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

                                    FORM 10-Q

      |X|   Quarterly Report Pursuant to Section 13 or 15(d) of
            the Securities Exchange Act of 1934

                      For the quarter ended March 31, 1997

      |_|   Transition Report Pursuant to Section 13 or 15(d) of
            the Securities Exchange Act of 1934

                         Commission file number 33-83524


                          MERIT SECURITIES CORPORATION
             (Exact name of registrant as specified in its charter)

            Virginia                                      54-1736551
(State or other jurisdiction of                      (I.R.S. Employer
        incorporation)                                  Identification No.) 

   10900 Nuckols Road, 3rd Floor, Glen Allen, Virginia    23060
   (Address of principal executive offices)              (Zip Code)

                                (804) 217-5800
             (Registrant's telephone number, including area code)

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 ninety days. |X| Yes |_| No

As of April 30, 1997, the latest  practicable  date,  there were 1,000 shares of
Merit Securities Corporation common stock outstanding.

The registrant  meets the conditions set forth in General  Instructions  H(1)(a)
and (b) of Form 10-Q and is  therefore  filing  this Form 10-Q with the  reduced
disclosure format.



<PAGE>

<TABLE>
<CAPTION>


                          MERIT SECURITIES CORPORATION
                                    FORM 10-Q
                                      INDEX


                                                               
                                                                                     Page Number
PART I.           FINANCIAL INFORMATION                                              -----------
<S>                    <C>                                                             <C>
Item 1.           Financial Statements
                      Balance Sheets at March 31, 1997 and
                      December 31, 1996                                                  3

                      Statements of Operations for the three months
                      ended March 31, 1997 and 1996                                      4

                      Statement of Shareholder's Equity for the three months
                      ended March 31, 1997                                               5

                      Statements of Cash Flows for the three months ended
                      March 31, 1997 and 1996                                            6

                      Notes to Unaudited Financial Statements                            7

Item 2.           Management's Discussion and Analysis of
                      Financial Condition and Results of Operations                      8

PART II.          OTHER INFORMATION

Item 1.           Legal Proceedings                                                      8

Item 5.           Other Information                                                      8

Item 6.           Exhibits and Reports on Form 8-K                                       9

SIGNATURES                                                                              12

</TABLE>


<PAGE>



PART I.     FINANCIAL INFORMATION
Item 1.     Financial Statements

MERIT SECURITIES CORPORATION
Balance Sheets
(amounts in thousands except share data)
<TABLE>
<CAPTION>

                                              March 31,     December 31,
                                               1997            1996
                                            ------------    ------------
<S>                                             <C>              <C>  
ASSETS  
   Collateral for collateralized bonds      $ 2,266,006     $ 2,463,842
   Prepaid shelf registration fees                  849             849
   Cash                                              10              10
                                              ==========      ==========
                                            $ 2,266,865     $ 2,464,701
                                              ==========      ==========

LIABILITIES AND SHAREHOLDER'S EQUITY

LIABILITIES:
   Collateralized bonds                     $ 2,111,914     $ 2,301,598
   Due to affiliates                             38,126          41,973
                                              ----------      ----------
                                              2,150,040       2,343,571
                                              ----------      ----------

SHAREHOLDER'S EQUITY:
   Common stock, no par value,
      10,000 shares authorized,
      1,000 shares issued and outstanding            10              10
   Additional paid-in capital                    82,136          82,136
   Net unrealized gain on investments            54,505          60,304
      available-for-sale
   Retained deficit                             (19,826 )       (21,320)
                                                ---------      ----------
                                              
                                                116,825         121,130
                                              ==========      ==========
                                            $ 2,266,865     $ 2,464,701
                                              ==========      ==========
<FN>
See notes to unaudited financial statements.
</FN>
</TABLE>




<PAGE>



MERIT SECURITIES CORPORATION
Statements of Operations
(amounts in thousands except share      Three Months Ended
data)
<TABLE>
<CAPTION>
                                             March 31,
                                         1997         1996
                                      -----------   ----------
<S>                                      <C>          <C>
Interest Income:
    Collateral for collateralized     $  42,549     $  17,267
    bonds
                                       ----------    ---------

Interest and related expense:
    Interest expense on                  38,974        15,603
    collateralized bonds
    Other collateralized bond expense       835           477
    Provision for losses                    600           400
                                       ----------    ---------
                                         40,409        16,480
                                       ----------    ---------

Net interest margin                       2,140           787

Interest on due to affiliate               (646)         (314)
                                       ----------    ---------

Net income                             $  1,494       $   473
                                       ==========    =========

<FN>
See notes to unaudited financial statements.
</FN>
</TABLE>


<PAGE>



MERIT SECURITIES CORPORATION
Statement of Shareholder's Equity
(amounts in thousands except share data)
<TABLE>
<CAPTION>


                                                                Net
                                                            unrealized
                                           Additional        gain on             Retained
                               Common       paid-in       investments            earnings
                                stock       capital      available-for-sale     (deficit)         Total
                              ----------  ----------    -------------------   ------------      --------
<S>                              <C>        <C>               <C>                   <C>          <C>
 
Balance at December 31, 1996  $   10     $ 82,136         $  60,304            $(21,320)     $ 121,130
                                                 

Change in net
unrealized gain on             -             -               (5,799)                   -        (5,799)
   investments
available-for-sale

Net income                     -             -                1,494                 1,494
                                        
                              -------   ---------        -----------           ----------    ---------
                       
Balance at March 31, 1997      $ 10      $ 82,136          $ 54,505            $ (19,826)    $ 116,825
                             ========= ===========       ============         ===========    =========

<FN>
See notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>



MERIT SECURITIES CORPORATION
Statements of Cash Flows
(amounts in thousands)
<TABLE>
<CAPTION>

                                                        Three                Three
                                                     Months Ended          Months Ended
                                                    March 31, 1997       March 31, 1996              
                                                   ---------------      ----------------
<S>                                                     <C>                     <C>
Operating activities:
  Net income                                           $   1,494           $    473
  Adjustments to reconcile net income to net cash
   provided by (used for) operating activities:
    Amortization, net                                      4,483                945
    Provision for losses                                     600                400
    Net change in accrued interest, other                 (2,147)              (200)
    assets and other liabilities    
    Decrease in prepaid shelf registration fees                -                145
                                                   -------------         ------------
      Net cash provided by operating activities            4,430              1,763
                                                   -------------        --------------


Investing activities:
  Collateral for collateralized bonds:
    Purchase of loans subsequently securitized                 -           (608,084)
    Principal payments on collateral                     188,825             58,362
                                                   -------------       ---------------
      Net cash provided by (used for)                    188,825           (549,722)
      investing activities                               
                                                    -------------       ---------------
                                                                     
Financing activities:
  Collateralized bonds:
    Proceeds from issuance of collateralized bonds             -            587,348
    Principal payments on collateralized bonds          (189,408)           (58,070)

 
  Increase in due to affiliate                            (3,847)             5,206
  Proceeds from capital contributions                          -             13,475
                                                       -------------      -------------
    Net cash (used for) provided by                     (193,255)           547,959
    financing activities                               
                                                       -------------      -------------

Net decrease in cash                                           -                 -
Cash at beginning of period                                   10                 10
                                                        -----------      -------------                                            
Cash at end of period                                 $       10        $        10
                                                      =============     ===============

Supplemental disclosure of cash flow information:
  Cash paid for interest                             $    39,251        $    13,599

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


<FN>
See notes to unaudited financial statements.
</FN>
</TABLE>
<PAGE>


MERIT SECURITIES CORPORATION
Notes to Unaudited  Financial  Statements  March 31, 1997  (amounts in thousands
except share data)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance  with the  instructions  to Form 10-Q and do not  include  all of the
information and notes required by generally accepted  accounting  principles for
complete financial statements.  The financial statements include the accounts of
Merit  Securities  Corporation  (the  Company).  The Company is a  wholly-owned,
limited-purpose  finance subsidiary of Issuer Holding Corporation (IHC). IHC was
formed on  September  4, 1996 to  acquire  all of the  outstanding  stock of the
Company and certain other affiliates from Dynex Capital, Inc. (Dynex),  formerly
Resource Mortgage Capital,  Inc. IHC is a wholly-owned  subsidiary of Dynex. The
Company was  organized to  facilitate  the  securitization  of loans through the
issuance and sale of collateralized bonds (the Bonds).

In the opinion of  management,  all material  adjustments,  consisting of normal
recurring  adjustments,  considered  necessary  for a fair  presentation  of the
financial  statements  have been included.  The Balance Sheet at March 31, 1997,
the Statements of Operations for the three months ended March 31, 1997 and 1996,
the Statement of Shareholder's Equity for the three months ended March 31, 1997,
the Statements of Cash Flows for the three months ended March 31, 1997 and 1996,
and the related notes to financial  statements are unaudited.  Operating results
for the three months ended March 31, 1997 are not necessarily  indicative of the
results that may be expected for the year ending  December 31, 1997. For further
information, refer to the audited financial statements and footnotes included in
the Company's Form 10-K for the year ended December 31, 1996.

Certain amounts for 1996 have been reclassified to conform with the presentation
for 1997.

NOTE 2--COLLATERAL FOR COLLATERALIZED BONDS

In accordance with the provisions of Statement of Financial Accounting Standards
No. 115, Accounting for Certain  Investments in Debt and Equity Securities,  the
Company   has    classified    collateral    for    collateralized    bonds   as
available-for-sale.  The following table summarizes the Company's amortized cost
basis and fair value of collateral  for  collateralized  bonds at March 31, 1997
and  December  31,  1996,  and the  related  average  effective  interest  rates
(calculated  for the month ended  March 31,  1997 and  December  31,  1996,  and
excluding unrealized gains and losses):

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                  March 31, 1997          December 31, 1996
-------------------------------------------------------------------------------

                                              Effective                Effective
                              Fair Value      Interest      Fair        Interest
                                                Rate        Value       Rate
-------------------------------------------------------------------------------
<S>                                <C>         <C>      <C>             <C>

Collateral for
collateralized bonds:
   Amortized cost           $   2,242,208     7.6%    $ 2,435,270       7.5%
   Allowance for losses           (30,707)                (31,732)
-------------------------------------------------------------------------------
      Amortized cost, net       2,211,501               2,403,538
   Gross unrealized gains          65,539                  68,557
   Gross unrealized losses        (11,034)                 (8,253)
-------------------------------------------------------------------------------
                            $   2,266,006             $ 2,463,842
-------------------------------------------------------------------------------
</TABLE>





<PAGE>


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

Merit  Securities  Corporation  (the  Company) was  incorporated  in Virginia on
August 19, 1994 as a wholly-owned,  limited-purpose  finance subsidiary of Dynex
Capital, Inc. (Dynex),  formerly Resource Mortgage Capital, Inc. On September 4,
1997,  Issuer Holding  Corporation,  Inc.  (IHC),  a wholly-owned  subsidiary of
Dynex,  acquired all of the  outstanding  stock of the company and certain other
affiliates of Dynex.

The Company was organized to facilitate the  securitization of loans through the
issuance and sale of collateralized bonds (the Bonds). The Bonds will be secured
primarily by: (i) mortgage loans secured by first or second liens on residential
property,   (ii)   Federal   National   Mortgage   Association   Mortgage-Backed
Certificates,  (iii)  Federal  Home Loan  Mortgage  Corporation  Mortgage-Backed
Certificates,  (iv) Government  National  Mortgage  Association  Mortgage-Backed
Certificates,   and  (v)  any  other  mortgage   pass-through   certificates  or
mortgage-collateralized  obligations  (collectively,  the  Collateral).  In  the
future,  The Company may also securitize other types of loans,  such as consumer
installment loans and commercial loans.

After  payment  of  the  expenses  of an  offering  and  certain  administrative
expenses,  the net  proceeds  from an offering of Bonds will be used to purchase
Collateral  from IHC or various  third  parties.  IHC can be expected to use the
proceeds  to reduce  indebtedness  incurred  to obtain  such loans or to acquire
additional Collateral.  After the issuance of a series of Bonds, the Company may
sell the  Collateral  securing that series of Bonds,  subject to the lien of the
Bonds.

The  Company  did not issue any Bonds  during the three  months  ended March 31,
1997.  As of March 31,  1997,  the Company had six (6) series of  collateralized
bonds outstanding totaling approximately $2.3 billion,  compared to $2.5 billion
at December 31, 1996, and $1.3 billion at March 31, 1996. Interest income on the
Collateral  increased  $25.2 million to $42.5 million for the three months ended
March 31, 1997  compared to $17.3  million for the three  months ended March 31,
1996 as a result of the increased number of series outstanding. Interest expense
on Bonds increased $23.4 from $15.6 million for the three months ended March 31,
1996 to $39.0 million for the three months ended March 31, 1997 primarily due to
the additional series outstanding.

At March 31, 1997,  the Company had  securities  of  approximately  $2.2 billion
remaining for issuance under a registration  statement filed with the Securities
and Exchange Commission. The Company anticipates issuing additional Bonds in the
future.

The  Company  competes  in a national  market with other  private  conduits  and
various financial firms. Economic conditions, interest rates, regulatory changes
and market dynamics all influence the mortgage securities market.

PART II.    OTHER INFORMATION

Item 1.     Legal Proceedings:

            None

Item 5.     Other Information:

            None


<PAGE>


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

(a)         Exhibits


3.1   Articles  of  Incorporation  of the  Registrant  (Incorporated  herein  by
      reference to the Exhibits to Registrant's Registration Statement No.
      33-83524 on Form S-3 filed August 31, 1994).

3.2   Bylaws  of  the  Registrant  (Incorporated  herein  by  reference  to the
      Exhibits to  Registrant's  Registration  Statement  No.  33-83524 on Form
      S-3 filed August 31, 1994).

3.3   Amended  and  Restated   Articles  of  Incorporation  of  the  Registrant,
      effective April 19, 1995  (Incorporated  herein by reference to Exhibit to
      the Registrant's Current Report on Form 8-K, filed April 21, 1995).

4.1   Indenture  between  Registrant  and  Trustee,  dated as of  August 1, 1994
      (Incorporated   herein  by  reference  to  the  Exhibits  to  Registrant's
      Registration Statement No. 33-83524 on Form S-3 filed August 31, 1994).

4.2   Form   of   Supplement   Indenture   between   Registrant   and   Trustee
      (Incorporated  herein  by  reference  to  the  Exhibits  to  Registrant's
      Registration Statement No. 33-83524 on Form S-3 filed August 31, 1994).

4.3   Copy of the  Indenture,  dated as of November 1, 1994,  by and between the
      Registrant  and Texas  Commerce  Bank  National  Association,  as  Trustee
      (Incorporated  herein by reference to Exhibit to the Registrant's  Current
      Report on Form 8-K, filed December 19, 1994).

4.4   Copy of the Series 1 Indenture  Supplement,  dated as of November 1, 1994,
      by  and  between  the   Registrant   and  Texas   Commerce  Bank  National
      Association,  as Trustee (including schedules and exhibits)  (Incorporated
      herein by reference to Exhibit to the Registrant's  Current Report on Form
      8-K, filed December 19, 1994).

4.5   Copy of the Series 2 Indenture  Supplement,  dated as of February 1, 1995,
      by  and  between  the   Registrant   and  Texas   Commerce  Bank  National
      Association,  as Trustee (including schedules and exhibits)  (Incorporated
      herein by reference to Exhibit to the Registrant's  Current Report on Form
      8-K, filed March 8, 1995).

4.6   Copy of the Series 3 Indenture  Supplement,  dated as of March 1, 1995, by
      and between the Registrant  and Texas Commerce Bank National  Association,
      as Trustee  (including  schedules  and exhibits)  (Incorporated  herein by
      reference to Exhibit to the Registrant's Current Report on Form 8-K, filed
      April 21, 1995).

4.7   Copy of the Series 4 Indenture  Supplement,  dated as of June 1, 1995,  by
      and between the Registrant  and Texas Commerce Bank National  Association,
      as Trustee  (including  schedules  and exhibits)  (Incorporated  herein by
      reference to Exhibit to the Registrant's Current Report on Form 8-K, filed
      July 10, 1995).

4.8   Copy of the Series 5 Indenture Supplement, dated as of October 1, 1995, to
      Indenture, dated as of November 1, 1994, by and between the Registrant and
      Texas Commerce Bank National  Association,  as Trustee  (related  exhibits
      available upon request to the Trustee).  (Incorporated herein by reference
      to Exhibit to the Registrant's  Current Report on Form 8-K, filed November
      15, 1995).

4.9   Copy of the Series 6 Indenture  Supplement,  dated as of March 1, 1996, by
      and between the Registrant  and Texas Commerce Bank National  Association,
      as Trustee  (including  schedules  and exhibits)  (Incorporated  herein by
      reference to Exhibit to the Registrant's Current Report on Form 8-K, filed
      March 21, 1996).


<PAGE>


4.10  Copy of the Series 7 Indenture Supplement, dated as of May 1, 1996, by and
      between the Registrant and Texas  Commerce Bank National  Association,  as
      Trustee  (related  schedules  and exhibits  available  upon request of the
      Trustee).  (Incorporated  herein by reference  to Exhibit to  Registrant's
      Current Report on Form 8-K, filed June 19, 1996).

4.11  Copy of the Series 8 Indenture Supplement,  dated as of September 1, 1996,
      by  and  between  the   Registrant   and  Texas   Commerce  Bank  National
      Association,  as Trustee  (related  schedules and exhibits  available upon
      request of the Trustee).  (Incorporates  herein by reference to Exhibit of
      Registrant's Current Report on Form 8-K, filed October 9, 1996).

99.1  Standard  Provisions  to  Servicing  Agreement  (Incorporated  herein  by
      reference  to the Exhibits to  Registrant's  Registration  Statement  No.
      33-83524 on Form S-3 filed August 31, 1994).

99.2  Form of  Servicing  Agreement  (Incorporated  herein by  reference to the
      Exhibits to  Registrant's  Registration  Statement  No.  33-83524 on Form
      S-3 filed August 31, 1994).

99.3  Standard  Terms to Master  Servicing  Agreement  (Incorporated  herein by
      reference  to the Exhibits to  Registrant's  Registration  Statement  No.
      33-83524 on Form S-3 filed August 31, 1994).

99.4  Form of Master Servicing Agreement  (Incorporated  herein by reference to
      the  Exhibits to  Registrant's  Registration  Statement  No.  33-83524 on
      Form S-3 filed August 31, 1994).

99.5  Form  of  Prospectus  Supplement  of  Bonds  secured  by  adjustable-rate
      mortgage  loans   (Incorporated   herein  by  reference  to  Exhibits  to
      Registrant's  Pre-Effective  Amendment  No. 4 to  Registration  Statement
      No. 33-83524 on Form S-3 filed December 5, 1994).

99.6  Form of  Financial  Guaranty  Assurance  Policy  (Incorporated  herein by
      reference  to the Exhibits to  Registrant's  Registration  Statement  No.
      33-83524 on Form S-3 filed August 31, 1994).

99.7  Form of GEMICO  Mortgage Pool Insurance  Policy  (Incorporated  herein by
      reference  to the Exhibits to  Registrant's  Registration  Statement  No.
      33-83524 on Form S-3 filed August 31, 1994).

99.8  Form of PMI Mortgage  Insurance Co. Pool Insurance  Policy  (Incorporated
      herein  by  reference  to  the  Exhibits  to  Registrant's   Registration
      Statement No. 33-83524 on Form S-3 filed August 31, 1994).

99.9  Form of Prospectus  Supplement  of Bonds  secured by fixed-rate  mortgage
      loans  (Incorporated  herein by  reference  to Exhibits  to  Registrant's
      Pre-Effective  Amendment No. 4 to Registration  Statement No. 33-83524 on
      Form S-3 filed December 5, 1994).

99.10 Copy  of  Financial  Guaranty  Insurance  Policy  No.  50331-N  issued  by
      Financial Security Assurance Inc., dated December 7, 1994, with respect to
      the Series 1 Bonds  (Incorporated  herein by  reference  to the Exhibit to
      Registrant's 1994 Form 10-K, dated and filed March 31, 1995).

99.11 Copy of  Financial  Guaranty  Insurance  Policy  No.  95010074  issued  by
      Financial  Guaranty  Insurance  Company,  dated  February 23,  1995,  with
      respect to the Series 2 Bonds (Incorporated herein by reference to Exhibit
      to the Registrant's Current Report on Form 8-K, filed March 8, 1995).

99.12 Copy of the Saxon Mortgage Funding Corporation  Servicing Guide for Credit
      Sensitive  Loans,   February  1,  1995  Edition  (Incorporated  herein  by
      reference to Exhibit to the Registrant's Current Report on Form 8-K, filed
      March 8, 1995).

99.13 Copy  of  Financial  Guaranty  Insurance  Policy  No.  50364-N  issued  by
      Financial  Guaranty  Assurance Inc.,  dated April 7, 1995, with respect to
      the Series 3 Bonds  (Incorporated  herein by  reference  to Exhibit to the
      Registrant's Current Report on Form 8-K, filed April 21, 1995).

99.14 Copy  of  Financial  Guaranty  Insurance  Policy  No.  50382-N  issued  by
      Financial  Guaranty  Assurance Inc.,  dated June 29, 1995, with respect to
      the Series 4 Bonds  (Incorporated  herein by  reference  to Exhibit to the
      Registrant's Current Report on Form 8-K, filed July 10, 1995).

99.15 Copy of the Standard  Terms to Master  Servicing  Agreement,  June 1, 1995
      Edition  (incorporated  herein by reference to Exhibit to the Registrant's
      Current Report on Form 8-K, filed July 10, 1995).

99.16 Copy of  Financial  Guaranty  Insurance  Policy No.  19804 issued by MBIA
      Insurance  Corporation  (Incorporated  herein by  reference to Exhibit to
      the Registrant's Current Report on Form 8-K, filed November 15, 1995).

99.17 Copy of  Financial  Guaranty  Insurance  Policy No.  20596 issued by MBIA
      Insurance  Corporation  (Incorporated  herein by  reference to Exhibit to
      the Registrant's Current Report on Form 8-K, filed March 21, 1996).

99.18 Copy of  Financial  Guaranty  Insurance  Policy No.  21296 issued by MBIA
      Insurance  Corporation  (Incorporated  herein by  reference to Exhibit to
      the Registrant's Current Report on Form 8-K, filed June 19, 1996).


(b)   Reports on Form 8-K

      None.



<PAGE>







                                        SIGNATURES



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.

                                        MERIT SECURITIES CORPORATION


                                     By /s/ Lynn K. Geurin
                                        ------------------------------
                                         Lynn K. Geurin
                                        (Principal Executive Officer)





                                       /s/ Stephen J. Benedetti
                                       ------------------------------
                                       Stephen J. Benedetti
                                      (Principal Financial & Accounting Officer)







Dated:  May 15, 1997