  the  Company  incurred a
$966,000 charge (a $941,000  non-cash charge from the issuance of 157,413 shares
of Common Stock plus $25,000 of transaction costs) during the three months ended
June 30,  1996.  Additionally,  during the three months ended March 31, 1996 and
the nine months ended  September 30, 1995, the grant of Common Stock pursuant to
DERs  resulted in  non-cash  charges to general  and  administrative  expense of
$96,000  and  $278,000,   respectively,   covering  16,362  and  46,230  shares,
respectively, of Common Stock which were subject to issuance pursuant to options
granted under the Stock Option Plan.





                                     - 6 -
<PAGE>




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

             Commercial  Assets,  Inc. was  incorporated  under  Maryland law on
August 11, 1993 by Asset Investors.  The Company commenced operations on October
12,  1993,  the date on which Asset  Investors  contributed  $75,000,000  to the
capital of the Company and distributed approximately 70% of the shares of Common
Stock of Commercial Assets, Inc. to Asset Investors' shareowners.  The Company's
Common Stock is listed on the American Stock Exchange under the symbol "CAX."

             The Company's  day-to-day  operations are performed by the Manager,
pursuant to the Management Agreement, which is subject to the annual approval of
a majority of the Independent Directors. Prior to April 1, 1996, the Company was
managed by an indirect, wholly owned subsidiary of MDC. Effective April 1, 1996,
Financial Asset  Management LLC assumed the obligations of the Manager under the
Management Agreement.  From April 1, 1996, through September 30, 1996, Financial
Asset  Management LLC was 80% owned by two wholly owned  subsidiaries of MDC and
20% owned by  Spencer  I.  Browne who was the  President  and a Director  of the
Company.  On  September  30, 1996,  MDC  acquired  Mr.  Browne's 20% interest in
Financial Asset  Management LLC and then sold 100% of the Manager to an investor
group led by Terry Considine and Thomas L. Rhodes.  In connection with the sale,
Larry A. Mizel  resigned as Chairman  of the Board of  Directors  and Spencer I.
Browne  resigned as  President,  Chief  Executive  Officer and a Director of the
Company.  Terry  Considine was elected as Chairman of the Board of Directors and
Co-Chief Executive  Officer,  Thomas L. Rhodes as Vice Chairman of the Board and
Co-Chief  Executive  Officer and Leslie B. Fox as President  of the Company.  No
change has been made to the Management Agreement, and Financial Asset Management
LLC will continue its obligations under the Management Agreement.

             The Manager is subject to the supervision of the Board of Directors
of the  Company.  As part of its duties,  the Manager  presents the Company with
asset  acquisition  opportunities  and  furnishes  the Board of  Directors  with
information  concerning the acquisition,  performance and disposition of assets.
The  Company  has no  employees.  Certain  employees  of the  Manager  have been
designated officers of the Company.

             With  the  proceeds  of its  initial  capitalization,  the  Company
acquired, and the Manager administers on the Company's behalf,  subordinate debt
interests  in  CMBS  bonds  issued  in  securitizations  of  mortgage  loans  on
multi-family  properties.  The Company owns nine CMBS bonds from five commercial
mortgage loan securitizations acquired at a cost of $65,345,000.  The CMBS bonds
had an outstanding principal balance of $89,407,000 at September 30, 1996 and an
estimated  weighted-average  yield-to-maturity  before  credit  losses of 13.6%.
Approximately 75% of the Company's CMBS bonds are unrated, and the remaining 25%
are rated "BB" or "B" by national credit rating agencies.  Geographic  diversity
of the  collateral  which  secures a CMBS bond is an important  component of the
Company's acquisition criteria.  The mortgages which comprise the collateral for
the  Company's  CMBS bonds are secured by  apartment  communities  in 36 states,
including 26%, 12% and 8% in Texas, Arizona and Florida, respectively.

             The multi-family  mortgage loans that  collateralize  the Company's
CMBS bonds were primarily  originated during 1993 and 1994. Capital for mortgage
financing  during 1993 and 1994 was generally  less  available  than in 1995 and
1996  because of,  among  other  things,  the  reduced  funding of such loans by
traditional real estate lenders (e.g. banks,  thrifts,  pension funds,  etc.) in
response to significant losses which resulted from falling real estate values in
the late 1980s and early 1990s.  Accordingly,  the Company believes the mortgage
loan  underwriting  procedures  applied to mortgage loans originated in 1993 and
1994 were more stringent than  underwriting  procedures  applied to multi-family
mortgage  loans  originated  in 1995 and 1996.  The Company may benefit from the
more stringent underwriting  procedures on the mortgage loans that collateralize
its CMBS bonds through reduced credit losses in the future. See "FORWARD LOOKING
INFORMATION" below.

             Presented  below  is a  schedule  of the  CMBS  bonds  owned by the
Company as of  September  30,  1996 and  December  31, 1995  (dollar  amounts in
thousands).




                                     - 7 -
<PAGE>



<TABLE>
<CAPTION>




                                                                         Weighted-                     Senior         Outstanding
                                                                         Average    Date             CMBS Bonds(4)    Balance at
                             Description               Coupon  Maturity  Life(5)  Acquired  Rating     9/30/96     9/30/96  12/31/95
                             -----------               ------  --------  -------  --------  ------     -------     -------  --------
   
     Kidder, Peabody Acceptance Corporation I, Series
<S>                                                    <C>      <C>       <C>      <C>       <C>      <C>         <C>       <C>     
         1993-M2, Class E(1)                           8.88%    8/2021    3.9 yrs  11/16/93    BB     $  93,035   $10,000   $ 10,000
     Lehman Capital Corporation Trust Certificate,
         Series 1994-2(2)                              6.50    10/2003    7.1       2/24/94  Unrated    126,293     2,143      2,143
     Lehman Capital Corporation Trust Certificate,
         Series 1994-3                                 6.50    10/2003    7.1       2/24/94  Unrated                4,162      4,162
     Aspen MHC, Series 1994-1, Class C(3)                                                                              --      6,261
     Aspen MHC, Series 1994-1, Class D-1(3)                                                                            --      3,596
     Fannie Mae Multi-Family REMIC Trust 1994-M2,
         Class C(6)                                    7.99     1/2001    4.1       3/30/94  Unrated    340,806    10,728     11,587
     Fannie Mae Multi-Family REMIC Trust 1994-M2,
         Class D(6)                                    8.18     1/2004    6.9       3/30/94  Unrated               38,470     38,715
     DLJ Mortgage Acceptance Corporation, Series
         1994-MF4, Class B-3                           8.50     4/2001    4.5       6/15/94     B        91,866     3,136      3,136
     DLJ Mortgage Acceptance Corporation, Series
         1994-MF4, Class C                             8.50     4/2001    4.5       6/15/94  Unrated                4,183      4,183
     Kidder, Peabody Acceptance Corporation I, Series
         1994-M1, Class C                              8.25    11/2002    4.8      11/29/94     B       230,106     8,930      8,930
     Kidder, Peabody Acceptance Corporation I, Series
         1994-M1, Class D                              8.25    11/2002    5.1      11/29/94  Unrated                7,655      7,655
                                                       ----               ---                         ---------   -------    -------
          Total outstanding balance                    8.15%              5.7 yrs                     $ 882,106    89,407    100,368
                                                       ====               ===                         =========

     Unamortized discount                                                                                         (12,283)  (14,393)
     Allowance for credit losses                                                                                  (12,720)  (12,720)
     Unamortized acquisition costs                                                                                    366       493
                                                                                                                 --------   -------
          Amortized cost                                                                                           64,770    73,748
          Net unrealized holding losses                                                                            (3,302)   (4,245)
                                                                                                                 --------   -------

          Total net book value                                                                                   $ 61,468   $69,503

                                                                                                                 ========   =======
<FN>
---------------------------------------------------------------
1    The Company has a 75.2% ownership interest in this CMBS bond.
2    The Company has a 51.7% ownership interest in this CMBS bond.
3    These bonds were redeemed in May 1996.
4    The amount of CMBS bonds senior to the Company's subordinate 
     CMBS bond classes.  The amount is aggregated for classes of a single
     issuance.
5    Remaining weighted-average life at September 30, 1996.
6    Payment of principal and interest is not guaranteed by FNMA.
</FN>
</TABLE>




                                     - 8 -
<PAGE>





                       RESULTS OF OPERATIONS FOR THE THREE

                AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

REIT Income

             The  Company's  REIT  income  for the three and nine  months  ended
September  30, 1996 was  $1,986,000  ($.19 per share) and  $6,591,000  ($.64 per
share),  respectively,  compared with $1,887,000 ($.19 per share) and $5,377,000
($.54 per share), respectively, for the same periods in 1995.

             REIT  income  from CMBS bonds for the three and nine  months  ended
September  30, 1996 was  $2,259,000  ($.22 per share) and  $9,106,000  ($.89 per
share),  respectively,  compared with $2,421,000 ($.24 per share) and $7,225,000
($.72 per share),  respectively,  for the same periods in 1995.  The increase in
REIT income from CMBS bonds  during the nine months  ended  September  30, 1996,
compared  to  the  same  period  in  1995,  resulted  from  an  increase  in the
amortization  into  income  of the  pricing  discount  due to:  (i) the May 1996
redemption of two CMBS bonds  acquired for $9,088,000 on March 8, 1994; and (ii)
prepayments  on one other CMBS bond during the first half of 1996.  The proceeds
from the redemption  have been invested in short-term cash  instruments  until a
long-term  strategy is determined.  The redemption of two CMBS bonds in May 1996
caused the decline in REIT income from CMBS bonds  during the three months ended
September 30, 1996, compared to the same period in 1995.

             In May 1996,  two CMBS bonds (Aspen MHC,  Series 1994-1 Class C and
D-1), with an outstanding  principal balance of $9,664,000,  were redeemed eight
years earlier than anticipated. As a result, the yield on the bonds increased to
18.1% from an expected yield of 11.8%.  The early  redemption of these two bonds
resulted in $1,455,000 of REIT income from acceleration of discount amortization
on the CMBS bonds.

             Additionally,  during the first half of 1996, the Company  received
principal  prepayments on one of its CMBS bonds.  For this particular  bond, the
Company  previously  had  elected,  under  the  Code,  to limit  the  amount  of
amortization  of the market  discount  to the lesser of  principal  received  or
computed  amortization.  During the nine months ended September 30, 1996,  there
were  $755,000 of principal  prepayments  from a mortgage  collateralizing  this
bond. As a result of the election,  amortization during the first nine months of
1996 was $627,000 higher than the same period in 1995 due to prepayments.

             The CMBS bonds have coupon interest rates ranging from 6.5% to 8.9%
and a weighted-average  yield-to-maturity before credit losses for REIT purposes
of 13.6%. The yield from CMBS bonds exceeds the coupon interest rate because the
subordinate CMBS bonds were acquired by the Company with original issue discount
or market  discount (i.e.,  the  acquisition  prices of the CMBS bonds were less
than their par values).

             Through  September  30, 1996,  one mortgage  loan with a balance of
$788,000 collateralizing the Company's CMBS bonds was in foreclosure. Otherwise,
there have been no delinquencies.  To date, no credit losses have been realized.
The Company  expects that the loss from the  mortgage  loan in  foreclosure  may
range from $0 to $200,000. See "FORWARD LOOKING INFORMATION" below.

             Interest  income  during the three and nine months ended  September
30,  1996  was  $129,000  ($.01  per  share)  and  $200,000  ($.02  per  share),
respectively,  compared  with $12,000  ($.00 per share) and  $182,000  ($.02 per
share),  respectively,  for the same periods in 1995.  The three and nine months
ended September 30, 1996,  reflect  earnings on the proceeds from the redemption
which have been invested in short-term cash instruments while the three and nine
months ended September 30, 1995,  reflect earnings on the $12,367,000 of cash on
hand at  December  31,  1994,  the  majority of which was used to pay down notes
payable during the first half of 1995.




                                     - 9 -
<PAGE>



             General and administrative expenses of the Company during the three
and nine months ended  September 30, 1996,  were  $105,000  ($.01 per share) and
$617,000 ($.06 per share), respectively, compared with $189,000 ($.02 per share)
and  $932,000  ($.09 per  share),  respectively,  for the same  periods in 1995.
General and  administrative  expenses decreased during the three and nine months
ended September 30, 1996 compared with the same periods of 1995 primarily due to
discontinuing  the DERs in May 1996,  lower costs for shareholder  relations and
reduced accounting expenses.

             On May 30, 1996, the Company's shareowners approved an amendment to
the Stock  Option  Plan at its annual  meeting  permitting  the Company to issue
shares of Common  Stock in the second  quarter  of 1996 to the  holders of stock
options  who  voluntarily  gave up their DERs.  The  amendment  also  eliminated
provisions  in the Stock Option Plan that would have  permitted  the issuance of
DERs in connection with stock options  granted in the future.  The effect of the
amendment will be to reduce general and administrative expenses from the accrual
of DERs  from  options  granted  under the Stock  Option  Plan by  approximately
$300,000 for 1996 and  approximately  $400,000 per year in subsequent years. The
issuance of Common Stock in exchange for the right to receive DERs resulted in a
one-time charge to income of $966,000 ($941,000 non-cash charge for the issuance
of 157,413 shares of Common Stock plus $25,000 of transaction  costs) during the
second quarter of 1996.

             The Manager receives fees pursuant to the Management Agreement. The
Base Fee is payable quarterly in an amount equal to 1% per annum of the "average
invested  assets" of the  Company.  The Manager also is entitled to an Incentive
Fee only after the  Company's  shareowners  first have  received a return on the
Company's  "average net worth" equal to the  "Ten-Year  United  States  Treasury
Rate" plus 1%. Twenty  percent of the  Company's  "net income" in excess of this
amount is paid to the Manager as the  Incentive  Fee.  The  Manager  receives an
Acquisition Fee of 1/2 of 1% of the initial cost of each asset which the Manager
assists the Company in acquiring.  The  Acquisition  Fee compensates the Manager
for performing due diligence  procedures on CMBS bonds reviewed for  acquisition
by the Company.  The Manager also performs certain bond administration and other
related  services  for the Company  pursuant  to the  Management  Agreement  and
receives an Administrative Fee for such services.

             The Company's  management  fees were $297,000  ($.03 per share) and
$1,127,000 ($.11 per share),  respectively,  for the three and nine months ended
September 30, 1996,  compared with $343,000  ($.03 per share) and $859,000 ($.08
per  share),  respectively,  for the same  periods  in  1995.  The  increase  in
management  fees during the first nine months of 1996 compared with 1995 was due
to an increase of $341,000 of Incentive Fees,  offset by decreases of $69,000 in
Base Fees and $4,000 in Administrative  Fees. The increase in Incentive Fees was
due to a $1,214,000 increase in REIT income and a 33 basis point decrease in the
average  Ten-Year  U.S.  Treasury Rate between the first nine months of 1995 and
the first nine months of 1996. The $966,000  charge for the  elimination of DERs
described  above reduced the second quarter 1996 Incentive Fee by $193,000 ($.02
per share).  The  decrease  in Base Fees was due  primarily  to a  reduction  of
invested  assets because of $4,245,000 of unrealized  holding losses on the CMBS
bonds  recorded at December 31, 1995 and the early  redemption of two CMBS bonds
(Aspen MHC,  Series 1994-1,  Class C and D-1) in the second quarter of 1996. The
decrease in  Administrative  Fees was due to the May 1, 1996,  redemption of two
CMBS bonds (Aspen MHC, Series 1994-1 Class C-1 and D-1).

             During the three and nine months ended September 30, 1996, interest
expense  on  the  Company's   short-term   notes  payable  was  $0  and  $5,000,
respectively,  compared  with $14,000 and $239,000,  respectively,  for the same
periods in 1995. The decrease  primarily was the result of paydowns of the notes
payable during the first half of 1995.





                                     - 10 -
<PAGE>




Dividend Distributions

             In September  1996,  the Company  declared a regular  third quarter
dividend  of $.17 per share and a special  dividend  of $.04  which were paid on
October 10, 1996 to  shareowners  of record on September 30, 1996.  This was the
eighth consecutive regular quarterly dividend of $.17 per share.

Book Income

             For the three and nine months ended September 30, 1996, the Company
earned book income  computed in  accordance  with GAAP of  $1,765,000  ($.17 per
share) and $5,364,000 ($.52 per share),  respectively,  compared with $1,686,000
($.17 per share) and  $4,868,000  ($.48 per share),  respectively,  for the same
periods in 1995. The $496,000  ($.05 per share)  increase in book income for the
nine months was due primarily to the same factors which  resulted in the changes
in REIT income previously discussed.

Reconciliation of REIT Income and Book Income

             The Company  computes its income in accordance  with the Code (REIT
income) and in accordance with GAAP (book income). As a REIT, the Company's REIT
income is extremely  important  as it is the basis upon which the Code  requires
the  Company to make  distributions  to its  shareowners.  However,  because the
Company's   Common  Stock  is  registered   with  the  Securities  and  Exchange
Commission,  the Company also is required to report its  financial  position and
income in accordance with GAAP.

             During the three and nine months ended  September  30,  1996,  REIT
income  exceeded book income by $221,000 ($.02 per share) and  $1,227,000  ($.12
per share),  respectively.  Substantially  all of this difference is due to: (i)
the method of recording  credit losses,  which for REIT income  purposes are not
deducted  until they occur (to date,  no credit  losses have been  realized) and
which for book income  purposes are  estimated  and  reflected as a reduction of
revenues in the form of lower discount  amortization included in interest income
from CMBS bonds; (ii) the method of amortizing  purchase price discounts,  which
for REIT income  purposes is subject to certain  limitations  not applicable for
book income  purposes;  and (iii) the timing of the  deduction  of DER  expense,
which for book income  purposes is on the record  date of the  dividend  and for
REIT income purposes may be subject to tax elections made by the recipient.

                         LIQUIDITY AND CAPITAL RESOURCES

             The Company has used its cash flows from  operating  activities and
other capital resources: (i) to provide working capital to support the Company's
operations; (ii) for making distributions to its shareowners;  and (iii) for the
repayment of short-term borrowings. For the nine months ended September 30, 1996
and 1995,  cash flows  provided by  operating  activities  were  $4,130,000  and
$4,555,000,  respectively. As of September 30, 1996, the Company had $10,407,000
in cash and cash equivalents.

             The Company has a loan and  security  agreement  which is currently
collateralized by four CMBS bonds (FNMA 94-M2C,  FNMA 94-M2D,  Kidder 94-M1C and
Kidder 94-M1D),  pursuant to which the Company can borrow amounts based upon the
value of the collateral  pledged. No borrowings were outstanding on this line at
September 30, 1996.  Advances  bear interest  based upon a spread over the LIBOR
with a term that most closely approximates the term of the advance. The loan and
security  agreement  contains  certain  covenants  with which the Company was in
compliance at September 30, 1996.

             On July 19, 1995,  the Company  entered into a one-year,  unsecured
line of credit with a bank for $1,000,000. The line of credit was renewed for an
additional  year on July 19, 1996.  Advances bear interest at prime.  Two of the
Company's  Independent  Directors  are members of the Board of  Directors of the
bank.  At September 30, 1996, no  borrowings  were  outstanding  on this line of
credit.

             Two of the Company's CMBS bonds (Aspen MHC, Series 1994-1,  Classes
C and D-1) with an outstanding  balance of $9,664,000 were redeemed in May 1996.



                                     - 11 -
<PAGE>



The redemption of the CMBS bonds occurred eight years earlier than  anticipated.
The proceeds from the bond  redemption  have been  invested in  short-term  cash
instruments until a long-term strategy is determined.

             The  indentures  of the  commercial  securitizations  in which  the
Company has acquired CMBS bonds generally  provide for substantial  penalties if
the mortgage loans underlying the commercial securitization are prepaid, and the
prepayments  generally  are  allocated  to the senior  bond  classes  before the
subordinate  bond  classes the Company  generally  owns.  Significant  principal
distributions to subordinate CMBS bonds generally are not anticipated  until the
scheduled principal distributions are made.

             The Company's ability to acquire  additional assets will depend on,
among other things,  unanticipated  principal prepayments such as the $9,664,000
of CMBS bonds  redeemed in May 1996,  or obtaining  new debt or equity  capital.
There is no  assurance  the  Company  will be able to  identify  new  CMBS  bond
acquisition  opportunities that meet the Company's  acquisition criteria or that
the Company  will be able to raise  additional  funds,  whether  from  principal
prepayments, borrowings, issuances of debt securities, Common Stock or Preferred
Stock or other sources. See "FORWARD LOOKING INFORMATION" below.

             As a  REIT,  the  Company  is  required,  among  other  things,  to
distribute  annually  to its  shareowners  at least 95% of its REIT  income.  By
qualifying  for  the  favorable  tax  treatment   accorded  to  a  REIT  and  by
distributing to its shareowners  100% of the Company's REIT income,  the Company
generally will not be required to pay income tax at the corporate level.

             Undistributed  REIT  income  through  the  third  quarter  of  1996
(cumulative  REIT income in excess of cumulative  distributions  to shareowners)
was  $1,121,000  ($.11 per  share).  The  Company,  in  general,  is required to
distribute:  (i) at least  85% of its  annual  REIT  income  by  January  of the
following year (as long as the dividend is declared  during the year);  and (ii)
the balance of its REIT income (at least 95%) before the Company's tax return is
filed.

             Under the Code,  the  Company  has  elected  an income  recognition
methodology   for  certain  of  its  CMBS  bonds  that  determines  REIT  income
attributable  to the  amortization  of market discount as the lesser of: (i) the
amount of principal  received from the CMBS bond; or (ii) the computed  discount
amortization. The effect of this election is to defer a portion of the amount of
the Company's  REIT income from non-cash  discount  amortization  from the early
years  in the life of the  applicable  bonds to  later  years  when  significant
repayments  of principal  are  expected to be received.  The Company was able to
make this election on four CMBS bonds which had an outstanding principal balance
of $55,503,000 at September 30, 1996.

             Subordinate  CMBS bonds  acquired  by the  Company  are  relatively
non-liquid  and,  as a result,  the  Company's  ability to change its  portfolio
quickly in response to changes in economic and other  conditions may be limited.
In addition,  REIT rules  applicable  to the Company may restrict the  Company's
ability to sell assets within four years of their acquisition. Under the Code, a
redemption or prepayment does not constitute a "sale."

             As the  holder of  subordinate  CMBS  bonds  (which  generally  are
allocated the first losses on the underlying  mortgage  loans),  the Company has
significant  credit  risk.  These bonds are subject to a greater risk of loss of
principal and  non-payment of interest than the more senior bonds secured by the
same  assets.  If a borrower  defaults  on a  commercial  mortgage  loan that is
pledged as  collateral  for a commercial  mortgage loan  securitization  and the



                                     - 12 -
<PAGE>



proceeds of the  foreclosure of the property are less than the unpaid balance of
the mortgage plus  foreclosure  costs  (principal and interest  advances through
foreclosure sale, repair and maintenance costs during the foreclosure, brokerage
fees, legal fees, taxes,  insurance,  etc.), the Company,  as the holder in most
cases of the subordinate class, will suffer a loss.

             The  Company  believes  that cash  generated  by current and future
operations and additional capital-raising activities, including borrowings, will
enable  the  Company  to meet  its  current  and  anticipated  future  liquidity
requirements, including the payment of dividends to its shareowners in an amount
equal to at  least  95% of the  Company's  REIT  income.  See  "FORWARD  LOOKING
INFORMATION" below.

             In the next few months,  the  management and the Board of Directors
of the Company will  evaluate its existing  structure  and strategy and consider
whether changes are warranted. The goal of management and the Board of Directors
is to invest in assets with the greatest risk-adjusted rates of return. A change
in the  Company's  existing  portfolio  may impact the  future  REIT  income and
resulting dividends of the Company. See "FORWARD LOOKING INFORMATION" below.

                         CMBS BOND YIELD CONSIDERATIONS

Defaults

             The yields on the CMBS bonds  acquired by the Company are extremely
sensitive  to the amount  and  timing of  defaults  and the  severity  of losses
resulting  from the defaults on the  mortgage  loans  collateralizing  such CMBS
bonds.  The  Company's  right,  as  a  holder  of  subordinate  CMBS  bonds,  to
distributions  of  principal  and  interest  is  subordinate  to the more senior
classes of CMBS bonds.  Actual  losses on the loans  (after  default,  where the
proceeds from the  foreclosure  sale of the real estate are less than the unpaid
balance of the mortgage loan plus disposition  costs) will be allocated first to
the  subordinate  first-loss  CMBS bonds  prior to being  allocated  to the more
senior CMBS bond classes.  One of the mortgages with an  outstanding  balance of
$788,000 that  collateralizes one of the Company's CMBS bonds was in foreclosure
at September 30, 1996.  Otherwise,  there have been no  delinquencies.  The CMBS
bonds the Company owns and may acquire in the future are  speculative and may be
subject to special  risks,  including a  substantially  greater  risk of loss of
principal and  non-payment  of interest than the more senior rated bonds secured
by the same assets. See "FORWARD LOOKING INFORMATION" below.

             If the Company acquires a CMBS bond with an anticipated yield based
on a projected  rate of default and severity of loss on the mortgage  loans that
is lower than the actual  default  rate and  severity of loss,  the yield on the
CMBS bond will be lower than the Company initially anticipated and, in the event
of substantial  losses,  the Company may not recover a significant  portion,  or
any, of its  acquisition  cost. The timing of actual losses also will affect the
Company's yield on CMBS bonds,  even if the rate of default and severity of loss
are consistent with the Company's  projections.  In general,  the earlier a loss
occurs, the greater the adverse effect on the Company's yield.

             The  Company's  CMBS  bonds  also will be  affected  by  prevailing
interest rate levels during the periods that the mortgage loans  collateralizing
the CMBS bonds mature. For example,  if at the maturity date of a mortgage loan,
the  prevailing  mortgage  interest  rates  are much  higher  than the  original
interest rate on the mortgage loan, the operating cash flows from the commercial
property  may not be  sufficient  to meet  the  higher  debt  service  costs  of
replacement  financing,  and the  owner of the  commercial  property,  unable to
obtain  replacement  financing,  may go into  default  on the  mortgage.  If the
property is not sold for more than the amount of the mortgage  plus  foreclosure
costs,  the  Company  may  incur  credit  losses.  Similar  losses  may occur if
refinancing of the commercial  properties  cannot be arranged at the maturity of
the current  outstanding  mortgage due to higher interest costs or poor property
performance.



                                     - 13 -
<PAGE>



             There can be no assurance as to the rate of  delinquency  or timing
and severity of losses on the mortgage loans collateralizing the CMBS bonds and,
thus, no assurance as to the actual yield received by the Company.

Prepayments

             The aggregate  amount of  distributions on the Company's CMBS bonds
and their  yields also will be  affected  by the amount and timing of  principal
prepayments  on the  mortgage  loans.  Generally,  all  payments  of  principal,
including  prepayments,  on the  mortgage  loans  will  be used  to  reduce  the
outstanding  principal  balance  of the more  senior  classes  before  principal
payments are paid to the subordinate  bond classes held by the Company.  Because
the Company is acquiring  the CMBS bonds at a  significant  discount  from their
outstanding  principal balance, if the Company receives prepayments of principal
on the CMBS  bonds the  Company  owns,  the  Company's  yield on its CMBS  bonds
generally would increase.

             Because the rate and timing of principal payments on mortgage loans
will depend on future  events and on a variety of factors over which the Company
has no control, no assurances can be given as to the rate or timing of principal
payments,  if any,  on the CMBS bonds the Company  owns.  See  "FORWARD  LOOKING
INFORMATION" below.

Loss Severity

             While the rate of default and the rate and timing of prepayments on
the Mortgage  Collateral are important in determining the  anticipated  yield on
subordinate  CMBS bonds,  the anticipated  severity of the loss (i.e., the total
loss  on any  foreclosure  sale as a  percentage  of the  remaining  outstanding
principal  balance  of a  mortgage  loan) is  significantly  more  important  in
determining  the anticipated  yield on a subordinate  CMBS bond. The severity of
the losses on defaulted  Mortgage  Collateral  through  foreclosure sales of the
properties,  which are the primary  security  for the  Mortgage  Collateral,  is
extremely  important  because such losses  generally will be allocated first to,
and will reduce the remaining  principal  balance of, the Company's  subordinate
CMBS bonds.  The severity of loss takes into account the anticipated  decline in
market value of the commercial property, accrued and unpaid interest through the
foreclosure and maintenance and disposition expenses, which include, among other
things, necessary repair and maintenance costs during the foreclosure, brokerage
fees, legal fees, interest charges on servicing  advances,  insurance and taxes.
In addition, the higher the coupon rate of the mortgage loan, the higher are the
costs of  foreclosure  which  reflect  accrued and unpaid  interest from default
through foreclosure sale.

        INFLATION, INTEREST RATES, MORTGAGE PREPAYMENTS AND OTHER FACTORS

             The Company and the Common Stock of the Company will be affected by
prevailing market interest rates,  including:  (i) the effects of interest rates
on the values of long-term,  fixed-rate  debt  securities;  (ii) the possibility
that, in periods of high interest rates, the Common Stock may be less attractive
than alternative  investments of equal or lower risk; (iii) possible  mismatches
between the Company's  borrowing costs and the Company's cash flow  requirements
which could have a negative  effect on the Company's  income;  (iv) the negative
effect  of high  interest  rates on the  properties  underlying  the CMBS  bonds
(including a negative impact on the owner's ability to refinance debt secured by
such  properties)  which the Company has acquired and may acquire in the future;
and (v) the effects of interest rates on the Company's borrowing costs. Interest
rates are determined in large part by market conditions and government  policies
which are beyond the control of the Company and which are difficult to predict.




                                     - 14 -
<PAGE>




                           FORWARD LOOKING INFORMATION

             Certain  statements in this Form 10-Q Quarterly  Report, as well as
statements made by the Company in periodic press releases,  oral statements made
by the  Company's  officials  to  analysts  and  shareowners  in the  course  of
presentations  about  the  Company  and  conference  calls  following  quarterly
earnings releases, constitute "forward-looking statements" within the meaning of
the Private  Securities  Litigation  Reform Act of 1995 (the "Reform Act"). Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that may cause the actual results,  performance or achievements of
the Company to be materially  different from any future results,  performance or
achievements  expressed  or  implied  by the  forward-looking  statements.  Such
factors  include  the  following:  general  economic  and  business  conditions;
investment opportunities;  interest rate changes;  competition; the availability
of financing  with terms and prices  acceptable  to the Company;  the  Company's
ability to maintain or reduce expense  levels and the assumption  that losses on
CMBS bonds do not exceed the Company's estimates.


                                   DEFINITIONS

             The  following  terms used in the text are  understood  to have the
meanings indicated below.

Acquisition Fee - a fee paid to the Manager pursuant to the Management Agreement
for performing due diligence  procedures in connection  with the  acquisition by
the Company of each asset equal to 0.5% of the cost of such acquisition.

Administrative  Fee - a fee of up to  $10,000  per  annum  which  is paid to the
Manager  pursuant  to the  Management  Agreement  for  administration  and other
services  related to each of the Company's CMBS bonds.  If the Company owns more
than one class of a commercial securitization the Manager is entitled to receive
an additional fee of $2,500 per annum for each additional class.

Asset Investors - Asset Investors Corporation, a Maryland corporation.

Base Fee - management  fee equal to 1% per annum of the  Company's  consolidated
Average Invested Assets as defined in the Management  Agreement which is payable
quarterly to the Manager pursuant to the Management Agreement.

CMBS bond -  commercial  mortgage-backed  security,  which is a debt  instrument
secured by mortgage loans on commercial real property.

Code - the Internal Revenue Code of 1986, as amended.

commercial mortgage loan securitizations - multi-class  issuances of bonds which
are  secured  and funded as to the  payments  of  principal  and  interest  by a
specific  group of  mortgage  loans on  multi-family  or other  commercial  real
estate, accounts and other collateral.

Company - Commercial Assets, Inc., a Maryland corporation.

DERs - Dividend  equivalent  rights,  as defined in the  Company's  Stock Option
Plan. Prior to adoption of an amendment to the Stock Option Plan that eliminated
DERs in May 1996,  option  holders  earned  shares of Common  Stock equal to the
value of dividends  received as if the options were outstanding shares of Common
Stock.




                                     - 15 -
<PAGE>



first-loss - a first-loss  security is the most subordinate  class of a security
having  multiple  classes  and  which is the  first  to bear the risk of  losses
related to defaults on the underlying collateral.

GAAP - generally accepted accounting principles.

Incentive  Fee - management  fee equal to 20% of the dollar  amount by which the
annual net income (in general, REIT income before incentive fees) of the Company
exceeds an amount  equal to the average net worth of the Company  multiplied  by
the ten-year  U.S.  Treasury  rate plus 1% per annum,  payable  quarterly to the
Manager pursuant to the Management Agreement.

Independent  Director  -  pursuant  to the  Company's  by-laws,  an  Independent
Director is a person "who is not  affiliated,  directly or indirectly,  with the
person or entity responsible for directing or performing the day-to-day business
affairs of the  corporation  (the  "advisor"),  including  a person or entity to
which the advisor subcontracts  substantially all of such functions,  whether by
ownership of,  ownership  interest in,  employment by, any material  business or
professional relationship with, or by serving as an officer of the advisor or an
affiliated business entity of the advisor."

LIBOR - the London Interbank Offered Rate on Eurodollar deposits.

Management  Agreement - the one-year  management  agreement entered into between
the Company and the Manager.

Manager - Financial  Asset  Management LLC,  effective  April 1, 1996.  Prior to
April 1, 1996, the Manager was Financial Asset Management Corporation,  a wholly
owned subsidiary of MDC.

MDC - M.D.C. Holdings,  Inc., a Delaware corporation;  as of September 30, 1996,
no longer affiliated with the management of the Company or the Manager.

REIT - a real estate investment trust, as defined in the Code.

REIT  income - taxable  income  computed  as  prescribed  for REITs prior to the
"dividends paid deduction" (including the dividends paid deduction for dividends
related to capital gains).

Stock Option Plan - the Commercial Assets, Inc. 1993 Stock Option Plan.






                                     - 16 -
<PAGE>




                                     PART II
                                OTHER INFORMATION



Item 6.           EXHIBITS AND REPORTS ON FORM 8-K.

                  (a)  Exhibits:

Exhibit No.       Description
-----------       -----------

     4.2          Form  of   certificate   representing   common  stock  of  the
                  Registrant (incorporated herein by reference to Exhibit 4.2 to
                  the Form 10-Q for the period ended  September 30, 1994, of the
                  Registrant,  Commission  File  No.  1-22262  filed  on May 16,
                  1995).

     4.3          Automatic  Dividend  Reinvestment  Plan relating to the common
                  stock of the Registrant  (incorporated  herein by reference to
                  Exhibit  4.2  to  Amendment  No.  1 to  the  Form  10  of  the
                  Registrant,  Commission File No. 1-22262,  filed on August 31,
                  1993).

     10.2         Registration  Rights  Agreement,  dated as of August 20, 1993,
                  between  the  Registrant  and  Asset  Investors  (incorporated
                  herein by reference to Exhibit 10.2 to Amendment  No. 2 to the
                  Form 10 of the Registrant,  Commission File No. 1-22262, filed
                  on September 15, 1993).

     10.3         Management Agreement, dated as of January 1, 1995, between the
                  Registrant   and  Financial   Asset   Management   Corporation
                  (incorporated  herein by reference  to Exhibit  10.3(b) to the
                  Registrants Quarterly Report on Form 10-Q for the period ended
                  March 31, 1995, Commission File No.
                  1-22262, filed on May 12, 1995).

     10.3(a)      Amendment to the Management  Agreement  dated as of January 1,
                  1996 between the  Registrant  and Financial  Asset  Management
                  Corporation  (incorporated  herein  by  reference  to  Exhibit
                  10.3(a) to the Registrants  Quarterly  Report on Form 10-Q for
                  the period ended March 31, 1996,  Commission File No. 1-22262,
                  filed on May 15, 1996).

     10.3(b)      Assignment of the  Management  Agreement  dated as of April 1,
                  1996  between  Financial  Asset  Management   Corporation  and
                  Financial  Asset  Management  LLC   (incorporated   herein  by
                  reference  to  Exhibit  10.3(b) to the  Registrants  Quarterly
                  Report on Form 10-Q, Commission File No.
                  1-22262, filed on May 15, 1996).

     10.4         Commercial  Assets,  Inc. 1993 Stock Option Plan (incorporated
                  herein by reference to Exhibit 10.4 to Amendment  No. 2 to the
                  Form 10 of the Registrant,  Commission File No. 1-22262, filed
                  on September 15, 1993).

     10.4(a)      First Amendment to Commercial  Assets,  Inc. 1993 Stock Option
                  Plan  (incorporated  herein by reference to Exhibit 10.4(a) to
                  the Registrants  Quarterly  Report on Form 10-Q for the period
                  ended June 30, 1996,  Commission  File No.  1-22262,  filed on
                  August 13, 1996).

     10.5         Form  of   Non-Officer   Directors   Stock  Option   Agreement
                  (incorporated  herein  by  reference  to  Exhibit  99.2 to the
                  Registration Statement on Form S-8, Registration No. 33-7467B,
                  filed on February 1, 1994).




                                     - 17 -
<PAGE>



     10.6         Form of Officers Stock Option Agreement  (incorporated  herein
                  by reference to Exhibit 99.3 to the Registration  Statement on
                  Form S-8,  Registration  No.  33-7467B,  filed on  February 1,
                  1994).

     10.7         Form of  Indemnification  Agreement between the Registrant and
                  each  Director  of  the  Registrant  (incorporated  herein  by
                  reference to Exhibit 10.5 to Amendment No. 1 to the Form 10 of
                  the Registrant,  Commission File No. 1-22262,  filed on August
                  31, 1993).

     10.8         Loan and  Security  Agreement,  dated as of November 29, 1994,
                  between the Registrant and PaineWebber Real Estate Securities,
                  Inc.  (incorporated herein by reference to Exhibit 10.8 to the
                  Registrants  Annual Report on Form 10-K,  Commission  File No.
                  1-22262, filed on March 29, 1995).

     10.8(a)      Amendment  to the Loan  and  Security  Agreement,  dated as of
                  November 29, 1994, between the Registrant and PaineWebber Real
                  Estate Securities,  Inc.  (incorporated herein by reference to
                  exhibit 10.8a to the  Registrants  Annual Report on Form 10-K,
                  commission File No. 1-22262, filed on March 28, 1996).

     27           Financial Data Schedule.

     (b)  Reports on Form 8-K:

                  No Current  Reports  on Form 8-K were filed by the  Registrant
during the period covered by this Quarterly Report on Form 10-Q.


                                    SIGNATURE

             Pursuant to the  requirements  of the  Securities  Exchange  Act of
1934,  the  Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.



                                               COMMERCIAL ASSETS, INC.
                                               (Registrant)



Date:  November 12, 1996                       By  /s/Kevin J. Nystrom
                                                 ---------------------
                                                 Kevin J. Nystrom
                                                 Chief Financial Officer




                                     - 18 -