<PAGE>                        Page 2


               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                       AMENDMENT NO. 1 TO
                            FORM 10-K

/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

          For the fiscal year ended September 30, 1996.

                               OR

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

           For the transition period from          to
                                
                 Commission file number 2-63708.

           METROPOLITAN MORTGAGE & SECURITIES CO., INC
     (Exact name of registrant as specified in its charter)

WASHINGTON                                   91-0609840
(State or other jurisdiction of         (I.R.S. Employer
incorporation or organization)               Identification No.)

      WEST 929 SPRAGUE AVENUE, SPOKANE, WASHINGTON   99204
    (Address of principal executive offices)       (Zip Code)

Registrant's telephone number, including area code: (509)838-3111
Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

Preferred Stock Series:

       C    438,343 shares    E-3   107,874   shares
       D    673,915 shares    E-4    62,978   shares
       E-1  728,698 shares    E-5    13,744   shares
       E-2   45,579 shares    E-6    80,689   shares


<PAGE>                        Page 3

_________________________________________________________________
(Title of Class)
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

Indicate  by  check  mark  if  disclosure  of  delinquent  filers
pursuant  to Item 405 of Regulation S-K (229.405 of this Chapter)
is  not contained herein, and will not be contained, to the  best
of  registrant's  knowledge, in definitive proxy  or  information
statements  incorporated by reference in Part III  of  this  Form
10-K or any amendment to this Form 10-K. /x/

The voting stock of the registrant is not traded on any exchange,
therefore there is no established market value.     The aggregate
market value of the stock cannot be computed by reference to  the
price  at  which the stock was sold, or the average bid  and  ask
price  of such stock, as of any date within 60 days prior to  the
date  of  filing because there have been no sales of  the  Common
Stock within sixty days prior to the date of filing.    

Indicate  the  number  of  shares  outstanding  of  each  of  the
registrant's classes of common stock, as of March 31, 1997.

     Class A Common Stock: 130

           Documents incorporated by reference:  None
                                
<PAGE>                        Page 4
                                
                             PART I

ITEM 1.   BUSINESS:

Terms:

For ease of reading, the following is a compilation of several of
the  defined  terms which appear regularly within this  document.
Also, See "Business".

Consolidated Group:  This term refers to the combined  businesses
consisting of Metropolitan and all of its subsidiaries.

Debentures:    Where this term is capitalized, it refers  to  the
Installment  and  Investment  Debentures  being  offered  herein.
Where  not  capitalized, it refers to debentures of  Metropolitan
generally.

Metropolitan:     This  term  refers  to  the   parent   company,
Metropolitan Mortgage & Securities, Co., Inc., exclusive  of  its
subsidiaries.

Metwest:    Metwest  Mortgage Services,  Inc.,  a  subsidiary  of
Metropolitan.

Preferred  Stock:   Where this term is capitalized, it refers  to
the Series E-7 Preferred Stock being offered herein. Where it  is
not  capitalized,  it refers to preferred stock  of  Metropolitan
generally.

Receivables:     Investments  in  cash   flows,   consisting   of
obligations  collateralized by real  estate  (both  pre  existing
obligations  purchased in the secondary market,  and  obligations
originated   by  Metwest),  structured  settlements,   annuities,
lottery prizes and other investments.

Western  United:    Western  United  Life  Assurance  Company,  a
subsidiary of Metropolitan.

Affiliated  Companies:   The following companies  are  affiliated
with Metropolitan through the common control of C. Paul Sandifur,
Jr.  Metropolitan and its subsidiaries provide services to these
<PAGE>                        Page 4

companies  for a fee and engage in various business  transactions
with these companies:

Arizona Life:   Arizona Life Insurance Company

Summit:   Summit Securities, Inc.

MIS:   Metropolitan Investment Securities, Inc.

Summit PD:   Summit Property Development, Inc.

Old Standard:   Old Standard Life Insurance Company.
                                
<PAGE>                        Page 6
                                
                      ORGANIZATIONAL CHART
          METROPOLITAN MORTGAGE & SECURITIES CO., INC.
                    (as of December 31, 1996)
_____________________________________|___________________________
_
          |                          |             |
         100%                        |            96.5%*
       Metwest                       |          Consumers
      Mortgage                       |            Group
     Services, Inc.                  |           Holding
                                     |          Co., Inc.
                                     |             |
                                     |             |
                                     |            100%
                                     |      Consumers Insurance
                                     |           Co., Inc.
                                     |             |
                                     |           75.5%
                                   24.5% ->   Western United
                                              Life Assurance
                                                  Company

Metropolitan   Mortgage  &  Securities   Co.,   Inc.   -   Parent
  organization,  invests  in Receivables and  other  investments,
  including   real   estate  development,  with   proceeds   from
  investments and securities offerings.
Consumers  Group Holding Co., Inc. - A holding company, its  sole
  business  activity  currently being that of  a  shareholder  of
  Consumers Insurance Co., Inc.
Consumers  Insurance Co., Inc. -  Property and casualty  insurer,
  its  principal  business activity currently  being  that  of  a
  shareholder of Western United Life Assurance Company.
Western  United  Life Assurance Company - Metropolitan's  largest
  subsidiary  and largest company within the Consolidated  Group,
  is  engaged  in investing in Receivables and other  investments
  principally  funded  by  life  insurance  policy  and   annuity
  contract  sales. Western United is domiciled in  the  State  of
  Washington.
Metwest  Mortgage  Services,  Inc. - Performs  loan  origination,
  collection  and servicing functions and is an FHA/HUD  licensed
  servicer and lender.


  <PAGE>                        Page 6

Metropolitan is the sole owner of several additional subsidiaries
  which  own  certain  individual  development  properties.   See
  "Business - Real Estate Development".

*  The  remaining 3.5% of Consumers Group Holding  Co.,  Inc.  is
owned   by   Summit.   See  "CERTAIN  RELATIONSHIPS   &   RELATED
TRANSACTIONS"

                            BUSINESS
OVERVIEW

      Metropolitan was established in 1953.  Through  growth  and
acquisitions,  it  has developed into a diversified  institution,
with  assets  exceeding  one billion dollars.   Its  subsidiaries
include  an  annuity and life insurance company, Western  United,
and a Receivable servicer and loan originator, Metwest.

      The  Consolidated  Group's principal business  activity  is
investing  in Receivables.  The Receivables primarily consist  of
real  estate  contracts  and promissory notes  collateralized  by
liens  on  real  estate.  The  Consolidated  Group  predominantly
invests in Receivables where the borrower or the collateral  does
not  qualify for conventional financing.  This market is commonly
referred  to  as  the non conventional or "B/C" market.   Because
borrowers in this market generally have blemished credit records,
underwriting  practices  focus more strongly  on  the  collateral
value  as  the ultimate source for repayment.  This contrasts  to
the  conventional or "A" credit market which focuses on borrowers
with   stronger   credit   records.    See   "BUSINESS-Receivable
Investments.   In addition to investing in existing  Receivables,
the  Consolidated Group began originating "B/C" loans during late
fiscal 1996 through Metwest. See "BUSINESS-Receivable Investments-
Loan  Originations".   Metropolitan  and  its  subsidiaries  also
acquire other types of Receivables, including but not limited  to
lottery  prizes,  structured  settlements  and  annuities.    See
"BUSINESS-Receivable      Investments-Lotteries,       Structured
Settlements & Annuities"

      All  Receivables  are  purchased at  prices  calculated  to
provide  a desired yield.  Often, in order to obtain the  desired
yield, the Receivables will be purchased at a discount from their
face  amount,  or  at a discount from their present  value.   See
"BUSINESS-Yield and Discount Considerations ".  The  Consolidated
Group   strives  to  achieve  a  positive  spread   between   its
investments and its cost of funds.


<PAGE>                        Page 8

       In   addition  to  the  Consolidated  Group's   Receivable
investments,  Western United and to a lesser extent  Metropolitan
invest  funds  in  securities  which  predominantly  consist   of
investment  grade corporate bonds, U.S. Treasury, and  government
agency   obligations,  mortgage  backed  securities,  and   other
securities  including  security  hedging  investments,  and   the
subordinate  certificate  and  residual  interests  created   out
Receivable     securitizations.      See     "BUSINESS-SECURITIES
INVESTMENTS" & "BUSINESS-Receivable Sales and Securitizations."

       The  Consolidated  group  has  developed  several  funding
sources.  These sources include Receivable investment income; the
issuance  of  annuity and life insurance policies;  the  sale  of
assets  including  sales  through securitizations;  the  sale  of
debentures,  and preferred stock; collateralized  borrowing;  the
sale  of  real  estate  and securities portfolio  earnings.   See
"BUSINESS-Method of Financing".

      Metropolitan also sells and develops real estate  primarily
as  the  result  of repossessions of Receivables.   In  addition,
Metropolitan is the developer of a timeshare resort, Lawai  Beach
Resort,  located  on  Kauai, Hawaii.  See  "BUSINESS-REAL  ESTATE
DEVELOPMENT".

RECEIVABLE INVESTMENTS

Introduction

         Metropolitan has been investing in Receivables  for  its
own  account  for over forty years.  Metropolitan  also  provides
Receivable   acquisition  and  underwriting   services   to   its
subsidiary,  Western  United, and to  Old  Standard,  Summit  and
Arizona Life.  See "BUSINESS-Receivable Investments-Management  &
Acquisition   Services"  &  "CERTAIN  RELATIONSHIPS   &   RELATED
TRANSACTIONS".  The  evaluation,  underwriting,  and  closing  is
performed  at Metropolitan's headquarters in Spokane, Washington.
The  following  information describes  the  Consolidated  Group's
Receivable acquisition and underwriting procedures as of the date
of this prospectus.  These practices may be amended, supplemented
and  changed  at  any time at the discretion of the  Consolidated
Group.    

     Types of Receivables:

<PAGE>                        Page 9


     The Consolidated Group's Receivable acquisitions include two
principal  types of Receivables: 1)Receivables collateralized  by
real  estate  (both  the acquisition of existing  loans  and  the
origination  of  loans), and 2)lotteries, structured  settlements
and  annuities.  The majority of the real estate Receivables  are
collateralized   by  first  position  liens  on   single   family
residences,  including land with mobile homes, and  condominiums.
To  a  lesser extent, the Consolidated Group acquires Receivables
collateralized  by  commercial real estate and undeveloped  land.
In addition, it acquires Receivables collateralized by second and
lower lien positions.

     Secondary Mortgage Markets:

      The  market  for  the acquisition of existing  real  estate
Receivables  is  commonly referred to as the  secondary  mortgage
market.   The  private  secondary  mortgage  market  consists  of
individual  Receivables or small pools of Receivables  which  are
held  and  sold  by individual investors.  These Receivables  are
typically  the  result of seller financed sales of  real  estate.
The  institutional secondary mortgage market consists of the sale
and resale of Receivables which were originated or acquired by  a
financial  institution  and which are sold  in  groups,  commonly
called   pools.   The  Consolidated  Group  acquires  Receivables
through both the private and the institutional secondary mortgage
markets.

     Loan Originations:

       During   late   1996,  Metwest  began  originating   loans
collateralized   by   real   estate.   See   "BUSINESS-Receivable
Investments-loan originations".

     Receivable servicing and collections:

        Metwest performs all Receivable servicing and collections
for  itself,  Metropolitan,  Western United,  the  aforementioned
affiliates and for others.  See "BUSINESS-Receivable Investments-
Servicing  &  Collection"  &  "CERTAIN  RELATIONSHIPS  &  RELATED
TRANSACTIONS".    

     Receivable Acquisition Volume:
     
     
<PAGE>                        Page 10
     
     Metropolitan's  Receivable  acquisition  activities   (total
activities  for  itself and for others), grew from  approximately
$142.5  million  in 1994, and $259.8 million in 1995,  to  $382.1
million  in  1996.  During 1996, the average monthly  acquisition
volume  was  approximately  $31.8 million.   At  the  same  time,
Metropolitan's median closing time has improved  to  20  days  in
1996,  in  comparison to 23 days in 1995, and 24  days  in  1994.
Management considers closing time to be an important factor in  a
seller's decision to sell a Receivable to Metropolitan.
     
Receivables Acquisitions: Sources, Strategies and Underwriting

     Metropolitan has developed marketing techniques and sources,
and  underwriting  practices for each of the different  types  of
Receivables.  In general, the real estate Receivables acquired or
originated by the Consolidated Group consist of non conventional,
"B/C"   credit   loans.   These  types  of  Receivables   possess
characteristics which differ from the conventional lending market
in that either the borrower or the property would not qualify for
"A" credit grade lending.  This type of lending requires that the
lender focus not only on the borrowers' ability to pay, but  also
the  quality  of the collateral as the ultimate recourse  in  the
event of the borrower's default.

Private Secondary Mortgage Market Sources

       Currently,  the  majority  of  the  Consolidated   Group's
Receivables  are acquired through the private secondary  mortgage
market.   See  "BUSINESS-Current Mix  of  Receivable  Investment"
This  market principally consists of loans which were  originated
through  the  seller  of  a  property financing  the  purchaser's
acquisition.  Metropolitan's principal source for private  market
Receivables are independent brokers located throughout the United
States.   These independent brokers typically deal directly  with
private individuals or organizations who own and wish to  sell  a
Receivable.

Private Market Acquisition Strategies

     Metropolitan's private secondary market acquisition strategy
is   designed   to  provide  flexible  structuring  and   pricing
alternatives  to the Receivable seller, and quick closing  times.
Metropolitan believes these are key factors to Metropolitan's
<PAGE>                        Page 11

ability to attract and purchase quality Receivables.  In order to
enhance its position in this market, Metropolitan is implementing
the  following acquisition strategies: 1)centralizing acquisition
activities,  2)  expanding  the use of Metropolitan's  Receivable
submission  software,  BrokerNet, 3) designing  and  implementing
flexible Receivable acquisition pricing options, 4) designing and
implementing   fast  closing  programs,  and  5)  designing   and
implementing broker incentive programs.

     1)   Centralization of acquisition activities:
     
          Currently,  the  Receivable  brokers  contact  one   of
Metropolitan's  branch  offices  to  submit  the  Receivable  for
evaluation.   During  the  first two  quarters  of  fiscal  1997,
Metropolitan plans to close all of its branch offices and in turn
plans  to  expand the Receivable acquisition staff  at  its  home
office  in Spokane Washington, which will be called the  Contract
Negotiation  Center.   This  change is  being  made  to  decrease
contract  acquisition  costs, as branch  offices  are  no  longer
necessary for identification of appropriate contracts to  acquire
due  to  existing contracts with brokers; to increase the closing
speed due to the ability to centralize the acquisition decisions,
and  to  further decrease acquisitions costs through, the use  of
technological  advances including the newly  developed  BrokerNet
software.    

     2) BrokerNet software:

      BrokerNet  was  developed by Metropolitan  to  enhance  its
position  in  the private secondary mortgage market,  principally
through  streamlining submissions, underwriting and  the  closing
process.   It  is  a menu driven software program  which  assists
brokers   in   preparing   accurate   and   complete   Receivable
submissions.   It  is designed to meet Metropolitan's  submission
requirements.  In addition, the program assists in analyzing  the
characteristics  of the Receivable, and provides online  purchase
price  quotes  based  upon the Receivable's  characteristics  and
Metropolitan's yield requirements.

     This  software was first available for online use by brokers
in March 1996.  Current plans for enhancing the software include:
preparing  the  legal  documents used to purchase  a  Receivable,
providing  internet  compatibility, providing  submission  status
tracking   (expected  to  be  available  mid  1997),  assist   in
monitoring
<PAGE>                        Page 12
     
     the   closing  of  a  Receivable  purchase  and  ultimately,
transfer   the  Receivable  data  directly  into  the  Receivable
servicing and collection system.
     
     Currently,  approximately  35% of  the  privately  purchased
Receivables are submitted to Metropolitan through BrokerNet.   It
is  currently  used  by approximately 15% of  the  Metropolitan's
brokers.   Management  believes that this  system  is  more  cost
effective   than  paper  submissions.   Metropolitan   plans   to
encourage  broker  use  of  BrokerNet through  various  financial
incentive  programs.  The current goal is  to  have  50%  of  the
brokers submitting through BrokerNet by the end of fiscal 1997.

     3)   Development of flexible sales options:
     
     Occasionally, a Receivable seller desires a flexible pricing
structure,  does not wish to sell the entire Receivable,  or  the
purchase   of   the  entire  Receivable  exceeds   Metropolitan's
investment to collateral value underwriting standards.  In  these
circumstances,   Metropolitan  has  developed  several   options.
Currently,    the    principal   options   include    1)"partial"
acquisitions,  2) multiple stage payouts, and 3) the  short  life
yield programs.

      Partial  purchases are purchases of the right to receive  a
portion  of the Receivable's balance where the seller's right  to
the  unsold  portion  of the Receivable is  subordinated  to  the
interest  of  Metropolitan or the company for which  Metropolitan
negotiated  the purchase.  Partials include the purchase  of  the
next  series of payments (an immediate partial), the purchase  of
future  payments or a balloon payment (a reverse partial) or  the
purchase  of  a  portion  of each payment  (a  split).   Partials
generally   result   in  a  reduced  level  of   investment   and
commensurate reduction in the risk to the purchaser than  if  the
entire Receivable cash flow is purchased.

      The multiple stage payout and short yield life programs are
pricing programs designed to satisfy variations in seller  needs.
The  Multiple stage payout involves the payment of the Receivable
purchase price through installment payments over time.  The short
life   yield   program  is  available  for  "A"  credit   quality
Receivables  collateralized  by  owner  occupied  single   family
residences.  This program prices Metropolitan's yield requirement
assuming  that  the loan will balloon with a full payoff  in  ten
years.


<PAGE>                        Page 13

     4) Development of faster closing programs:

     Metropolitan has developed several submission programs which
are  designed  to  reduce closing times.  The  principal  program
consists of the Fast Track submission program which requires that
the  broker  obtain  and  submit  a  Receivable  with  a  current
appraisal,   title   policy,  and   all   other   documents   and
verifications  required  to  analyze,  evaluate  and  close   the
transaction.   Metropolitan attempts to close all  accepted  Fast
Track submissions within seven days.

     5) Broker Incentive Programs:

      In  order  to  maintain strong professional ties  with  its
independent brokers, Metropolitan held its first annual  Broker's
Convention during the summer of 1994.  The second such convention
is  currently planned for late 1997.  In addition, various  bonus
commission   and  incentive  programs  as  well  as   streamlined
Receivable submission procedures have been developed and continue
to be developed in order to reduce closing times.

       Currently,  the  principal  incentive  programs  are   the
wholesale  pricing program and the Premier Broker  Program.   The
wholesale pricing program requires that brokers pay the  cost  of
the   Receivable's  title  policy  and  appraisal.   In   return,
Metropolitan reduces its yield requirement (currently  by  .25%).
Through  the  Premier  Broker program, Metropolitan  pays  volume
brokers   a   bonus  for  every  $250,000  in  closed  Receivable
acquisitions.   For  Brokers  whose volume  exceeds  one  million
annually,  Metropolitan reduces its yield requirement  (currently
by  .25%) for all future acquisitions from the qualifying premier
broker.   Both  of  these  programs are designed  to  provide  an
incentive  to  the  volume broker to submit their  Receivable  to
Metropolitan.   Volume  brokers  are  often  efficient   in   the
Receivable packaging and submission, which can result in a  lower
acquisition processing cost.

     Private Secondary Mortgage Market Underwriting

      Because  Receivables  in the private market  are  generally
seller  financed  transactions, these Receivables  are  typically
subject  to terms and conditions which were negotiated to satisfy
the  unique  needs  of the particular private buyer  and  seller.
Therefore, the underwriting of these loans requires careful
<PAGE>                        Page 14

evaluation  of  the loan documentation and terms.  Metropolitan's
acquisition of these Receivables should be distinguished from the
conventional    mortgage   lending   business   which    involves
standardized  documentation  and  terms,  substantial  first-hand
contact  by lenders with each borrower and the ability to  obtain
an  interior  inspection  appraisal prior  to  granting  a  loan.
Management  believes  that the underwriting  functions  that  are
employed  in  its private secondary mortgage market  acquisitions
are   as   thorough   as  reasonably  possible  considering   the
characteristics of the Receivables, and considering the volume of
Receivables submitted for review.

      When  Metropolitan  is  offered a  Receivable  through  the
private secondary mortgage market, the Receivable information  is
transmitted  to  one  of  Metropolitan's contract  buyers  either
through  an  online  BrokerNet submission or a traditional  paper
submission.   Paper submissions are input by the contract  buyers
into  the BrokerNet system.  The contract buyer makes an  initial
evaluation of the Receivable's characteristics to verify that  it
satisfies the requirements for the particular type of submission.

      If  the  Receivable appears acceptable, it is entered  into
Metropolitan's submissions tracking system, and forwarded to  the
demography department.  The demography department uses a national
computerized  database  to  identify  local  trends  in  property
values,   personal   income,  population   and   other   economic
indicators.

      The  Receivable  is  then  forwarded  to  the  Underwriting
Committee.   Metropolitan's underwriting team currently  consists
of  six  individuals  with  a combined  experience  of  90  years
evaluating seller financed Receivables.  Receivables of  $100,000
or   less  are  evaluated  by  individual  underwriters.    Loans
exceeding  that amount are reviewed by a committee  of  at  least
three underwriters.  Additionally, underwriters may obtain a team
review of any Receivable.

       The  underwriters  evaluate  the  proposed  investment  to
collateral  value,  the payor's credit and payment  history,  the
interest   rate,  the  demographics  of  the  region  where   the
collateral is located, and the potential for environmental risks.
Currently,  the ratio of the investment in a Receivable  compared
to  the value of the property which collateralizes the Receivable
generally  does  not  exceed  70%-80% (depending  upon  acquiring
company,  collateral type and collateral quality) on  Receivables
collateralized by
<PAGE>                        Page 15

single family residences; 30-70% on Receivables collateralized by
other types of improved property such as commercial property; and
55%  on  unimproved land.  Management believes  these  collateral
ratio  requirements  generally provide higher  than  conventional
levels   of   collateral  to  protect  the  purchasing  company's
investment in the event of a default on a Receivable.

      Receivable  investments  which the  Underwriting  Committee
identifies  for  legal review are referred to Metropolitan's  in-
house  legal department which currently includes a staff of  five
attorneys.   Receivables  which  exceed  specified  amounts   are
submitted  to an additional special risk evaluation review.   The
investment amount which gives rise to special risk evaluation  is
dependent  upon the type and quality of collateral, ranging  from
$250,000  for conventionally financable residential  property  to
$100,000  for  residential property which is not owner  occupied,
and   $150,000  for  Receivables  collateralized  by   commercial
property.

      Based  upon  Metropolitan's  underwriting  guidelines,  the
underwriters may approve the acquisition or change the  terms  of
the  acquisition, such as limiting the acquisition to  a  partial
purchase  in order to decrease the acquiring company's investment
risk.   If the terms are changed, the contract buyer is notified,
who  in  turn  contacts  the broker to renegotiate  the  purchase
terms.   The  underwriters may also approve the loan  subject  to
certain  closing criteria.  If the broker and/or  seller  accepts
the  proposed  transaction, a written agreement  to  purchase  is
executed,  which  is subject to Metropolitan's full  underwriting
requirements.

      Once  the  Receivable  has been approved  in  principle,  a
current  market valuation of the collateral is obtained in  order
to  verify  the investment to collateral value.  These valuations
can  consist  of  1)a  valuation  from  a  statistical  valuation
service,  2) an appraisal by a licensed independent appraiser  or
3)   an   appraisal  by  one  of  Metropolitan's  licensed  staff
appraisers.

      Statistical  valuations are available in  the  majority  of
counties  in  the  United States.  They are based  upon  property
characteristics  and sales trends which can be  analyzed  through
computer  modeling.   The cost of statistical valuations  average
approximately $35 and are available virtually instantly, compared
to  a  cost  of  approximately $250 for standard  appraisals  and
generally  a one week processing time.  Metropolitan began  using
statistical valuations in 1996.  Metropolitan limits its use of
<PAGE>                        Page 16

statistical valuations to properties with low investment to value
ratios  and  single  family residential  properties.   Currently,
Metropolitan  is  monitoring  the  quality  of  the   statistical
services through obtaining post closing traditional appraisals on
a minimum of 10% of the acquisitions.

     When traditional appraisals are obtained, they are generally
based  on a drive-by inspection of the collateral and comparative
sales analysis.  The appraiser generally does not have access  to
the  property  for  an  interior  inspection.   Each  statistical
valuation and independent appraisal is also subject to review  by
a staff appraiser.

      The  approved  Receivable  is  provided  to  Metropolitan's
closing  department where the property title  is  evaluated,  the
legal  documents are reviewed and the appraisal is reviewed.   If
the  closer  discovers  any  material  discrepancies  during  the
closing  review,  or  if  the Receivable  does  not  satisfy  any
specified  closing  contingencies, then  the  Receivable  is  re-
submitted to the underwriting committee for re-evaluation.   Upon
completion  of the underwriting process and the closer's  review,
appropriate  closing and transfer documents are executed  by  the
seller  and/or broker, transfer documents are recorded,  and  the
transaction is funded.
     
     Institutional Secondary Mortgage Market Sources

       During   fiscal  1996,  approximately  $73.6  million   in
Receivables were institutional acquisitions.  These portfolios of
real estate Receivables are acquired from banks, savings and loan
organizations, the Resolution Trust Corporation and  the  Federal
Deposit Insurance Corporation and other financial institutions.

      An  institutional seller typically offers a loan  pool  for
sale in order provide liquidity, to meet regulatory requirements,
to  liquidate assets, or other business reasons.  Over the years,
Metropolitan  has  built relationships with several  brokers  and
lenders  who provide a regular flow of potential acquisitions  to
the  institutional  secondary  department.   In  addition,  other
brokers  learn  about  Metropolitan through  word  of  mouth  and
contact Metropolitan directly.  Finally, some leads on loan pools
are generated by cold calling lending institutions or brokers.

      These  acquisitions are typically negotiated through direct
contact with the portfolio departments at the various selling
<PAGE>                        Page 17

institutions,  or  acquired through bidding at  an  auction.  The
closing   costs  per  loan  for  institutional  acquisitions   is
generally   lower   than   private  secondary   mortgage   market
acquisitions.   However, the investment yield is  also  generally
lower than yields available in the private market.  During fiscal
1996,  approximately  25%  of  the institutional  purchases  were
acquired  from  FSB  Mortgage Company (a  subsidiary  of  Federal
Savings Bank of Rogers, Arkansas).

     Institutional Secondary Mortgage Market Underwriting

      Receivables  acquired  through the  institutional  mortgage
market  differ from those acquired in the private market in  that
these  Receivables  were  generally  originated  by  a  financial
institution,   applying  standard  underwriting   practices   and
standardized  documentation.  Generally, the seller  provides  an
initial  summary  of the pool which typically includes  the  pool
balance, the number of loans, the weighted average interest rate,
the  weighted  average  maturity, weighted average  loan-to-value
ratio,   delinquency  status,  collateral  addresses,  collateral
types,  and  lien  positions.   Receivable  pools  are  initially
reviewed   by  the  institutional  secondary  market  staff   who
determine  whether the pool yield and characteristics are  within
the current acquisition guidelines and yield requirements.

      The pool characteristics and yield are then reviewed by the
Underwriting   Committee.   If  approved  by   the   Underwriting
Committee,  a  letter of intent is executed and the institutional
secondary marketing staff perform a due diligence review  of  the
loan   pool   which  generally  includes:  1)   review   of   the
documentation  in each individual loan file, 2) determination  of
the  payment  history and delinquency pattern of  the  loans,  3)
determination  of  the individual and pool loan-to-value  ratios,
and   maturity  characteristics,  and  4)  determination  of  the
economics  and  demography  for the  geographic  area  where  the
collateral is located. If the appraisal is over one year  old,  a
new   statistical  valuation  or  traditional  appraisal  of  the
collateral  is  generally  obtained.   Any  exceptions   in   the
documentation or Receivable characteristics are noted during  the
due  diligence  review.  A summary of exceptions,  as  determined
from  the  due  diligence, is provided to the seller  to  resolve
prior  to  closing.  If the exception(s) cannot be resolved,  the
corresponding loan(s) may be removed from the pool, the terms  of
the   acquisition  renegotiated,  or  the  transaction  canceled.
Following completion of its due
<PAGE>                        Page 18

diligence,  and  acceptable  resolution  of  any  exceptions,   a
purchase  and  sale agreement is executed and the acquisition  is
funded  and  closed.  Generally, these acquisitions are  acquired
with servicing released.

Loan Originations Sources

      During  the  last  quarter of fiscal  1996,  Metropolitan's
subsidiary,  Metwest,  began originating  residential  loans  and
small  commercial loans.  The commercial lending focuses on loans
of  $1,500,000  or smaller.  Metwest is currently licensed  as  a
lender  in  twenty  six  states.  Metwest  plans  to  expand  its
activities  throughout  the  United States  during  fiscal  1997.
Metwest  originates loans through licensed mortgage  brokers  who
submit  loan  applications on behalf  of  the  borrower.   Before
Metwest  will enter into a broker agreement, the mortgage  broker
must  demonstrate that it is properly licensed,  experienced  and
knowledgeable  in  lending.   The  volume  of  Metwest's  lending
activities  were immaterial to the Consolidated  Group  in  1996.
Actual  growth  of  this  new venture cannot  be  predicted  with
certainty; however, it is currently projected that Metwest  could
originate  as much as approximately $8-$10 million in residential
loans per month by fiscal year end, which could amount to as much
as  approximately  30%  of  the Consolidated  Group's  Receivable
investing  by  the  end  of  fiscal 1997.   Metwest's  commercial
lending  activities  are  currently in the  initial  phases,  and
management  is unable to predict with any level of certainty  the
volume  of commercial loans which may be originated during fiscal
1997.

     Loan Originations Underwriting

      Loans  originated  by  Metwest  are  underwritten  applying
criteria   which  include  the  following:  evaluation   of   the
borrower's   credit,  obtaining  a  current  appraisal   of   the
collateral, and obtaining title insurance.  The borrower's credit
determines the down payment and interest rate which Metwest  will
require.  A lower credit rating would result in a higher required
down  payment and higher interest rate.  Metwest will lend up  to
90%  of  the  collateral's value on "A" credit  borrowers,  which
decreases   to  70%  for  "D"  credit  borrowers.    Unlike   the
Receivables  purchased in the private secondary mortgage  market,
the  loans originated by Metwest have standard documentation  and
terms.    Currently,   Metwest  originates  fixed   rate   loans.
Residential loans up to $207,000 are
<PAGE>                        Page 18

evaluated by an individual loan underwriter.  Loans in excess  of
$207,000 require the approval of two approved underwriters.

     Lotteries, Structured Settlements and Annuities Sources

      Metropolitan  also negotiates the purchase  of  Receivables
which  are  not collateralized by real estate, such as structured
settlements,  annuities and lottery prizes.  The  lottery  prizes
generally  arise  out of state operated lottery games  which  are
typically  paid in annual installments to the prize winner.   The
structured  settlements generally arise out of the settlement  of
legal  disputes where the prevailing party is awarded  a  sum  of
money,  payable  over  a  period of time, generally  through  the
creation  of  an annuity.  Other annuities generally  consist  of
investments  which cannot be cashed in directly with the  issuing
insurance  company.  Metropolitan's source for these  investments
is  generally  private brokers who specialize in these  types  of
Receivables.

     Lottery, Structured Settlement and Annuity Underwriting

      In the case of structured settlement annuity purchases, the
underwriting  guidelines  of  Metropolitan  generally  include  a
review  of the settlement agreement.  In the case of all  annuity
purchases,   Metropolitan's  underwriting  guidelines   generally
include  a  review of the annuity policy, related documents,  the
credit  rating  of the annuity seller, the credit rating  of  the
annuity  payor (generally an insurance company), and a review  of
other  factors  relevant to the risk of purchasing  a  particular
annuity as deemed appropriate by management in each circumstance.
Typically,  Metropolitan  limits its  acquisition  of  structured
settlements  and annuities to the purchase of a  maximum  of  the
next seven year's payments.

      In  the case of lottery prizes, the underwriting guidelines
generally  include a review of the documents providing  proof  of
the  prize,  and a review of the credit rating of  the  insurance
company,  or  other  entity, making the lottery  prize  payments.
Where  the  lottery  prize  is from  a  state  run  lottery,  the
underwriting guidelines generally include a confirmation with the
respective lottery commission of the prize winner's right to sell
the  prize,  and  acknowledgment from the lottery  commission  of
their receipt of notice of the sale.  In many states, in order to
sell  a state lottery prize, the winner must obtain a court order
permitting the
<PAGE>                        Page 19

sale.  In those states, Metropolitan requires a certified copy of
the court order.

Yield and Discount Considerations

      Metropolitan  negotiates  all  Receivable  acquisitions  at
prices calculated to provide a desired yield.  Often this results
in a purchase price less than the Receivable's unpaid balance, or
less  than  its  present value (assuming a fixed discount  rate).
The  difference between the unpaid balance and the purchase price
is  the  "discount". The amount of the discount will vary in  any
given  transaction depending upon the purchasing company's  yield
requirements at the time of the purchase. Yield requirements  are
established  in  light of capital costs, market  conditions,  the
characteristics of particular classes or types of Receivables and
the  risk  of  default by the Receivable payor.   See  "BUSINESS-
Receivable Investments-Underwriting"

      For Receivables of all types, the discounts originating  at
the  time of purchase, net of capitalized acquisition costs,  are
amortized  using  the  level  yield (interest)  method  over  the
remaining  contractual term of the Receivable.   For  Receivables
which  were acquired after September 30, 1992, these net purchase
discounts  are amortized on an individual basis using  the  level
yield  method  over  the remaining life of the  Receivable.   For
those  Receivables  acquired before October 1,  1992,  these  net
purchase discounts were pooled by the fiscal year of purchase and
by  similar  contract types, and amortized on a pool basis  using
the  level yield method over the expected remaining life  of  the
pool.   For these Receivables, the amortization period, which  is
approximately  78  months,  is based  on  an  estimated  constant
prepayment rate of 10-12 percent per year on scheduled  payments,
which   is   consistent  with  the  Consolidated  Group's   prior
experience  with  similar  loans  and  the  Consolidated  Group's
expectations.

     Management establishes the yield requirements for Receivable
investments by assuming that all payments on the Receivables will
be paid as scheduled.

      A  greater  effective yield can also  be  achieved  through
negotiating  amendments  to  the  Receivable  agreements.   These
amendments may involve adjusting the interest rate and/or monthly
payments,  extension of financing in lieu of a  required  balloon
payment or other adjustments in cases of delinquencies where  the
payor appears able to resolve the delinquency.  As a result of
<PAGE>                        Page 21

these amendments, the cash flow may be maintained or accelerated,
the  latter of which increases the yield realized on a Receivable
purchased at a discount.

Current Mix of Receivable Investment Holdings

      The  Consolidated  Group's investments  in  Receivables  is
concentrated  in  Receivables collateralized by  first  liens  on
single  family  residential property.  Management  believes  that
this  concentration in residential real estate presents  a  lower
credit  risk  than would a portfolio predominantly collateralized
by  commercial property or unimproved land, and that much of  the
risk  in the portfolio is further dissipated by the large numbers
of relatively small Receivables, the geographic dispersion of the
collateral,  and  the  collateral  value  to  investment   amount
requirements.

       At  the  time  of  acquisition,  the  face  value  of  all
Receivables collateralized by real estate generally range in size
from approximately $15,000 to $300,000.  During fiscal 1996,  the
average  Receivable  balance at the time of  acquisition  by  the
Consolidated  Group was approximately $52,000.   See  Note  2  to
Consolidated Financial Statements.

      Management  continually monitors economic  and  demographic
conditions  throughout  the country  in  an  effort  to  avoid  a
concentration  of  its  real estate Receivables  in  those  areas
experiencing economic decline, which could result in higher  than
anticipated default rates and subsequent investment losses.

     The following charts present information on the Consolidated
Group's portfolio of outstanding Receivables as of September  30,
1996  regarding  geographical distribution, type of  real  estate
collateral and lien position:

PIE  CHARTS  SHOWING BREAKDOWNS OF RECEIVABLES BY TYPE,  SECURITY
POSITION  AND  PIE  CHART SHOWING BREAKDOWN OF  THE  CONSOLIDATED
GROUPS' ASSETS

1.   This  page  contains  three pie charts  with  the  following
headings and breakdowns in the charts:

   a.   Distribution of Receivable By Collateral Type  (September
30, 1996)

<PAGE>                        Page 22


Residential    69%
Commercial     19%
Farms, land
Other          12%

  b.  Distribution of Receivables (collateralized by real estate)
By Security Position (September 30, 1996)

First Lien Position       99%
Second Lien or Lower
Position                   1%

c. Distribution of Assets

Cash and Cash
Equivalents                    3%
Investments                   21%
Receivables Collateralized
 by real estate               54%
Other Receivables (structured
 settlements, lotteries and
 annuities)                    4%
Real Estate Held               8%
Deferred Costs                 7%
Other                          3%



<PAGE>                        Page 23

GRAPH SHOWING MAP OF THE UNITED STATES AND DISTRIBUTION OF RECEIVABL
E INVESTMENTS BY STATE:

2.   This graph contains a map of the United States and indicates
the branch and headquarter offices and identifies the percent  of
distribution  of  the principal amount of Receivable  investments
(collateralized  by  real estate) as of  September  30,  1996  by
state, for the states with 1% or more invested.

     The following amounts are shown for the following states:

Washington   17.1%
Oregon        5.4%
California   10.3%
Arizona       8.4%
Idaho              2.5%
New Mexico         3.2%
Texas             11.3%
Colorado      1.1%
Michigan      2.1%
Georgia       1.6%
Florida       5.6%
New York      3.2%
Hawaii        4.8%
Minnesota     1.1%
Nevada        1.1%

                                
<PAGE>                        Page 24
                                
   METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                      LOANS ON REAL ESTATE
                       September 30, 1996
                                
Real estate contracts and mortgage notes receivable include mortgages
collateralized  by property located throughout the  United  States.
At  September 30, 1996, the Consolidated Group held first  position
liens associated with contracts and mortgage notes receivable  with
a  face  value  of approximately $675 million (99%) and  second  or
lower   position   liens   of  approximately   $6   million   (1%).
Approximately  23% of the face value of the Company's  real  estate
contracts  and  mortgage  notes receivable  are  collateralized  by
property  located  in  the Pacific Northwest  (Washington,  Alaska,
Idaho,  Montana and Oregon), approximately 20% by property  located
in   the   Pacific  Southwest  (California,  Arizona  and  Nevada),
approximately  10%  in  the  Southeast  (Florida,  Georgia,   North
Carolina  and  South  Carolina)  , approximately  10%  in  Atlantic
Northeast  (New  York,  Pennsylvania, New Jersey,  Connecticut  and
Maryland)  and  approximately  16%  by  property  located  in   the
Southwest  (Texas  and New Mexico).  The face  value  of  the  real
estate  contracts  and mortgage notes receivable range  principally
from   $15,000   to  $300,000  with  52  receivables,   aggregating
approximately $29.4 million in excess of this range.  No individual
contract  or note is in excess of 0.4% of the total carrying  value
of  real estate contracts and mortgage notes receivables, and  less
than  3%  of the contracts are subject to variable interest  rates.
Contractual  interest rates principally range from 6%  to  13%  per
annum with approximately 91% of the face value of these receivables
within this range.  The weighted average contractual interest  rate
on  these receivables at September 30, 1996 is approximately  9.4%.
Maturity dates range from 1996 to 2026.
    


<PAGE>                        Page 25

    <TABLE>
<CAPTION>
                       Number of              Carrying     Delinquent   Non        Number of
Description            Receivable  Interest   Amount of    Principal    Accrual    Non Accrual
                       s           Rates      Receivables  Amount       Principal  Receivables
                                                                        Amount
                                                                                   
RESIDENTIAL                        Principal
                                   ly
<S>                    <C>         <C>        <C>          <C>          <C>        <C>
First Mortgage >            738       6%-13%   $108,873,69  $ 5,687,601          $         7
$100,000                                                 7               1,548,124
First Mortgage >          2,500       6%-13%   161,285,463    7,443,607         --        --
$50,000
First Mortgage <         13,568       6%-13%   261,018,755    9,129,035         --        --
$50,000
Second or Lower >             1         7.5%       243,213           --         --        --
$100,000
Second or Lower >             6       9%-10%       384,654           --         --        --
$50,000
Second or Lower <           358       6%-13%     3,487,974      191,504         --        --
$50,000
COMMERCIAL                                                                                  
First Mortgage >            248       6%-13%    52,072,095    1,248,896         --        --
$100,000
First Mortgage >            252       6%-13%    18,218,639      500,571         --        --
$50,000
First Mortgage <            447       6%-13%    11,837,475      107,111         --        --
$50,000
Second or Lower >             4     9%-10.5%     1,564,708           --         --        --
$100,000
Second or Lower>              3      8%-9.5%       204,917           --         --        --
$50,000
Second or Lower <             9       8%-11%       192,717           --         --        --
$50,000
FARM, LAND AND OTHER                                                                        
First Mortgage >             67       8%-12%    14,551,734    1,101,876  1,101,876         2
$100,000
First Mortgage >            151       6%-13%     9,697,972      220,731         --        --
$50,000
First Mortgage <          2,178       6%-13%    36,929,717      841,020         --        --
$50,000
Second or Lower >             1          14%       100,000           --         --        --
$100,000
Second or Lower>              2       9%-10%       164,743           --         --        --
$50,000
Second or Lower <            40       9%-12%       349,674       28,048         --        --
$50,000
                                                                                            
Unrealized discounts,                                     
net of unamortized                                        
acquisition costs, on                                     
receivables purchased                          (38,607,376
at a discount                                            )
                                                                                            
Accrued Interest                                 8,362,559                                  
Receivables                                    -----------  -----------  ---------  --------
                                                        --            -         --        --
CARRYING VALUE                                 $650,933,33  $26,500,000  $2,642,00 
                                                         0  ===========          0
                                               ===========               =========
                                                         =                       =

<PAGE>                        Page 26

</TABLE>
<TABLE>
<CAPTION>
The  contractual  maturities  of the aggregate amounts  of  Receivables  (face
amount) are as follows:


                           Residential     Commercial      Farm, Land,     Total
                           Principal       Principal       Other           Principal
                                                           Principal
                           ------------    --------------  --------------  --------------
                                           ------          ----            --
<S>                        <C>             <C>             <C>             <C>
October 1996 - September     $ 43,589,264     $10,647,400     $10,083,453     $ 64,320,117
1999
October 1999 - September       50,673,223      10,160,940       8,005,953       68,840,116
2001
October 2001 - September       53,408,352       8,270,489       5,145,528       66,824,369
2003
October 2003 - September       62,945,018      15,076,814      10,890,593       88,912,425
2006
October 2006 - September      100,196,799      13,896,939      13,898,207      127,991,945
2011
October 2011 - September       72,017,732       7,719,548       6,273,944       86,011,224
2016
October 2016 - Thereafter     152,463,368      18,318,421       7,496,162      178,277,951
                              -----------      ----------      ----------      -----------
                             $535,293,756     $84,090,551     $61,793,840     $681,178,147
                             ============     ===========     ===========     ============

</TABLE>

                                
<PAGE>                        Page 27
                                
  METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                      LOANS ON REAL ESTATE
                       September 30, 1995
Real estate contracts and mortgage notes receivable include mortgages
collateralized  by property located throughout the  United  States.
At  September 30, 1995, the Consolidated Group held first  position
liens associated with contracts and mortgage notes receivable  with
a  face  value  of approximately $610 million (99%) and  second  or
lower   position   liens   of  approximately   $8   million   (1%).
Approximately  27% of the face value of the Company's  real  estate
contracts  and  mortgage  notes receivable  are  collateralized  by
property  located  in  the Pacific Northwest  (Washington,  Alaska,
Idaho,  Montana and Oregon), approximately 20% by property  located
in   the   Pacific  Southwest  (California,  Arizona  and  Nevada),
approximately 9% in the Southeast (Florida, Georgia, North Carolina
and  South  Carolina) and approximately 15% by property located  in
the  Southwest (Texas and New Mexico).  The face value of the  real
estate  contracts  and mortgage notes receivable range  principally
from   $15,000   to  $300,000  with  41  receivables,   aggregating
approximately $22.5 million in excess of this range.  No individual
contract  or note is in excess of 0.3% of the total carrying  value
of  real estate contracts and mortgage notes receivables, and  less
than  4%  of the contracts are subject to variable interest  rates.
Contractual  interest rates principally range from 7%  to  14%  per
annum with approximately 93% of the face value of these receivables
within this range.  The weighted average contractual interest  rate
on  these receivables at September 30, 1995 is approximately  9.6%.
Maturity dates range from 1995 to 2025.


<PAGE>                        Page 28

    <TABLE>
<CAPTION>

                       Number of   Interes  Maturity  Carrying     Delinquen Non        Number of
Description            Receivable  t Rates  Dates     Amount of    t         Accrual    Non
                       s                              Receivables  Principal Principal  Accrual
                                                                   Amount    Amount     Receivable
                                                                                        s
RESIDENTIAL                        Principally                                          
<S>                    <C>         <C>      <C>       <C>          <C>        <C>        <C>
First Mortgage >            582      7%-14%    1995-            $  $2,842,17   $ 642,384      3
$100,000                                        2025   87,229,481          8
First Mortgage >          2,032      7%-14%    1995-  136,531,451  3,675,440          --     --
$50,000                                         2025
First Mortgage <         13,770      7%-14%    1995-  279,102,436  7,619,058          --     --
$50,000                                         2025
Second or Lower >             3      7%-11%    2005-      686,087    339,801          --     --
$100,000                                        2018
Second or Lower >            11      8%-12%    2002-      672,012    166,846          --     --
$50,000                                         2017
Second or Lower <           313      7%-14%    1995-    4,123,093     73,302          --     --
$50,000                                         2025
COMMERCIAL                                                                                     
First Mortgage >            175      7%-14%    1995-   35,889,341    741,083          --     --
$100,000                                        2025
First Mortgage >            194      7%-14%    1995-   13,948,069    295,408          --     --
$50,000                                         2025
First Mortgage <            354      7%-14%    1995-    8,967,314    131,197          --     --
$50,000                                         2025
Second or Lower >             3       7%-9%    2010-      852,197         --          --     --
$100,000                                        2025
Second or Lower>              4       8%-9%    2000-      281,043         --          --     --
$50,000                                         2016
Second or Lower <             5      8%-10%    1997-       63,809         --          --     --
$50,000                                         2000
FARM, LAND AND OTHER                                                                           
First Mortgage >             54      7%-10%    1995-   12,173,717  1,026,615     226,116      1
$100,000                                        2025
First Mortgage >            104      8%-11%    1995-    6,865,287         --          --     --
$50,000                                         2025
First Mortgage <          1,948      7%-14%    1995-   29,093,311    554,713          --     --
$50,000                                         2025
Second or Lower >             1          6%     2009      336,544         --          --     --
$100,000
Second or Lower>              2       7%-9%    2005-      153,066         --          --     --
$50,000                                         2020
Second or Lower <            53      9%-12%    1996-      544,695     34,359          --     --
$50,000                                         2022
                                                                                               
Unrealized discounts,                                                                          
net of unamortized                                                                             
acquisition costs, on                                                                          
receivables purchased                                 (37,354,378         --          --     --
at a discount                                                   )
                                                                                                
Accrued Interest                                                                                   
Receivables                                             7,335,039         --         --      --
                                                      -----------  ---------   --------  ------
CARRYING VALUE                                        $587,493,61  $17,500,0   $868,500            
                                                                4         00   ========
                                                      ===========  =========
                                                                =          =
</TABLE>

<PAGE>                        Page 29



<PAGE>                        Page 30

      The  following  tables present certain statistical  information
about  the Consolidated Group's Receivable investment activity during
the three fiscal years ended September 30, 1996.
<TABLE>
<CAPTION>                                        Year Ended or at September 30
                                                     -----------------
------------
                                                       1996
1995      1994
                                                     --------------
---------------
                                                           (Dollars
in thousands)
<S>                                                 <C>         <C>
<C>
DISCOUNTED REAL ESTATE RECEIVABLES
PURCHASED DURING PERIOD
         Number.....................                             4,969
4,130         2,906
    Average  Face  Amount........                      $      52      $
45      $     52
                                                    -------      ------
-        -------
       Face     Amount...............                          $256,486
$187,305     $150,709
   Unrealized Discounts, Net of
         Acquisition    Costs.......                           (24,718)
(15,338)      (21,186)
   Underlying Obligations
         Assumed    (1).............                            (3,634)
(527)         (191)
                                                   --------     -------
-      --------
                                                               $228,134
$171,440                                $129,332
                                                               ========
========                                ========
DISCOUNTED REAL ESTATE RECEIVABLES
   OUTSTANDING AT END OF PERIOD
    Number.....................                       13,358       13,4
36         13,994
                                                   --------     -------
-      --------
       Face     Amount................                         $548,538
$505,441     $502,314
   Unrealized Discounts, Net
   of Unamortized Acquisition
         Costs...................                              (38,607)
(37,354)      (46,989)
                                                   --------    --------
--------
       Net     Balance................                         $509,931
$468,087      $455,325
                                                               ========
========                                ========
TOTAL REAL ESTATE RECEIVABLES
   OUTSTANDING AT END OF PERIOD (2)
         Number.....................                             20,573
19,608        18,820
                                                   --------     -------
-      --------
   Face Amount Discounted
           Receivables.............                            $548,538
$505,441      $502,314
   Face Amount Non-Discounted
           Receivables............                              132,641
112,072       104,011
                                                   --------     -------
-      --------
      Total    Outstanding    Receivables                       681,179
617,513       606,325

   Unrealized Discounts, Net of
        Unamortized    Acquisition   Costs                     (38,607)
(37,354)      (46,989)
      Accrued    Interest   Receivable                            8,361
7,335         7,920
                                                    --------    -------
-       --------
       Net     Balance................                         $650,933
$587,494      $567,256
                                                               ========
========      ========
Average Net Balance per
   Receivable (Excluding
       Accrued    Interest)                                       $31.2
$29.6                                      $29.7

Average Annual Yield on

<PAGE>                        Page 31

    Discounted Receivables (3)                           11.9%      12.
8%          13.6%
<FN>
</TABLE>

  (1)  Consisting  of pre-existing first lien position  contracts  or
mortgages which remain when the Consolidated Group invests in  second
lien position Receivables.

(2)  Approximately 19% of the portfolio at September 30, 1996, 18% of
the  portfolio  at  September 30, 1995 and 17% of  the  portfolio  at
September  30, 1994 represented financing for resales of  repossessed
properties and other non-discounted Receivables.

(3)   Yield  on  Receivables  represent  gross  interest  and  earned
discount revenues, net of amortized acquisition costs, prior  to  any
overhead  allocation and losses recorded following foreclosure.   The
reasons  for  changes in yield are (i) fluctuations in  the  rate  of
actual  prepayments;  (ii) securitization and  sale  of  Receivables;
(iii)   the  changing  mix  of  Receivable  purchases  between  those
originated from Metropolitan's network of offices and those purchased
in bulk; (iv) the amortization of the existing portfolio; and (v) the
amount of discount on Receivables purchased.

      At September 30, 1996, the average contractual interest rate on
Receivables  collateralized  by real estate  (weighted  by  principal
balances) was approximately 9.4%.

Servicing and Collection Procedures, and Delinquency Experience

      The  servicing and collection of Receivables of all types owned
by  the  Consolidated  Group is performed by Metwest.   Metwest  also
services  the Receivables of Summit, Old Standard, and Arizona  Life,
and  the  Receivables sold through securitizations.  Metwest  uses  a
flexible  computer software program, Sanchez, to monitor and  service
the  Receivables.   The Consolidated Group considers  consistent  and
timely collection activity to be critical to successful servicing and
minimization  of  foreclosure  losses, for  its  predominantly  "B/C"
Receivables portfolio.

       Fees  for  providing  servicing  and  collection  services  to
Metropolitan  and  Western United had no impact  on  the  results  of
operations  of the Consolidated Group.  Fees for providing  servicing
and collection services to Summit, Old Standard and Arizona Life were
approximately $290,000 during 1996.  These charges to parties outside
the Consolidated Group provide income to the Consolidated Group.

      The  principal  amount  of Receivables collateralized  by  real
estate, held by the Consolidated Group (as a percentage of the total
<PAGE>                        Page 32

outstanding principal amount of Receivables) which was in arrears for
more than ninety days at the end of the following fiscal years was:

          1996  ---  3.9%
          1995  ---  2.8%
          1994  ---  3.1%


      The  real  estate collateralized Receivables purchased  by  the
Consolidated   Group  are  predominantly  "B/C"  credit  Receivables.
Accordingly,  higher delinquency rates are expected which  Management
believes  are  generally  offset  by  the  value  of  the  underlying
collateral.   In  addition,  the  Consolidated  Group  maintains   an
allowance  for  losses  on  delinquent  real  estate  Receivables  as
described  below.   As  a  result, management  believes  losses  from
resales  of  repossessed properties are generally  lower  than  might
otherwise  be expected given the delinquency rates. In addition,  the
Consolidated  Group  is  compensated for  the  risk  associated  with
delinquencies  through  Receivable  yields  that  are  greater   than
typically  available  through the conventional, "A",  credit  lending
markets.

      When  a  Receivable becomes delinquent, the payor is  initially
contacted  by  letter approximately seven days after the  delinquency
date.   If  the  delinquency is not cured, the payor is contacted  by
telephone (generally on the 17th day following the payment due date).
If the default is still not cured (generally within three to six days
after  the  initial call), additional collection activity,  including
further  written  correspondence and further  telephone  contact,  is
pursued.   If  these  collection  procedures  are  unsuccessful,  the
account  is  referred  to  a committee who  analyzes  the  basis  for
default,  the  economics  of the Receivable  and  the  potential  for
environmental risks.  When appropriate, a Phase I environmental study
is  obtained  prior  to foreclosure.  Based upon this  analysis,  the
Receivable   is   considered  for  a  workout  arrangement,   further
collection  activity,  or  foreclosure  of  any  property   providing
collateral for the Receivable.  Collection activity may also  involve
the  initiation of legal proceedings against the Receivable  obligor.
Legal  proceedings,  when necessary, are generally  initiated  within
approximately ninety days after the initial default.  If accounts are
reinstated  prior  to completion of the legal action,  then  attorney
fees,  costs, expenses and late charges are generally collected  from
the  payor,  or  added to the Receivable balance, as a  condition  of
reinstatement.

Allowance for Losses on Real Estate Assets

      The  Consolidated Group establishes an allowance  for  expected
losses  on real estate assets (both Receivables and repossessed  real
estate). This allowance is based upon a statistical valuation or
<PAGE>                        Page 33

traditional  appraisal  of  the  Consolidated  Group's  real   estate
holdings  for  each delinquent Receivable having a principal  balance
greater   than   $100,000.   In  addition,  the  Consolidated   Group
calculates an allowance for losses on delinquent Receivables having a
principal  balance  below  the  $100,000  threshold  based  upon  its
historical  loss  experience.   The Consolidated  Group  reviews  the
results  of  its resales of repossessed real estate, both before  and
after  year  end, to identify any market trends and to  document  the
Group's historical experience on such sales.  The Consolidated  Group
adjusts  its  allowance for losses requirement as appropriate,  based
upon such observed trends in delinquencies and resales.

      The  Consolidated Group's current real estate valuation  policy
requires  annual statistical valuations or traditional appraisals  on
real  estate  and delinquent Receivables when their values  exceed  a
threshold equal to 1/2% of total assets of the Consolidated Group or,
in  the case of the insurance subsidiary, 5% of statutory capital and
surplus.  Biannual appraisals are required for all other real  estate
holdings where an investment exceeds $50,000.

     The following table outlines the Consolidated Group's changes in
the allowance for losses on real estate assets:
<TABLE>
<CAPTION>
                                   1996            1995           1994
<S>                           <C>             <C>           <C>
Beginning Balance             $ 8,116,065     $9,108,383    $10,598,491
Provisions                      6,360,072      4,174,644      5,533,193
Charge-Offs                    (4,283,553)    (5,166,962)    (7,023,301)
                               ----------     ----------     ----------
Ending Balance                $10,192,584     $8,116,065    $ 9,108,383
                               ==========    ==========      ==========
Percentage of Ending
Balance of Allowances
to Outstanding
Real Estate Assets                    1.4%           1.2%           1.4%
                                     ====           ====           ====
   
Ratio of Net Charge-Offs
to Average Real Estate
Assets Outstanding
During the Period                     0.6%           0.8%           1.1%
                                     ====           ====           ====
    
</TABLE>
Repossessions


<PAGE>                        Page 34

      In  the  course  of  its  Receivable investment  activity,  the
Consolidated  Group  acquires various parcels of  real  estate  as  a
result  of  foreclosures and/or voluntary repossessions.  It  is  the
Consolidated  Group's  general  policy  to  attempt  to  resell  such
properties  at the earliest possible time following its  acquisition.
Improvements  are  made to certain properties  for  the  purposes  of
preservation  or  restoration  to maximize  the  resale  price.   The
marketing status of all properties is reviewed at least monthly by  a
committee which includes both sales personnel and management.

     The carrying value of a repossessed property is determined as of
the  date  of  repossession  of  the  property  and  is  based  on  a
statistical   valuation,  an  appraisal  by  a  licensed  independent
appraiser  or  by  one  of Metropolitan's licensed  staff  appraisers
either  at the time the Receivable was purchased or at the  time  the
property was repossessed in accordance with the Consolidated  Group's
appraisal policy.  In addition, a new appraisal is obtained not  less
frequently  than  every  two  years  on  all  real  estate   holdings
previously valued at $50,000 or more.  Internal valuation reviews  on
all  repossessed properties are performed at least annually based  on
management's knowledge of market conditions and  comparable  property
sales.

<PAGE>                        Page 35

<TABLE>
<CAPTION>

      The following table presents specific information about the
Consolidated Group's repossessed properties with carrying  values
of  $100,000 or more which were held at September 30, 1996 and/or
September  30,  1995.  The carrying values of certain  properties
may   reflect  additional  costs  incurred,  such  as  taxes  and
improvements, when such costs  are estimated to be recoverable in
the sale of the repossessed property.
<S>                          <C>             <C>                  <C>
<C>        <C>
                          Carrying       Carrying              Market
Year of    Gross
Property Type/               Value         Value                Value
Fore-    Monthly
State Location              9/30/95       9/30/96             9/30/96
closure    Income



26.73 Commercial Acres  $  252,875     $  238,036           $  238,036
1983 (1)
Farm/Ranch 1,927 Acres,
   Washington              285,690        285,690              329,500
1988 (2) $3,879
50,000 sq. Ft Commercial
       Building,    Washington       850,000              Sold      A
1989
34     Acres,     Washington               3,071,006        3,145,113
3,350,000      1991 (3)
Land, California           225,360        225,360               250,400
1994
K-5 Grade School,
   California              202,500        202,500               225,000
1994
House, California          117,000         90,000               100,000
1994
Duplex,    New    Jersey            103,500               Sold      B
1994
House,     California              103,500               Sold       C
1994
House,     New    Jersey             121,500              Sold      D
1995
House,     Michigan                116,100               Sold       E
1995
House,     New    York               138,600              Sold      F
1995
House,     New    York               189,000              Sold      G
1995
House,     California              162,000               Sold       H
1995
House,     California              127,800               Sold       I
1995
House,     Arizona                  146,700               Sold      J
1995
House,     California              256,500               Sold       K
1995
House, California          130,500        110,700               123,000
1995
House, Connecticut         187,200        114,750               127,500
1995
House,     Washington              135,900               Sold       L
1995
House,     New    York               140,400              Sold      M
1995
14 Unit Apartment
  Bldg., Washington                       108,000              120,000
1996
House, Maryland                           108,000              120,000
1996
Condo, California                         137,105              152,339
1996
Multi Unit Professional
  Bldg., New Jersey                      162,000               180,000
1996
House, California                        261,000               290,000
1996
House, Washington                        126,000               140,000
1996
House, Washington                        115,885               128,761
1996
House, Florida                             120,706               134,118           1996

<PAGE>                        Page 36

House, New York                          100,800               112,000
1996
House, California                        113,207               125,786
1996
House, Massachusetts                      124,200               138,000
1996
                           ----------  ----------           ----------
------
                           $7,063,631 $5,889,052            $6,384,440
$3,879
                           ========== ==========            ==========
======
The sales prices of the referenced properties were as follows:


$930,000    A
  55,000    B
  90,000    C
 120,000    D
 122,500    E
 120,000    F
 210,000    G
 180,000    H
 105,000    I
 163,000    J
 270,000    K
 115,000    L
 135,000    M
---------
$2,615,500

The following are descriptions of the marketing status of all properties
listed  above which were acquired by the Consolidated Group prior  to
fiscal 1993:

(1) Located in Pasco, Washington, the commercial property is in the area
of a planned freeway interchange.

(2)  Located in Grant County, Washington.  A portion of the property is
currently leased. Approximately 940 acres of the property is  in  the
federal government's Crop Reduction Program.

(3)  See discussion regarding "Renton" in "Real Estate Development-Other
Development Properties".

      For  further information regarding the Consolidated Group's
activity  in  properties held for development, See  "REAL  ESTATE
DEVELOPMENT".
</TABLE>

Management & Receivable Acquisition Services


<PAGE>                        Page 37

     Metropolitan provides management, and Receivable acquisition
services  for  a  fee  to its subsidiaries and  to   Summit,  Old
Standard  and Arizona Life.  The Receivable acquisition fees  are
based  upon  a  yield requirement established by  the  purchasing
company.   Metropolitan  collects  as  its  fee,  the  difference
between  the  yield requirement and the yield which  Metropolitan
actually negotiates.

   
      In the case of Western United, beginning in 1994, the yield
requirement  established  by  Western  United  is  guaranteed  by
Metropolitan,  and  an  intercompany reserve  is  established  to
support  the  guarantee.   Because  of  the  guarantee,  and  the
corresponding  decrease in risk, Western  United's  stated  yield
requirement  is  relatively lower than the other companies.   The
reserve  established  in  1996 on purchases  of  $327.6  million,
including  origination  expenses, net of  purchase  discount  was
$12.54  million.  Metropolitan remains liable to  Western  United
for  any losses in excess of the reserve.   While this charge has
the  effect  of  reducing the Receivable yield of  the  insurance
subsidiary,   there  is  a  corresponding  positive   effect   on
Metropolitan.    With  the  elimination  of  these   intercompany
guarantees  and  yield adjustments in consolidation,  the  yields
recognized by the Consolidated Group are the same as though there
were no guarantee or yield adjustments.
    

        The  acquisition  fees are amortized into  Metropolitan's
income,  over the same period and in the same amount as they  are
amortized  into  expenses  by the insurance  subsidiary.   During
1996, 1995 and 1994, Metropolitan charged Western United fees  of
approximately  $29.4 million, $14.6 million  and  $12.8  million,
respectively.   The 1996, 1995 and 1994 charge  was  before  loss
reserves  of  $12.54  million, $6.95 million and  $4.75  million,
respectively.  Underwriting fees charged to Summit, Old  Standard
and Arizona Life are recognized as revenues when the related fees
are charged to those companies. During 1996, Metropolitan charged
Summit,   Old  Standard  and  Arizona  Life  fees  of   $310,000,
$1,032,000  and  $22,000, respectively.  The  service  agreements
with Western United has no effect upon the consolidated financial
results  of  the Consolidated Group.  The service agreement  with
companies  outside the Consolidated Group, including Summit,  Old
Standard and
<PAGE>                        Page 38

Arizona  Life provided fee income to Metropolitan.  See  "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS"
    

Receivable Sales

      The  Consolidated Group sells pools of Receivables when  it
considers  it  profitable to do so.  Such sales  generally  occur
through  one  of two methods: (1) securitization  or  (2)  direct
sales.  Management believes that the sale of Receivables provides
a number of benefits including allowing the Consolidated Group to
diversify its funding base, provide liquidity and lower its  cost
of  funds.   In addition to providing liquidity and profits,  the
sale  of  Receivables is a source of cash which can be reinvested
into additional Receivables.  The sale of Receivables allows  the
Consolidated Group to continue to expand its investing activities
without increasing its asset size.

       During   May   1996,  Metropolitan  and   Western   United
participated  with  Old Standard and Summit  as  sellers  in  the
securitization  of approximately $ 122.9 million  in  Receivables
collateralized by real estate, principally consisting  of  seller
financed  first  lien residential Receivables.  The  second  such
securitization  of approximately $ 126.7 million  of  first  lien
residential and commercial real estate lien Receivables, of which
approximately 54% were seller financed Receivables,  occurred  in
November   1996.   Currently,  it  is  proposed  that  the   next
securitization of Receivables collateralized by real estate  will
not  occur until the second half of fiscal 1997. The Consolidated
Group   is  also  evaluating  the  market,  economic  and   legal
implications of selling  its non real estate Receivables  through
securitizations.    There   can  be  no   assurance   that   such
securitizations will be pursued, or if pursued, that they will be
profitable.

     Generally, a securitization involves the transfer of certain
specified  Receivables  to  a single purpose  trust.   The  trust
issues   certificates  which  represent  an  undivided  ownership
interest  in  the  Receivables  transferred  to  the  trust.  The
certificates consist of different classes, which include  classes
of  senior  certificates, and a residual interest  and  may  also
include  intermediate classes of subordinated certificates.   The
rights of the senior certificate holders can be enhanced through
<PAGE>                        Page 39
     
     several methods which include subordination of the rights of
the subordinate certificate holders to receive distributions,  or
the   establishment  of  a  reserve  fund.  In  connection   with
securitizations, the senior certificates are sold  to  investors,
generally  institutional  investors.  The  companies  which  sold
their   Receivables  to  the  trust  receive   a   cash   payment
representing their respective interest in the sales price for the
senior  certificates and any subordinate certificates sold.   The
selling  companies receive an interest in any unsold  subordinate
certificates,  and  also typically receive  an  interest  in  the
residual  interest.   Such  interests are  generally  apportioned
based  upon  the respective companies contribution of Receivables
to the pool of Receivables sold to the trust.
     
     In  the  typical  securitization structure,  the  Receivable
payments  are distributed first to the senior certificates,  next
to  the  subordinated  certificates, if  any,  and  last  to  the
residual  interests.  As a result, the residual interest  is  the
interest  first  affected by any loss due to the failure  of  the
Receivables  to  pay as scheduled.  The holders of  the  residual
interest  values  such  interest on  their  respective  financial
statements   based   upon  certain  assumptions   regarding   the
anticipated  losses  and  prepayments.   To  the  extent   actual
prepayments  and losses are greater or less than the assumptions,
the  companies holding the residual interests will  experience  a
loss or gain.
     
      In  the  securitizations which occurred in May and November
1996,  the rights of the senior certificate holders were enhanced
through  subordinating  the  rights  of  subordinate  certificate
holders  to  receive distributions with respect to  the  mortgage
loans  to such rights of senior certificate holders.  The selling
companies  retained  their  respective  residual  interests.   At
September   30,  1996,  the  residual  interests  held   by   the
Consolidated  Group  for  the May 1996 securitization  aggregated
approximately  $3.6 million.  At the close of the November  1996,
securitization  the  Consolidated Group held  residual  interests
aggregating approximately $7.1 million.

       In   addition   to  sales  through  securitizations,   the
Consolidated  Group  sells  pools  of  Receivables  directly   to
purchasers.   These sales are typically without recourse,  except
that for a period of time the selling company is generally
<PAGE>                        Page 40

required  to repurchase or replace any Receivables which  do  not
conform to the representations and warranties made at the time of
sale.   During  1996, the Consolidated Group sold  portfolios  of
real estate Receivables through securitizations with proceeds  of
approximately $108.4 million, and gains of $8.6 million.   During
that  same  period, the Consolidated Group sold other Receivables
with  proceeds of approximately $73.8 million and gains  of  $4.1
million.

LIFE INSURANCE AND ANNUITY OPERATIONS

Introduction

      The Consolidated Group raises the majority of its new funds
through its insurance subsidiary, Western United.  Western United
was  incorporated in Washington State in 1963.  Since  1979,  the
assets  of  the Western United have grown from $600,000  to  over
$1.1  billion and the number of policyholders and annuitants have
increased from 200 to about 45,000.  Based on its assets, Western
United  ranks  sixth  in size among the life insurance  companies
domiciled in the State of Washington.

      Western  United  markets  its annuity  and  life  insurance
products   through   approximately    1,400   independent   sales
representatives under contract.  These representatives  may  also
sell  life insurance and/or annuity products for other companies.
Western United is licensed as an insurer in the states of Alaska,
Arizona, Hawaii, Idaho, Montana, Nebraska, Nevada, North  Dakota,
Oregon,  South  Dakota,  Texas, Utah,  Washington,  and  Wyoming.
During   1995,  the  most  recent  year  for  which   statistical
information  is available, Western United's annuity market  share
was  5.8%  (ranking it third in production) in the six states  in
which  approximately  81% of its annuity business  was  produced:
Washington, Oregon, Idaho, Montana, North Dakota and Utah.

      Management  intends  to expand the  operations  of  Western
United  into  other  states  as opportunities  arise,  which  may
include  the  acquisition of other existing insurance  companies.
Western  United  currently  has  insurance  license  applications
pending  in the states of Kansas, Minnesota, New Mexico, Oklahoma
and  Wisconsin.  The application process generally  extends  over
several  years.  Accordingly, Western United does  not  presently
anticipate  expanding its sales into these markets during  fiscal
1997.

<PAGE>                        Page 41


      Metropolitan provides management and Receivable acquisition
services  for  a fee to Western United.  See "BUSINESS-RECEIVABLE
INVESTMENTS-Management & Receivable Acquisition Services".

      Western United may invest up to 65% of its statutory assets
in  real  estate  related Receivables.  The  balance  of  Western
United's  investments are principally invested in  corporate  and
government  securities, but may be invested  into  a  variety  of
other areas as permitted by applicable insurance regulations. See
"BUSINESS-Securities Investments" and "BUSINESS-Regulation".

       Generally,   loans   which  are   acquired   through   the
institutional  secondary  mortgage market  qualify  as  "mortgage
related  securities"  pursuant to the Secondary  Mortgage  Market
Enhancement   Act   (SMMEA).   SMMEA  generally   provides   that
qualifying  loans  may  be  acquired  to  the  same  extent  that
obligations of which are issued by or guaranteed as to  principal
and  interest  by the United States Government, its agencies  and
instrumentalities can be acquired.  As a result,  Western  United
can  acquire qualifying Receivables in amounts which  exceed  the
above  referenced  65%  limitation.  Such acquisitions  are  also
exempt  from other state insurance regulations including loan  to
value and appraisal regulations.

Annuities

      Western  United has actively marketed single  and  flexible
premium  deferred annuities since 1980.  During  the  past  three
years, over 97% of premiums for Western United were derived  from
annuity  sales.  Management believes that annuity  balances  have
continued  to grow due to market acceptance of the products  (due
largely  to  a  competitive rate and a  reputation  for  superior
service), and changes in tax laws that removed the attractiveness
of   competing  tax-advantaged  products.   Western   United   is
currently developing several new annuity product types.   One  of
new products is an equity indexed annuity.  The interest which is
credited  on  this product will vary as a selected  equity  index
(currently expected to be the S & P 500) performs.  This  product
type is designed to meet the needs of investors who are reluctant
to  make a long term fixed interest annuity investment during the
current economic period of relatively lower interest rates.


<PAGE>                        Page 42

      Western  United's annuities also qualify for use as  either
Individual  Retirement Annuities, Simplified  Employee  Pensions,
Qualified Corporate Pension Plans or Tax-Sheltered Annuities  for
teachers  and  certain other nonprofit organizations'  retirement
plans.  Under these qualified plans, the interest is tax deferred
and  the  principal  contributions,  within  limits  specifically
established  by the Internal Revenue Service, are tax  deductible
during  the accumulation period.  These annuities are subject  to
income  tax  only  upon  actual receipt of proceeds,  usually  at
retirement  when  an individual's tax rate is anticipated  to  be
lower.

     Western United prices its new products and renewals in order
to achieve a spread between its available Receivable investments,
while  considering current annuity market rates of  interest  and
competitive pressures. Flexible and single premium annuities  are
offered  with  surrender periods varying from  one  year  to  ten
years.

      At  September  30, 1996, deferred policy acquisition  costs
were  approximately  8.1%  of life and annuity  reserves.   Since
surrender   charges  typically  do  not  exceed  9%,   increasing
termination  rates may have an adverse impact  on  the  insurance
subsidiary  earnings,  requiring  faster  amortization  of  these
costs.   Management believes that this potentially adverse impact
is  mitigated  by  higher  annuity interest  spreads,  which  are
estimated  to  be  about 250 basis points in future  years.  This
spread analysis, net of management fees paid to Metropolitan,  is
shown  in  the following table, which applies to the  results  of
Western  United  during the past three calendar years,  based  on
insurance regulatory report filings:
<TABLE>
<CAPTION>
                                 1995            1994           1993
Three Year

Average
                                 --------         ---------       ---------
----------
<S>                              <C>                <C>               <C>
<C>
Net Investment

<PAGE>                        Page 43

Earnings  Rate                    8.30%            8.49%            9.11%
8.63%

Average Credited
Interest  Rate                    6.06%            5.59%            6.38%
6.01%

Spread                             2.24%            2.90%             2.73%
2.62%
</TABLE>
      During 1996, 1995 and 1994, amortization of deferred policy
acquisition  costs  was  $9.1 million,  $10.3  million  and  $7.0
million, respectively.  All calculations have been reviewed by an
independent actuary.

     Annuity lapse rates are calculated by dividing cash outflows
related  to  benefits and payments by average  annuity  reserves.
For  the  calendar  years 1995, 1994 and 1993, lapse  rates  were
18.9%,  21.5%, and 15.3%, respectively.  Based upon  results  for
the nine months ended September 30, 1996, lapse rates were 16.6%.

Life Insurance

        Approximately 1.8% of Western United's statutory premiums
are  derived  from  the  sale of interest  sensitive  whole  life
insurance and term life insurance policies.  As of September  30,
1996,  the  face  amount of life insurance policies  written  and
outstanding,  totaled  $295,692,000,  net  of  amounts  ceded  to
reinsurers.  As with annuities, gross profits are  determined  by
the  difference  between interest rates credited  on  outstanding
policies  and  interest  earned on investment  of  premiums.   In
addition, profitability is affected by mortality experience (i.e.
the  frequency of claims resulting from deaths of policyholders).
Although  Western  United's mortality rates  to  date  have  been
substantially lower than expected, higher credited interest rates
and  higher  issuing  expenses  combined  with  low  volume  have
resulted in lower profits than those experienced with its annuity
products.
    

         The  following  table sets forth certain  key  financial
information regarding the Company's insurance subsidiaries.   The
information  includes  Western United for  all  periods  and  Old
Standard through May 31, 1995, the date on which it was sold.    

<PAGE>                        Page 44

<TABLE>
<CAPTION>
   
                                             Year Ended at September 30,
                                                          ----------------
-----------
                                                     1996             1995
1994
                                                   --------         --------
--------
                                                             (Dollars in
thousands)
 <S>                                             <C>                 <C>
<C>
Insurance In Force
        Individual   Life                               $     354,371
$373,573       $398,837
     Less Ceded to other
        Companies                                   (58,679)         (62,906)
(69,311)
                                                 ----------        -------
-        --------
                                                      $       295,692
$310,667       $326,526
                                                           ==========
========       ========
Life Insurance Premiums                          $    3,355         $
3,365       $  3,346
Less Ceded Premiums                                    (355)            (365)
(388)
                                                 ----------         ------
--       --------
Net Life Insurance Premiums                      $    3,000         $
3,000       $  2,958
                                                           ==========
========       ========
Net Investment Income                            $   65,561         $
64,970       $ 65,944
                                                           ==========
========       ========
Benefits, Claim Losses and
     Settlement Expenses                         $   48,301         $
45,484       $ 41,919
                                                           ==========
========       ========
Deferred Policy Acquisition
     Costs                                       $   71,933         $
71,131       $ 71,075
                                                 ==========         ========
========
Reserves for Future Policy
     Benefits, Losses,
     Claims and Loss Expenses                    $  837,366         $781,716
$744,645
                                                 ==========         ========
========
Total Assets                                     $1,128,237         $922,556
$924,822
                                                 ==========         ========
========
Capital and Surplus                              $   81,606         $ 78,827
$ 77,142
                                                 ==========         ========
========

</TABLE>
    

   
   The life insurance subsidiaries of the Consolidated Group  are
required  to  file  statutory  financial  statements  with  state
insurance  regulatory authorities in their  states  of  domicile.
Accounting  principles used to prepare these statutory  financial
statements  differ from generally accepted accounting  principles
(GAAP).  A reconciliation of GAAP net income to statutory net
<PAGE>                        Page 44

income  for  the years ended September 30, 1996, 1995  and  1994,
respectively, is as follows:

                                  1996        1995       1994
[S]                            [C]         [C]        [C]
Net Income - GAAP                                     
                               $3,076,252  $2,717,89  $8,449,317
                                           3
Adjustments to reconcile:                             
  Deferred policy acquisition                         
costs                          (774,906)   (807,667)  85,324
   State  insurance  guaranty                         
fund                           257,686     105,753    (313,660)
    Annuity   reserves    and                         
benefits                       (304,688)   (5,759,00  218,975
                                           9)
   Capital  gains   and   IMR                         
amortization                   336,258     3,790,892  (4,132,940
                                                      )
 Allowance for losses                                 
                               3,046,274   1,923,161  4,368,159
 Federal income taxes                                 
                               1,587,522   1,154,586  3,930,215
 Other                                                
                               (39)        (458,943)  (61,320)
                                ---------   --------    --------
                               -           --         --
Total                                                 $12,544,07
                               $7,224,359  $2,666,66  0
                                           6          ==========
                               ==========             =
                                           =========
                                           =

    
Reinsurance

      Reinsurance  is  the practice whereby an insurance  company
enters  into agreements (termed "treaties") with other  insurance
companies in order to assign some of its insured risk, for  which
a  premium is paid, while retaining the remaining risk.  Although
reinsurance treaties provide a contractual basis for  shifting  a
portion  of  the  insured  risk to other  insurers,  the  primary
liability  for  payment  of  claims  remains  with  the  original
insurer.  Most life insurers obtain reinsurance on a  portion  of
their  risks in the ordinary course of business.  The  amount  of
mortality  risk  that a company is willing  to  retain  is  based
primarily on considerations of the amount of insurance it has  in
force   and   upon  its  ability  to  sustain  unusual  mortality
fluctuations.

Annuity Reinsurance

      Western United has negotiated a reinsurance agreement  with
Old  Standard  whereby 75% of the risk on six  different  annuity
products will be reinsured through Old Standard.  It is presently
anticipated that this will result in reinsurance of approximately
five  million in premiums per month.  This procedure  will  allow
Western  United to continue its market presence and  relationship
with  its insurance agents, while moderating its rate of  growth.
The  agreement is pending regulatory approval and is expected  be
become effective during January 1997.


<PAGE>                        Page 46

Life Policy Reinsurance

      Western United reinsured $58,679,000 of life insurance risk
at  September  30,  1996  which equaled all  risk  in  excess  of
$100,000  on  each whole life policy and all risk  in  excess  of
$50,000  on  each term life policy.  Life insurance in  force  at
that  time  was  $354,371,000.  Western  United  is  a  party  to
seventeen  separate reinsurance treaties with  seven  reinsurance
companies,  the  largest  treaty  (with  Lincoln  National   Life
Insurance   Company)   providing,   at   September   30,    1996,
approximately $30,652,000 of reinsurance coverage.  The  majority
of the remaining coverage is with Business Mens Assurance Company
of America and Phoenix Home Life Mutual Insurance Company.  Total
reinsurance  premiums paid by Western United  during  the  fiscal
year ended September 30, 1996 were $354,830.

Reserves

      Western  United's  reserves for  both  annuities  and  life
insurance are actuarially determined and prescribed by its  state
of  domicile  and other states in which it does business  through
laws  which  are designed to protect annuity contract owners  and
policy  owners.  Western  United  utilizes  the  services  of   a
consulting  actuary  to review the amount of these  reserves  for
compliance with state law. These reserves are amounts  which,  at
certain  assumed rates, are calculated to be sufficient  to  meet
Western  United's future obligations under annuity  contacts  and
life insurance policies currently in force. At September 30, 1996
such  reserves were $837,366,000.  Reserves are recalculated each
year  to  reflect amounts of reinsurance in force, issue ages  of
new policy holders, duration of policies and variations in policy
terms.   Since  such reserves are based on actuarial assumptions,
no representation is made that ultimate liability will not exceed
these reserves.

SECURITIES INVESTMENTS

     At September 30, 1996, 1995 and 1994, 94.3%, 96.8% and 99.3%
of  the Consolidated Group's securities investments were held  by
Western United.


<PAGE>                        Page 47

      The  following table outlines the nature and carrying value
of securities investments held by Western United at September 30,
1996:

<TABLE>
<S>                                  <C>         <C>         <C>     <C>
                                            Available        Held  To
Total
                                            For Sale      Maturity
                                           Portfolio       Portfolio
                                           ----------      --------      -
-------  --------
                                            (Dollars in Thousands)

Total  Amount                                $   31,209      $122,768
$153,997   100.0%
                                             ==========      ========
========   ======
%Invested in:
       Fixed  Income                          $   31,205     $122,768
$153,973   100.0%
       Equities                                       4            --
4    0.0%
                                            ----------     --------      -
-------   ------
                                             $    31,209     $122,768
$153,977   100.0%
                                             ==========      ========
========   ======
% Fixed Income:
       Taxable                                $   31,205     $122,768
$153,973   100.0%
       Non-taxable                                    -             -
-     0.0%
                                            ----------     --------      -
-------   ------
                                             $    31,205     $122,768
$153,973   100.0%
                                             ==========      ========
========   ======
% Taxable:
      Government/
      Agency                                $    8,480      $ 58,025     $
66,505    43.2%
       Corporate                                 22,725        64,743
87,468    56.8%
                                            ----------      --------     -
-------   ------
                                             $   31,205      $122,768
$153,973   100.0%
                                             ==========      ========
========    =====
% Corporate Bonds:
          AAA   $                                  709      $ 39,700     $
40,409    46.2%
           AA                                     1,989         4,030
6,019     6.9%
           A                                     13,817         7,494
21,311    24.4%
           BBB                                    1,925           997
2,922     3.3%
           Below Investment Grade                 4,285        12,522
16,807    19.2%
                                            ----------      --------     -
-------   ------
                                            $   22,725      $ 64,743     $
87,468   100.0%
                                             ==========      ========
========   ======
% Corporate:
      Mortgage-backed                       $    4,285      $ 44,688     $
48,973    56.0%
       Asset-backed                                  --         3,009
3,009     3.4%
         Finance                                      8,560           9,543
18,103    20.7%
       Industrial                                  6,913          2,514
9,427    10.8%
       Utility                                    2,967         4,989
7,956     9.1%
                                              ----------     --------
--------    -----
                                            $   22,725      $ 64,743     $
87,468    100.0%
                                             ==========      ========
========    ======

<PAGE>                        Page 48

</TABLE>

      Investments of Western United are subject to the  direction
and control of an investment committee appointed by its Board  of
Directors.   All  such  investments must comply  with  applicable
state insurance laws and regulations.  See "BUSINESS-Regulation".
Western  United's  securities  investments  are  principally   in
investment   grade  corporate,  government  agency,   or   direct
government  obligations,  in  order to  substantially  limit  the
credit risk in the portfolio.

      Metropolitan is authorized by its Board of Directors to use
financial futures instruments for the purpose of hedging interest
rate  risk  relative  to  the securities portfolio  or  potential
trading  situations.  In both cases, the futures  transaction  is
intended to reduce the risk associated with price movements for a
balance sheet asset.  Securities are also sold "short" (the  sale
of  securities  which  are not currently  in  the  portfolio  and
therefore  must be purchased to close out the sale agreement)  as
another  means of hedging interest rate risk, to benefit from  an
anticipated movement in the financial markets.  At September  30,
1996  there were seven open short sale positions with a  carrying
value of $132,652,000.

     During the twelve month period ended September 30, 1995, the
consolidated  group engaged in hedging activities  to  protect  a
portion  of  its  held-to-maturity securities  portfolio  from  a
potential  increase  in  interest  rates.   The  portfolio  being
protected  by the hedge position generally improved in value  due
to  a  decrease in interest rates while the position in financial
futures  contracts  declined  in  value  by  approximately   $1.6
million.  This loss is being amortized using the interest  method
over  the  remaining  life  of the securities  which  were  being
covered   by   the  financial  futures  position,   a   term   of
approximately  eight  years.  There were no  significant  hedging
transactions 1994.

      The  Consolidated  Group purchases collateralized  mortgage
obligations (CMO's) for its investment portfolio.  Such purchases
have  been limited to tranches that perform in concert  with  the
underlying  mortgages,  i.e., improving  in  value  with  falling
interest rates and declining in value with rising interest rates.
The Consolidated Group has not invested in "derivative products"
<PAGE>                        Page 49

that have been structured to perform in a way that magnifies  the
normal impact of changes in interest rates or in a way dissimilar
to  the  movement  in  value  of the underlying  securities.   At
September 30, 1996, the Consolidated Group was not a party to any
derivative financial instruments.

      At  September  30,  1996, 1995 and  1994,  amounts  in  the
available  for sale portfolio on a consolidated basis were  $38.6
million,  $31.8  million, and $89.1 million,  respectively.   The
available  for  sale  portfolio  had  net  unrealized  losses  of
approximately  $946,000  at  September  30,  1996,   $423,000  at
September  30,  1995  and  $3,351,000  at  September  30,   1994,
respectively.  In the held to maturity portfolio, net  unrealized
losses  were  approximately $5,548,000  at  September  30,  1996,
$6,010,000  at September 30, 1995, and $15,440,000  at  September
30,  1994,  respectively.  See Note 8 to  Consolidated  Financial
Statements.

METHOD OF FINANCING

      The Consolidated Group finances its business operations and
growth  with the proceeds of Receivable cash flows, the  sale  of
life  insurance and annuity products, the sale and securitization
of  Receivables,  the  sale of debentures  and  preferred  stock,
collateralized  borrowing,  sale of real  estate  and  securities
portfolio  earnings.   Metropolitan engages  in  a  substantially
continuous  public offering of debt securities  (debentures)  and
preferred   stock.    Western  United   markets  life   insurance
policies   and  annuities.   See  "BUSINESS-Life  Insurance   and
Annuities"

      The  following  table presents information about  the  debt
securities issued by the Consolidated Group:
<TABLE>
<CAPTION>

                                                                As of
September 30
                                                      1996          1995
1994
                                                   --------        -------
-        -------
                                                             (Dollars in
Thousands)
<S>                                               <C>             <C>
<C>
Principal Amount
     Outstanding                                   $163,034        $176,815
$172,666

Compound and Accrued
     Interest                                        29,140          24,497
26,711

<PAGE>                        Page 50

                                                   --------       ---------
--------
TOTAL                                              $192,174        $201,312
$199,377
                                                   ========       =========
========
Weighted Average
     Interest Rate                                     8.18%           8.24%
8.43%
                                                   ========       =========
========
Range of Interest
     Rates                                          5% - 11%        5% - 11%
5% - 11%
                                                   ========       =========
========
     </TABLE>
      Substantially  all  of the debt securities  outstanding  at
September 30, 1996 will mature during the five-year period ending
September  30, 2001.  Management expects to fund net  retirements
of   debentures  maturing  during  that  period  with  cash  flow
generated  by  Receivable investments, sales of real  estate  and
issuances  of  securities.  During the year ended  September  30,
1996,  approximately  30%   of  Metropolitan's  debentures   were
reinvested  at  maturity.  Principal payments received  from  the
Consolidated Group's Receivable portfolio and proceeds from sales
of  real  estate and Receivables were as follows for the  periods
indicated:

      Fiscal 1996:   $296,425,000
      Fiscal 1995:   $197,069,000
      Fiscal 1994:   $134,010,000

      Proceeds of preferred stock issuances less redemptions were
$1,765,000  in 1996, $4,250,000 in 1995 and $1,274,000  in  1994.
The  liquidation  preference of outstanding  preferred  stock  at
September  30,  1996 was $49,496,000. Preferred shareholders  are
entitled  to  monthly distributions at a variable rate  based  on
U.S. Treasury obligations.  The average monthly distribution rate
during fiscal 1996 was 7.91%.  Preferred stock distributions paid
by  Metropolitan were $3,868,000 in 1996, $4,038,000 in 1995  and
$3,423,000,  in  1994.  See Note 1 to the Consolidated  Financial
Statements.

      The  following table summarizes Metropolitan's  anticipated
annual  cash  principal and interest obligations  on  debentures,
other   debt   payable  and  anticipated  annual  cash   dividend
requirements  on preferred stock for the indicated periods  based
on  outstanding  debt  and  securities  at  September  30,  1996,
assuming no reinvestments of maturing debentures:
<TABLE>
<CAPTION>

<PAGE>                        Page 51

<S>                            <C>          <C>         <C>          <C>
                                          Debenture             Other
Preferred
Fiscal Year Ending                    Bonds          Debt            Stock
September 30,                                       Payable        Dividends
Total
------------------                 ----------    -----------       -------
----    ---------
                                                     (In Thousands of
Dollars)

        1997                              $   50,030          $37,023
$4,207        $ 91,260
         1998                                52,163               710
4,207          57,080
         1999                                41,335               242
4,207          45,784
         2000                                40,408               137
4,207          44,752
         2001                                 5,877               187
4,207          10,271
                                     -------        -------         -------        --------
                                         $189,813             $38,299
$21,035        $249,147
                                          =======             =======
=======        ========
</TABLE>

      In addition to these contractual cash flow requirements,  a
certain  amount  of  the  insurance  subsidiary's  annuities  may
reprice  annually which could cause termination of such annuities
subject to a surrender charge.  See "MANAGEMENT'S DISCUSSION  AND
ANALYSIS-Asset Liability Management".  Management  believes  that
cash  flows will remain adequate during the next year to  satisfy
all obligations Metropolitan owes to holders of its securities.

REAL ESTATE DEVELOPMENT

                       Lawai Beach Resort

Description

      Metropolitan  is  the owner and developer  of  Lawai  Beach
Resort  on  the island of Kauai, Hawaii.  Metropolitan also  owns
other   condominium  units  adjoining  the  resort  and   another
subsidiary,   the  Southshore  Corporation,  owns  a   restaurant
operating company.

      Lawai Beach Resort is located on 8.7 acres of deeded ocean-
front property on the south shore of Kauai near the area known as
Poipu Beach. It consists of three four-story buildings containing
a  total of 170 residential condominium units.  Related amenities
include  swimming pools, tennis courts, a 180 car parking garage,
modern   exercise  facilities  and  a  sewage  treatment   plant.
Construction  costs  were financed entirely  with  Metropolitan's
internally  generated funds and the property remains unencumbered
by external debt.  Metropolitan's total investment (carrying
<PAGE>                        Page 52

value)  in  Lawai  Beach  Resort as of  September  30,  1996  was
$17,636,000.

      Additional properties, all of which adjoin the Lawai  Beach
Resort,  include  11  condominium  units  in  the  Prince   Kuhio
Condominiums  with an aggregate carrying value of  $1,059,000,  a
four-plex  condominium timeshare building with 4 weekly intervals
remaining  and a carrying value of approximately $21,000;  and  a
restaurant  site  with a carrying value (land  and  building)  of
approximately   $3,826,000  as  of  September  30,   1996.    The
restaurant is currently operated by Pacific Cafe.  The restaurant
rental income was $69,000 in fiscal 1996.

Marketing

      Metropolitan  engaged  an affiliate  of  the  Shell  Group,
Chicago,  Illinois, Shell-Lawai ("Shell"), to provide  management
services  and  sell  timeshare units at Lawai  Beach.   In  1994,
timeshare  sales totaled approximately $17.6 million for  monthly
average  sales of approximately $1.5 million.  In 1995, timeshare
sales  totaled  approximately $23.1 million for  monthly  average
sales  of  over  $1.9 million.  In 1996, timeshare sales  totaled
approximately  $22.8 million for monthly average  sales  of  $1.9
million.  Management believes that sales decreased in 1996 due to
increased competition, principally due to the addition of several
new  time share resorts within the Poipu area of Kauai.  Although
there can be no assurance that sales will continue at the present
pace, if the present pace does continue, the remaining timeshares
units would be completely sold by approximately early 1998.

Additional Information

     The tables below set forth additional historical information
about the timeshare sales and revenue of Lawai Beach Resort.   It
is  Metropolitan's intention to sell the timeshares at  favorable
prices  in  order  to convert the inventory into  cash  or  other
interest earning assets.

<PAGE>                        Page 53

<TABLE>
<CAPTION>
                                                    FOR THE YEARS
ENDED
                                                        SEPTEMBER
30,
                                 --------------------------------
--------------
                                            1996                    1995
1994
                                    -------------        -------------
-------------
<S>                                     <C>                   <C>
<C>
TIMESHARE SALES
   Number  of  Sales                         1,441                1,485
1,500
   Amount  of  Sales                   $22,799,107          $23,120,888
$17,642,544
   Costs                               (8,051,102)          (7,353,510)
(7,171,159)
   Expenses                           (15,480,230)         (14,996,260)
(10,737,591)
                                      ------------            -----------
-----------
   Profit(Loss)                       $  (732,225)         $    771,118
$  (266,206)
                                     ============           ===========
===========
WHOLE-UNIT CONDOMINIUM
SALES
   Number  of  Units                              -                    1
-
   Amount  of Sales                             -          $    500,000
-
   Costs                                         -             (321,855)
-
   Expenses                                     -               (1,787)
-
                                     ------------           -----------
-----------
   Operating  Profit                           --          $    176,358
--
                                      ============           ===========
===========
</TABLE>

Receivable Financing

      Most  purchasers of timeshare weeks at Lawai  Beach  Resort
finance  a  portion  of the purchase price through  Metropolitan,
subject   to  approved  credit.   As  of  September   30,   1996,
Metropolitan's   outstanding   Lawai   Beach   Resort   timeshare
Receivables  balance was approximately $36.4 million.   The  loan
delinquency rate (based on the principal balances of  loans  more
than ninety days in arrears) on that date was approximately 4.6%.

                       Skier's Edge Resort

      Metropolitan, owns approximately 376 timeshare use  periods
at   Skier's   Edge,   a  timeshare  condominium   located   near
Breckenridge,  Colorado,  together  with  approximately  eighteen
acres  of  undeveloped land adjoining the resort.   The  carrying
value  at  September 30, 1996 was $972,500.  The total  timeshare
use  periods in the project were approximately 1,200 at September
30,  1996.   Unsold timeshares, while being held  for  sale,  are
included in a
<PAGE>                        Page 54

rental  pool  operated  by the resort owner's  association.   Net
rental revenue was $6,629 in 1996, $21,956 in 1995 and $31,454 in
fiscal  1994.  The market value of the property is  estimated  at
$1,100,000 at September 30, 1996 based upon Metropolitan's review
of the assessed valuation of the property for tax purposes and an
analysis of prior timeshare sales.

                  Other Development Properties

      In  addition  to  the  resort properties  described  above,
Metropolitan,  is  engaged in the development  of  various  other
properties.  These development properties were generally acquired
in  the  ordinary  course of Metropolitan's  business,  generally
through  repossessions.   In addition, Metropolitan  may  acquire
property   for  development.   These  acquisitions  may   include
properties  adjoining one already owned in order to  enhance  the
value  of  the original parcel, or the acquisition of  properties
unrelated  to existing holdings.  The development or  improvement
of properties is undertaken for the purposes of enhancing values,
to increase salability and to maximize profit potential.

      Substantially all of the Development activity is  performed
for Metropolitan by Summit Property Development, a subsidiary  of
Summit.    During   1996,  Metropolitan  paid   Summit   Property
Development fees of approximately $2.0 million.

        Significant development properties, sales activities  for
1996  and  plans for 1997 are described below.  There can  be  no
assurance  that  Metropolitan will  be  successful  in  its  1997
development and sales plans and Metropolitan may modify its plans
at its sole discretion.

* The MeadowWood Properties
      Located just east of Spokane, Washington near Liberty Lake,
this  land  was  acquired by Metropolitan between 1989  and  1991
primarily  utilizing  repossessed properties  held  for  sale  as
consideration.   During  fiscal 1996, the property  included  one
residential development parcel and two business parcels, each  of
which  is  described  more fully below.   The  area  where  these
parcels   are   located  includes  residential,  commercial   and
industrial properties including a business park.


<PAGE>                        Page 55

      MeadowWood  Business Park Phase I:  This site consisted  of
24.7  acres.   The sale of the last property in  this  phase  was
"Madsen Court".  This property consisted of a 46,351 square  foot
commercial  building which was built and leased  by  Metropolitan
and sold for $3,350,000 in March 1996.

      MeadowWood  Business  Park Phase II:   This  phase  of  the
business  park  includes 9.86 acres owned and  62.1  acres  under
option  by  Metropolitan  at $10,500  per  acre.   A  preliminary
binding  site  plan for Meadowwood Business Park - Phase  II  has
been  approved by the County of Spokane.  It is currently planned
to  finalize  engineering and proceed with the development  of  a
portion  of  this property during 1997.  At September  30,  1996,
Metropolitan's carrying value in the property was $3,641,261.

      MeadowWood Residential:  This residential parcel, The Glen,
consisted  of  37 acres of which 32 acres were sold  in  February
1996   for  $755,000.   At  September  30,  1996,  Metropolitan's
carrying value for the remaining five acres was $80,571.

* The Summit Property
     This property consists of approximately 88 acres in downtown
Spokane  adjacent to the central business district and is located
along  the north bank of the Spokane River.  It contains  several
parcels which were purchased between 1982 and 1996.  The property
is  zoned for mixed use from medium density residential to office
and  retail.   A  final  Environmental Impact  Statement  on  the
proposed  project  was published in 1993.  The  master  plan  and
Shoreline Substantial Development Use Permit were approved by the
City  of  Spokane in 1995.  There are several warehouse buildings
located  on  the  property,  which  are  vacant  and  slated  for
demolition in 1997.  At September 30, 1996, the carrying value of
the property was $11,553,466.

* Airway Business Centre
      As of September 30, 1996, this property includes a 110 acre
portion of an original tract of 440 acres which was purchased  in
1979.   It  is located in the City of Airway Heights, Washington,
approximately ten miles west of Spokane.  The property  is  zoned
commercial/industrial and fronts a four-lane highway.  Phase I of
the  business park has a binding site plan, recorded in 1993, for
thirteen lots on 47 acres.  Two lots sold in 1996 for $63,000 and
$225,000.  At September 30, 1996, the carrying value was
<PAGE>                        Page 56

$2,047,828.  The site was appraised at $2,800,000 as of September
30, 1996.

* Airway Heights Residential
      This  site is 33 acres located adjacent to Airway  Business
Centre  in  the City of Airway Heights.  This property  is  zoned
residential  and has a carrying value at September  30,  1996  of
$135,267.   During 1995, Metropolitan sold an option to  purchase
the property.  The purchase price of the property escalates at 7%
annually  from  a  base price of $250,000.  The  option  must  be
exercised in part by 1997 and in full by 1999.

* Spokane Valley Plaza
       The  property  is  located  near  the  Sullivan  Road  and
Interstate  90  freeway  interchange just  east  of  Spokane  and
consists of 33 acres of commercially zoned land.  County approval
for  a  348,000 square foot shopping center was received in 1991.
The  property was acquired in 1990 using repossessed property  as
consideration.   During  1996, Metropolitan  sold  a  12.65  acre
portion  of this parcel to Wal-Mart for $2,798,351.  As  part  of
the  consideration  for  the sale, Metropolitan  entered  into  a
codevelopment  agreement to develop on-site infrastructure  at  a
cost to Metropolitan of approximately $900,000.  At September 30,
1996, the carrying value was $7,380,000.  The appraised value  is
$7,580,000 .

* Broadmoor Park (Pasco)
      This  property,  acquired  through  repossession  in  1988,
consists of 368 acres of land, at a freeway interchange in Pasco,
Washington.  The property was zoned in 1994 for mixed residential
and  commercial use.  Water and sewer have been extended  to  the
property.    Access  to  the  property  has  been   improved   by
construction of a new interior road.

     Broadmoor Factory Outlet Mall:  The Broadmoor Factory Outlet
Mall is 24.5 acres located on the north side of the freeway.  The
Mall  is 107,000 square feet, and over 81% leased as of September
30, 1996.  The carrying value of the property as of September 30,
1996  is $10,525,471.  The appraised value was $13,325,000 as  of
December  15,  1995.   Lease payments from  the  initial  tenants
commenced August, 1995. The mall generated approximately  $24,000
of rental income in fiscal 1995 and approximately $695,000 during
fiscal 1996.


<PAGE>                        Page 57

      Broadmoor Park General:  The remaining 344 acres is platted
for  development  as a business park; hotels, motels,  fast  food
restaurants,  gas  stations,  a  variety  of  stores;  land   for
development of both single and multi-family residential  housing;
and  civic  uses.  Two parcels were sold during fiscal  1996  for
$569,765.   The  carrying  value as  of  September  30,  1996  is
$3,195,813.  The appraised value was $10,800,000 as of  September
30,  1996.  The appraised value of substantially unimproved  land
is subject to a number of assumptions.  Actual results may differ
substantially from such appraisals.

* Puyallup
      This  property is approximately 20 acres of land zoned  for
commercial  and  multi-family  development  in  Puyallup,  Pierce
County,  Washington and is located adjacent to a  major  shopping
area.    Sewer  capacity  issues  are  currently  impacting   the
marketability  of  this  property.  At September  30,  1996,  the
carrying   value  was  $1,448,929.   Its  appraised   value   was
$1,740,000 as of September 30, 1996.

* Everett
      This  property  is  a  98 acre parcel  of  industrial-zoned
property  located  adjacent  to Boeing's  Paine  Field  plant  at
Everett,   Washington.   Studies  of  utility  services,   access
requirements  and  environmental  issues  are  ongoing   as   are
discussions with several parties to sell and/or jointly   develop
the  property.  At September 30, 1996, the carrying value in  the
property was $4,908,806.  The appraised value is $7,635,000 as of
September  30, 1996.  The appraised value of unimproved  land  is
subject  to  a number of assumptions.  Actual results may  differ
substantially from such appraisals.

* Renton
       This   property  is  approximately  35   acres.    It   is
characterized  by  heavily  vegetated  terrain   and   is   zoned
residential.   The  City of Renton has annexed  and  rezoned  the
property  increasing its density from just over  100  residential
units to over 200 residential units.  At September 30, 1996,  the
carrying  value  in the property was $3,145,113.   The  appraised
value was $3,425,000 as of September 30, 1996.


<PAGE>                        Page 58

       Risks   associated  with  holding  these  properties   for
development include possible adverse changes in zoning  and  land
use  regulations and local economic changes each of  which  could
preclude  development or resale. Because most of  the  properties
are  located in Washington State, which is currently experiencing
relatively  stable  economic  conditions,  a  regional   economic
downturn  could have a material negative impact on Metropolitan's
ability to timely develop and sell a significant portion of them.

      The  appraised  value of substantially unimproved  land  is
subject  to  a number of assumptions.  Actual sales  results  may
differ  substantially  from such appraisals.   There  can  be  no
assurance  that  the sales prices as indicated by the  appraisals
will be realized.

   The  total  development property sales were $9,535,068  during
fiscal 1996.

      The  following table presents additional information  about
the  Consolidated Group's investments in and sales of real estate
held for sale and development:

<PAGE>                        Page 59

<TABLE>
<CAPTION>

                                            Year Ended or at September 30,
                                             -----------------------------
REAL ESTATE HELD FOR                         1996        1995       1994
SALE AND DEVELOPMENT                       ---------   ----------  -------
                                                 (Dollars in Thousands)
<S>                                        <C>         <C>       <C>
     Investment Property Held For
       Sale and Development                $48,175     $53,101    $37,729
     Real Estate Acquired in
       Satisfaction of Debt and
       Foreclosures in Process              36,158       38,00   4 39,037
                                          --------    --------   --------
     Net Balance                           $84,333     $91,105    $76,766
                                          ========    ========   ========
SUMMARY OF CHANGES
     Balance at Beginning of Year          $91,105     $76,766    $76,269
     Additions and Improvements:
       Condominiums                         18,795      26,276     19,563
       Repossessed & Development
         Real Estate                        21,392      24,644     19,950
       Transfer from Fixed and Other
         Assets                                 --       1,599        259
       Depreciation                         (3,048)     (1,731)      (778)
     Cost of Real Estate Sold:
       Condominium Units                   (23,531)    (22,674)   (17,909)
       Real Estate                         (20,380)    (13,775)   (20,588)
                                          --------     -------   --------
     Balance at End of Year                $84,333     $91,105    $76,766
                                          ========     =======   ========
GAIN (LOSS) ON SALE OF REAL ESTATE
     Condominiums:
       Sales                               $22,799      23,621   $17,643
       Unit Costs                           (8,051)     (7,676)   (7,171)
       Associated Selling Costs            (15,480)    (14,998)  (10,738)
                                          --------     -------  --------
     Condominium - Gain (Loss)                (732)        947      (266)
                                          --------     -------  --------
     Real Estate:
       Sales                                22,849      15,767     22,381
       Equity Basis                        (20,380)    (13,775)   (20,588)
                                          --------     -------   --------
       Real Estate - Gain                    2,469       1,992      1,793
                                          --------     -------   --------
       Total Gain on Sale of Real Estate   $ 1,737     $ 2,939    $ 1,527
                                          ========     =======   ========
</TABLE>
COMPETITION


<PAGE>                        Page 59

       The   Consolidated   Group  competes  with   other   financial
institutions  including  various real estate  financing  firms,  real
estate brokers, banks and individual investors for the Receivables it
acquires.   In  the  private secondary mortgage  market  the  largest
single  competitors are subsidiaries of much larger  companies  while
the  largest  number  of  competitors are a multitude  of  individual
investors.  In all areas of Receivable acquisitions, the Consolidated
Group  competes with financial institutions many of which are larger,
have  access  to  more resources, and greater name recognition.   The
primary  competitive  factors are the amounts  offered  and  paid  to
Receivable  sellers  and  the speed with  which  the  processing  and
funding  of the transaction can be completed.  Competitive advantages
enjoyed  by the Consolidated Group includes Metropolitan's  BrokerNet
software;   its  ability  to  purchase  long-term  Receivables;   its
availability  of  funds;  its flexibility in  structuring  Receivable
acquisitions; its reputation for reliability established by its  long
history in the business; and its in-house capabilities for processing
and  funding  transactions. To the extent other competing  Receivable
investors  may  develop faster closing procedures  or  more  flexible
investment policies, they may experience a competitive advantage.

      Management  is  unaware  of  any competitors  with  acquisition
networks   and   private  secondary  market  Receivables   portfolios
comparable  to the Consolidated Group's and believes the Consolidated
Group  to be one of the largest investors in such Receivables in  the
United States.

      Metropolitan,  Western  and Metwest compete  in  the  secondary
market  as  seller's of pools of receivables (both direct  sales  and
sales through securitization).  This market is a multi-billion dollar
market  and  includes competitors with access to  greater  resources,
greater volumes and economics of sales and better name recognition.

       Metropolitan's   securities  products  face  competition   for
investors  from  other  securities issuers many  of  which  are  much
larger, and have greater name recognition.

      The  life insurance and annuity business is highly competitive.
Western  United competes with other financial institutions  including
ones  with  greater resources and greater name recognition.   Premium
rates,  annuity  yields  and commissions to agents  are  particularly
sensitive   to  competitive  forces.   Western  United's   management
believes  that  it  is  in an advantageous position  in  this  regard
because  of its earning capability through investments in Receivables
compared  to that of most other life insurance companies. From  June,
1986 until June,
<PAGE>                        Page 60

1995,  Western United had been assigned a "B+ (Very Good)" rating  by
A.  M.  Best  Co., a nationally recognized insurance  company  rating
organization.   During June, 1995, Western United's Best  rating  was
revised to B.  Best bases its rating on a number of complex financial
ratios,  the  length  of  time a company has been  in  business,  the
nature, quality, and liquidity of investments in its portfolio, depth
and  experience  of  management and various  other  factors.   Best's
ratings  are supplied primarily for the benefit of policyholders  and
insurance agents.

REGULATION

      The  Consolidated  Group is subject to laws  of  the  State  of
Washington  which regulate "debenture companies" in part  because  it
obtains  capital  for  its  activities  through  offerings  of   debt
securities  to  residents  of the State of Washington.   These  laws,
known  as the Debenture Company Act (the "Act"), are administered  by
the   Securities  Division  of  the  State  Department  of  Financial
Institutions (the Department).  Designed to protect the interests  of
investors,  the Act limits the amount of debt securities Metropolitan
may issue by requiring the maintenance of certain ratios of net worth
to  outstanding debt securities.  The required ratio depends  on  the
amount of debt securities outstanding, declining from 20% for amounts
of  $1,000,000  or  less, to 10% for amounts between  $1,000,000  and
$100,000,000,  and to 5% for amounts in excess of  $100,000,000.   At
September  30,  1996,  Metropolitan's required  net  worth  for  this
purpose  was  approximately $14,709,000 while its  actual  net  worth
(stockholders'  equity)  was  approximately  $46,343,000.   The   Act
requires  that 50% of the required net worth amount be maintained  in
cash  or  other  liquid assets. In addition, the  Act  limits  equity
investments by Metropolitan in a single project or subsidiary to  the
greater  of net worth or 10% of assets; aggregate equity investments,
with  certain  exceptions,  to 20% of assets;  loans  to  any  single
borrower to 2.5% of assets; and investments in unsecured loans to 20%
of  assets.  Other  provisions of the Act prohibit Metropolitan  from
issuing  more  than 50% of its debentures for terms of two  years  or
less; prohibit transfer of control of Metropolitan without regulatory
approval; prohibit common control of another debenture company,  bank
or  trust  company; and prohibit officers, directors and  controlling
shareholders   from  directly  or  indirectly  borrowing   funds   of
Metropolitan  and  from participating in certain  other  preferential
transactions  with  it.   Metropolitan  is  required  to  notify  its
debentureholders in writing fifteen to forty-five days in advance  of
the   maturity  dates  of  their  investments  and  to  provide   all
debentureholders with copies of its annual financial statements.  The
<PAGE>                        Page 61

Act  also  provides for periodic examinations of the accounts,  books
and  records of debenture companies such as Metropolitan to ascertain
compliance with the law.  Finally, the Act and other applicable  laws
and  regulations  provide  the  Department  with  authority  to  take
regulatory  enforcement actions in the event of a violation  of  such
laws and regulations.

         Throughout the securities offering which expired January 31,
1997,   Metropolitan's  aggregate  principal  amount  of  outstanding
debentures,  including  accrued  and  compound  interest,   and   its
aggregate  amount  of  preferred stock outstanding  were  limited  to
$251,300,000, by the terms of the securities sales permits issued  by
the  State of Washington pending improvement in Metropolitan's  ratio
of  earnings to its fixed charges and preferred stock dividends.  For
the  purposes  of this calculation, the earnings of subsidiaries  are
excluded  unless  actually paid to Metropolitan as dividends.   These
limitations restricted Metropolitan's ability to sell debentures  and
preferred  stock during the 12 month offering period  ending  January
31,  1997.  See  "MANAGEMENT'S DISCUSSION AND ANALYSIS  OF  FINANCIAL
CONDITION   AND   RESULTS  OF  OPERATIONS-  Liquidity   and   Capital
Resources".    

     All areas of the Consolidated Group's Receivable acquisition and
servicing  activities are highly regulated by Federal and State  laws
designed  principally  to protect the payor.  Metwest's  lending  and
servicing activities must comply with, among other regulations, Truth
in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA),
Regulation  X,  and Z.  Metwest is licensed with FHA  and  HUD  as  a
lender  and servicer, as such it must comply with applicable FHA  and
HUD regulations and guidelines.

     Metropolitan is subject to certain federal and Hawaii state laws
and  regulations governing timeshare marketing procedures,  licensing
requirements   and   interest  rates.   Hawaii  also   requires   the
registration  and periodic renewal of timeshare condominium  projects
prior to the commencement or continuation of sales in the state.  The
law  also  provides  timeshare purchasers with a seven-day  right  of
rescission following execution of an agreement to purchase.

      Western  United and Metropolitan are subject to  the  Insurance
Holding  Company  Act  as administered by the  Office  of  the  State
Insurance  Commissioner of the State of Washington. The act regulates
transactions  between insurance companies and their  affiliates.   It
requires  that  Metropolitan provide notification  to  the  Insurance
Commissioner  of  certain transactions between the insurance  company
and
<PAGE>                        Page 62

affiliates.   In  certain instances, the Commissioner's  approval  is
required before a transaction with an affiliate can be consummated.

       Western   United  is  subject  to  extensive  regulation   and
supervision by the Office of the State Insurance Commissioner of  the
State  of  Washington as a Washington domiciled  insurer,  and  to  a
lesser extent by all of the other states in which it operates.  These
regulations  are  directed  toward  supervision  of  such  things  as
granting  and  revoking licenses to transact  business  on  both  the
insurance   company  and  agency  levels,  approving  policy   forms,
prescribing   the   nature  and  amount  of  permitted   investments,
establishing  solvency  standards and conducting  extensive  periodic
examinations  of  insurance  company  records.   Such  regulation  is
intended to protect annuity contractholders and policy owners, rather
than investors in an insurance company.  Certain of these regulations
may  be  subject  to  additional  federal  regulation,  such  as  the
Secondary  Mortgage  Market Enhancement Act,  which  is  designed  to
enhance  the  movement  of funds in the national  secondary  mortgage
market.

      All states in which Western United operates have laws requiring
solvent  life insurance companies to pay assessments to  protect  the
interests  of  policyholders of insolvent life  insurance  companies.
Assessments are levied on all member insurers in each state based  on
a  proportionate share of premiums written by member insurers in  the
lines  of business in which the insolvent insurer engaged.  A portion
of  these  assessments can be offset against the  payment  of  future
premium  taxes.  However, future changes in state laws could decrease
the  amount available for offset.  The economy and other factors have
caused failures of substantially larger companies which have and will
continue to result in substantially increased future assessments.

      The  net  amounts expensed by Western United,  and  the  amount
expensed  prior  to May 31, 1995 for Old Standard for  guaranty  fund
assessments  and charged to operations for the years ended  September
30,  1996,  1995  and  1994  were $900,000,  $782,000  and  $192,000,
respectively.  These estimates were based on information provided  by
the  National  Organization  of Life and  Health  Insurance  Guaranty
Associations  regarding insolvencies occurring  during  1988  through
1994.   Management  does  not  believe  that  the  amount  of  future
assessments  associated with known insolvencies after  1994  will  be
material to its financial condition or results of operations.  During
the  year  ended  September  30,  1994,  the  insurance  subsidiaries
(Western  United  and Old Standard) reduced their estimate  of  these
losses  by $588,000 based upon updated information from the  National
Organization  of Life and Health Guaranty Associations.   During  the
years ended September 30, 1996 and 1995, Western United did not  make
an adjustment
<PAGE>                        Page 63

based  on updated information.  These estimates are subject to future
revisions based upon the ultimate  resolution of the insolvencies and
resultant   losses.   Management  cannot  reasonably   estimate   the
additional  effects, if any, upon its future assessments pending  the
resolution  of  the  above  described  insolvencies.  The  amount  of
guaranty fund assessment that was originally accrued in 1993 has been
recorded  net  of  a  8.25% discount rate applied  to  the  estimated
payment term of approximately seven years.  The remaining unamortized
discount  associated with this accrual was approximately $832,000  at
September 30, 1996.

      Dividend restrictions are imposed by regulatory authorities  on
Western United.  The unrestricted statutory surplus of Western United
totaled approximately $5,567,000 as of September 30, 1996, $1,986,000
as of September 30, 1995 and $5,499,000 as of September 30, 1994. The
principal reason for the decrease during fiscal 1995 was the  payment
of dividends to Metropolitan.

     For statutory purposes, Western United's capital and surplus and
its  ratio of capital and surplus to admitted assets were as  follows
for the dates indicated:
<TABLE>
<CAPTION>
                                             As of                  As of
December 31,
                                     September 30, 1996     1995        1994
1993
                                     -------------------   ------  -----------
---    ------
             <S>                                     <C>              <C>
<C>      <C>
         Capital and Surplus
           (Millions)                              $48.7            $46.2
$43.8    $43.0
         Ratio of Capital and
         Surplus to Admitted
           Assets                                    5.2%            5.3%
5.5%     5.7%
</TABLE>
      Although  the  State of Washington requires only $4,000,000  in
capital and surplus to conduct insurance business, Western United has
attempted  to  maintain a capital and surplus ratio of  at  least  5%
which   management  considers  adequate  for  regulatory  and  rating
purposes.

      In  1993, Washington State enacted the Risk Based Capital Model
law  which requires an insurance company to maintain minimum  amounts
of  capital and surplus based on complex calculations of risk factors
that  encompass the invested assets and business activities.  Western
United's  capital  and surplus levels exceed the  calculated  minimum
requirements at September 30, 1996.
                                  
                                  
                             MANAGEMENT

<PAGE>                        Page 64


        Directors, Executive Officers and Certain Employees
         (Age Information Current as of December 31, 1996)

 Name                 Age            Position

C. Paul Sandifur, Jr. *      55 President, CEO and
                                Chairman of the Board
Bruce J. Blohowiak *   43    Executive Vice President, Corporate
                                Counsel and Director
Michael Kirk           45    Senior Vice President/Production
Jay Caferro*           49    Senior Vice President/Underwriting
Steven Crooks*         50    Vice President, Controller and
                                Acting Chief Financial Officer
Susan Thomson*         36    Vice President and Assistant
                                Corporate Counsel
Tracy Z *              30    Vice President-Production
Doug Greybill          47    Vice President
John McCreary          28    Acting Treasurer
Reuel Swanson          58    Secretary and Director
John Van Engelen       44    President, Western United
Irv Marcus             72    Director
Charles H. Stolz       87    Director
________________________

Neil Fosseen           78    Honorary Director

* Member of Executive Committee

     Directors and officers are elected to one-year terms.

      C.  Paul Sandifur, Jr. became Executive Vice President in 1980,
was  elected  President  in  1981,  succeeded  his  father  as  Chief
Executive Officer in 1991 and became Chairman of the Board  in  1995.
He  has  been a Director since 1975.  Mr. Sandifur was a real  estate
salesman with Diversified Properties in Kennewick, Washington  during
1977 and 1978 and then with Century 21 Real Estate in Kennewick.   In
June  1979, he became an associate broker with Red Carpet  Realty  in
Kennewick  before rejoining Metropolitan in 1980.  He is  a  director
and  officer  of most of the subsidiary companies.  He  is  the  sole
shareholder  of  National Summit Corp., which in  turn  is  the  sole
shareholder  of former subsidiaries of Metropolitan, Summit  and  Old
Standard.


<PAGE>                        Page 65

     Bruce J. Blohowiak joined Metropolitan's legal staff in 1979 and
became  its  Corporate  Counsel in  1986.   In  1987,  he  became  an
Assistant Vice President and was appointed a Vice President in  1990.
In  1995  he  was named Executive Vice President and Chief  Operating
Officer.  He is also a Vice President of Western United.  A member of
the  Washington State bar, Mr. Blohowiak received his  J.  D.  degree
from Gonzaga University School of Law in 1979.

      Michael Kirk joined Metropolitan as a Receivable Contract Buyer
in  1982.  He later became a member of the underwriting committee and
is  currently the Receivable Production Team Manager.  He was elected
Assistant  Vice President in 1990, Vice President in 1992 and  became
Senior Vice President in 1995.

      Jay  Caferro  joined Metropolitan in 1990 as a  member  of  its
Underwriting Committee.  He was promoted to Underwriting Manager, and
to  Senior  Vice President during 1995.  From 1986 to  1990,  he  was
employed  by  Seattle  First  National  Bank  as  Vice  President  of
Commercial  Real  Estate Lending for Eastern  Washington.   Prior  to
1986, he had worked 15 years in residential lending.  He has a BA and
MBA from Gonzaga University.

      Steven  Crooks  has been employed in Metropolitan's  accounting
department  since  1972.   He became Controller  and  Assistant  Vice
President in 1990, Vice President in 1994, and Acting Chief Financial
Officer in 1996.  Mr. Crooks has been a Washington licensed Certified
Public Accountant since 1974.

      Susan  Thomson joined Metropolitan's legal staff in  1989.   In
1993,  she was appointed Assistant Secretary for Metropolitan and  in
1995  was appointed Vice President. From 1992 through 1996,  she  was
Vice  President and Compliance Officer with MIS, the underwriter  for
Metropolitan's  securities  offerings.   She  is  a  member  of   the
Washington  State Bar Association and received her J.D. from  Gonzaga
University School of Law in 1989.

      Tracy  Z joined Metropolitan in 1988 as a member of the closing
staff.   She was later promoted to the underwriting committee and  is
now  a  member of the Receivable Production Team.  She was  appointed
Vice  President during 1995.  For approximately three  months  during
1994,  she was employed by English Mortgage, a subsidiary of Citicorp
as a mortgage originator.

      Doug  Greybill joined Metropolitan in 1992.  From 1990 to 1992,
he  was  self  employed as a Banking Consultant and Mortgage  Trader.
From
<PAGE>                        Page 66

1983  to  1990, he was Chief Operating Officer for Willamette Savings
and  Loan.  He was elected Assistant Vice President in 1994, and Vice
President in 1995.

      Reuel  Swanson has worked for Metropolitan since 1960  and  has
been  a  Director  since 1969.  From 1972 to 1975,  Mr.  Swanson  was
Metropolitan's Treasurer.  In 1976, he became Secretary.  He is  also
a director and officer of most of the subsidiary companies.

      John McCreary joined Metropolitan in 1993 as a Treasury Analyst
and  is  currently the Acting Treasurer.  Mr. McCreary has six  years
experience   in   portfolio  management,   financial   analysis   and
accounting.   He  has  previously been employed  by  Electronic  Data
Systems as a Financial Analyst and Public Utility District No.  2  of
Grant  County as an Accountant.  Mr. McCreary is a CFA, CPA  and  CMA
and holds a BS in Finance from Central Washington University.

         John Van Engelen joined Metropolitan's insurance subsidiary,
Western  United  in  1984 as its underwriting  manager,  and  shortly
thereafter  was  appointed Vice President-Underwriting.   From  1987-
1994,  he  was the marketing manager.  During 1994, he was  appointed
President.   Prior  to  working for Western, he  had  worked  in  the
insurance industry and in corporate and public accounting.  He  holds
the following certifications CPA,CFP,CLU,CHFC,FLMI.
    
   

      Irv  Marcus had been an officer of Metropolitan from 1974 until
his retirement in 1995.  At retirement, he was Senior Vice President,
a  title  which  he  had held since 1990, and during  which  time  he
supervised  Metropolitan's Receivable investing operations.   He  had
previously  been  a loan officer with Metropolitan and  has  over  25
years experience in the consumer finance business.  He continues as a
director following his retirement.

     Charles H. Stolz has been a Director of Metropolitan since 1953.
Mr.  Stolz was one of the founders of Metropolitan.  He is a licensed
public accountant and has been a realtor for over 25 years.  He is  a
former  Chairman of the Washington State Real Estate  Commission  and
President of the Spokane Board of Realtors.

      Neil  Fosseen was elected honorary director of Metropolitan  in
1995.   As an honorary director, he is not entitled to vote at  board
meetings.  Mr. Fosseen was mayor of Spokane from 1960-1967.   He  has
over 30 years of experience in banking and finance.
                                  
<PAGE>                        Page 68
                                  
                       EXECUTIVE COMPENSATION

      The  following table sets forth the aggregate compensation paid
by  Metropolitan  during  the fiscal years  specified  to  its  Chief
Executive Officer and other highly compensated executives. All  other
officers  and executives of Metropolitan received less than  $100,000
in  compensation  during  the  year ended  September  30,  1996.   No
executive  officer is a party to, or a participant  in,  any  pension
plan,  contract or other arrangement providing for cash  or  non-cash
forms   of   remuneration  except  Metropolitan's  401(k)   qualified
retirement  plan  adopted as of January 1, 1992, which  is  available
generally to all employees of Metropolitan.  The 401(k) Plan provides
for  maximum annual contributions equal to 1.5% of each participant's
salary.   Approximately $84,000 was paid by Metropolitan pursuant  to
the  401(k)  plan during the year ended September 30,  1996.   As  of
September 30, 1996, Metropolitan had no compensation plans  or  stock
option plans in effect. Directors of  Metropolitan are paid $500  per
meeting.
<TABLE>
<CAPTION>

                     SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------
---------(a)---------------------(b)----------------(c)---------------(d)
 Name and Principal             Year              Salary ($)      Bonus/
Position                                                        Commissions
------------------------------------------------------------------------

 <S>                               <C>        <C>                 <C>
 C. Paul Sandifur, Jr.             1996      $147,145
 Chief Executive Officer           1995      $128,869            $1,004
                                   1994      $107,063


 Bruce Blohowiak                   1996      $105,000
 Executive Vice President          1995          *
 General Counsel                   1994          *

 Michael Kirk                      1996       $85,000           $91,867
 Senior Vice President             1995       $65,813           $38,050
 -Production                       1994          *

 Tracy Z                           1996       $80,000           $78,743
 Vice President-Production         1995          *
                                   1994          *

<PAGE>                        Page 69


 John Van Engelen                  1996      $105,500           $19,747
 President, Western United         1995          *
                                   1994          *

* Salaries and other compensation were less than $100,000

</TABLE>

     COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
                                  
      Metropolitan does not have a formal compensation  committee  of
the board of directors.  Executive officer compensation is determined
by  C. Paul Sandifur, Jr., Bruce J. Blohowiak and the Human Resources
Manager  (currently Nobumichi Hara, formerly Paul  Chalmers).   There
are  no compensation committee interlocks between the above described
individuals and another entity's compensation committee.  None of the
above  described individuals serve as an executive officer of another
entity outside the Consolidated Group.  
    
    Mr. Sandifur is the  sole
shareholder  of  National  Summit, which in  turn  owns  Summit,  Old
Standard  and  Arizona  Life.   The  Consolidated  Group  engages  in
transactions  with these companies as more fully  set  forth  in  the
following discussion.    

       
            CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS

Transactions with and between Metropolitan and Subsidiaries.

       In  the  normal  course  of  business,  Metropolitan  and  its
subsidiaries  engage in intercompany transactions.  All  subsidiaries
are  wholly  owned  by Metropolitan except Western United,  in  which
Metropolitan   owns  24.5%  directly  and  75.5%   indirectly.    See
"PROSPECTUS SUMMARY-Organizational Chart".

      During  the three year period ended September 30, 1996, Western
United  purchased  some  of  its  Receivables  from  Metropolitan  at
Metropolitan's  cost.   In these transactions,  Western  United  paid
Metropolitan  $9,351,600 for Receivables with  aggregate  outstanding
principal   balances   of  $9,550,915.   The  difference   represents
unrealized discounts net of acquisition costs.

      Metropolitan charges Western United for Receivable  acquisition
services. In 1996, 1995 and 1994, respectively, Metropolitan charged
<PAGE>                        Page 69

Receivable acquisition fees of $29.4 million, $14.6 million and $12.8
million  to Western United.  The charge to Western United  for  1996,
1995  and  1994  is  a gross amount before a loss reserve  of  $12.54
million  in  1996, $6.95 million in 1995 and $4.75  million  in  1994
which  was  provided by Metropolitan. The amounts of  the  Receivable
acquisition fees were determined based on the adjustment necessary to
convert   Receivables   purchased   by   Western   United   utilizing
Metropolitan's services to a defined fair market yield.   The  effect
of  the  fees charged was to reduce Western United's effective yields
on  the purchased Receivables to approximately 8.2% in 1996, 9.3%  in
1995  and  8.3%,  in 1994. The estimated value of the loss  guarantee
reserve,   increases  the  effective  yield  to  Western  United   to
approximately  9.6%  in  1996,  10.7%  in  1995  and  9.7%  in  1994.
Management  believes the adjusted yields represent the  yields  which
Western  United  could achieve by purchasing similar  Receivables  in
arms-length   transactions  with  unrelated  vendors.  In   addition,
Metropolitan   charges   Western  United  for  management   services,
Receivable  collection services and rental of offices and  equipment.
These charges have no effect on the Consolidated Financial Statement,
but  create  fee income for Metropolitan when presented  alone.   See
Note 19 to the Consolidated Financial Statements.

       Metwest  provides  Receivable  servicing  and  collection  for
Metropolitan   and  Western.  See  "BUSINESS-Receivable  Investments-
Servicing and Collection Procedure and Delinquency Experience."


      In the normal course of its business, Western United loans cash
to  Metropolitan and Metwest.  These loans, when made, are  generally
collateralized  by Receivables or real property.   At  September  30,
1996, there were $9.7 million in loans outstanding.

     From time to time, since December of 1979, Metropolitan has made
loans  to Consumers Group Holding Co. for purposes of increasing  the
capital and surplus of Consumers and Western United.  These loans are
in  the  form  of  surplus certificates and are repayable  on  demand
provided total capital and surplus meets statutory requirements.   As
of September 30, 1996, these loans outstanding totaled $3,800,000 and
currently bear no interest.

      In  the  three  years ended September 30, 1996, Consumers  sold
credit  guaranty  insurance to Metropolitan  for  $540,000  in  total
premiums.

Transactions with affiliates.

<PAGE>                        Page 70


      In  the  normal  course  of business, Metropolitan  engages  in
transactions with companies which were former subsidiaries and  which
are  currently  affiliated  through the common  control  of  C.  Paul
Sandifur, Jr.

      Metropolitan  Investment Securities (MIS), a broker-dealer  and
former  subsidiary  of  Metropolitan, sells the  publicly  registered
securities of Metropolitan and Summit.  Metropolitan pays commissions
to  MIS  for  the sale of its  securities pursuant to  the  terms  of
written  Selling Agreements.  During the fiscal years ended September
30, 1996, 1995, and 1994, Metropolitan paid commissions to MIS in the
amounts  of  $203,946, $1,461,033, and $1,111,044, on sales  of  debt
securities   in   the   amounts  of  $9,125,303,   $53,120,179,   and
$46,414,738,  respectively.  During the fiscal years ended  September
30, 1996, 1995, and 1994, Metropolitan paid commissions to MIS in the
amounts of $8,216, $152,427, and $17,451 on sales of preferred  stock
in   the   amounts   of  $2,143,930,  $4,665,720,   and   $1,790,100,
respectively.   Additionally, in 1996, 1995, and  1994,  Metropolitan
paid  commissions  to MIS in the amounts of $156,918,  $140,555,  and
$198,180  on  sales  of preferred stock through an  in-house  trading
list.

      Metropolitan  provides  Management and  Receivable  Acquisition
Services for a fee to Summit, Old Standard and Arizona Life.   During
1996,  such  fees  were  approximately  $1.364  million.   Also   See
"BUSINESS-Receivable Investments-Management & Receivable  Acquisition
Services".

      Metwest  provides Receivable Collection services for a  fee  to
Summit,  Old Standard and Arizona Life.  During 1996, such fees  were
approximately  $290,000.  Also See "BUSINESS-Receivable  Investments-
Servicing and Collection Procedure and Delinquency Experience."

     Management believes that the terms of the service agreements are
at least as favorable as could have been obtained from non-affiliated
parties.

     Western has negotiated a Reinsurance Agreement with Old Standard
which  became  effective in January 1997 for reinsurance  of  75%  of
specified   annuity  policies.   As  a  result  of  this   agreement,
approximately $2 to $5 million in premiums are reinsured monthly with
Old  Standard.   The  actual amount reinsured varies  depending  upon
Western's  annuity  sales volume.  The Agreement  provides  that  Old
Standard will pay Western fees of 1% of the policy issue cost based
<PAGE>                        Page 71

upon  the 75% reinsurance quota, and a monthly administrative fee  of
 .0333%  of  the reinsurance quota share of the total account  values.
Actual  fees  will  vary  depending upon the volume  reinsured.   See
"BUSINESS-Life Insurance and Annuity Operations-Reinsurance".

      Metropolitan's property development activities are provided  by
Summit   Property  Development.  Metropolitan  paid  Summit  Property
Development $2.0 million in development fees during 1996.  See  "REAL
ESTATE DEVELOPMENT".

                       OWNERSHIP OF MANAGEMENT

      The  following table sets forth certain information as to  each
class  of  equity  securities of Metropolitan  and  its  subsidiaries
beneficially owned by Metropolitan officers and directors as of March
31, 1997.
<TABLE>
<CAPTION>
                                                              Number of
                                                                Shares
                                                             Beneficially
Name                         Title of Class                Owned   %of Class
<S>                          <C>                         <C>        <C>
C. Paul Sandifur, Jr.       Metropolitan Preferred
929 West Sprague            Stock All Series                246     0.05%
Spokane, WA....             Metropolitan Class A
                            Common Stock                11.5258     8.84%

C. Paul Sandifur, Jr.
Trustee(1)..............    Metropolitan Class A
929 West Sprague            Common Stock                82.4667(1) 63.24%
Spokane, WA

Summit Securities, Inc.(2)  Metropolitan Preferred
929 West Sprague Avenue     Stock, All Series          248,025(2)   5.26%
Spokane, WA 99204           Metropolitan Class A
                            Common Stock                9.2483(2)   7.09%

Irv Marcus..............    Metropolitan
929 West Sprague            Preferred Stock,
Spokane, WA                 All Series                      406     0.01%
                            Metropolitan Class A
                            Common Stock                 1.0000     0.77%

Bruce J. Blohowiak......    Metropolitan Class A

<PAGE>                        Page 72

929 West Sprague            Common Stock                 2.0000     1.53%
Spokane, WA 99208

Charles H. Stolz........    Metropolitan Preferred
929 West Sprague            Stock, All Series            19,477     0.39%
Spokane, WA

All officers and
directors as a
group ..                  Metropolitan
                          Preferred Stock, All Series    268,154   5.60%
                          Metropolitan Class A           106.2408 81.47%
                         Common Stock
<FN>
(1)    C. Paul Sandifur, Jr., is trustee of the C. Paul Sandifur and J. Evelyn
Sandifur  irrevocable  trust  and has sole  voting  and  sole  investment
control  over these shares of stock. The trust beneficiaries are C.  Paul
Sandifur, Jr., Mary L. Sandifur and William F. Sandifur.

(2)    Summit Securities, Inc. is a wholly owned subsidiary of National Summit
Corp., a Delaware corporation, which is wholly owned by C. Paul Sandifur,
Jr.  As a result, Mr. Sandifur effectively has sole voting and investment
control over these shares.
</TABLE>

   
                       PRINCIPAL SHAREHOLDERS

      The following table sets forth information with respect to  the
beneficial owners of more than five percent of Metropolitan's  voting
stock as of March 31, 1997.

<TABLE>
<CAPTION>
                                         Shares of Class A
   Name and Address                         Common Stock        % of Class
 <S>                                         <C>                   <C>
C. Paul Sandifur, Jr.
929 West Sprague
Spokane, Washington.................              11.5258          8.84%

C. Paul Sandifur, Jr.
      Trustee......................              82.4667         63.24%


<PAGE>                        Page 73

Mary L. Sandifur
West 601 Main, Suite 714
Spokane, Washington 99201...........               8.7156         6.68%

William F. Sandifur
West 601 Main, Suite 714
Spokane, Washington 99201...........               8.9391         6.85%

Estate of
C. Paul Sandifur, Sr. and J. Evelyn Sandifur
West 601 Main, Suite 714
Spokane, Washington 99201............              6.5120         5.00%

Summit Securities, Inc.
929 West Sprague Avenue
Spokane, Washington..................              9.2483         7.09%

 (1)  C. Paul Sandifur, Jr., is trustee of the C. Paul Sandifur and J. Evelyn
Sandifur  irrevocable  trust  and has sole  voting  and  sole  investment
control over these shares of stock.  The trust beneficiaries are C.  Paul
Sandifur, Jr., Mary L. Sandifur and William F. Sandifur.

</TABLE>
    
                           INDEMNIFICATION

       Metropolitan's   Articles   of   Incorporation   provide   for
indemnification of Metropolitan's directors, officers  and  employees
for  expenses  and other amounts reasonably required to  be  paid  in
connection  with  any civil or criminal proceedings  brought  against
such  persons  by  reason  of  their  service  of  or  position  with
Metropolitan  unless  it  is adjudged in such  proceedings  that  the
person  or persons are liable due to willful malfeasance, bad  faith,
gross  negligence or reckless disregard of his or her duties  in  the
conduct of his or her office.  Such right of indemnification  is  not
exclusive  of  any other rights that may be provided by  contract  or
other  agreement  or provision of law.  Such indemnification  is  not
currently covered by insurance.

      As  of  the  date of this Prospectus, no contractual  or  other
agreements  providing for indemnification of officers,  directors  or
employees were in existence other than as set forth above.   Pursuant
to  Washington  State law, Metropolitan is required to indemnify  any
director for his reasonable expenses incurred in the successful
<PAGE>                        Page 74

defense  of any proceeding in which such director was a party because
he was a director of Metropolitan.

      Insofar  as indemnification for liabilities arising  under  the
Securities  Act of 1933 may be permitted to Metropolitan's  officers,
directors   or   controlling  persons  pursuant  to   the   foregoing
provisions, Metropolitan has been informed that in the opinion of the
Securities  and Exchange Commission such indemnification  is  against
public policy as expressed in the Act and is therefore unenforceable.


ITEM 2.   PROPERTIES.

     Metropolitan Mortgage & Securities Co., Inc. (Metropolitan)  was
     established  and  incorporated in the  State  of  Washington  in
     January,  1953.  Its principal executive offices are located  at
     929  West  Sprague Avenue, Spokane, WA.  Its mailing address  is
     P.O.  Box 2162, Spokane, WA 99210-2162 and its telephone  number
     is (509) 838-3111.

     See  "BUSINESS - Receivable Investments; BUSINESS - Real  Estate
     Development"  under  Item  1 and Notes  2  and  3,  Consolidated
     Financial Statements.

ITEM 3.   LEGAL PROCEEDINGS.

     There are no material pending legal proceedings.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     N/A
                                  
                               PART II

ITEM  5.    MARKET  FOR  THE REGISTRANT'S COMMON EQUITY  AND  RELATED
STOCKHOLDER MATTERS.

     (a)  There is no market for the registrant's common stock.

     (b)  There were 8 Class A Common stockholders

     (c)  See "Item 6. Selected Financial Data."


<PAGE>                        Page 76

ITEM 6.   SELECTED FINANCIAL DATA.

                      SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>      The  consolidated financial data shown below as of September  30,
1996  and 1995 and for the years ended September 30, 1996, 1995, and 1994 (other
than  the Ratio of Earnings to Fixed Charges and preferred stock dividends) have
been  derived  from,  and  should  be read in conjunction  with,  Metropolitan's
consolidated  financial  statements, related notes, and Management's  Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations  appearing
elsewhere  herein.  The consolidated financial data shown as  of  September  30,
1994,  1993  and 1992 and for the years ended September 30, 1993 and  1992  have
been  derived  from  audited  financial  statements  not  included  herein.  The
consolidated  financial statements as of and for the years ended  September  30,
1996,  1995,  1994 and 1993 have been audited by Coopers & Lybrand  L.L.P.   The
consolidated  financial statements as of and for the year  ended  September  30,
1992 has been audited by BDO Seidman.
   
                          Six Months Ended                            
                             March 31,                                
                            (Unaudited)                   Year Ended September 30,
                        --------  ---------   -----------------------------------------------
                                              ----------
                          1997       1996       1996      1995      1994      1993      1992
                                                (Dollars in Thousands
                                              Except Per Share Amounts)
<S>                     <C>       <C>         <C>       <C>       <C>       <C>       <C>
CONSOLIDATED                                                                          
STATEMENTS OF INCOME
DATE
Revenues                 $74,349     $72,079   $156,672  $138,107  $138,186  $133,113  $121,22
                                                                                             1
                         =======     =======   ========  ========  ========  ========  =======
                                                                                             =
Income before minority                                                                        
interest,                                                                                     
extraordinary item and                                                                        
cumulative effect of                                                                          
change in accounting      $5,063      $1,473   $  8,146  $  6,376  $  5,702  $  8,558        $
principle                                                                                3,290
<PAGE>    Page 77
Income allocated to                                                                           
minority interests           (62)        (36)      (108)      (73))    (224)     (255)   (363)
                         --------    --------   --------   -------- --------  -------- -------
                                                                                             -
Income before                                                                                 
extraordinary item and                                                                        
cumulative effect of                                                                          
change in accounting       5,001       1,437      8,038     6,303     5,478     8,303    2,927
for income taxes
Extraordinary item (1)        --          --         --        --        --        --      651
Cumulative effect of                                                                          
change in accounting                                                                          
for income taxes (2)          --          --         --        --        --    (4,300)      --
                        --------    --------   --------  --------  --------   -------- -------
                                                                                             -
Net income                 5,001       1,437      8,038     6,303     5,478     4,003    3,578

Preferred stock           (2,037)     (1,824)    (3,868)   (4,038)   (3,423)   (3,313) (3,399)
dividends                --------    --------   --------  --------  --------  -------- -------
                                                                                             -

Income (loss)                                                                                 
applicable to common      $2,964       $(387)    $4,170    $2,265    $2,055   $   690        $
stockholders            ========      =======  ========  ========  ========  ========      179
                                                                                       =======
                                                                                             =
                                                                                              
Ratio of Earnings to                                                                          
Fixed Charges               1.74        1.06       1.46      1.35      1.29      1.43     1.21
Ratio of Earnings to                                                                          
Fixed Charges and                                                                    
Preferred Stock             1.33                   1.14      1.03      1.04      1.17
Dividends (4)                                                                        
PER COMMON SHARE DATA                                                                         
(3):
Income (loss) before                                                                          
extraordinary item and                                                                        
cumulative effect of                                                                          
change in accounting     $22,801     $(2,974)   $32,073  $ 17,288  $ 14,996  $ 37,239  $(3,579
principle                                                                                    )
Extraordinary items           --          --         --        --        --        --    4,932
(1)
                                                                                              
Cumulative effect of                                                                          
change in accounting          --          --         --        --        --   (32,089)      --
principle (2)           --------    --------   --------  --------  --------   -------- -------
                                                                                             -
<PAGE>      Page 78
Income (loss)                                                                                 
applicable to common     $22,801     $(2,974)   $32,073  $ 17,288   $14,996   $ 5,150        $
stockholders (5)        ========     ========  ========  ========  ========  ========    1,353
                                                                                       =======
                                                                                             =
Weighted Average                                                                              
Number of Common                                                                              
Shares Outstanding(3)        130         130        130       131       137       134      132
                        ========    ========   ========  ========  ========  ========  =======
                                                                                             =
                                                                                              
Cash Dividends Per                                                                            
Common Share            $     --    $     --   $     --  $  3,800  $    675  $    675  $     -
                        ========    ========   ========  ========  ========  ========        -
                                                                                       =======
                                                                                             =
CONSOLIDATED BALANCE                                                                          
SHEET DATA:

Total Assets            $1,132,8  $1,116,833  $1,282,65  $1,078,4  $1,063,2  $1,031,9  $982,25
                              28                      9        68        90        58        9
Debt Securities, Other                                                                        
Debt Payable and                                                                              
Securities Sold, Not     195,365     227,323    363,427   226,864   261,500   234,497  230,814
Owned
Stockholders' Equity      51,027      40,889     46,343    40,570    32,625    32,781   28,260
                                                                                              
                                                                                              
                                                                                              
    
</TABLE>

<PAGE>                        Page 79


       (1)    Benefit   from   utilization   of   net   operating   loss   carry
forwards.

       (2)      Change   in   accounting  principles   reflects   the   adoption
of    Statement    of    Financial    Accounting    Standards    No.    109    -
"Accounting for Income Taxes."

        (3)       All    information   retroactively   reflects   the    reverse
common   stock   split   of   2,250:1   which   occurred   during   the   fiscal
year ended September 30, 1994.

       (4)    The   consolidated  ratio  of  earnings  to  fixed   charges   and
preferred   dividends   was  1.14,  1.03,  1.04   and   1.17   for   the   years
ended    September    30,    1996,   1995,   1994   and   1993,    respectively.
Earnings    were   insufficient   to   meet   fixed   charges   and    preferred
dividends   for   the   year   ended  September  30,  1992,   by   approximately
$783,000.

       Assuming   no   benefit   from   the   earnings   of   its   subsidiaries
with    the   exception   of   direct   dividend   payments,   the   ratio    of
earnings     to     fixed     charges    and     preferred     dividends     for
Metropolitan   alone   was   1.11,  1.05,  1.34   and   1.06   for   the   years
ended    September    30,    1996,   1995,   1994   and   1993,    respectively.
Earnings    were   insufficient   to   meet   fixed   charges   and    preferred
dividends   for   the   year   ended  September  30,  1992,   by   approximately
$13,012,000.

        The    consolidated    ratio    of    earnings    to    fixed    charges
excluding   preferred   stock  dividends  was   as   follows   for   the   years
ended   September  30,  1996  -  1.46;  1995  -  1.35;  1994  -  1.29;  1993   -
1.43;   and   1992   -   1.21.   The  ratio  of  earnings  to   fixed   charges,
excluding    preferred    stock    dividends,   for    Metropolitan,    assuming
no    benefit    from    the   earnings   of   its   subsidiaries    with    the
exception   of   direct   dividend   payments   was   1.48,   1.40,   1.36   and
1.31   for   the  years  ended  September  30,  1996,  1995,  1994   and   1993,
respectively.    Such    "parent   only"   earnings   of    Metropolitan    were
insufficient   to   meet   fixed   charges  for   the   year   ended   September
30, 1992 by approximately $7,701,000.

        (5)    Earnings   per   common   share   are   computed   by   deducting
preferred   stock   dividends  from  net  income   and   dividing   the   result
by the weighted average number of shares of common stock
<PAGE>                        Page 79

outstanding.      There     were    no    common    stock     equivalents     or
potentially     dilutive    securities    outstanding    during     any     year
presented.


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                    AND RESULTS OF OPERATIONS
                                
Introduction

         Consolidated  Group net income after  income  taxes  and
minority  interest was approximately $8.0 million for the  fiscal
year ended September 30, 1996 as compared to $6.3 million for the
comparable  1995 period and $5.5 million for the comparable  1994
period.    The   increase  in  1996  over  1995   was   primarily
attributable to a net increase of $7.4 million in realized  gains
from  the  sales of investments and Receivables, an  increase  of
$1.3  million in net interest sensitive income and expense, being
offset  by  a  $1.2  million decrease in gains from  real  estate
sales,  a decrease of $1.5 million in fees, commissions,  service
and  other  income, an increase of $2.2 million in the  provision
for losses on real estate assets, a $.8 million increase in other
operating  expenses, including salaries and benefits, commissions
to  agents, general operating expenses and capitalized costs, net
of  amortization and an increase of $1.2 million in income  taxes
and  income allocated to minority stockholders.  The increase  in
1995  over  1994 was primarily attributable to a net increase  of
$1.4  million in net gains from real estate sales, a decrease  of
$1.4  million in the provision for losses on real estate  assets,
an  increase of $1.3 million in realized net gains from the sales
of  investments and Receivables, an increase of $1.6  million  in
expenses capitalized as deferred costs, net of amortization,  and
an  improvement of $.8 million in fees, commissions, service  and
other  income, all which were partially offset by  a  decline  of
$1.6 million in net interest sensitive income and expense and  an
increase of $4.2 million in commissions to agents.

      The  Company  implements  its primary  investment  goal  to
maximize  its risk adjusted rate of return by investing  in  non-
conventional    real   estate   Receivables.     Non-conventional
Receivables  are  typically  Receivables  not  originated  by   a
regulated financial institution and not underwritten to FNMA or
<PAGE>                        Page 80

FHA  underwriting guidelines.   Normally, either the borrower  or
the  collateral will not meet sufficient FNMA or FHA underwriting
guidelines  to qualify for conventional financing and the  seller
will  be required to provide the financing to complete the  sale.
These   "seller   financed  Receivables"  or  "seller   take-back
Receivables"  are  the  types  of  non-conventional   Receivables
normally  acquired  by the Company.  Because  borrowers  in  this
market  generally  have blemished credit records,  the  Company's
underwriting  practices  focus more strongly  on  the  collateral
value as the ultimate source for repayment.  In conjunction  with
its  investment  in  non-conventional Receivables,  while  higher
delinquency rates are expected, the Company believes this risk is
generally  offset by the value of the underlying  collateral  and
the superior yields over conventional financing.    

      During the three year period ended September 30, 1996,  the
Consolidated Group operated in an environment of somewhat  narrow
fluctuations  in interest rate levels with rates trending  up  in
1996 after declining in late 1995 and with a generally increasing
trend  in  late  1994.  Over the three year period,  the  general
decrease in interest rate levels positively impacted earnings and
increased the fair value of the portfolio of predominantly  fixed
rate  investments.  A portion of this improvement  in  value  was
recognized  with  the  realization of  gains  from  the  sale  of
investment  securities  and Receivables of  $11.9  million,  $4.4
million  and  $3.1 million in 1996, 1995 and 1994,  respectively.
The net effect of the sales was to recognize the present value of
future  income  from the Receivables sold and  to  reduce  future
income  to the extent that the proceeds from sales were  invested
at lower rates of return.  For further information concerning the
investment  portfolio, See "BUSINESS-Life Insurance  and  Annuity
Operations" & "BUSINESS-Securities Investments".  The  Receivable
portfolio also experienced higher than normal prepayments  during
the  periods  of  declining  rates  which  increased  income   by
triggering  the  recognition  of  unamortized  discounts  at   an
accelerated rate.

      Although  the  national  economy has  experienced  moderate
growth  over  the  past  three years,  the  Consolidated  Group's
financial results were not adversely impacted in any material way
because   of:   (1)  the  wide  geographic  dispersion   of   its
Receivables;  (2)  the  relatively small  average  size  of  each
Receivable; (3) the primary
<PAGE>                        Page 81

concentration  of  investments in residential  Receivables  where
market   values   have  been  more  stable  than  in   commercial
properties; and (4) a continuing strong demand for tax-advantaged
products, such as annuities.

         During  1995, the Consolidated Group  sold  two  of  its
subsidiary  operating  companies and  discontinued  its  property
development  division.  In January 1995, the  Consolidated  Group
sold   its   broker/dealer  subsidiary,  MIS,   to   Summit   and
discontinued  its property development activities.  Old  Standard
was  sold to Summit in May, 1995.  The financial results of these
transactions were not material to the Consolidated Group.   Also,
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".    

      During  1996, construction on a major timeshare development
project   in   Kauai,  Hawaii  was  completed.   At   completion,
approximately $21.4 million had been invested.  The  sales  price
of  each timeshare week is projected to range between $14,000 and
$18,000  with  an expected sellout in approximately  early  1998.
See "Business-Real Estate Development-Lawai Beach Resort".

        Net income in 1996, 1995, 1994 and 1993 was sufficient to
cover   fixed   charges   including  preferred   stock   dividend
requirements, in contrast to shortfalls in 1992 and prior  years.
After considering the effects of potentially non-recurring income
items such as gains from insurance settlements and the gains from
sales  of  investments,  Receivables and real  estate,  the  1996
income  would  have been insufficient to cover fixed  charges  by
approximately  $9.7  million.  Additionally, the  elimination  of
similar   items  in  1995  and  1994  would  have   resulted   in
insufficient  earnings  to cover fixed charges  by  approximately
$6.8  million and $4.2 million, respectively.  See "RISK FACTORS"
& "SELECTED CONSOLIDATED FINANCIAL DATA".    

Revenues and Expenses

      Revenue  for the Consolidated Group of $156.7  million  for
1996  showed  a  substantial increase  from  the  $138.1  million
reported in the prior year.  Revenues of $138.1 million  for  the
fiscal  year  ended  September 30, 1995 was relatively  unchanged
from the $138.2 million reported for the same period in 1994. The
$18.6  million increase in 1996 was primarily attributable to  an
increase of $6.5
<PAGE>                        Page 82

million  from interest related revenues, a $6.3 million  increase
in  real  estate  sales and a $8.3 million increase  in  realized
gains  on  sales  of  Receivables. The  modest  decline  in  1995
included a reduction of $1.7 million in other investment interest
and a decrease of $1.1 million in realized net gains on sales  of
investments, offset by an increase of $2.4 million in  net  gains
from the sale of Receivables.

     Expenses of operation for the Consolidated Group were $144.3
million, $128.6 million and $129.5 million for fiscal years ended
September 30, 1996, 1995 and 1994, respectively.  The increase in
expenses  in 1996 over 1995 included an increase of $2.8  million
in the cost of insurance policy and annuity benefits, an increase
of  $2.4 million in interest expense, an increase of $2.2 million
in  the  provision  for losses on real estate assets  and  a  $.8
million  increase in other operating expenses, including salaries
and  benefits, commissions to agents, general operating  expenses
and  capitalized costs, net of amortization.  The slight  decline
in  expenses in 1995 as compared to 1994 included an increase  of
$3.6 million in the cost of insurance policy and annuity benefits
and  an  increase  of $4.2 million in recognized  commissions  to
agents due to an increase in volume.  These increases were offset
by  a  $3.5 million decrease in interest expense, a $2.0  million
decrease in the cost of real estate sold, a $1.4 million decrease
in  the  provision for losses on real estate, and an increase  of
$1.6  million in the amount of expenses capitalized  as  deferred
costs, net of amortization.

Interest Sensitive Income and Expense

     Management monitors interest sensitive income and expense as
it  manages  objectives for the financial results of  operations.
Interest  sensitive income consists of interest  on  Receivables,
earned  discount  on  Receivables, insurance revenues  and  other
investment  interest.   Interest sensitive  expense  consists  of
interest  expense  on  borrowed money and  insurance  policy  and
annuity benefits.

         The  Consolidated  Group is in a  "liability  sensitive"
position  in that its interest sensitive liabilities  reprice  or
mature  more  quickly  than  do its  interest  sensitive  assets.
Consequently, in a rising interest rate environment, the net
<PAGE>                        Page 83

return  from interest sensitive assets and liabilities will  tend
to decrease.  Conversely, in a falling interest rate environment,
the  net  return  from interest sensitive assets and  liabilities
will  tend  to  improve. As with the impact  on  operations  from
changes  in  interest rates, the Company's NPV (the  Net  Present
Value)  of  financial  assets  and  liabilities  is  subject   to
fluctuations in interest rates.  The Company continually monitors
the sensitivity of net income and NPV of its financial assets and
liabilities to changes in interest rates.    


<PAGE>                        Page 85

   
      The  following table presents, as of September 30, 1996, the  Consolidated
Group's estimate of the change in its NPV of financial assets and liabilities if
interest  rate  levels  generally were to increase or decrease  by  1%  and  2%,
respectively.   These calculations, which are highly subjective  and  technical,
may differ from actual results.  See "Asset/ Liability Management".
<TABLE>
<CAPTION>


                                                                 Interest Rate Change
                            Carrying    Fair Value   Decrease   Decrease   Increase 1%   Increase
                            Amounts                     1%         2%                       2%
                                                    (Dollars in Thousands)
<S>                         <C>         <C>         <C>        <C>         <C>          <C>
Financial Assets:                                                                       
Cash and cash equivalents     $167,879    $167,879    $167,879    $167,879    $167,879    $167,879
Investments                    163,303     157,755     170,612     178,393     156,442     149,990
Real estate contracts                                                                             
 and mortgage notes            642,571     668,373     691,541     716,159     646,543     625,954
Other receivable               107,494     109,258     114,885     120,916     104,077      99,232
 investments                ----------  ----------  ----------  ----------  ----------  ----------
                            $1,081,247  $1,103,265  $1,144,917  $1,183,347  $1,074,941  $1,043,055
                            ==========  ==========  ==========  ==========  ==========  ==========
                                                                                                  
Financial Liabilities:                                                                            
Annuity reserves              $837,366    $837,366    $865,487    $894,936    $810,506    $784,842
Debentures payable             189,321     191,631     193,584     195,566     189,703     187,803
Debt payable                    38,450      38,486      39,822      41,266      37,141      35,895
Securities sold-not owned      132,652     132,652     137,386     142,363     128,135     123,836
                            ----------  ----------  ----------  ----------  ----------  ----------
                            $1,197,789  $1,200,135  $1,236,279  $1,274,131  $1,165,485  $1,132,376
                            ==========  ==========  ==========  ==========  ==========  ==========
    



<PAGE>                        Page 86


      Net  interest sensitive income was $27.8 million for the fiscal
year ended September, 30, 1996.  The comparable results for 1995  and
1994  were  $26.5 million and $28.1 million, respectively.   Interest
rates  in  1996  remained relatively stable with slightly  increasing
rates  as  the  fiscal  year closed.  Interest rates  were  generally
increasing  over  1995  before declining  later  in  the  year  which
contributed to the decrease of $1.6 million in net interest sensitive
income.  Also  contributing to the changes in net interest  sensitive
income  was  the capitalization of approximately $2.5  million,  $2.7
million  and  $2.2  million  for the  years  1996,  1995,  and  1994,
respectively,  of  interest  associated  with  various  real   estate
development projects owned by the Consolidated Group.

Real Estate Sales

      The  Consolidated  Group  is  in the  real  estate  market  due
primarily  to  its  repossession of properties  following  Receivable
defaults and its investment in a major timeshare development  project
in Kauai, Hawaii.  See "BUSINESS-Real Estate Development."

     At September 30, 1996, excluding timeshare development property,
approximately 80% of real estate owned by the Consolidated  Group  is
located in the Pacific Northwest (Alaska, Washington, Oregon,  Idaho,
Montana),  which has experienced a stronger more stable economy  than
many  areas  of  the nation in the past several years.  Consequently,
management  believes that the sale of these assets  will  be  largely
dependent on the attractiveness of the Pacific Northwest marketplace.
Of  the  property  owned in the Pacific Northwest, approximately  $13
million is invested in commercial developments with approximately $35
million in undeveloped land.

      The Consolidated Group is engaged in the development of various
properties  acquired  in the course of business through  repossession
and  as  investment  property.   The development  or  improvement  of
properties  is  undertaken for the purpose  of  enhancing  values  to
increase salability and to maximize profit potential.

      Real  estate sales exceeded cost of those sales by $1.7 million
in 1996, $2.9 million in 1995, and $1.5 million in 1994.  Included in
these  results are sales of timeshare units with a net  loss  of  $.7
million  and $.3 million in 1996 and 1994, respectively,  and  a  net
gain  of $.9 million 1995.  Metropolitan has engaged an affiliate  of
the Shell Group, Chicago, Illinois, Shell-Lawai ("Shell") to provide
<PAGE>                        Page 86

management  services and sell timeshare units at  Lawai  Beach.   See
"BUSINESS-Real   Estate  Development-Lawai  Beach   Resort".     This
agreement  provides for a fixed fee to Shell plus  an  incentive  fee
based upon future sales after a base amount of cash flow is generated
by  the  property.  Sales of timeshare units in 1996, 1995  and  1994
were  approximately $22.8 million, $23.6 million and  $17.6  million,
respectively.

     Real estate sales, including timeshare unit sales, totaled $45.6
million for 1996, $39.4 million for 1995 and $40.0 million for  1994.
Sales  of repossessed properties have more than kept pace with yearly
additions resulting in a total investment in repossessed real  estate
of  $36.2  million at September 30, 1996, $38.0 million at  September
30,  1995  and  $39.0 million at September 30, 1994.   The  aggregate
investment in real estate held for sale and development decreased  to
$84.3  million at September 30, 1996, from $91.1 million at September
30,  1995, which increased from $76.8 million at September 30,  1994.
The  decrease  from  1995  to  1996  is  attributable  to  the  final
completion of the timeshare project in Kauai, Hawaii in October  1995
and  the sale of several large commercial properties throughout 1996.
The  increase  of  $14.3  million in  1995  over  1994  is  primarily
attributable  to the continuing development of the timeshare  project
and  the  development of a factory outlet mall in Pasco,  Washington.
In  addition to timeshare unit development, the Consolidated Group is
in  the general business of holding and developing property for sale.
The largest investments in such activities at September 30, 1996 were
a  $11.6 million development located in downtown Spokane adjacent  to
the central business district and a $10.5 million factory outlet mall
development   located  in  Pasco,  Washington.   See  "BUSINESS-Other
Development Properties".

      Gains or losses on real estate sold (excluding timeshare units)
are  a function of several factors.  Management's experience with the
most  significant of these factors during the last three fiscal years
is set forth below:


</TABLE>
<TABLE>
                                    For the Fiscal Year Ended
                                           September 30,
                                       1996       1995     1994
                                         (Dollars in Thousands)
<S>                                   <C>        <C>      <C>
  Amount of delinquencies over
    three months at fiscal year end   $26,500    $17,500 $19,000

  Amount of foreclosures during
    the fiscal year                   $14,271    $13,834 $19,117


<PAGE>                        Page 87

  Amount of foreclosed real estate
    held for sale at fiscal year end  $36,158    $38,004 $39,037

  Gain (loss) on sale of the property
    during the fiscal year             $2,469    $1,992  $ 1,793
</TABLE>

      The  principal amount of Receivables in arrears for  more  than
ninety  days as of September 30, 1996, 1995 and 1994 was  3.9%,  2.8%
and   3.1%,  respectively,  stated  as  a  percentage  of  the  total
outstanding  principal amount of Receivables.   See  Note  2  to  the
Consolidated   Financial  Statements.   Improving  the   Consolidated
Group's  collection procedures, reducing delinquencies  and  reducing
real  estate  held  for  sale and development, including  repossessed
property, continue to be ongoing goals of management.

      The increase in three month delinquencies from 1995 to 1996  of
approximately $9 million was primarily the result of an  increase  in
the outstanding principal amount of Receivables, a higher delinquency
rate  on  timeshare Receivable and an overall increase in the general
delinquency rate for all Receivables.  Additionally, as only  current
Receivables  could be sold in the securitizations,  the  Consolidated
Group  focused more closely on the Receivables to be included in  the
Receivable securitizations.  Subsequent to the second securitization,
which closed in November 1996, the Consolidated Group has renewed its
efforts  on controlling the delinquency in its Receivables portfolio.
Also, effective February 1997, the Consolidated Group will bring  in-
house  the  servicing of timeshare Receivables which were  previously
serviced by a third party in Hawaii.  The Consolidated Group believes
the  increased  delinquency  rates were adequately  reserved  as  the
Consolidated  Group  has increased the allowance  for  loss  on  real
states  assets associated with Receivables from $6.3 million in  1995
to $7.9 million 1996.

Provision for Losses on Real Estate Assets

      During  the years ended September 30, 1996, 1995 and 1994,  the
Consolidated  Group  provided $6.4 million,  $4.2  million  and  $5.5
million,  respectively,  for  losses  on  real  estate  assets.    At
September  30,  1996,  1995  and 1994,  the  Consolidated  Group  had
aggregate  allowances  for  losses on real  estate  assets  of  $10.2
million, $8.1 million and $9.1 million, respectively, on real  estate
assets  of $735 million, $679 million and $644 million, respectively.
See Notes 3 and 6 to the Consolidated Financial Statements.


<PAGE>                        Page 88

Non-Interest Income and Expense

      Non-interest income, composed of "Fees, Commissions,  Services,
and  Other Income" on the income statement, was $4.3 million for  the
fiscal  year  ended September 30, 1996, $5.8 million for  the  fiscal
year  ended  September 30, 1995, and $5.0 million for the  comparable
period in 1994.  Income sources include service fees and late charges
in  connection with Receivables, charges for loan servicing and other
services  provided  to  outside  affiliated  companies,  and   rents,
commissions  and other revenues primarily associated with  the  Lawai
Beach  Resort, Kauai, Hawaii.  The decrease of $1.5 million  in  1996
from  1995  was primarily the result of ceasing the operations  of  a
restaurant  at  Lawai  Beach Resort and converting  it  to  a  leased
operation, thereby reducing both revenues and related expenses, while
the  increase  of  $.8  million  in  1995  over  1994  was  primarily
attributable  to  charges  for  services  rendered  to  three  former
subsidiary  companies which were sold in September of  1994,  and  in
January and May of 1995.

      Non-interest  expense  consists of  all  non-interest  expenses
except  the cost of real estate sold and the provision for losses  on
real  estate assets.  Non-interest expense was $26.9 million for  the
year  ended  September  30, 1996 compared to $26.1  million  for  the
fiscal  year  ended  September 30, 1995 and  $23.6  million  for  the
comparable  period in 1994.  The increase in cost of $.8  million  in
1996  over  1995  was primarily attributable to an increase  of  $1.4
million  in  salaries and benefits and a decrease of $1.9 million  in
capitalized costs, net of amortization being only partially offset by
a  $2.0  million reduction in commissions to agents and a $.5 million
decrease  in other operating expenses. The increase in cost  of  $2.5
million  in 1995 over 1994 was primarily attributable to an  increase
of  $4.2  million in the recognition of commissions paid to insurance
agents  and  other  agents which were offset  only  partially  by  an
increase  in  the  amount  capitalized  as  deferred  costs,  net  of
amortization.  See Note 13 to the Consolidated Financial Statements.

Realized Net Gains (Losses) on Sales of Investments and Receivables

        The Consolidated Group invests in securities and  Receivables
as well as real estate investment properties.  The Consolidated Group
adopted  SFAS No. 115 on September 30, 1993 and since that  time  has
classified  its investments in debt and equity securities  as  either
"trading", "available-for-sale" or "held-to-maturity".  From time  to
time, gains or losses are recognized on trading positions and
<PAGE>                        Page 89

securities classified as "available-for-sale" may be sold at  a  gain
or  a  loss.  Net losses from the sale of investments was $.8 million
in  1996  with  net gains of $.03 million and $1.1  million  for  the
fiscal  years  ended September 30, 1995 and 1994, respectively.   See
"BUSINESS-Securities Investments".   The Consolidated Group purchases
Receivables collateralized by real estate, lottery prizes  structured
settlements,  and  annuities.  See "BUSINESS-Receivable  Investments"
and  Notes  2 and 4 to the Consolidated Financial Statements.    Such
assets are generated through the ongoing production operations of the
Consolidated  Group.  At times, Receivables which have  increased  in
value,  primarily  from a decreasing interest  rate  environment,  or
which  exceed internal demand, may be remarketed either through whole
loan  sales or securitizations.  See "BUSINESS-Receivable Sales"  and
"RISK  FACTORS".  Net gains from the sale of Receivables  were  $12.7
million,  $4.4  million and $2.0 million for the fiscal  years  ended
September 30, 1996, 1995 and 1994, respectively.    

Asset/Liability Management

         The  Consolidated  Group is subject to  interest  rate  risk
because  most of its assets and liabilities are financial in  nature.
Generally, the Consolidated Group's financial assets (primarily  cash
and  cash  equivalents,  Receivables and  fixed  income  investments)
reprice   more   slowly  than  the  Consolidated  Group's   financial
liabilities  (primarily securities sold, not  owned,  debentures  and
annuities).  In a rising rate environment, this mismatch will tend to
reduce  earnings, while in a falling rate environment, earnings  will
tend to increase.   During fiscal 1997, approximately $256 million of
interest  sensitive assets are expected to reprice or mature.   These
assets  consist  of  approximately $42 million  of  Receivables,  $46
million of fixed income investments and $168 million of cash and cash
equivalents.  For liabilities, most of the balance of life  insurance
and  annuity  contracts  may  be repriced  during  1997.   Management
estimates  this  amount at $628 million.  In addition,  approximately
$50 million of debentures, $37 million of other debt and $133 million
of  securities  sold, not owned, will mature or reprice  during  that
period.   At  September 30, 1996, these estimates result in  interest
sensitive  liabilities  in  excess of interest  sensitive  assets  of
approximately  $592 million, or a ratio of interest sensitive  assets
to interest sensitive liabilities of approximately 330%.    

         The  Consolidated Group is able to manage this liability  to
asset  mismatch of approximately 3.3:1 by the fact that approximately
74%  of  the  interest sensitive liabilities are life  insurance  and
annuity contracts which are subject to surrender charges.  These
<PAGE>                        Page 90

contracts have maturities which extend for as long as nine years with
surrender  charges of decreasing amounts during their term.   At  the
option  of  the  Consolidated Group, these contracts are  subject  to
annual  repricing.   In  periods of declining  interest  rates,  this
feature  is beneficial as it allows the Consolidated Group to reprice
its  liabilities at lower market rates of interest.   In  periods  of
increasing  interest  rates,  such  liabilities  were  protected   by
surrender charges of approximately $20 million at September 30, 1996.
Depending on the remaining surrender charges, the Consolidated  Group
has  the  option to extend any interest rate increase over a  two  to
three year period, thereby making it not generally economical for  an
annuitant to pay the surrender charge in order to receive payment  in
lieu  of  accepting  a rate of interest that is  lower  than  current
market  rates of interest.  As a result, the Consolidated  Group  may
respond  more  slowly  to increases in market  interest  rate  levels
thereby  diminishing  the  impact of  the  current  mismatch  in  the
interest   sensitivity  ratio.   Additionally,   through   Receivable
securitizations, the Consolidated Group has increased its ability  to
raise  necessary liquidity to manage the liability to asset mismatch.
If  necessary, the proceeds from the securitization could be used  to
payoff maturing liabilities.    

Effect of Inflation

     During the three year period ended September 30, 1996, inflation
has  had  a  generally  positive impact on the  Consolidated  Group's
operations.   This  impact has primarily been indirect  in  that  the
level  of  inflation  tends  to impact interest  rates  on  both  the
Consolidated Group's assets and liabilities.  See "Interest Sensitive
Income  and Expense".  However, both interest rate levels in  general
and  the cost of the Consolidated Group's funds and the return on its
investments are influenced by additional factors such as the level of
economic  activity  and  competitive  or  strategic  product  pricing
issues.   The  net effect of the combined factors on the earnings  of
the  Consolidated Group has been a slight improvement over the  three
year  period  in the positive spread between the rate  of  return  on
interest earning assets less the cost of interest paying liabilities.
Inflation  has not had a material effect on the Consolidated  Group's
operating  expenses.  Increases in operating expenses  have  resulted
principally   from  increased  product  volumes  or  other   business
considerations.

      Revenues  from  real  estate sold are  influenced  in  part  by
inflation, as, historically, real estate values have fluctuated  with
the rate of inflation.  However, management is unable to quantify the
effect of inflation in this respect with any degree of accuracy.

<PAGE>                        Page 91


New Accounting Rules

      In  May, 1993, Statement of Financial Accounting Standards  No.
114 (SFAS No. 114) "Accounting by Creditors for Impairment of a Loan"
was  issued.  SFAS  No. 114 requires that certain impaired  loans  be
measured  based  on the present value of expected future  cash  flows
discounted at the loans' effective interest rate or the fair value of
the collateral.  The Consolidated Group adopted this new standard  on
October 1, 1995. The adoption of SFAS No. 114 did not have a material
effect  on the consolidated financial statements.  See Note 1 to  the
Consolidated Financial Statements.

      In  March 1995, Statement of Financial Accounting Standards No.
121  (SFAS  No.  121), "Accounting for the Impairment  of  Long-Lived
Assets  and  for  Long-Lived Assets to be Disposed of,"  was  issued.
SFAS  No.  121  requires  certain  long-lived  assets,  such  as  the
Consolidated  Group's real estate assets, be reviewed for  impairment
in  value whenever events or circumstances indicate that the carrying
value  of an asset may not be recoverable.  In performing the review,
if  expected future undiscounted cash flows from the use of the asset
or  the  fair value, less selling costs, from the disposition of  the
asset  is less than its carrying value, an impairment loss is  to  be
recognized.   The Consolidated Group is required to  adopt  this  new
standard  on  October  1,  1996.  The  Consolidated  Group  does  not
anticipate  that  the adoption of SFAS No. 121 will have  a  material
effect on the consolidated financial statements.

        In June 1996, Statement of Financial Accounting Standards No.
125  (SFAS 125), "Accounting for Transfers and Servicing of Financial
Assets  and  Extinguishments of Liabilities" was  issued.   SFAS  125
provides  accounting and reporting standards based  on  a  consistent
application  of  a  financial components  approach  that  focuses  on
control.  Under this approach, after a transfer of financial  assets,
an  entity recognizes the financial and servicing assets it  controls
and  the  liabilities it has incurred, derecognizes  financial  asset
when  control has been surrendered and derecognizes liabilities  when
extinguished.   This  statement  provides  consistent  standards  for
distinguishing  transfers of financial assets  that  are  sales  from
transfers  that  are secured borrowings.  SFAS 125 is  effective  for
transfers  and  servicing of financial assets and extinguishments  of
liabilities occurring after December 31, 1996.  The Company does  not
expect that the application of the provisions of SFAS 125 will have a
<PAGE>                        Page 92

material  effect  on  the Company's financial condition,  results  of
operations or cash flows.    

Liquidity and Capital Resources

      The  Consolidated Group's sources of liquidity are tied to  its
ability  to renew, maintain or obtain existing and additional sources
of   cash.   The  Consolidated  Group  has  successfully  met   these
requirements during the past three years and has continued to  invest
funds generated by operations, financing activities, Receivables  and
investments.

      Cash  provided from operating activities was $185.9 million  in
1996,  $40.8 million in 1995 and $46.0 million in 1994. Cash utilized
by  the  Consolidated  Group in its investing  activities  was  $54.1
million  in 1996, $43.6 million in 1995 and $106.8 million  in  1994.
Cash provided to the Consolidated Group from its financing activities
was  $3.3 million in 1996, $6.3 million in 1995 and $17.2 million  in
1994.  These  cash  flows have resulted in year  end  cash  and  cash
equivalent balances of $167.9 million in 1996, $32.8 million in  1995
and $29.3 million in 1994.  The increase in cash and cash equalivents
of $137.1 million in 1996 over 1995 was almost entirely the result of
the  proceeds  from  the  sale of securities,  not  owned  of  $132.7
million.  These securities were sold "short" as an economic hedge  to
protect the profits in the Receivable securitization which closed  in
November  1996.   In 1996, Receivable acquisitions of $382.1  million
and  $28.5  million  in  acquisition and costs associated  with  real
estate  held for sale and development were financed by proceeds  from
Receivable  sales, securitizations and principal payments  of  $245.9
million,  $55.5  million in proceeds from maturities and  sales  less
purchases  of  investments and other cash proceeds of  $53.2  million
from  operating activities.  Proceeds from operating activities  were
primarily  from  net  income of $8.0 million and $45.8  million  from
increases  in life insurance and annuity reserves.  At September  30,
1996,  management  considers  its  cash  and  cash  equivalent  funds
combined  with its other sources of funds to be adequate  to  finance
any required debt retirements or planned asset additions.

      The State of Washington is responsible for regulating the total
amount  of debentures and preferred stock that Metropolitan can  have
outstanding.   During  1994,  1995 and through  September  30,  1996,
Metropolitan  was authorized to have no more than an aggregate  total
of  approximately $202.3 million in outstanding debentures (including
accrued  and  compound interest) and aggregate outstanding  preferred
stock (based on original sales price) of approximately $49.5 million.
Outstanding preferred stock was limited to the amount outstanding as
<PAGE>                        Page 93

of  June  30,  1996  ($49.0 million) plus reinvested  dividends  ($.5
million) after that date. See "BUSINESS-Regulation". At September 30,
1996,  Metropolitan had total outstanding debentures of approximately
$192.2 million and total outstanding preferred stock of approximately
$49.5  million.   These  regulatory limitations  did  not  cause  the
Company to incur any material adverse impact on liquidity during 1993
through  1996,  however,  the Company did  forgo  various  investment
opportunities which could have been made if able to be funded by  the
additional sales of debentures and preferred stock.    

      During  1997,  anticipated  principal,  interest  and  dividend
payments on outstanding debentures, other debt payments and preferred
stock  distributions are expected to be approximately $97.5  million.
During  1996, the principal portion of the payments received  on  the
Consolidated  Group's Receivables and proceeds  from  sales  of  real
estate  and  Receivables  was  $302.5 million.   A  decrease  in  the
prepayment  rate  on  these Receivables or the  ability  to  sell  or
securitize   Receivables  would  reduce  future   cash   flows   from
Receivables  and  might  adversely affect  the  Consolidated  Group's
ability to meet its principal, interest and dividend payments.

      The  Consolidated  Group  expects to maintain  high  levels  of
liquidity  in  the  foreseeable future by continuing  its  securities
offerings,   annuity  sales  and  the  sale  and  securitization   of
Receivables.  At  September 30, 1996, cash or cash  equivalents  were
$168  million, or 13.1% of assets.  Of the $168 million of  cash  and
cash  equivalents,  approximately $131 million  was  restricted  from
general  use  by  the  Consolidated Group  until  such  time  as  the
obligation for securities sold, not owned, was satisfied.   Including
securities that are available for sale and excluding restricted  cash
equivalents,  total liquidity was $75 million, $65 million  and  $118
million  as  of  September 30, 1996, 1995 and 1994, respectively,  or
5.9%, 6.0% and 11.1% of total assets, respectively.

       Access   to   new   "capital   markets"   through   Receivable
securitizations has allowed the Consolidated Group to  both  increase
liquidity and accelerate earnings through the gains recorded  on  the
securitizations.   The  increased ability  to  raise  liquidity  will
enable  the  Consolidated  Group  to accept  certain  asset/liability
mismatches   which   have  historically  been   beneficial   to   the
Consolidated  Group    when they have been  able  to  finance  higher
earning  longer term assets with lower cost of funds associated  with
shorter term liabilities.

      For  statutory  purposes,  Western United  performs  cash  flow
testing  under seven different rate scenarios.  The results of  these
tests are
<PAGE>                        Page 94

filed  annually  with  the Insurance Commissioner  of  the  State  of
Washington.   At the end of calendar year 1995, the results  of  this
cash flow testing process were satisfactory.

     Metropolitan alone generated approximately $20.8 million in cash
from operations in 1996.  Net cash of approximately $23.5 million was
used in investing activities.  Funds used included $32.2 million  for
the  purchase  of  Receivables, $11.7 million  for  the  purchase  of
investments and $17.2 million in additions to real estate  held.   An
additional  $16.3 million was used for investment in and advances  to
subsidiaries.   Funds  provided  from investing  activities  included
$24.3  from  the sale of Receivables and $12.5 million  of  principal
payments on such Receivables.  Additional funds of $9.2 million  from
proceeds  on sales of real estate and $9.1 million from the sale  and
maturities of investments were received.  Net cash used in  financing
activities  in 1996 of $8.4 million included $22.9 million  repayment
of  debentures and $3.9 million in preferred dividend payments, which
were  offset  by  new  debenture sales of $9.1 million,  issuance  of
preferred stock, net of redemption, of $1.8 million.

      Metropolitan alone generated approximately $2.4 million in cash
from  operations in 1995. Net cash of approximately $3.9 million  was
used  in  investing activities.  Funds used included  $18.4  million,
$12.1  million,  and $12.5 million for the purchase  of  Receivables,
investments,  and  additions to real estate held,  respectively.   An
additional  $9.6 million was used for investment in and  advances  to
subsidiaries.   Funds  provided  from investing  activities  included
$34.9  million  from the sale of Receivables collateralized  by  real
estate  and  $5.1 million of principal payments on such  Receivables.
Additional funds of $1.9 million and $7.6 were provided from the sale
of  real  estate  and investments, respectively.  Net  cash  of  $8.0
million  provided  from financing activities in 1995  included  $53.1
million  in proceeds from the sale of debentures which was  partially
offset  by  $49.0 million in repayment of debentures.   Additionally,
$4.5  million was obtained from the issuance of preferred  stock  and
$4.2  million was obtained in net borrowings while $4.5  million  was
distributed in cash dividends.

      Metropolitan alone generated approximately $1.8 million in cash
from  operations  in  1994.   Investing  activities,  which  provided
approximately  $4.8 million, were primarily: (1) investments  in  and
advances to subsidiaries which provided $6.3 million; (2) changes  in
investments  and Receivables, which provided $4.0 million;  less  (3)
capital  expenditures and the net change in real estate held of  $5.5
million.  Cash used in financing activities of $11.0 million were
<PAGE>                        Page 95

primarily  used for: (1) net redemption of debenture  bonds  of  $5.2
million;  (2) repayment of borrowings from banks and others  of  $3.3
million; (3) cash dividends of $3.5 million: which were offset by (4)
net  issuance  of preferred stock less redemption and  retirement  of
common  stock  of approximately $1.0 million.  For 1994, Metropolitan
had  a  decrease  in cash and cash equivalents of approximately  $4.4
million  resulting  in  a  year  end balance  of  approximately  $9.4
million.

         At  September 30, 1996, Metropolitan had approximately  $1.6
million  in construction commitments associated with its real  estate
development projects.  Additionally, Metropolitan had no knowledge of
any  environmental liabilities associated with any of its real estate
asset    investments.    Metropolitan   anticipates   other   capital
expenditures  in the normal course of business of up to $1.5  million
including  a new telephone system costing approximately $.6  million.
Metropolitan  anticipates  funding  these  commitments  through  cash
provided  by  operating  activities or  cash  provided  by  financing
activities including potential leasing contracts.

    The Company will be required to make further enhancements to  its
computer software operating systems to enable recognition of the  new
century.   The  program codes within the operating systems  currently
store  only  a two digit character for the year in which transactions
occur.   The modification of these program codes to store four  digit
years  will  occur  in the near term.  The Company expects  that  the
costs  of  these modifications will not be material and  all  changes
will   be   made   by  existing  personnel  during  routine   program
maintenance.    All  expenses  will  be  charged  to  operations   as
incurred.    

         Management  believes  that  cash  flow  generated  from  the
Consolidated  Group's  operating activities and financing  activities
will  be  sufficient to conduct its business and meet its anticipated
obligations  as they mature during the next fiscal year. Included  in
the  anticipated  obligations for the Consolidated Group  during  the
next  fiscal year is the repayment of approximately $133  million  in
debt   associated   with  the  short  sale   of   securities.    With
approximately $131 million in cash and cash equivalents at  September
30, 1996 restricted from general corporate use and being held for the
specific purpose of paying-off debt associated with the short sale of
securities,  the  Consolidated Group expects no  material  effect  on
corporate  liquidity  from this obligation.  Metropolitan  has  never
defaulted on any of its obligations since its founding in 1953.    

ITEM 8. Financial Statements and Supplementary Data

<PAGE>                        Page 96


            METROPOLITAN MORTGAGE & SECURITIES CO., INC.
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
            Years Ended September 30, 1996, 1995 and 1994
                                  

Report of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements


     REPORT OF INDEPENDENT ACCOUNTANTS



     The Directors and Stockholders
     Metropolitan Mortgage & Securities Co., Inc.


     We have audited the accompanying consolidated balance sheets of
     Metropolitan Mortgage & Securities Co., Inc. and subsidiaries as of
     September 30, 1996 and 1995, and the related consolidated statements
     of income, stockholders' equity and cash flows for each of the three
     years in the period ended September 30, 1996. These financial
     statements are the responsibility of the Company's management. Our
     responsibility is to express an opinion on these financial statements
     based on our audits.

     We conducted our audits in accordance with generally accepted auditing
     standards. Those standards require that we plan and perform the audit
     to obtain reasonable assurance about whether the financial statements
     are free of material misstatement. An audit includes examining, on a
     test basis, evidence supporting the amounts and disclosures in the
     financial statements. An audit also includes assessing the accounting
     principles used and significant estimates made by management, as well
     as evaluating the overall financial statement presentation. We believe
     that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present
     fairly, in all material respects, the consolidated financial position
     of Metropolitan Mortgage & Securities Co., Inc. and subsidiaries as of
     September 30, 1996 and 1995, and the consolidated results of their
     operations and their cash flows for each of the three years in the
     period ended September 30, 1996 in conformity with generally accepted
     accounting principles.

     As discussed in Note 1, the Company changed its method of accounting
     for impaired loans in 1996.


                                     /s/COOPERS & LYBRAND L.L.P.        

     Spokane, Washington
     December 6, 1996










                                      F-1 
     <PAGE>
     METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
     CONSOLIDATED BALANCE SHEETS
     September 30, 1996 and 1995



                      ASSETS                    1996             1995
                                           --------------   --------------
     Cash and cash equivalents             $   35,226,746   $   32,798,627
     Restricted cash and cash equivalents     132,652,334
     Investments:
       Available-for-sale securities, 
         at market                             38,554,498       31,829,980
       Held-to-maturity securities, at 
         amortized cost                       124,748,490      188,073,542
       Accrued interest on investments          1,516,390        2,372,891
                                           --------------   --------------
           Total cash and investments         332,698,458      255,075,040
                                           --------------   --------------
     Real estate contracts and mortgage 
       notes receivable, net, including 
       real estate contracts and mortgage 
       notes receivable held for sale of 
       approximately $106,575,000 in 1996     650,933,330      587,493,614
     Real estate held for sale and 
       development, including foreclosed 
       real estate received in satis-
       faction of debt of $36,158,099 
       and $38,004,011                         84,333,288       91,105,003
                                           --------------   --------------
           Total real estate assets           735,266,618      678,598,617

     Less allowance for losses on real 
       estate assets                          (10,192,584)      (8,116,065)
                                           --------------   --------------
           Net real estate assets             725,074,034      670,482,552
                                           --------------   --------------
     Other receivable investments             107,494,150       41,591,415
                                           --------------   --------------
     Other assets:
       Deferred costs                          74,530,361       74,521,803
       Land, buildings and equipment, 
         net of accumulated depreciation        8,516,598        8,148,850
       Other assets including receivables 
         from affiliates, net of allow-
         ances of $180,954 and $77,039         34,345,227       28,648,340
                                           --------------   --------------
           Total other assets                 117,392,186      111,318,993
                                           --------------   --------------
           Total assets                    $1,282,658,828   $1,078,468,000
                                           ==============   ==============





                                      F-2 
     <PAGE>
     METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
     CONSOLIDATED BALANCE SHEETS, CONTINUED
     September 30, 1996 and 1995




              LIABILITIES AND
           STOCKHOLDERS' EQUITY                 1996             1995
                                           --------------   --------------
     Liabilities:
       Life insurance and annuity 
         reserves                          $  837,366,108   $  781,716,153
       Debenture bonds and accrued 
         interest                             192,173,751      201,311,873
       Debt payable                            38,601,146       25,552,451
       Securities sold, not owned, at 
         market                               132,652,334
       Accounts payable and accrued 
         expenses                              18,082,782       15,558,818
       Deferred income taxes                   15,894,831       12,254,475
       Minority interest in consolidated 
         subsidiaries                           1,544,544        1,503,788
                                           --------------   --------------
           Total liabilities                1,236,315,496    1,037,897,558
                                           --------------   --------------
     Commitments and contingencies 
       (Notes 5 and 14)

     Stockholders' equity:
       Preferred stock, (liquidation 
         preference $49,495,906 and 
         $47,825,310)                          21,518,198       21,627,106
       Subordinate preferred stock, no par             --               --
       Common stock, $2,250 par                   293,417          293,417
       Additional paid-in capital              16,791,670       14,917,782
       Retained earnings                        8,731,070        4,561,554
       Net unrealized losses on invest-
         ments, net of income taxes of 
         $510,530 and $427,283                   (991,023)        (829,417)
                                           --------------   --------------
           Total stockholders' equity          46,343,332       40,570,442
                                           --------------   --------------
           Total liabilities and stock-
             holders' equity               $1,282,658,828   $1,078,468,000
                                           ==============   ==============


     The accompanying notes are an integral part of the consolidated
       financial statements.






                                      F-3 
     <PAGE>
     METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF INCOME
     for the years ended September 30, 1996, 1995 and 1994

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                 -----------   -----------   -----------
      <S>                                        <C>           <C>           <C>
      Revenues:
        Insurance premiums                       $ 3,000,000   $ 3,000,000   $ 2,958,000
        Interest on receivables                   58,529,828    56,553,869    56,420,184
        Earned discount on receivables            18,036,075    13,786,977    13,790,211
        Other investment interest                 15,291,496    15,039,706    16,715,517
        Real estate sales                         45,648,264    39,388,086    40,023,974
        Gain on insurance settlement                                50,922       203,691
        Fees, commissions, service and other 
           income                                  4,300,381     5,847,020     4,992,505
        Realized net gains (losses) on sales
           of investments                           (821,481)       34,565     1,111,974
        Realized net gains on sales of 
           receivables                            12,687,616     4,406,338     1,969,907
                                                 -----------   -----------   -----------
             Total revenues                      156,672,179   138,107,483   138,185,963
                                                 -----------   -----------   -----------
      Expenses:
        Insurance policy and annuity benefits     48,301,010    45,483,802    41,918,907
        Interest, net                             18,787,655    16,381,004    19,895,252
        Cost of real estate sold                  43,910,654    36,449,309    38,496,776
        Provision for losses on real estate 
           assets                                  6,360,072     4,174,644     5,533,193
        Salaries and employee benefits            10,199,812     8,803,131     8,846,677
        Commissions to agents                     10,574,049    12,588,546     8,430,654
        Other operating and underwriting           6,958,938     7,414,502     7,420,022
        Less amount capitalized as deferred 
           costs, net of amortization               (801,825)   (2,671,195)   (1,050,279)
                                                 -----------   -----------   -----------
             Total expenses                      144,290,365   128,623,743   129,491,202
                                                 -----------   -----------   -----------
      Income before income taxes and minority 
        interest                                  12,381,814     9,483,740     8,694,761
      Provision for income taxes                  (4,235,469)   (3,107,897)   (2,992,476)
                                                 -----------   -----------   -----------
      Income before minority interest              8,146,345     6,375,843     5,702,285

      Income of consolidated subsidiaries 
        allocated to minority stockholders          (108,681)      (73,197)     (224,529)
                                                 -----------   -----------   -----------
      Net income                                   8,037,664     6,302,646     5,477,756
      Preferred stock dividends                   (3,868,148)   (4,037,921)   (3,423,326)
                                                 -----------   -----------   -----------
      Income applicable to common stockholders   $ 4,169,516   $ 2,264,725   $ 2,054,430
                                                 ===========   ===========   ===========
      Income per share applicable to common 
        stockholders                             $    32,073   $    17,288   $    14,996
                                                 ===========   ===========   ===========
      Weighted average number of shares of 
        common stock outstanding                         130           131           137
                                                 ===========   ===========   ===========
      </TABLE>

      The accompanying notes are an integral part of the consolidated
       financial statements.

                                      F-4 
     <PAGE>
     METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
     for the years ended September 30, 1996, 1995 and 1994

     <TABLE>
     <CAPTION>
                                                                            Additional    Net Unrealized
                                                Preferred     Common        Paid-in       Gains (Losses)   Retained
                                                Stock         Stock         Capital       on Investments   Earnings
                                                -----------   -----------   -----------   --------------   -----------
      <S>                                       <C>           <C>           <C>           <C>              <C>
      Balance, September 30, 1993               $21,402,599   $   310,485   $ 9,754,510    $   535,635     $   778,260
      Net income                                                                                             5,477,756
      Net change in unrealized (losses) on
        available-for-sale securities, net 
        of income taxes of $1,721,435                                                       (3,371,012)
      Cash dividends, common ($675 per share)                                                                  (87,012)
      Cash dividends, preferred (variable rate)                                                             (3,423,326)
      Redemption and retirement of stock
        (14,470 shares)                            (144,699)                   (353,743)
      Redemption and retirement of stock
        (6 shares) and change in minority
        interest                                                  (13,864)      (12,914)
      Sale of variable rate preferred stock,
        net (17,901 shares)                         179,010                   1,593,639
                                                -----------   -----------   -----------    -----------     -----------
      Balance, September 30, 1994                21,436,910       296,621    10,981,492     (2,835,377)      2,745,678
      Net income                                                                                             6,302,646
      Net change in unrealized gains on 
        available-for-sale securities, net 
        of income taxes of $1,018,219                                                        2,005,960
      Cash dividends, common ($3,800 per share)                                                               (501,582)
      Cash dividends, preferred (variable rate)                                                             (4,037,921)
      Redemption and retirement of stock (2 
        shares) and change in minority interest                    (3,204)     (123,551)
      Redemption and retirement of stock
        (27,637 shares)                            (276,376)                     13,120
      Sale of variable rate preferred stock, 
        net (46,657 shares)                         466,572                   4,046,721
      Excess sales price over historical cost
        basis of subsidiaries sold to related 
        parties                                                                                                 52,733
                                                -----------   -----------   -----------    -----------     -----------
      Balance, September 30, 1995                21,627,106       293,417    14,917,782       (829,417)      4,561,554
      </TABLE>


                                       F-5
     <PAGE>
     METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED
     for the years ended September 30, 1996, 1995 and 1994

     <TABLE>
      <CAPTION>
                                                                            Additional    Net Unrealized
                                                Preferred     Common        Paid-in       Gains (Losses)   Retained
                                                Stock         Stock         Capital       on Investments   Earnings
                                                -----------   -----------   -----------   --------------   -----------
      <S>                                       <C>           <C>           <C>           <C>              <C>
      Balance, September 30, 1995                21,627,106       293,417    14,917,782       (829,417)      4,561,554
      Net income                                                                                             8,037,664
      Net change in unrealized (losses) on
        available-for-sale securities, net 
        of income taxes of $83,247                                                            (161,606)
      Cash dividends, preferred (variable rate)                                                             (3,868,148)
      Redemption and retirement of stock
        (32,330 shares)                            (323,301)                    (47,433)
      Sale of variable rate preferred
        stock, net (21,439 shares)                  214,393                   1,921,321
                                                -----------   -----------   -----------    -----------     -----------
      Balance, September 30, 1996               $21,518,198   $   293,417   $16,791,670    $  (991,023)    $ 8,731,070
                                                ===========   ===========   ===========    ===========     ===========
      </TABLE>
      The accompanying notes are an integral part of the consolidated
       financial statements.
                                      F-6
     <PAGE>
     METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF CASH FLOWS
     for the years ended September 30, 1996, 1995 and 1994

     <TABLE>
     <CAPTION>
                                                 1996           1995            1994
                                             -------------  -------------   -------------
      <S>                                    <C>            <C>             <C>
      Cash flows from operating activities:
        Net income                           $   8,037,664  $   6,302,646   $   5,477,756
        Adjustments to reconcile net income 
          to net cash provided by operating 
          activities:
            Proceeds from sale of trading 
              securities                        67,093,831    515,677,468   1,064,997,088
            Purchase of trading securities     (67,448,595)  (515,570,230) (1,064,712,932)
            Realized net gains on sales of 
              investments and receivables      (11,866,135)    (4,440,903)     (3,081,881)
            Gain on sales of real estate        (1,737,610)    (2,938,777)     (1,527,198)
            Gain on insurance settlement                          (50,922)       (203,691)
            Provision for losses on real 
              estate assets                      6,360,072      4,174,644       5,533,193
            Provision for losses (recover-
              ies) on other assets                  70,500        (35,657)        204,650
            Depreciation and amortization        4,617,664      3,023,233       2,066,365
            Minority interests                     108,681         73,197         224,529
            Deferred income tax provision        3,640,356      2,747,990       2,644,170
            Changes in assets and liabili-
              ties, net of effects from 
              sale of subsidiaries:
                Life insurance and annuity 
                  reserves                      45,782,339     42,033,038      39,322,517
                Deferred costs, net                 (8,558)    (3,034,857)     (1,349,405)
                Compound and accrued 
                  interest on bonds              4,642,760     (2,214,261)     (2,096,810)
                Securities sold, not owned     132,652,334
                Other                           (6,089,670)    (4,910,909)     (1,537,118)
                                             -------------  -------------   -------------
                    Net cash provided by 
                      operating activities     185,855,633     40,835,700      45,961,233
                                             -------------  -------------   -------------
      Cash flows from investing activities:
        Proceeds from sale of subsidiaries, 
          net of cash                                          (1,406,873)
        Change in restricted cash and cash
          equivalents                         (132,652,334)
        Principal payments on real estate 
          contracts and mortgage notes 
          receivable                           107,702,333    118,869,137     107,040,612
        Principal payments on other 
          receivable investments                 6,049,097      1,664,132
        Proceeds from sales of real estate 
          contracts and mortgage notes 
          receivable and other receivable
          investments                          182,177,259     72,914,006      20,407,270
        Acquisition of real estate contracts 
          and mortgage notes receivable       (282,313,300)  (203,525,666)   (142,479,298)
        Acquisition of other receivable 
          investments                          (99,804,805)   (56,229,758)
        Proceeds from insurance settlement                         50,922         203,691
        Proceeds from sales of real estate       6,545,323      5,285,839       6,562,008
        Proceeds from maturities of held-
          to-maturity investments                2,598,081      4,696,003       8,875,268
      </TABLE>

                                       F-7
      <PAGE>
      METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
      for the years ended September 30, 1996, 1995 and 1994

      <TABLE>
      <CAPTION>

                                                 1996           1995           1994
                                             -------------  -------------  -------------
      <S>                                    <C>            <C>            <C>
      Cash flows from investing activities,
        Continued:
          Proceeds from maturities of 
            available-for-sale investments      37,496,910               
          Purchases of held-to-maturity 
            investments                        (12,181,445)    (1,557,219)    (5,263,021)
          Proceeds from sales of available-
            for-sale investments                31,686,315     92,779,569    367,846,050
          Purchases of available-for-sale 
            investments                         (4,138,391)   (34,387,059)  (441,965,194)
          Purchases of and costs associated 
            with real estate held for sale 
            and development                    (28,499,006)   (41,841,982)   (27,544,340)
          Capital expenditures                  (1,369,802)      (894,673)      (471,097)
                                             -------------  -------------  -------------
                    Net cash used in 
                      investing activities    (186,703,765)   (43,583,622)  (106,788,051)
                                             -------------  -------------  -------------
      Cash flows from financing activities:
        Increase (decrease) in short-term 
          borrowings                            11,353,125    (36,598,375)    59,730,000
        Repayments of debt payable              (2,060,440)      (524,046)    (2,468,655)
        Receipts from life and annuity 
          products                             112,894,347    145,066,891     85,332,591
        Withdrawals of life and annuity 
          products                            (103,026,731)  (105,469,442)  (124,642,366)
        Issuance of debenture bonds              9,125,303     53,120,179     56,954,423
        Repayment of debenture bonds           (22,906,185)   (48,970,828)   (55,193,403)
        Issuance of preferred stock              2,135,714      4,513,293      1,772,649
        Redemption and retirement of stock        (370,734)      (327,336)      (775,742)
        Cash dividends                          (3,868,148)    (4,539,503)    (3,510,338)
                                             -------------  -------------  -------------
                    Net cash provided by 
                      financing activities       3,276,251      6,270,833     17,199,159
                                             -------------  -------------  -------------
      Net increase (decrease) in cash and 
        cash equivalents                         2,428,119      3,522,911    (43,627,659)

      Cash and cash equivalents:
        Beginning of year                       32,798,627     29,275,716     72,903,375
                                             -------------  -------------  -------------
        End of year                          $  35,226,746  $  32,798,627  $  29,275,716
                                             =============  =============  =============

      </TABLE>
      See Note 16 for supplemental cash flow information.


     The accompanying notes are an integral part of the consolidated
       financial statements. 


                                      F-8
     <PAGE>
     METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


      1.  SUMMARY OF ACCOUNTING POLICIES:

            BUSINESS AND ORGANIZATION

            Metropolitan Mortgage & Securities Co., Inc. (the Company and
            Metropolitan) invests in real estate contracts and mortgage
            notes receivable and other investments, including real estate
            development, with proceeds from investments and securities
            offerings.

            On September 9, 1994, the Company sold its entire interest in
            one of its subsidiaries, Summit Securities, Inc. (Summit), to
            National Summit Corp., a Delaware corporation which is wholly
            owned by C. Paul Sandifur, Jr., the Company's Chief Executive
            Officer. The change in control was made pursuant to a
            reorganization wherein Summit redeemed all the common shares
            held by its former parent company. Summit redeemed the common
            shares for $3,600,000 paid in cash to the Company. The sales
            price was based upon Summit's estimated fair value, which
            approximated the net book value of Summit at the date of
            acquisition. The results of operations of Summit are included
            in the consolidated financial statements for the period prior
            to September 9, 1994. Also, during the year ended September 30,
            1994, some of the Company's majority-owned subsidiaries had
            reverse stock splits and fractional shares were redeemed and
            retired for cash.

            On January 31, 1995, Metropolitan and Summit consummated a
            transaction whereby 100% of the common stock of Metropolitan
            Investment Securities, Inc. (MIS) was sold to Summit. The cash
            price was $288,950, the approximate historical net book value
            of MIS at closing. MIS is a broker/dealer and the exclusive
            broker/dealer for the securities sold by Metropolitan and
            Summit. This sale did not materially affect the business
            operations of MIS. The results of operations of MIS are
            included in the consolidated financial statements for periods
            prior to January 31, 1995.

            Additionally, by agreement, effective January 31, 1995,
            Metropolitan discontinued its property development division,
            which consisted of a group of employees experienced in real
            estate development. On the same date, Summit commenced the
            operation of a property development subsidiary employing those
            same individuals who had previously been employed by
            Metropolitan. Summit Property Development Corporation, a 100%
            owned subsidiary of Summit, has negotiated an agreement with
            Metropolitan to provide future property development services. 


                                      F-9
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            BUSINESS AND ORGANIZATION, CONTINUED

            On May 31, 1995, Metropolitan and Summit consummated a
            transaction whereby 100% of the common stock of Old Standard
            Life Insurance Company (OSL) was sold to Summit. The cash price
            was $2,722,000, the approximate historical net book value of
            OSL at closing, with future contingency payments equal to 20%
            of statutory income prior to the accrual of income taxes for
            the fiscal years ending December 31, 1995, 1996 and 1997. The
            cash sales price plus estimated future contingency payments
            approximated the appraised valuation of OSL. OSL is engaged in
            the business of acquiring receivables using funds derived from
            the sale of annuities, investment income and receivable cash
            flows. The sale of OSL decreased total assets and liabilities
            by approximately $46.2 million. The results of operations of
            OSL are included in the consolidated financial statements for
            periods prior to May 31, 1995.

            The total purchase price of MIS and OSL exceeded the historical
            cost bases of the net assets of the companies by approximately
            $53,000. Due to the common control of Metropolitan and Summit,
            this excess purchase price was recorded as an increase to
            retained earnings in the periods in which the sales occurred.

            Metropolitan is effectively controlled by C. Paul Sandifur, Jr.
            through his common stock ownership and voting control.

            PRINCIPLES OF CONSOLIDATION

            The consolidated financial statements include the accounts of
            Metropolitan Mortgage & Securities Co., Inc. and its majority-
            owned subsidiaries. All significant intercompany transactions
            and balances have been eliminated in consolidation.

            CASH AND CASH EQUIVALENTS

            The Company considers all highly-liquid debt instruments
            purchased with a remaining maturity of three months or less to
            be cash equivalents. Cash includes all balances on hand and on
            deposit in banks and financial institutions. The Company
            periodically evaluates the credit quality of its depository
            financial institutions. Substantially all cash and cash
            equivalents are on deposit with one financial institution and
            balances periodically exceed the FDIC insurance limit.


                                      F-10
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            INVESTMENTS

            The Company has classified its investments in debt and equity
            securities as "available-for-sale," "held-to-maturity" or
            "trading." The accounting policies related to these investment
            classifications are as follows:

              AVAILABLE-FOR-SALE SECURITIES:  Available-for-sale
              securities, consisting primarily of government-backed
              securities, public utility and corporate bonds, are carried
              at market value. Unrealized gains and losses on these
              securities are presented as a separate component of
              stockholders' equity, net of related deferred income taxes. 

              HELD-TO-MATURITY SECURITIES:  Held-to-maturity securities,
              consisting primarily of public utility and corporate bonds
              and mortgage- and government-backed securities having fixed
              maturities, are carried at amortized cost. The Company has
              the ability and intent to hold these investments until
              maturity.

              TRADING SECURITIES:  Trading securities, consisting primarily
              of government-backed securities and corporate bonds, are
              bought and held principally for the purpose of selling them
              in the near term and are recorded at market value. Realized
              and unrealized gains and losses are included in the
              consolidated statements of income.

            Realized gains and losses on investments are calculated on the
            specific-identification method and are recognized in the
            consolidated statements of income in the period in which the
            investment is sold.

            For other than a temporary decline in the value of a common
            stock, preferred stock or publicly traded bond below cost or
            amortized cost, the investment is reduced to its net realizable
            value, which becomes the new cost basis of the investment. The
            amount of the reduction is reported as a loss. Any recovery of
            market value in excess of the investment's new cost basis is
            recognized as a realized gain only upon sale, maturity or other
            disposition of the investment. Factors which the Company
            evaluates in determining the existence of an other than
            temporary decline in value include the length of time and
            extent to which market value has been less than cost; the
            financial condition and near-term prospects of the issuer; and
            the intent and ability of the Company to retain its investment
            for the anticipated period of recovery in market value.


                                      F-11
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE

            Real estate contracts and mortgage notes receivable held for
            investment purposes are carried at amortized cost. Discounts
            originating at the time of purchase, net of capitalized
            acquisition costs, are amortized using the level yield
            (interest) method. For receivables acquired after September 30,
            1992, net purchase discounts are amortized on an individual
            contract basis using the level yield (interest) method over the
            remaining contractual term of the receivables. For receivables
            acquired before October 1, 1992, the Company accounts for its
            portfolio of discounted receivables using anticipated
            prepayment patterns to apply the level yield (interest) method
            of amortizing discounts. Discounted receivables are pooled by
            the fiscal year of purchase and by similar receivable types.
            The amortization period, which is approximately 78 months,
            estimates a constant prepayment rate of 10-12 percent per year
            and scheduled payments, which is consistent with the Company's
            prior experience with similar receivables and the Company's
            expectations.

            REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE, HELD 
            FOR SALE

            Real estate contracts and mortgage notes receivable held for
            sale are carried at the lower of cost (outstanding principal
            adjusted for net discounts and capitalized acquisition costs)
            or market value, determined on an aggregate basis by major type
            of loan. Gains or losses on such sales are recognized utilizing
            the aggregation method for financial reporting and income tax
            purposes at the time of sale. Interest on these receivables is
            included in interest income. Deferred net discounts and
            capitalized acquisition costs are recognized at the time the
            related receivables are sold to third-party investors or
            securitized through transfer to a real estate investment trust.

            OTHER RECEIVABLE INVESTMENTS

            Other receivables held for investment purposes are carried at
            amortized cost. Discounts originating at the time of purchase,
            net of capitalized acquisition costs, are amortized using the
            level yield (interest) method on an individual receivable basis
            over the remaining contractual term of the receivable.


                                      F-12
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            REAL ESTATE HELD FOR SALE AND DEVELOPMENT

            The Company holds real estate, stated at the lower of cost or
            fair value less costs to sell, for purposes of development and
            resale. The Company acquires real estate through direct
            purchase and foreclosure. Cost is determined by the purchase
            price of the real estate or, for real estate acquired by
            foreclosure, at the lower of (a) the fair value of the property
            at the date of foreclosure less estimated selling costs, or (b)
            cost (unpaid receivable carrying value). Periodically, the
            Company reviews its carrying values of real estate held for
            sale and development by obtaining new or updated appraisals and
            adjusts its carrying values to the lower of cost or net
            realizable value, as necessary. As a result of changes in the
            real estate markets in which these properties are located, it
            is reasonably possible that these carrying values could change
            in the near term.

            Occasionally, these real estate properties are rented, with the
            revenue being included in other income and related costs are
            charged to expense.

            In March 1995, SFAS No. 121 (SFAS 121), "Accounting for the
            Impairment of Long-Lived Assets and for Long-Lived Assets to be
            Disposed Of," was issued. SFAS No. 121 requires certain long-
            lived assets, such as the Company's real estate assets, be
            reviewed for impairment in value whenever events or
            circumstances indicate that the carrying value of an asset may
            not be recoverable. In performing the review, if expected
            future undiscounted cash flows from the use of the asset or the
            fair value, less selling costs, from the disposition of the
            asset is less than its carrying value, an impairment loss is to
            be recognized. The Company is required to adopt this new
            standard on October 1, 1996. The Company does not anticipate
            that the adoption of SFAS No. 121 will have a material effect
            on the consolidated financial statements.

            Profit on sales of real estate is recognized when the buyers'
            initial and continuing investment is adequate to demonstrate
            (1) a commitment to fulfill the terms of the transaction, (2)
            that collectibility of the remaining sales price due is
            reasonably assured, and (3) the Company maintains no continuing
            involvement or obligation in relation to the property sold and
            has transferred all the risks and rewards of ownership to the
            buyer.


                                      F-13
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            ALLOWANCE FOR LOSSES ON REAL ESTATE ASSETS

            The established allowances for losses on real estate assets
            include amounts for estimated probable losses on both real
            estate held for sale and development and real estate contracts
            and mortgages receivable. Specific allowances are established,
            as necessary, for delinquent receivables with net carrying
            values in excess of $100,000. Additionally, the Company
            establishes allowances, based on historic delinquency and loss
            experience, for currently performing receivables and smaller
            delinquent receivables. Allowances for losses are determined
            based upon the net carrying values of the receivables,
            including accrued interest, determined in accordance with the
            provisions of Statement of Financial Accounting Standards
            (SFAS) No. 114, "Accounting by Creditors for Impairment of a
            Loan." The Company adopted this new standard on October 1,
            1995, which did not have a material effect on the consolidated
            financial statements. 

            The Company continues to accrue interest on delinquent loans
            until foreclosure, unless the principal and accrued interest on
            the receivable exceeds the fair value of the collateral, net of
            the estimated selling costs. The Company obtains new or updated
            appraisals on collateral for appropriate delinquent
            receivables, and adjusts the allowance for losses as necessary,
            such that the net carrying value does not exceed net realizable
            value.

            DEFERRED COSTS

            Commission expense and other insurance policy, annuity and
            debenture issuance costs are deferred. For debenture issuance
            costs, amortization is computed over the expected term which
            ranges from 6 months to 5 years, using the level yield
            (interest) method. For annuities and life insurance costs, the
            portion of the deferred policy acquisition cost that is
            estimated not to be recoverable from surrender charges is
            amortized as a constant percentage of the estimated gross
            profits (both realized and unrealized) associated with the
            policies in force. Changes in the amount or timing of estimated
            gross profits will result in adjustments in the cumulative
            amortization of these costs.


                                      F-14
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            LAND, BUILDINGS AND EQUIPMENT

            Land, buildings and equipment are stated at cost. Buildings,
            improvements, furniture and equipment are depreciated using
            both straight-line and accelerated methods over their estimated
            useful lives which, for buildings and improvements, range from
            5 to 40 years, and for furniture and equipment, range from 3 to
            10 years. Repairs, maintenance and minor renewals are charged
            to expense as incurred. Upon sale or retirement, the costs and
            related accumulated depreciation are eliminated from the
            accounts and any resulting gain or loss is reflected in
            operations.

            COMPUTER SOFTWARE COSTS

            The Company capitalizes direct costs of enhancements to
            computer software operating systems acquired and modified for
            internal use to the extent that the functionality of the
            software is improved. At September 30, 1996, total enhancement
            costs of approximately $6,566,000 have been capitalized. These
            costs are being amortized over 5- and 10-year periods,
            depending on the estimated useful life of the enhancement,
            using the straight-line method. It is reasonably possible that
            the remaining estimated useful lives could change in the near
            term. As a result, the carrying value of these enhancements may
            be reduced.

            The Company will be required to make further enhancements to
            its computer software operating systems to enable recognition
            of the new century. The program codes within the operating
            systems currently store only a two digit character for the year
            in which transactions occur. The modification of these program
            codes to store four digit years will occur in the near term.
            The Company expects that the costs of these modifications will
            not be material and will be charged to operations as incurred.

            INSURANCE AND ANNUITY RESERVES

            Premiums for universal life contracts and annuities are
            reported as life insurance and annuity reserves under the
            deposit method. Reserves for life insurance and annuities are
            equal to the sum of the account balances including deferred
            service charges. Based on past experience, consideration is
            given in actuarial calculations to the number of policyholder
            and annuitant deaths that might be expected, policy lapses,
            surrenders and terminations. As a result in changes in the
            factors considered in the actuarial calculations, it is
            reasonably possible that the reserves for insurance and
            annuities could change in the near term.


                                      F-15
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            RECOGNITION OF INSURANCE AND ANNUITY REVENUES

            Revenues for universal life contracts are recognized upon
            assessment. Revenues for annuity contracts are recognized over
            the estimated policy term. These revenues consist of charges to
            policyholders primarily for mortality expenses and surrender
            charges. Annuity revenues consist of the charges assessed
            against the annuity account balance for services and surrender
            charges. Charges for future services are assessed; however, the
            related revenue is deferred and recognized in income over the
            period benefitted using the same assumptions as are used to
            amortize deferred policy acquisition costs.

            GUARANTY FUND ASSESSMENTS

            The Company's life insurance subsidiary is subject to insurance
            guaranty laws in the states in which it writes business. These
            laws provide for assessments against insurance companies for
            the benefit of policyholders and claimants in the event of
            insolvency of other life insurance companies. A portion of
            these assessments can be offset against the payment of future
            premium taxes. However, future changes in state laws could
            decrease the amount available for offset. As of September 30,
            1996 and 1995, the Company has accrued an estimated liability
            for guaranty fund assessments for known insolvencies net of
            estimated recoveries through premium tax offsets.

            INTEREST COSTS

            Interest costs associated with the development of real estate
            projects are capitalized. During the years ended September 30,
            1996, 1995 and 1994, the Company capitalized interest of
            $2,468,411, $2,730,373 and $2,151,651, respectively. 

            INCOME TAXES

            The Company accounts for income taxes using the liability
            method, which requires that deferred tax assets and liabilities
            be determined based on the temporary differences between the
            financial statement carrying amounts and tax bases of assets
            and liabilities and tax attributes using enacted tax rates in
            effect in the years in which the temporary differences are
            expected to reverse.


                                      F-16
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            INCOME TAXES, CONTINUED

            The Company files a consolidated federal income tax return with
            its includable affiliates. The consolidating companies have
            executed a tax allocation agreement. Under the agreement, the
            Companies' income tax provisions are computed on a separate
            return basis and consolidated affiliates receive a reim-
            bursement to the extent that their losses and other credits
            result in a reduction of the consolidated tax liability.

            EARNINGS PER COMMON SHARE

            Earnings per common share are computed by deducting preferred
            stock dividends from net income and dividing the result by the
            weighted average number of shares of common stock outstanding.
            All weighted average common shares outstanding and per share
            amounts have been retroactively restated to reflect the reverse
            stock split which occurred in fiscal 1994 (see Note 11). There
            were no common stock equivalents or potentially dilutive
            securities outstanding during any of the three years in the
            period ended September 30, 1996.

            HEDGING ACTIVITIES

            The Company is authorized by its Board of Directors, subject to
            certain limitations, to use financial futures instruments for
            the purpose of hedging interest rate risk relative to the
            securities portfolio and in anticipation of sales and
            securitizations of real estate contracts and other receivable
            investments. The insurance subsidiary sells securities "short"
            (the sale of securities which are not currently in the
            portfolio and therefore must be purchased to close out the sale
            agreement) as another means of managing interest rate risk or
            to benefit from an anticipated movement in the financial
            markets.

            The Company also purchases collateralized mortgage obligations
            (CMOs), pass-through certificates and other asset-backed
            securities for its investment portfolio. Such purchases have
            been limited to tranches that perform in concert with the
            underlying mortgages or assets; i.e., improving in value with
            falling interest rates and declining in value with rising
            interest rates. The Company has not invested in "derivative 


                                      F-17
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            HEDGING ACTIVITIES, CONTINUED

            products" that have been structured to perform in a way that
            magnifies the normal impact of changes in interest rates or in
            a way dissimilar to the movement in value of the underlying
            securities.

            Unrealized gains or losses associated with financial future
            contracts that meet the hedge criteria prescribed in Statement
            of Financial Standards No. 80 (SFAS No. 80), "Accounting for
            Futures Contracts" are deferred and recognized when the effects
            of changes in interest rate on the hedged asset are recognized.
            Sales of securities, not owned, are recognized as liabilities
            and are adjusted to market value with the unrealized gain or
            loss recognized currently in operations.

            In fiscal 1996, the Company sold U.S. Treasury securities,
            which it did not own, to provide an economic hedge for the
            anticipated securitization of real estate contracts and
            mortgage notes receivable which was completed in November 1996.
            At September 30, 1996, the Company was obligated to deliver
            U.S. Treasury securities with a market value of approximately
            $132,652,000. During the year ended September 30, 1996, the
            Company recognized a loss of approximately $820,000 associated
            with this obligation. At September 30, 1996, approximately
            $131,091,000 of the Company's cash and cash equivalents were
            restricted until such time as these obligations are repaid.

            INTEREST RATE RISK

            The results of operations of the Company may be materially and
            adversely affected by changes in prevailing economic
            conditions, including rapid changes in interest rates. The
            Company's financial assets (primarily real estate contracts and
            mortgage notes receivable, other receivables and investment
            securities) and liabilities (primarily annuity contracts and
            investment certificates) are subject to interest rate risk. In
            the year ending September 30, 1997, approximately $848,000,000
            of the Company's financial liabilities will reprice or mature
            as compared to approximately $256,000,000 of its financial
            assets, resulting in a mismatch of approximately $592,000,000.
            This structure is beneficial in periods of declining interest
            rates; however, may result in declining net interest income
            during periods of rising interest rates. Of the financial
            liabilities scheduled to reprice or mature, approximately 74%
            are annuity contracts which are subject to surrender charges.
            Management is aware of the sources of interest rate risk and
            endeavors to actively monitor and manage its interest rate
            risk, although there can be no assurance regarding the
            management of interest rate risk in future periods.


                                      F-18
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:

            ESTIMATES

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

            RECLASSIFICATIONS

            Certain amounts in the 1995 and 1994 consolidated financial
            statements have been reclassified to conform with the current
            year's presentation. These reclassifications had no effect on
            net income or retained earnings as previously reported.


      2.  REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE:

          Real estate contracts and mortgage notes receivable include
          mortgages collateralized by property located throughout the
          United States. At September 30, 1996, the Company held first
          position liens associated with real estate contracts and mortgage
          notes receivable with a face value of approximately $675,000,000
          (99%) and second or lower position liens of approximately
          $6,000,000 (1%). The Company's real estate contracts and mortgage
          notes receivable at September 30, 1996 are collateralized by
          property concentrated in the following geographic areas:


            Pacific Northwest (Alaska, Idaho, Montana, Oregon 
              and Washington)                                           23%
            Pacific Southwest (Arizona, California and Nevada)          20
            Southwest (New Mexico and Texas)                            16
            Atlantic Northeast (Connecticut, Maryland, New Jersey, 
              New York and Pennsylvania)                                10
            Southeast (Florida, Georgia, North Carolina and South 
              Carolina)                                                 10
            Other                                                       21
                                                                       ---
                                                                       100%
                                                                       ===

          The value of real estate properties in these geographic regions
          will be affected by changes in the economic environment of that
          region. It is reasonably possible that these values could change
          in the near term, which would affect the Company's estimate of
          its allowance for losses associated with these receivables.


                                      F-19
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      2.  REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE, CONTINUED:

          The face value of the real estate contracts and mortgage notes
          receivable range principally from $15,000 to $300,000. At
          September 30, 1996, the Company had 52 receivables aggregating
          approximately $29,400,000 which had face values in excess of
          $300,000. No individual receivable is in excess of 0.4% of the
          total carrying value of real estate contracts and mortgage notes
          receivable, and less than 3% of the receivables are subject to
          variable interest rates. Contractual interest rates for 91% of
          the face value of receivables fall within a range from 6% to 13%
          per annum. The weighted average contractual interest rate on
          these receivables at September 30, 1996 is approximately 9.4%.
          Maturity dates range from 1996 to 2026.

          The following is a reconciliation of the face value of real
          estate contracts and mortgage notes receivable to the Company's
          carrying value at September 30, 1996 and 1995.

                                                  1996           1995
                                              ------------   ------------
            Face value of discounted 
              receivables                     $548,537,547   $505,440,872
            Face value of originated 
              receivables                      132,640,600    112,072,081
            Unrealized discounts, net of 
              unamortized acquisition costs    (38,607,376)   (37,354,378)
            Accrued interest receivable          8,362,559      7,335,039
                                              ------------   ------------
            Carrying value                    $650,933,330   $587,493,614
                                              ============   ============

          The originated receivables are collateralized primarily by first
          position liens and result from loans made by the Company to
          facilitate the sale of its repossessed property. No unrealized
          discounts are attributable to originated receivables.

          The principal amount of receivables with required principal or
          interest payments being in arrears for more than three months was
          approximately $26,500,000 and $17,500,000 at September 30, 1996
          and 1995, respectively.

          Real estate contracts and mortgage notes receivable with net
          carrying values of approximately $38,212,000 were sold, resulting
          in gains of approximately $1,255,000, by the Company's life
          insurance subsidiary to affiliated entities in fiscal 1996. Sales
          of receivables with net carrying values of approximately
          $54,388,000 and $18,437,000 were sold without recourse to various
          financial institutions resulting in gains of approximately
          $2,645,000 and $1,970,000 in fiscal 1995 and 1994, respectively.


                                      F-20
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      2.  REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE, CONTINUED:

          Aggregate amounts of receivables (face value) expected to be
          received, based upon contractual payments are as follows:

            Fiscal Year Ending
               September 30,   
            ------------------
                   1997                       $ 26,327,000
                   1998                         28,911,000
                   1999                         31,748,000
                   2000                         34,865,000
                   2001                         38,287,000
                Thereafter                     521,040,147
                                              ------------
                                              $681,178,147
                                              ============

      3.  REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE, HELD FOR
          SALE:

          Real estate contracts and mortgage notes receivable, held for
          sale consist of a pool of receivables which are intended to be
          securitized and sold without recourse in a private placement. On
          November 26, 1996, the Company securitized and sold all real
          estate contracts and mortgage notes receivable held for sale at
          September 30, 1996, which resulted in a pretax gain of
          approximately $8.9 million.

          The Company entered into a securitization transaction during the
          year ended September 30, 1996. The Company participates in these
          securitization transactions with its subsidiaries and affiliates.
          These receivables are structured in classes by credit rating and
          transferred to a real estate trust, which sells pass-through
          certificates to third parties. These securitizations are recorded
          as sales of receivables and gains, net of transaction expenses,
          are recognized in the consolidated statements of income as each
          class is sold.

          During the year ended September 30, 1996, proceeds from
          securitization transactions were approximately $112,975,000 and
          resulted in gains of approximately $7,798,000. The gain realized
          included approximately $2,290,000 associated with the estimated
          fair value of the mortgage servicing rights retained on the pool,
          which is included in other assets in the consolidated balance
          sheet. The fair value of these rights was determined based on the
          estimated present value of future net servicing cash flows,
          including float interest and late fees, adjusted for anticipated
          prepayments. The Company evaluates possible impairment in its
          mortgage servicing rights by similar type of loan, and to the
          extent that carrying value for a stratum exceeds its estimated
          fair value, an impairment loss is recognized. It is reasonably
          possible that actual prepayment experience could exceed the
          estimated prepayment factor in the near term, which would result
          in a reduction in the carrying value of retained mortgage
          servicing rights.

                                      F-21
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      3.  REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE, HELD FOR
          SALE, CONTINUED:

          Of the receivables securitized, the Company has retained an
          investment in certain classes of the securities having a fair
          value of approximately $4,333,000 at September 30, 1996. These
          securities were transferred to the Company's investment portfolio
          and classified as available-for-sale. These certificates are the
          B-4 and residual certificate classes and are subordinate to the
          other offered classes of certificates. These classes receive the
          lowest priority of principal and interest distributions and thus
          bear the highest credit risk. The Company provides for this risk
          by reducing the interest yield on these securities and by
          providing a reserve for the principal distributions due on these
          subordinate classes which may not be received due to default or
          loss. The weighted average constant effective yield recognized by
          the Company on these securities was 13.2% at September 30, 1996.

          In June 1996, Statement of Financial Accounting Standards No. 125
          (SFAS 125), "Accounting for Transfers and Servicing of Financial
          Assets and Extinguishments of Liabilities" was issued. SFAS 125
          provides accounting and reporting standards based on a consistent
          application of a FINANCIAL-COMPONENTS APPROACH that focuses on
          control. Under this approach, after a transfer of financial
          assets, an entity recognizes the financial and servicing assets
          it controls and the liabilities it has incurred, derecognizes
          financial assets when control has been surrendered and
          derecognizes liabilities when extinguished. This statement
          provides consistent standards for distinguishing transfers of
          financial assets that are sales from transfers that are secured
          borrowings. SFAS 125 is effective for transfers and servicing of
          financial assets and extinguishments of liabilities occurring
          after December 31, 1996. The Company does not expect that the
          application of the provisions of SFAS 125 will have a material
          effect on the Company's financial condition, results of
          operations or cash flows.


      4.  OTHER RECEIVABLE INVESTMENTS:

          Other receivable investments include various cash flow
          investments, primarily annuities and lottery prizes. Annuities
          are general obligations of the payor, which is generally an
          insurance company. Lottery prizes are general obligations of the
          insurance company or other entity making the lottery prize
          payments. Additionally, when the lottery prizes are from a state-
          run lottery, the lottery prizes are often backed by the general
          credit of the state.

          These investments normally are non-interest bearing and are
          purchased at a discount sufficient to meet the Company's
          investment yield requirements. The weighted average constant
          yield on these receivables at September 30, 1996 is approximately
          8.71%. Maturity dates range from 1996 to 2035.


                                      F-22
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      4.  OTHER RECEIVABLE INVESTMENTS, CONTINUED:

          The following is a reconciliation of the face value of the other
          receivable investments to the Company's carrying value at
          September 30, 1996 and 1995.


                                                  1996           1995
                                              ------------   ------------

            Face value of receivables         $173,280,414   $ 70,965,501
            Unrealized discounts, net of 
              unamortized acquisition costs    (65,786,264)   (29,374,086)
                                              ------------   ------------
            Carrying value                    $107,494,150   $ 41,591,415
                                              ============   ============


          All such receivables at September 30, 1996 were performing in
          accordance with their contractual terms.

          During the years ended September 30, 1996 and 1995, the Company
          sold approximately $27,853,000 and $14,120,000, respectively, of
          these receivables without recourse and recognized gains of
          approximately $1,882,000 and $1,761,000, respectively.

          The following other receivable investments, by obligor, were in
          excess of ten percent of stockholders' equity at September 30,
          1996 and 1995.

                                                             Aggregate
                                                             Carrying
            Issuer                                           Amount
            ----------------------------------------------   ------------

            1996:
              California State Agency                        $ 24,718,527
              New York State Agency                            15,511,891
              New Jersey State Agency                          10,975,661
              Oregon State Agency                              10,532,006
              Arizona State Agency                             10,223,076
              Michigan State Agency                             8,518,973
              Colorado State Agency                             4,903,971

            1995:
              California State Agency                           8,934,296
              Arizona State Agency                              6,630,281
              New Jersey State Agency                           4,931,025
              New York State Agency                             4,758,062


                                      F-23
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      4.  OTHER RECEIVABLE INVESTMENTS, CONTINUED:

          Aggregate amounts of contractual maturities of other receivable
          investments (face amounts) are as follows:

            Fiscal Year Ending
               September 30,
            ------------------
                   1997                       $ 15,880,000
                   1998                         15,364,000
                   1999                         16,177,000
                   2000                         16,973,000
                   2001                         15,399,000
                Thereafter                      93,487,414
                                              ------------
                                              $173,280,414
                                              ============


                                      F-24
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      5.  REAL ESTATE HELD FOR SALE AND DEVELOPMENT:

          A detail of the Company's real estate held for sale and development 
          by state as of September 30, 1996 is as follows:

     <TABLE>
      <CAPTION>
                                                Single-       Multi-
                                                Family        Family
              State               Land          Dwelling      Dwelling      Commercial    Condominium   Total
              ----------------    -----------   -----------   -----------   -----------   -----------   -----------
              <S>                 <C>           <C>           <C>           <C>           <C>           <C>
              Alabama                           $    74,500                                             $    74,500
              Alaska              $    51,710                                             $    80,790       132,500
              Arizona                 550,142       410,472                 $    80,000                   1,040,614
              Arkansas                               81,000                                                  81,000
              California            1,100,363     1,999,116   $    14,543       370,450       546,285     4,030,757
              Colorado                160,000                                                 812,471       972,471
              Connecticut                           301,113                                                 301,113
              Florida                  28,642       868,778        20,000                     125,422     1,042,842
              Georgia                                47,821                                                  47,821
              Hawaii                                                          3,825,791    18,829,598    22,655,389
              Idaho                                  61,564                                                  61,564
              Illinois                               69,082                                                  69,082
              Indiana                                16,000                                                  16,000
              Iowa                                  110,309                                                 110,309
              Kansas                                 72,870                                                  72,870
              Louisiana                              17,796                                                  17,796
              Maine                                 204,896                                                 204,896
              Maryland                              307,165                                                 307,165
              Massachusetts                         138,000                                                 138,000
              Michigan                              259,230                      90,000                     349,230
              Minnesota                             195,085                                                 195,085
              Mississippi              28,106        58,782                                                  86,888
              Missouri                 40,500       169,181                                   119,811       329,492
              Montana                  27,083                                                                27,083
              Nebraska                               38,231                                                  38,231
              Nevada                                 62,000                                                  62,000
              New Hampshire                         171,114        50,000                                   221,114
              New Jersey                             84,937                     180,000                     264,937
              New Mexico               10,500        39,449                                                  49,949
              New York                  7,633       455,070                                                 462,703
              North Carolina           10,907                                                                10,907
      </TABLE>

                                       F-25
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      5.  REAL ESTATE HELD FOR SALE AND DEVELOPMENT, CONTINUED:

     <TABLE>
     <CAPTION>
                                                Single-       Multi-
                                                Family        Family
              State               Land          Dwelling      Dwelling      Commercial    Condominium   Total
              ----------------    -----------   -----------   -----------   -----------   -----------   -----------
              <S>                 <C>           <C>           <C>           <C>           <C>           <C>
              Ohio                                   82,400                                                  82,400
              Oklahoma                 51,045       140,992                                                 192,037
              Oregon                                 75,659                                                  75,659
              Pennsylvania             32,400       195,715                                                 228,115
              South Carolina                         71,400                      91,506        30,000       192,906
              Tennessee                              77,650                                                  77,650
              Texas                    48,649       910,960                      65,000                   1,024,609
              Utah                                   26,000                                                  26,000
              Virginia                               26,500                                    72,000        98,500
              Washington           34,736,817       855,044                  13,126,130        57,500    48,775,491
              Wyoming                                85,613                                                  85,613
                                  -----------   -----------   -----------   -----------   -----------   -----------
              Balances at
                September 30, 
                1996              $36,884,497   $ 8,861,494   $    84,543   $17,828,877   $20,673,877   $84,333,288
                                  ===========   ===========   ===========   ===========   ===========   ===========
              Balances at
                September 30,
                1995              $39,084,721   $ 7,124,907   $         0   $16,312,303   $28,583,072   $91,105,003
                                  ===========   ===========   ===========   ===========   ===========   ===========
      </TABLE>
          At September 30, 1996, the Company had approximately $68,930,000
          invested in real estate development projects and approximately
          $1,600,000 in commitments for construction associated with these
          projects.


                                      F-26

     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      6.  ALLOWANCE FOR LOSSES ON REAL ESTATE ASSETS:

          The following is a summary of the changes in the allowance for
          losses on real estate assets for the years ended September 30,
          1996, 1995 and 1994:

                                     1996          1995          1994
                                  -----------   -----------   -----------
            Beginning balance     $ 8,116,065   $ 9,108,383   $10,598,491
            Provisions              6,360,072     4,174,644     5,533,193
            Charge-offs            (4,283,553)   (5,166,962)   (7,023,301)
                                  -----------   -----------   -----------
            Ending balance        $10,192,584   $ 8,116,065   $ 9,108,383
                                  ===========   ===========   ===========

          At September 30, 1996, the net investment in real estate
          contracts and mortgage notes receivable for which impairment has
          been recognized in accordance with SFAS 114 was approximately
          $2,642,000, of which approximately $118,000, representing the
          amounts by which the net carrying value of the receivable exceeds
          the fair value of the collateral, has been specifically included
          in the allowance for losses on real estate assets.

          During the year ended September 30, 1996, the average recorded
          investment in impaired receivables was approximately $2,251,000.
          Interest income of approximately $212,000 was recognized on these
          receivables in fiscal 1996 during the period in which they were
          impaired.


      7.  LAND, BUILDINGS AND EQUIPMENT:

          Land, buildings, equipment and related accumulated depreciation
          at September 30, 1996 and 1995 consisted of the following:

                                                   1996          1995
                                                -----------   -----------

            Land                                $   561,794   $   561,794
            Buildings and improvements            6,850,175     6,486,193
            Furniture and equipment              10,365,201     9,415,754
                                                -----------   -----------
                                                 17,777,170    16,463,741
            Less accumulated depreciation        (9,260,572)   (8,314,891)
                                                -----------   -----------
            Totals                              $ 8,516,598   $ 8,148,850
                                                ===========   ===========


                                      F-27
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      8.  INVESTMENTS:

          A summary of carrying and estimated market values of investments
          at September 30, 1996 and 1995 is as follows:

     <TABLE>
     <CAPTION>
                                                                         1996
                                              --------------------------------------------------------------
                                                             Gross          Gross          Estimated
                                              Amortized      Unrealized     Unrealized     Market Values
              Available-for-Sale              Costs          Gains          Losses         (Carrying Values)
              -----------------------------   ------------   ------------   ------------   -----------------
              <S>                             <C>            <C>            <C>            <C>
              Government-backed bonds         $ 11,932,337   $         --   $   (477,670)    $ 11,454,667
              Corporate bonds                   20,230,518          1,897       (437,009)      19,795,406
              Utility bonds                      3,003,075             --        (35,897)       2,967,178
              Pass-through certificates          4,333,481             --             --        4,333,481
                                              ------------   ------------   ------------     ------------
              Total fixed maturities            39,499,411          1,897       (950,576)      38,550,732
              Equity securities                      1,592          2,174             --            3,766
                                              ------------   ------------   ------------     ------------
              Totals                          $ 39,501,003   $      4,071   $   (950,576)    $ 38,554,498
                                              ============   ============   ============     ============
      <CAPTION>
                                                                         1996
                                              --------------------------------------------------------------
                                              Amortized
                                              Costs          Gross          Gross
                                              (Carrying      Unrealized     Unrealized     Estimated
              Held-to-Maturity                Values)        Gains          Losses         Market Values
              -----------------------------   ------------   ------------   ------------   -----------------
              <S>                             <C>            <C>            <C>            <C>
              Government-backed bonds         $ 60,005,894   $     11,775   $ (4,006,114)    $ 56,011,555
              Corporate bonds                   12,056,534             --       (202,717)      11,853,817
              Utility bonds                      4,989,311             --       (189,652)       4,799,659
              Mortgage- and asset-backed 
                  securities                    47,696,751         38,062     (1,199,760)      46,535,053
                                              ------------   ------------   ------------     ------------
              Totals                          $124,748,490   $     49,837   $ (5,598,243)    $119,200,084
                                              ============   ============   ============     ============
      </TABLE>

                                       F-28
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      8.  INVESTMENTS, CONTINUED:

     <TABLE>
     <CAPTION>
                                                                         1995
                                              --------------------------------------------------------------
                                                             Gross          Gross          Estimated
                                              Amortized      Unrealized     Unrealized     Market Values
              Available-for-Sale              Costs          Gains          Losses         (Carrying Values)
              -----------------------------   ------------   ------------   ------------   -----------------
              <S>                             <C>            <C>            <C>            <C>
              Government-backed bonds         $ 15,626,072   $         --   $   (275,286)    $ 15,350,786
              Corporate bonds                   15,627,468         12,621       (143,083)      15,497,006
              Utility bonds                        999,346             --        (17,158)         982,188
                                              ------------   ------------   ------------     ------------
              Totals                          $ 32,252,886   $     12,621   $   (435,527)    $ 31,829,980
                                              ============   ============   ============     ============
      <CAPTION>
                                                                         1995
                                              --------------------------------------------------------------
                                              Amortized
                                              Costs          Gross          Gross
                                              (Carrying      Unrealized     Unrealized     Estimated
              Held-to-Maturity                Values)        Gains          Losses         Market Values
              -----------------------------   ------------   ------------   ------------   -----------------
              <S>                             <C>            <C>            <C>            <C>
              Government-backed bonds         $ 71,323,272   $     46,942   $ (3,901,292)    $ 67,468,922
              Corporate bonds                   68,659,432          6,337     (1,084,387)      67,581,382
              Utility bonds                     10,653,392             --       (261,680)      10,391,712
              Mortgage- and asset-backed 
                  securities                    37,437,446             --       (815,577)      36,621,869
                                              ------------   ------------   ------------     ------------
              Totals                          $188,073,542   $     53,279   $ (6,062,936)    $182,063,885
                                              ============   ============   ============     ============
      </TABLE>

          All bonds and mortgage- and asset-backed securities held at
          September 30, 1996 and 1995 were performing in accordance with
          their terms.


                                      F-29

     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      8.  INVESTMENTS, CONTINUED:

          During the year ended September 30, 1995, the Company entered
          into financial futures contracts to hedge its interest rate risk
          on certain held-to-maturity debt securities with remaining
          contractual terms of approximately eight years against a
          potential increase in interest rates. Interest rates declined,
          resulting in a realized loss of $1,600,000 associated with such
          contracts. The hedging loss has been deferred and is being
          amortized over the contractual term of the hedged debt securities
          using the interest method. The remaining unamortized hedging 
          loss at September 30, 1996 was approximately $1,398,000. At
          September 30, 1996 and 1995, the Company was not a party to any
          derivative financial instruments relative to its investments in
          debt or equity securities.

          Net unrealized losses, net of deferred federal income taxes, of
          approximately $625,000 and $279,000, respectively, on the
          available-for-sale portfolio at September 30, 1996 and 1995 are
          reported as a separate component of stockholders' equity. During
          the year ended September 30, 1994, the Company transferred
          approximately $79,000,000 of investments from the available-for-
          sale portfolio to the held-to-maturity portfolio. At the date of
          transfer, these investments had net unrealized losses of
          approximately $1,060,000 before income taxes. These unrealized
          losses are being amortized over the term of the investments
          transferred using the interest method. At September 30, 1996, the
          remaining unamortized loss of approximately $507,000, net of
          deferred income taxes, is reported as a reduction of
          stockholders' equity.

          During the year ended September 30, 1996, in accordance with a
          Special Report issued by the Financial Accounting Standards
          Board, the Company reassessed and reclassified held-to-maturity
          debt securities with a carrying value of approximately
          $72,500,000 to the available-for-sale classification. At the date
          of the transfer, the debt securities were valued at fair value of
          approximately $72,000,000. The difference between the carrying
          value and fair value of the reclassified debt securities at the
          date of transfer of approximately $500,000 is being recognized
          over the remaining contractual term of the securities using the
          interest method.


                                      F-30
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      8.  INVESTMENTS, CONTINUED:

          The following individual investments (excluding  U.S. government
          bonds) held by the Company at September 30, 1996 and 1995, were
          in excess of ten percent of stockholders' equity.

                                                             Carrying
            Issuer                                           Amount
            ----------------------------------------------   ------------
            1996:
              Mortgage-backed securities:
                Residential Funding Mortgage Securities
                  (four issues)                              $ 16,142,719
                Chase Mortgage Finance Corp. 
                  (seven issues)                               10,620,875
                Prudential Home Mortgage Securities 
                  (three issues)                                7,160,855
                Countrywide Funding Corp.                       4,852,322

            1995:
              Mortgage-backed securities:
                Residential Funding Mortgage Securities 
                  (three issues)                               14,450,307
                Chase Mortgage Finance Corp.                    4,992,835
                Prudential Home Mortgage Securities 
                  (two issues)                                  7,350,343
                Countrywide Funding Corp.                       4,821,305

          The amortized costs and estimated market values of held-to-
          maturity and available-for-sale debt securities at September 30,
          1996, by contractual maturity, are shown below. Expected
          maturities will differ from contractual maturities because
          issuers may have the right to call or prepay obligations with or
          without call or prepayment penalties.

                                              Amortized      Estimated
                                              Cost           Market Value
                                              ------------   ------------
            Available-for-sale debt 
              securities:
                Due in one year or less       $ 10,541,669   $ 10,522,470
                Due after one year through 
                  five years                    13,552,416     13,284,073
                Due after five years through 
                  ten years                     11,071,845     10,410,708
                                              ------------   ------------
                                                35,165,930     34,217,251
                Pass-through certificates        4,333,481      4,333,481
                                              ------------   ------------
                                              $ 39,499,411   $ 38,550,732
                                              ============   ============


                                      F-31
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      8.  INVESTMENTS, CONTINUED:

                                              Amortized      Estimated
                                              Cost           Market Value
                                              ------------   ------------
            Held-to-maturity debt securities:
              Due in one year or less         $  7,654,667   $  7,612,538
              Due after one year through 
                five years                      18,557,157     18,137,785
              Due after five years through 
                ten years                       50,591,766     46,658,714
              Due after ten years                  248,149        255,994
                                              ------------   ------------
                                                77,051,739     72,665,031
              Mortgage- and asset-backed 
                bonds                           47,696,751     46,535,053
                                              ------------   ------------
                                              $124,748,490   $119,200,084
                                              ============   ============

          The Company intends to maintain an available-for-sale portfolio
          which may be shifted between investments of differing types and
          maturities to attempt to maximize market returns without assuming
          unacceptable levels of credit risk. Future purchases assigned to
          the held-to-maturity portfolio will be to replace maturing
          investments, or increase the overall size of the portfolio (while
          maintaining its overall composition).


      9.  DEBT PAYABLE, CONTINUED:

          At September 30, 1996 and 1995, debt payable consisted of the
          following:
     <TABLE>
     <CAPTION>

                                                                  1996          1995
                                                               -----------   -----------
              <S>                                              <C>           <C>
              Reverse repurchase agreements with various 
                 securities brokers, interest at 5.0% to 
                 5.8% per annum; due on October 1, 1996; 
                 collateralized by $17,700,000 in U.S. 
                 government-backed bonds                       $16,834,750

              Reverse repurchase agreements with Paine-
                 Webber, interest at 5.38% per annum; due 
                 on October 4, 1996; collateralized by 
                 $20,000,000 in U.S. Treasury bonds             18,650,000

              Reverse repurchase agreements with various 
                 securities brokers, interest at 6.1% to 
                 6.75% per annum; due on October 2, 1995; 
                 collateralized by $25,000,000 in U.S. 
                 Treasury bonds                                              $24,131,625
      </TABLE>

                                       F-32
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

      9.  DEBT PAYABLE, CONTINUED:
     <TABLE>
     <CAPTION>
                                                                  1996          1995
                                                               -----------   -----------
              <S>                                              <C>           <C>
              Real estate contracts and mortgage notes 
                 payable, interest rates ranging from 3.0% 
                 to 10.9%, due in installments through 
                 2016; collateralized by senior liens on 
                 certain of the Company's real estate 
                 contracts, mortgage notes and real estate 
                 held for sale                                   2,965,107     1,385,568

              Accrued interest payable                             151,289        35,258
                                                               -----------   -----------
                                                               $38,601,146   $25,552,451
                                                               ===========   ===========
      </TABLE>

          Aggregate amounts of principal and accrued interest payments due
          on debt payable at September 30, 1996 are as follows:

            Fiscal Year Ending
               September 30,   
            ------------------
                   1997                              $37,023,000
                   1998                                  710,000
                   1999                                  242,000
                   2000                                  137,000
                   2001                                  187,000
                Thereafter                               302,146
                                                     -----------
                                                     $38,601,146
                                                     ===========

     10.  DEBENTURE BONDS:

          At September 30, 1996 and 1995, debenture bonds consisted of the
          following:
     <TABLE>
     <CAPTION>
                                       Principally
              Annual Interest Rates    Maturing in               1996           1995
              ---------------------    -------------------   ------------   ------------
              <S>                      <C>                   <C>            <C>
              5% to 6%                 1997                  $    537,000   $  2,486,000
              6% to 7%                 1997, 1998 and 1999      4,979,000      6,911,000
              7% to 8%                 1999 and 2000           51,261,000     50,165,000
              8% to 9%                 1997, 1998 and 2000     84,372,000     85,258,000
              9% to 10%                1997                    20,136,000     30,044,000
              10% to 11%               1998 and 1999            1,749,000      1,951,000
                                                             ------------   ------------
                                                              163,034,000    176,815,000
              Compound and accrued interest                    29,139,751     24,496,873
                                                             ------------   ------------
                                                             $192,173,751   $201,311,873
                                                             ============   ============
      </TABLE>

                                       F-33
      <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     10.  DEBENTURE BONDS, CONTINUED:

          Unamortized debenture issuance costs incurred in connection with
          the sale of debentures aggregated $2,597,477 and $3,390,744 at
          September 30, 1996 and 1995, respectively, and are included in
          deferred costs on the consolidated balance sheets.

          Debenture bonds at September 30, 1996 mature as follow:

            Fiscal Year Ending
              September 30,
            ------------------           
                   1997                             $ 50,030,000
                   1998                               52,163,000
                   1999                               41,335,000
                   2000                               40,408,000
                   2001                                5,877,000
                Thereafter                             2,360,751
                                                    ------------
                                                    $192,173,751
                                                    ============

          At September 30, 1996, as required by Washington State
          regulation, the parent company could not have more than an
          aggregate total of $202,300,000 in outstanding debentures
          (including accrued and compound interest) and outstanding
          preferred stock (based on original sales price) of $49,540,000.
          Outstanding preferred stock is limited to the amount outstanding
          June 30, 1996 ($49,000,000) plus reinvested dividends ($540,000)
          after that date. At September 30, 1996, the Company had total
          outstanding debentures of approximately $192,174,000 and total
          outstanding preferred stock of approximately $49,496,000.


                                      F-34
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     11.  STOCKHOLDERS' EQUITY:

          A summary of preferred and common shares at September 30, 1996
          and 1995 is as follows:
     <TABLE>
     <CAPTION>
                                                       Issued and Outstanding Shares
                                             -------------------------------------------------
                                                      1996                      1995
                                             -----------------------   -----------------------
                                Authorized
                                Shares       Shares      Amount        Shares      Amount
                                ----------   ---------   -----------   ---------   -----------
              <S>               <C>          <C>         <C>           <C>         <C>
              Preferred Stock
                 Series A          750,000         --    $        --         --    $       -- 
                 Series B          200,000         --             --         --            -- 
                 Series C        1,000,000     438,343     4,383,432     441,794     4,417,943
                 Series D        1,375,000     673,915     6,739,150     682,359     6,823,587
                 Series E        5,000,000   1,039,562    10,395,616   1,038,558    10,385,576
                                ----------   ---------   -----------   ---------   -----------
                                 8,325,000   2,151,820   $21,518,198   2,162,711   $21,627,376
                                ==========   =========   ===========   =========   ===========
              Common Stock
                 Class A               222         130   $   293,417         130   $   293,417
                 Class B               222          --            --          --            --
                                ----------   ---------   -----------   ---------   -----------
                                       444         130   $   293,417         130   $   293,417
                                ==========   =========   ===========   =========   ===========
              Subordinate 
                 Preferred
                 Stock           1,000,000          --   $        --          --   $        --
                                ==========   =========   ===========   =========   ===========
      </TABLE>

          The Series E preferred stock has been issued in the following 
          sub-series:
     <TABLE>
     <CAPTION>
                                                       Issued and Outstanding Shares
                                             -------------------------------------------------
                                                      1996                      1995
                                             -----------------------   -----------------------
                                             Shares      Amount        Shares      Amount
                                             -----------------------   ---------   -----------
              <S>                            <C>         <C>           <C>         <C>
              Series E-1                       728,698   $ 7,286,982     748,578   $ 7,485,783
              Series E-2                        45,579       455,790      45,621       456,208
              Series E-3                       107,874     1,078,736     108,369     1,083,685
              Series E-4                        62,978       629,776      62,993       629,929
              Series E-5                        13,744       137,443      13,747       137,475
              Series E-6                        80,689       806,889      59,250       592,496
                                             ---------   -----------   ---------   -----------
                                             1,039,562   $10,395,616   1,038,558   $10,385,576
                                             =========   ===========   =========   ===========
      </TABLE>

                                       F-35
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     11.  STOCKHOLDERS' EQUITY, CONTINUED:

            PREFERRED STOCK

            Series A preferred stock has a par value of $1 per share, is
            cumulative and the holders thereof are entitled to receive
            dividends at the annual rate of 8.5%. Series B preferred stock
            is cumulative and the holders thereof are entitled to receive
            monthly dividends at the annual rate of two percentage points
            over the rate payable on six-month U.S. Treasury Bills as
            determined by the Treasury Bill auction last preceding the
            monthly dividend declaration. Series C, D and E-1 preferred
            stock are also cumulative and the holders thereof are entitled
            to receive monthly dividends at an annual rate equal to the
            highest of the "Treasury Bill Rate," the "Ten Year Constant
            Maturity Rate" or the "Twenty Year Constant Maturity Rate"
            determined immediately prior to the declaration date. The Board
            of Directors may, at its sole option, declare a higher dividend
            rate; however, dividends shall be no less than 6% or greater
            than 14% per annum. Series E-2, E-3, E-4, E-5 and E-6 preferred
            stock are also cumulative and the holders thereof are entitled
            to receive monthly dividends at an annual rate of one-half of
            one percent more than the rate in effect for the E-1 series;
            however, dividends shall be no less than 6% or greater than 14%
            per annum.

            Series B, C, D and E-1 preferred stock have a par value of $10,
            were sold to the public for $10 and are callable at the sole
            option of the Board of Directors at $10.50 per share reduced
            proratably to $10.20 per share as of the date five years from
            the date of issuance. Series E-2, E-3, E-4, E-5 and E-6
            preferred stock have a par value of $10 per share, were sold to
            the public at $100 per share and are callable at the sole
            option of the Board of Directors at $100 per share.

            All preferred stock series have liquidation preferences equal
            to their issue price, are non-voting and are senior to the
            common shares as to dividends. All preferred stock dividends
            are based upon the original issue price.

            At September 30, 1996, as required by state regulation, the
            amount of the Company's aggregate total outstanding preferred
            stock and debentures was limited (see Note 10).


                                      F-36
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     11.  STOCKHOLDERS' EQUITY, CONTINUED:

            SUBORDINATE PREFERRED STOCK

            Subordinate preferred shares, no par value, shall be entitled
            to receive dividends as authorized by the Board of Directors,
            provided that such dividend rights are subordinate and junior
            to all series of preferred stock. Subordinate preferred shares
            shall be entitled to distributions in liquidation in such
            priority as established by the Board of Directors prior to the
            issuance of any such shares. These liquidation rights shall at
            all times be subordinate and junior to all series of preferred
            stock. At September 30, 1996 and 1995, no subordinate preferred
            stock had been issued.

            COMMON STOCK

            Prior to September 30, 1994, Class A and B common stock had a
            par value of $1 per share. On September 30, 1994, the Company's
            Board of Directors authorized a 2,250:1 reverse stock split and
            changed the par value from $1 per share to $2,250 per share.
            All common shares reflect the reverse stock split. Class B is
            senior to Class A common stock as to liquidation up to the
            amount of the original investment. Any remaining amounts are
            then distributed pro rata to Class A and Class B common
            stockholders. Class B common stock has no voting rights. All
            series of common stock are subordinate in liquidation to all
            series of preferred stock.

            Dividend restrictions are imposed by regulatory authorities on
            the insurance subsidiary in which the Company has a 96.5% or
            greater stock ownership interest. These restrictions are
            limited to the unassigned statutory surplus of the insurance
            subsidiary which totaled approximately $5,567,000 at 
            September 30, 1996 (see Note 15).


                                      F-37
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     12.  INCOME TAXES:

          The Company files a consolidated federal income tax return with
          all of its subsidiaries.

          The income tax effects of the temporary differences giving rise
          to the Company's deferred tax assets and liabilities as of
          September 30, 1996 and 1995 are as follows:
     <TABLE>
     <CAPTION>
                                                                         1996
                                                               -------------------------
                                                               Assets        Liabilities
                                                               -----------   -----------
              <S>                                              <C>           <C>
              Allowance for losses on real estate assets       $ 2,678,016
              Reserves on repossessed real estate                  707,643
              Deferred contract acquisition costs and 
                 discount yield recognition                                  $16,715,163
              Office properties and equipment                                  1,776,499
              Deferred policy acquisition costs                               22,964,052
              Life insurance and annuity reserves                9,018,029
              Guaranty fund liability                            1,353,320
              Investments                                                        636,939
              Tax credit carryforwards                           1,742,000
              Other                                                959,206
              Net operating loss carryforwards                   9,739,608
                                                               -----------   -----------
              Total deferred income taxes                      $26,197,822   $42,092,653
                                                               ===========   ===========
      <CAPTION>
                                                                         1995
                                                               -------------------------
                                                               Assets        Liabilities
                                                               -----------   -----------
              <S>                                              <C>           <C>
              Allowance for losses on real estate assets       $ 1,325,773
              Reserves on repossessed real estate                  867,550
              Deferred contract acquisition costs and 
                 discount yield recognition                                  $18,224,880
              Office properties and equipment                                  1,529,695
              Deferred policy acquisition costs                               22,653,678
              Life insurance and annuity reserves                6,395,750
              Guaranty fund liability                            1,047,320
              Investments                                                      1,377,602
              Tax credit carryforwards                           1,115,000
              Other                                                863,898
              Net operating loss carryforwards                  19,916,089
                                                               -----------   -----------
              Total deferred income taxes                      $31,531,380   $43,785,855
                                                               ===========   ===========
      </TABLE>


                                      F-38
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     12.  INCOME TAXES, CONTINUED:

          No valuation allowance has been established to reduce deferred
          tax assets as it is more likely than not that these assets will
          be realized due to the future reversals of existing taxable
          temporary differences.  Realization is dependent on the
          generation of sufficient taxable income prior to expiration of
          the net operating loss carryforwards. The amount of the deferred
          tax asset considered realizable, however, could be reduced in the
          near term if estimates of future taxable income during the
          carryforward period are reduced.

          Following is a reconciliation of the provision for income taxes
          to an amount as computed by applying the statutory federal income
          tax rate to income before income taxes:

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                 -----------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Federal income taxes at statutory 
                 rate                            $ 4,209,817   $ 3,224,472   $ 2,956,219
              State taxes and other                   25,652      (116,575)       36,257
                                                 -----------   -----------   -----------
              Income tax provision               $ 4,235,469   $ 3,107,897   $ 2,992,476
                                                 ===========   ===========   ===========
      </TABLE>

            The components of the provision for income taxes are as follows:

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                 -----------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Current                            $   595,113   $   359,907   $   348,306
              Deferred                             3,640,356     2,747,990     2,644,170
                                                 -----------   -----------   -----------
                                                 $ 4,235,469   $ 3,107,897   $ 2,992,476
                                                 ===========   ===========   ===========
      </TABLE>


                                       F-39
      <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     12.  INCOME TAXES, CONTINUED, CONTINUED:

          At September 30, 1996, the Company and its subsidiaries had
          unused net operating loss carryforwards, for income tax purposes,
          as follows:

      <TABLE>
      <CAPTION>
                                                               Life
                                                 Non-Life      Company
                                                 Group Net     Net           Net
                                                 Operating     Operating     Operating
              Expiring in                        Losses        Losses        Losses
              -----------                        -----------   -----------   ------------
              <S>                                <C>           <C>           <C>
                  2004                           $ 3,766,219                 $ 3,766,219
                  2005                             6,409,762                   6,409,762
                  2006                             5,612,555                   5,612,555
                  2007                               945,516                     945,516
                  2008                                         $11,911,853    11,911,853
                                                 -----------   -----------   -----------
                                                 $16,734,052   $11,911,853   $28,645,905
                                                 ===========   ===========   ===========
      </TABLE>

          Federal tax regulations require non-life net operating losses to
          be offset first against non-life income for the tax year and then
          against a maximum of 35% of taxable life income for the year, if
          any.

          At September 30, 1996, the Company has alternative minimum tax
          credits of approximately $1,237,000 and general business tax
          credit carryforwards of approximately $505,000 available to
          reduce regular income taxes payable. The general business tax
          credit carryforwards begin to expire in 2004.


                                      F-40

     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     13.  DEFERRED COSTS:

          An analysis of deferred costs related to policy acquisition and
          debenture issuance for the years ended September 30, 1996, 1995
          and 1994 is as follows:

      <TABLE>
      <CAPTION>

                                                 Policy        Debenture
                                                 Acquisition   Issuance      Total
                                                 -----------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Balance at September 30, 1993      $70,024,363   $ 3,422,308   $73,446,671
              Deferred during the year:
                 Commissions                       5,572,146     1,381,525     6,953,671
                 Other expenses                    2,493,703       510,588     3,004,291
                                                 -----------   -----------   -----------
              Total deferred                      78,090,212     5,314,421    83,404,633
              Amortized during the year           (7,015,570)   (1,592,987)   (8,608,557)
              Reduction upon sale of subsidiary                   (688,559)     (688,559)
                                                 -----------   -----------   -----------
              Balance at September 30, 1994       71,074,642     3,032,875    74,107,517
              Deferred during the year:
                 Commissions                       9,383,938     1,461,033    10,844,971
                 Other expenses                    3,587,804       280,196     3,868,000
                                                 -----------   -----------   -----------
              Total deferred                      84,046,384     4,774,104    88,820,488
              Amortized during the year          (10,300,547)   (1,383,360)  (11,683,907)
              Reduction upon sale of subsidiary   (2,614,778)                 (2,614,778)
                                                 -----------   -----------   -----------
              Balance at September 30, 1995       71,131,059     3,390,744    74,521,803
              Deferred during the year:
                 Commissions                       6,503,580       191,064     6,694,644
                 Other expenses                    3,438,804       402,360     3,841,164
                                                 -----------   -----------   -----------
              Total deferred                      81,073,443     3,984,168    85,057,611
              Amortized during the year           (9,140,559)   (1,386,691)  (10,527,250)
                                                 -----------   -----------   -----------
              Balance at September 30, 1996      $71,932,884   $ 2,597,477   $74,530,361
                                                 ===========   ===========   ===========
      </TABLE>

          The amortization of deferred policy acquisition costs, which is
          based on the estimated gross profits of the underlying life and
          annuity products, could be changed significantly in the near term
          due to changes in the interest rate environment. As a result, the
          recoverability of these costs may be adversely affected in the
          near term.



                                      F-41
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     14.  LIFE INSURANCE AND ANNUITY RESERVES:

          Life insurance and annuity reserves are based upon contractual
          amounts due to the annuity holder, including accrued interest.
          Annuity contract interest rates ranged from 4.25% to 10.65% and
          4.45% to 10.65% during the years ended September 30, 1996 and
          1995, respectively. Interest assumptions used to compute life
          insurance reserves ranged from 5.0% to 6.5% and 5.25% to 6.5%
          during the years ended September 30, 1996 and 1995, respectively.

          The Company's subsidiary has ceded a portion of certain life
          insurance risks and the related premiums to other companies.
          These insurance transactions permit the Company to recover
          defined portions of losses from claims on life insurance policies
          issued by the Company. The reinsured risks are treated as though
          they are risks for which the subsidiary is not liable. Life
          insurance reserves, as reported in these financial statements, do
          not include reserves on the ceded business. The face value of
          life insurance policies ceded to other companies was
          approximately $58,679,000 and $62,906,000 at September 30, 1996
          and 1995, respectively. Life insurance premiums ceded were
          $354,830 and $364,553 for fiscal 1996 and 1995, respectively. The
          Company is contingently liable for claims on ceded life insurance
          business in the event the reinsuring companies do not meet their
          obligations under those reinsurance agreements.

          All states in which the Company's life insurance subsidiary
          operates have laws requiring solvent life insurance companies to
          pay assessments to protect the interests of policyholders of
          insolvent life insurance companies. Assessments are levied on all
          member insurers in each state based on a proportionate share of
          premiums written by member insurers in the lines of business in
          which the insolvent insurer engaged. A portion of these
          assessments can be offset against the payment of future premium
          taxes. However, future changes in state laws could decrease the
          amount available for offset. 

          The net amounts expensed by the Company's life insurance
          subsidiary for guaranty fund assessments and amounts estimated to
          be assessed for the years ended September 30, 1996, 1995 and 1994
          were $900,000, $782,000 and $192,000, respectively. The Company's
          estimate of these liabilities is based upon updated information
          from the National Organization of Life and Health Insurance
          Guaranty Associations regarding insolvencies occurring during the
          years 1988 through 1994. These estimates are subject to future
          revisions based upon the ultimate resolution of the insolvencies
          and resultant losses. As a result of these uncertainties, the 


                                      F-42
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     14.  LIFE INSURANCE AND ANNUITY RESERVES, CONTINUED:

          Company's estimate of future assessments could change in the near
          term. The Company does not believe that the amount of future
          assessments associated with known insolvencies after 1994 will be
          material to its financial condition or results of operations. At
          September 30, 1996, the amount of estimated future guaranty fund
          assessments of approximately $3,980,000 have been recorded, which
          is net of a 8.25% discount rate applied to the estimated payment
          term of approximately seven years. The remaining unamortized
          discount associated with this accrual was approximately $832,000
          at September 30, 1996.


     15.  STATUTORY ACCOUNTING:

          The Company's life insurance subsidiary is required to file
          statutory financial statements with state insurance regulatory
          authorities. Accounting principles used to prepare these
          statutory financial statements differ from generally accepted
          accounting principles (GAAP). Selected statutory and the GAAP
          financial statement balances for insurance subsidiaries as of and
          for the years ended September 30, 1996, 1995 and 1994 are as
          follows:

     <TABLE>
     <CAPTION>
                                                               Statutory     GAAP
                                                               ------------  -----------
              <S>                                              <C>           <C>
              Stockholders' equity:
                 1996                                          $48,721,922   $81,605,742
                 1995                                           43,340,817    78,826,654
                 1994                                           48,206,960    77,142,373

              Net income:
                 1996                                          $ 7,224,359   $ 3,076,252
                 1995                                            2,634,919     2,717,893
                 1994                                           12,544,070     8,449,317

              Unassigned statutory surplus and retained earnings:
                 1996                                          $ 5,566,922   $38,450,742
                 1995                                            1,985,817    38,233,333
                 1994                                            6,826,960    38,559,708
      </TABLE>

          Due to the sale of OSL during fiscal 1995, stockholders' equity
          and unassigned statutory surplus and retained earnings amounts
          above do not include OSL at September 30, 1996 and 1995. Also,
          the 1995 net income above only includes OSL operations through
          May 31, 1995.


                                      F-43
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     15.  STATUTORY ACCOUNTING, CONTINUED:

          Under applicable Washington State Insurance laws and regulations,
          the Company's life insurance subsidiary is required to maintain
          minimum levels of surplus, determined in accordance with
          statutory accounting practices, in the aggregate amount of
          $150,000. The Revised Code of Washington defines surplus as "the
          excess of statutory assets over statutory liabilities, accounting
          for the pear value of capital stock as a liability." At
          September 30, 1996, the Company's life insurance subsidiary was
          in compliance with this requirement.

          The National Association of Insurance Commissioners (NAIC)
          currently is in the process of codifying statutory accounting
          practices, the result of which is expected to constitute the only
          source of "prescribed" statutory accounting practices.
          Accordingly, that project, which is expected to be completed in
          1997, will likely change, to some extent, prescribed statutory
          accounting practices that insurance enterprises use to prepare
          their statutory financial statements. Written approval was
          received from the Insurance Department of the state of Washington
          to capitalize the underwriting fees charged to the life insurance
          subsidiary by Metropolitan and to amortize these fees as an
          adjustment of the yield on acquired receivables. Statutory
          accounting practices prescribed by the state of Washington do not
          describe the accounting required for this type of transaction. As
          of September 30, 1996, this permitted accounting practice
          increased statutory surplus by approximately $28,700,000 over
          what it would have been had prescribed practices disallowed this
          accounting treatment.

          The regulatory authorities impose minimum risk-based capital
          requirements on insurance enterprises that were developed by the
          NAIC. The formulas for determining the amount of risk-based
          capital (RBC) specify various weighting factors that are applied
          to financial balances or various levels of activity based on
          perceived degree of risk. Regulatory compliance is determined by
          a ratio of the enterprise's regulatory total adjusted capital, as
          defined by the NAIC, to its authorized control level, RBC, as
          defined by the NAIC. Enterprises below specific trigger points or
          ratios are classified within certain levels, each of which
          requires specified corrective action. The RBC measure of the
          insurance subsidiary at September 30, 1996 and 1995 was above the
          minimum standards.


                                      F-44
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     16.  SUPPLEMENTAL DISCLOSURES FOR STATEMENTS OF CASH FLOWS:

          The following table summarizes interest costs, net of amounts
          capitalized and income taxes paid during the years ended
          September 30, 1996, 1995 and 1994:

      <TABLE>
      <CAPTION>
                                                    1996          1995          1994
                                                ------------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Interest, net of amounts 
                 capitalized                     $12,653,377   $20,214,329   $23,541,173
              Income taxes                         2,503,482     1,157,155       333,154
      </TABLE>


          Non-cash investing and financing activities of the Company during
          the years ended September 30, 1996, 1995 and 1994 are as follows:

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                ------------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Loans to facilitate the sale of 
                 real estate held                $39,102,941   $34,102,247   $33,461,966
              Transfers between annuity 
                 products                         17,051,327    58,012,857    22,248,418
              Transfer of investments from 
                 available-for-sale portfolio 
                 to held-to-maturity portfolio                                79,001,795
              Transfer of investment from 
                 held-to-maturity portfolio
                 to available-for-sale portfolio  72,572,322
              Transfer of property from land, 
                 buildings and equipment 
                 to real estate held for sale 
                 and development                                 1,598,999       258,894
              Change in net unrealized (losses) 
                 gains on investments, net          (244,853)    2,005,960    (3,371,012)
              Real estate held for sale and 
                 development acquired through 
                 foreclosure                      14,270,520    13,850,388    19,245,977
              Debt assumed upon foreclosure of 
                 real estate contracts                              16,059       129,062
              Assumption of other debt payable 
                 in connection with the acqui-
                 sition of real estate contracts 
                 and mortgage notes                3,633,657       526,868       191,213
      </TABLE>


                                       F-45
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     16.  SUPPLEMENTAL DISCLOSURES FOR STATEMENTS OF CASH FLOWS, CONTINUED:

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                ------------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Reduction in assets and liabili-
                 ties associated with sale of 
                 subsidiaries:
                   Investment securities                         9,401,577
                   Real estate contracts and 
                      mortgage notes receivable                 32,391,856    27,267,736
                   Real estate held for sale                       514,889       503,000
                   Allowance for losses on real 
                      estate assets                                322,548       287,439
                   Deferred costs                                2,620,571       688,559
                   Equipment                                        13,395
                   Other assets                                    186,316        22,176
                   Annuity reserves                             44,558,959
                   Debenture bonds and accrued 
                      interest                                                30,111,270
                   Debt payable                                                  120,953
                   Accounts payable and accrued 
                      expenses                                   1,653,970       318,574
      </TABLE>


     17.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

          The following disclosure of the estimated fair value of financial
          instruments is made in accordance with the requirements of
          Statement of Financial Accounting Standards No. 107, "Disclosures
          about Fair Value of Financial Instruments." The estimated fair
          value amounts have been determined using available market
          information and appropriate valuation methodologies. However,
          considerable judgment is necessarily required to interpret market
          data and to develop the estimates of fair value. Accordingly, the
          estimates presented herein are not necessarily indicative of the
          amounts the Company could realize in a current market exchange.
          The use of different market assumptions and/or estimation
          methodologies may have a material effect on the estimated fair
          value amounts.

          The following methods and assumptions were used to estimate the
          fair value of each class of financial instruments for which it is
          practicable to estimate that value. Potential income tax
          ramifications related to the realization of unrealized gains and
          losses that would be incurred in an actual sale and/or settlement
          have not been taken into consideration.

            PUBLICLY TRADED INVESTMENT SECURITIES - Fair value is
            determined by quoted market prices.


                                      F-46
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     17.  FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:

            REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE - For
            loans, the discount rate is estimated using rates currently
            offered for loans of similar characteristics that reflect the
            credit and interest rate risk inherent in the loan. For
            residential mortgage loans, fair value is estimated by
            discounting contractual cash flows adjusted for prepayment
            estimates. The prepayment estimates are based upon internal
            historical data. 

            OTHER RECEIVABLE INVESTMENTS - The fair value of other
            receivable investments is based on the discounted value of
            contractual cash flows. The discount rate is estimated using
            the rates currently offered for investments with similar credit
            ratings and similar remaining maturities.

            DEBENTURE BONDS AND DEBT PAYABLE - The fair value of debenture
            bonds and debt payable is based on the discounted value of
            contractual cash flows. The discount rate is estimated using
            the rates currently offered for debt with similar remaining
            maturities.

            SECURITIES SOLD, NOT OWNED - Fair value is determined by quoted
            market prices, including accrued interest necessary to settle
            repurchase.

            OTHER FINANCIAL ASSETS AND LIABILITIES - The carrying amount of
            financial instruments in these classifications, including
            insurance policy loans approximates fair value. Policy loans
            are charged interest on a variable rate subject to current
            market conditions, thus carrying amounts approximate fair
            value.

            The estimated fair values of the following financial
            instruments as of September 30, 1996 and 1995 are as follows:
     <TABLE>
     <CAPTION>
                                                                        1996
                                                             ---------------------------
                                                             Carrying
                                                             Amounts        Fair Value
                                                             ------------   ------------
                 <S>                                         <C>            <C>
                 Financial assets:
                   Cash and cash equivalents                 $167,879,080   $167,879,080
                   Investments:
                      Available-for-sale securities            38,554,498     38,554,498
                      Held-to-maturity securities             124,748,490    119,200,084
                   Real estate contracts and mortgage 
                      notes receivable                        642,570,771    668,373,000
                   Other receivable investments               107,494,150    109,258,000
                 Financial liabilities:
                   Debenture bonds - principal and 
                      compound interest                       189,320,833    191,631,000
                   Debt payable - principal                    38,449,857     38,486,000
                   Securities sold, not owned                 132,652,334    132,652,334
      </TABLE>
                                       F-47
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     17.  FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:
      <TABLE>
      <CAPTION>

                                                                        1995
                                                             ---------------------------
                                                             Carrying
                                                             Amounts        Fair Value
                                                             ------------   ------------
                 <S>                                         <C>            <C>
                 Financial assets:
                   Cash and cash equivalents                 $ 32,798,627   $ 32,798,627
                   Investments:
                      Available-for-sale securities            31,829,980     31,829,980
                      Held-to-maturity securities             188,073,542    182,063,885
                   Real estate contracts and mortgage 
                      notes receivable                        580,158,575    608,775,000
                   Other receivable investments                41,591,415     45,446,000
                 Financial liabilities:
                   Debenture bonds - principal and 
                      compound interest                       198,286,390    205,004,000
                   Debt payable - principal                    25,517,193     25,564,000
      </TABLE>

            LIMITATIONS - The fair value estimates are made at a discrete
            point in time based on relevant market information and
            information about the financial instruments. Because no market
            exists for a significant portion of these financial
            instruments, fair value estimates are based on judgments
            regarding future expected loss experience, current economic
            conditions, risk characteristics of various financial
            instruments and other factors. These estimates are subjective
            in nature and involve uncertainties and matters of significant
            judgment and, therefore, cannot be determined with precision.
            Changes in assumptions could significantly affect the
            estimates. Accordingly, the estimates presented herein are not
            necessarily indicative of what the Company could realize in a
            current market exchange. 

                                      F-48
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     18.  RELATED-PARTY TRANSACTIONS:

          During the years ended September 30, 1996 and 1995, the Company
          had the following related-party transactions with Summit and
          other affiliates:

     <TABLE>
     <CAPTION>

                                                                 1996           1995
                                                             ------------   ------------
              <S>                                            <C>            <C>
              Real estate contracts and mortgage notes 
                 receivable and other receivable invest-
                 ments sold to Summit and OSL                $ 45,137,473   $ 59,578,347
              Contract acquisition costs charged to Summit 
                 and OSL on sale of real estate contracts 
                 and mortgage notes receivable and other 
                 receivable investments, including manage-
                 ment underwriting fees                         1,753,206      1,967,409

              Gains on real estate contract and mortgage 
                 notes receivable and other receivable 
                 investments purchased from Summit and OSL                       335,469

              Service fees paid to Summit Property 
                 Development                                    2,038,202      1,250,017

              Commissions and service fees paid to MIS            369,080      1,124,481

              Dividends paid to Summit on preferred stock         200,256        256,991
      </TABLE>

          At September 30, 1996 and 1995, the Company had payables due to
          affiliates of $1,205,920 and $1,962,923, respectively, related
          primarily to advance payments on receivable acquisitions.


     19.  BUSINESS SEGMENT REPORTING:

          The Company principally operates in the three industry segments
          which encompass: (1) the investing in real estate contracts and
          mortgage notes receivables, other receivables and investment
          securities, (2) insurance and annuity operations, and (3)
          property development. The insurance segment also invests a
          substantial portion of the proceeds from insurance and annuity
          operations in real estate contracts and mortgage notes
          receivables, other receivables and investment securities.


                                      F-49
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     19.  BUSINESS SEGMENT REPORTING, CONTINUED:

          Information about the Company's separate business segments and 
          in total as of and for the years ended September 30, 1996, 1995 
          and 1994 are as follows:

     <TABLE>
     <CAPTION>

                                                                               Property        Intersgement
                                               Investing       Insurance       Development     Elimination     Total
                                               --------------  --------------  --------------  --------------  --------------
      <S>                                      <C>             <C>             <C>             <C>             <C>
              September 30, 1996:
                Revenues                       $   37,093,527  $   92,893,077  $   33,948,826  $   (7,063,061) $  156,672,179
                Income (loss) from operations       9,869,632       6,080,155      (3,567,973)                     12,381,814
                Identifiable assets, net          237,724,744   1,133,741,015      68,148,987    (156,955,928)  1,282,658,826
                Depreciation and amortization       1,388,222         181,093       3,048,349                       4,617,664
                Capital expenditures                1,325,151          44,651                                       1,369,802

              September 30, 1995:
                Revenues                           29,861,448      88,344,548      27,178,017      (7,276,528)    138,107,483
                Income (loss) from operations       5,573,034       4,695,158        (784,452)                      9,483,740
                Identifiable assets, net          204,166,053     929,358,768      78,272,958    (131,329,779)  1,078,468,000
                Depreciation and amortization       1,172,856         119,476       1,730,901                       3,023,233
                Capital expenditures                  811,006          83,667                                         894,673

              September 30, 1994:
                Revenues                           35,687,861      91,047,193      18,932,334      (7,481,425)    138,185,963
                Income (loss) from operations      (3,421,338)     13,291,685      (1,175,586)                      8,694,761
                Identifiable assets, net          199,843,275     935,051,736      60,678,188    (132,283,296)  1,063,289,903
                Depreciation and amortization       1,203,909          84,918         777,538                       2,066,365
                Capital expenditures                  453,842          17,255                                         471,097

      </TABLE>


                                      F-50
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     20.  PARENT COMPANY ONLY FINANCIAL STATEMENTS:

          The condensed balance sheets of Metropolitan Mortgage & Securities
          Co., Inc. ("Metropolitan" or the "parent company") at September 30,
          1996 and 1995 are as follows:
     <TABLE>
     <CAPTION>
                                                                 1996           1995
                                                             ------------   ------------
              <S>                                            <C>            <C>
                             ASSETS

              Cash and cash equivalents                      $  4,807,147   $ 15,965,359
              Investments                                       8,840,977      6,153,393
              Real estate contracts and mortgage notes 
                 receivable and other receivable investments   72,018,452     30,429,638
              Real estate held for sale and development        69,360,885     48,574,018
              Allowance for losses on real estate assets       (6,297,676)    (3,108,597)
              Equity in subsidiary companies                   97,302,358    117,281,602
              Land, buildings and equipment, net                9,376,863      9,049,942
              Prepaid expenses and other assets, net           12,620,101     10,243,463
              Accounts and notes receivable, net                5,190,592        893,983
              Receivables from affiliates                      24,626,214     43,812,436
                                                             ------------   ------------
                   Total assets                              $297,845,913   $279,295,237
                                                             ============   ============
                            LIABILITIES

              Debenture bonds and accrued interest           $192,173,751   $201,311,873
              Debt payable                                     13,155,334      5,645,410
              Accounts payable and accrued expenses             7,463,342      2,917,769
              Deferred underwriting fee income                 38,710,154     28,849,743
                                                             ------------   ------------
                   Total liabilities                          251,502,581    238,724,795
                                                             ------------   ------------
                         STOCKHOLDERS' EQUITY

              Preferred stock, $10 par (liquidation 
                 preference, $49,495,906 and $47,825,310, 
                 respectively)                                 21,518,198     21,627,106
              Subordinate preferred stock, no par                      --             --
              Common stock, $2,250 par                            293,417        293,417
              Additional paid-in capital                       16,791,670     14,917,782
              Retained earnings                                 8,731,070      4,561,554
              Net unrealized losses on investments               (991,023)      (829,417)
                                                             ------------   ------------
                   Total stockholders' equity                  46,343,332     40,570,442
                                                             ------------   ------------
                   Total liabilities and stockholders' 
                      equity                                 $297,845,913   $279,295,237
                                                             ============   ============
      </TABLE>
                                       F-51
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     20.  PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED:

          Metropolitan's condensed statements of income for the years ended
          September 30, 1996, 1995 and 1994 are as follows:

      <TABLE>
      <CAPTION>
                                                    1996          1995          1994
                                                ------------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Revenues:
                 Interest and earned discounts   $ 8,303,775   $ 8,721,451   $ 8,756,861
                 Fees, commissions, service and 
                   other income                   28,567,964    21,788,065    15,056,870
                 Real estate sales                23,499,363     4,700,560     7,607,652
                 Realized net gains on sales of 
                   investments and receivables     2,357,010     1,134,510       366,409
                                                 -----------   -----------   -----------
                      Total revenues              62,728,112    36,344,586    31,787,792
                                                 -----------   -----------   -----------
              Expenses:
                 Interest, net                    15,630,068    16,205,083    17,616,074
                 Cost of real estate sold         22,266,024     3,719,349     7,330,073
                 Provision for losses on real 
                   estate assets                   4,578,315     2,316,354       737,042
                 Salaries and employee benefits   12,085,532    10,035,360     9,332,118
                 Other operating expenses          1,523,541       816,134     2,142,358
                                                 -----------   -----------   -----------
                      Total expenses              56,083,480    33,092,280    37,157,665
                                                 -----------   -----------   -----------
              Income (loss) from operations 
                 before income taxes and equity 
                 in net income of subsidiaries     6,644,632     3,252,306    (5,369,873)
              Income tax benefit (provision)      (2,268,916)   (1,105,581)    1,813,051
                                                 -----------   -----------   -----------
              Income (loss) before equity in 
                 net income of subsidiaries        4,375,716     2,146,725    (3,556,822)
              Equity in net income of 
                 subsidiaries                      3,661,948     4,155,921     9,034,578
                                                 -----------   -----------   -----------
              Net income                         $ 8,037,664   $ 6,302,646   $ 5,477,756
                                                 ===========   ===========   ===========
      </TABLE>
                                       F-52
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     20.  PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED:

          Metropolitan's condensed statements of cash flows for the years
          ended September 30, 1996, 1995 and 1994 are as follows:

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                ------------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Cash flows from operating 
                 activities:
                   Net income                    $ 8,037,664   $ 6,302,646   $ 5,477,756
                   Adjustments to reconcile 
                      net income to net cash
                      provided by operating 
                      activities                  12,717,338    (3,909,025)   (3,679,005)
                                                 -----------   -----------   -----------
              Net cash provided by operating 
                 activities                       20,755,002     2,393,621     1,798,751
                                                 -----------   -----------   -----------
              Cash flows from investing 
                 activities:
                   Principal payments on real 
                      estate contracts and 
                      mortgage notes receivable 
                      and other receivable 
                      investments                 12,480,667     5,069,237    10,550,918
                   Proceeds from sales of real 
                      estate contracts and 
                      mortgage notes receivable 
                      and other receivable 
                      investments                 24,297,171    34,946,274
                   Acquisition of real estate 
                      contracts and mortgage
                      notes and other receiv-
                      able investments           (32,175,162)  (18,449,630)   (6,520,436)
                   Proceeds from real estate 
                      sales                        9,221,958     1,876,900     2,915,452
                   Proceeds from sales of 
                      investments                  3,294,326     7,647,099       361,132
                   Proceeds from maturities of 
                      investments                  5,800,000
                   Purchase of investments       (11,689,836)  (12,108,637)     (399,465)
                   Additions to real estate 
                      held for sale and develop-
                      ment                       (17,191,856)  (12,483,117)   (7,945,133)
                   Capital expenditures           (1,271,041)     (803,302)     (469,475)
                   Net change in investment 
                      in and advances to 
                      subsidiaries               (16,293,198)   (9,591,121)    6,332,550
                                                 -----------   -----------   -----------
                        Net cash provided by 
                          (used in) investing 
                          activities             (23,526,971)   (3,896,297)    4,825,543
                                                 -----------   -----------   -----------
      </TABLE>
                                       F-53
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     20.  PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED:

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                ------------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Cash flows from financing 
                 activities:
                   Net borrowings (repayments) 
                      from banks and others        7,497,807     4,156,501    (3,324,722)
                   Issuance of debenture bonds     9,125,303    53,120,179    46,414,738
                   Issuance of preferred stock     2,135,714     4,513,293     1,772,649
                   Repayment of debenture bonds  (22,906,185)  (48,970,828)  (51,610,174)
                   Cash dividends                 (3,868,148)   (4,539,503)   (3,510,338)
                   Redemption and retirement of 
                      stock                         (370,734)     (266,460)     (775,742)
                                                 -----------   -----------   -----------
                        Net cash provided by 
                          (used in) financing 
                          activities              (8,386,243)    8,013,182   (11,033,589)
                                                 -----------   -----------   -----------
              Net increase (decrease) in cash 
                 and cash equivalents            (11,158,212)    6,510,506    (4,409,295)

              Cash and cash equivalents at 
                 beginning of year                15,965,359     9,454,853    13,864,148
                                                 -----------   -----------   -----------
              Cash and cash equivalents at 
                 end of year                     $ 4,807,147   $15,965,359   $ 9,454,853
                                                 ===========   ===========   ===========
      </TABLE>

          Non-cash investing and financing activities not included in
          Metropolitan's condensed statements of cash flows for the years
          ended September 30, 1996, 1995 and 1994 are as follows:

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                ------------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Loans to facilitate the sale of 
                 real estate                     $14,277,405   $ 2,823,660   $ 4,692,200
              Real estate acquired through 
                 foreclosure                         198,454     1,219,983     2,166,655
              Debt assumed with acquisition of 
                 real estate contracts and 
                 mortgage notes and debt assumed 
                 upon foreclosure of real estate 
                 contracts                                         113,876        81,530
              Change in net unrealized gains 
                 (losses) on investments            (161,606)    2,005,960    (3,371,012)
              Increase in assets and liabili-
                 ties associated with liquida-
                 tion of subsidiary:
                   Real estate contracts and 
                      mortgage notes receivable   30,052,954

                                       F-54
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     20.  PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED:

     
</TABLE>
<TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                ------------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Real estate held for sale           27,915,041
              Allowance for losses on 
                 real estate assets                1,107,129
              Land, building and equipment, 
                 net                                  15,518
              Other assets                         1,911,314
              Accounts receivable                  2,963,966
              Debt payable                            13,948
              Accounts payable and accrued 
                 expenses                          2,759,214
              Investments in and advances to 
                 subsidiaries                     58,978,502
      </TABLE>

          Accounting policies followed in the preparation of the preceding
          condensed financial statements of Metropolitan (parent company
          only) are the same as those policies described in the
          consolidated financial statements except that the equity method
          was used in accounting for the investments in and net income from
          subsidiaries. 

          At September 30, 1996 and 1995, Metropolitan's debt payable
          consists of the following:

     <TABLE>
     <CAPTION>
                                                                  1996          1995
                                                               -----------   -----------
              <S>                                              <C>           <C>
              Reverse repurchase agreement with a securities 
                 broker, interest at 5.8% per annum, due 
                 October 1, 1996; collateralized by 
                 $2,700,000 in U.S. government-backed bonds    $ 2,678,500

              Reverse repurchase agreement with a securities 
                 broker, interest at 6.75% per annum, due 
                 October 2, 1995; collateralized by 
                 $5,000,000 in U.S. Treasury bonds                           $ 4,606,625

              Real estate contracts and mortgage notes 
                 payable, interest rates ranging from 3% to 
                 10.9%, due in installments through 2016; 
                 collateralized by senior liens on certain
                 of the Company's real estate contracts, 
                 mortgage notes and real estate held for 
                 sale                                           10,456,496     1,016,616

                 Accrued interest payable                           20,338        22,169
                                                               -----------   -----------
                                                               $13,155,334   $ 5,645,410
                                                               ===========   ===========
      </TABLE>
                                       F-55
      <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     20.  PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED:

          Aggregate amounts of principal payments due on the parent
          company's debt payable are expected to be as follows:

            Fiscal Year Ending
              September 30,
            ------------------           

                  1997                              $  3,040,000
                  1998                                   364,000
                  1999                                   393,000
                  2000                                   356,000
                  2001                                   374,000
                Thereafter                             8,628,334
                                                    ------------
                                                    $ 13,155,334
                                                    ============

          At September 30, 1996 and 1995, Metropolitan's debenture bonds
          payable consisted of the following:

     <TABLE>
     <CAPTION>
                                       Principally
              Annual Interest Rates    Maturing in               1996           1995
              ---------------------    -------------------   ------------   ------------
              <S>                      <C>                   <C>            <C>
              5% to 6%                 1997                  $    537,000   $  2,486,000
              6% to 7%                 1997, 1998 and 1999      4,979,000      6,911,000
              7% to 8%                 1999 and 2000           51,261,000     50,165,000
              8% to 9%                 1997, 1998 and 2000     84,372,000     85,258,000
              9% to 10%                1997                    20,136,000     30,044,000
              10% to 11%               1998 and 1999            1,749,000      1,951,000
                                                             ------------   ------------
                                                              163,034,000    176,815,000
              Compound and accrued interest                    29,139,751     24,496,873
                                                             ------------   ------------
                                                             $192,173,751   $201,311,873
                                                             ============   ============
      </TABLE>

          Unamortized debenture issuance costs totaled $2,597,477 at
          September 30, 1996 and $3,390,744 at September 30, 1995.


                                      F-56
     <PAGE>
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     20.  PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED:

          Maturities of the parent company's debenture bonds are as
          follows:

            Fiscal Year Ending
              September 30,
            ------------------           
                   1997                             $ 50,030,000
                   1998                               52,163,000
                   1999                               41,335,000
                   2000                               40,408,000
                   2001                                5,877,000
                Thereafter                             2,360,751
                                                    ------------
                                                    $192,173,751
                                                    ============

          Metropolitan had the following related party transactions with
          its various subsidiaries and affiliated entities:

     <TABLE>
     <CAPTION>
                                                    1996          1995          1994
                                                 -----------   -----------   -----------
              <S>                                <C>           <C>           <C>
              Dividends received:
                 Summit Securities, Inc.                                     $ 1,422,007
                 Old Standard Life Insurance 
                   Company                                     $ 1,922,000       700,000
                 Metropolitan Mortgage & 
                   Securities Co. of Alaska      $ 1,243,950                     225,000
                 Spokane Mortgage Co.                              125,000     1,800,000
                 Western United Life Assurance 
                   Company                           441,510       288,208     2,604,875
                 Beacon Properties, Inc.             185,000       360,000       330,000
                 Consumers Group Holding Co., 
                   Inc.                            1,880,450       723,250     6,791,358
                 Metropolitan Mortgage Hawaii, 
                   Inc.                                                        1,770,000
                 Metropolitan Investment 
                   Securities, Inc.                                138,950
                 Broadmore Park Factory Outlet, 
                   Inc.                               85,000
                                                 -----------   -----------   -----------
                                                 $ 3,835,910   $ 3,557,408   $15,643,240
                                                 ===========   ===========   ===========

              Fees, commissions, service and 
                 other income                    $26,969,251   $18,829,557   $13,814,334
              Interest income                      1,858,521     4,152,257     3,218,813

      </TABLE>

                                       F-57
      <PAGE>
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     20.  PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED:

          Metropolitan charged various subsidiaries and affiliated entities
          for underwriting fees of $29,362,000 in 1996, $14,936,306 in 1995
          and $13,248,132 in 1994 related to contracts sold to these
          entities. Amounts charged to subsidiaries are deferred and
          recognized as income over the estimated life of the contracts.
          Amounts amortized into service fee income were $18,323,435 in
          1996, $10,416,849 in 1995 and $6,596,877 in 1994.

          The underwriting fees are based upon a yield requirement
          established by the purchasing entity. For contracts sold to
          Western United Life Assurance Co. (Western United), one of
          Metropolitan's subsidiaries, the yield is guaranteed by
          Metropolitan. In connection with its guarantee, Metropolitan has
          holdbacks of $12,538,000 and $6,945,473 at September 30, 1996 and
          1995, respectively.


                                      F-58
     <PAGE>
<PAGE>




     <PAGE>                        Page 98

ITEM 9.   CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON
     ACCOUNTING AND FINANCIAL DISCLOSURE.

     N/A.

                              PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.

     See "Management" under Item 1.

ITEM 11.  EXECUTIVE COMPENSATION.

     See "Executive Compensation" under Item 1.
        See    "Compensation   Committee   Interlocks   and   Insider
Participation"
          under ITEM 1.    

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT.

     See "Ownership of Management" and "Principal
     Shareholders" under Item 1.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     See "Certain Transactions" under Item 1.
                                  
<PAGE>                        Page 99
                                  
                               PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.

     (a)  1.  FINANCIAL STATEMENTS
     Included in Part II, Item 8 of this report:

     Report of Independent Accountants
     Consolidated Balance Sheets at September 30, 1996, and 1995.
     Consolidated Statements of Income for the Years Ended
          September 30, 1996, 1995, and l994
     Consolidated Statements of Stockholders' Equity for the
          Years Ended September 30, 1996, 1995, and 1994.
     Consolidated Statements of Cash Flows for the Years Ended
          September 30, 1996, 1995, and l994.
     Notes to Consolidated Financial Statements

     (b)  2.   FINANCIAL STATEMENT SCHEDULES

     Included in Part IV of this report:

     Report of Independent Accountants on Financial Statement
     Schedules.

     Schedules Required by Article 7.
     Schedule I          --   Summary of Investments other than
                         Investments in Related Parties
     Schedule III   --   Supplementary Insurance Information
     Schedule IV    --   Supplementary Reinsurance Information

     Schedules Required by Article 5.
     Schedule II    --   Valuation and Qualifying Accounts and
                         Reserves
     Schedule IV    --   Loans on Real Estate

     Other schedules are omitted because of the absence of
     conditions under which they are required or because the
     required information is given in the financial statements
     or notes thereto.

     (c)  3.   Exhibits


                <PAGE>                        Page 99

                              3(a).        Restated    Articles    of
                Incorporation, as amended, dated November  30,  1987.
                (Exhibit  3(a)  to  Metropolitan's Annual  Report  on
                Form 10-K for fiscal 1987).

                            3(b).       Amendment  to   Articles   of
                Incorporation dated November 5, 1991.  (Exhibit  3(c)
                to Registration No. 33-40220.)

                            3(c).       Amendment  to   Articles   of
                Incorporation  dated September  20,  1992.   (Exhibit
                3(c)  to  Metropolitan's Annual Report on  Form  10-K
                for fiscal 1992.)

                           3(d).     Bylaws as amended to October 31,
                1988.   (Exhibit 3(b) to Metropolitan's Annual Report
                on Form 10-K for fiscal 1988.)

                            3.(e).Restated  Bylaws  as   amended   to
                December  26,  1995. (Exhibit 3(e) to Form  10-K  for
                Period Ending September 30, 1995.

                           4(a).      Indenture, dated as of July  6,
                1979,    between   Metropolitan   and   Seattle-First
                National  Bank,  Trustee (Exhibit 3 to Metropolitan's
                Annual Report on Form 10-K for fiscal 1979).

                           4(b).      First  Supplemental  Indenture,
                dated  as  of  October 3, 1980, between  Metropolitan
                and  Seattle-First NationalBank, Trustee  (Exhibit  4
                to  Metropolitan's Annual Report  on  Form  10-K  for
                fiscal 1980).

                           4(c).      Second Supplemental  Indenture,
                dated  as  of November 12, 1984, between Metropolitan
                and  Seattle-First  National Bank,  Trustee  (Exhibit
                4(d) to Registration No. 2-95146).

                           4(d).      Amended  Statement  of  Rights,
                Designations   and  Preferences  of   Variable   Rate
                Preferred   Stock,   Series  C   (Exhibit   4(g)   to
                Registration No. 33-2699).

                              4(e).        Statement    of    Rights,
                Designations   and  Preferences  of   Variable   Rate
                Preferred   Stock,   Series  D   (Exhibit   4(a)   to
                Registration No. 33-25702).


                <PAGE>                        Page 100

                              4(f).        Statement    of    Rights,
                Designations   and  Preferences  of   Variable   Rate
                Preferred  Stock,  Series  E-1,  (Exhibit   4(a)   to
                Registration No. 33-19238).

                           4(g).      Amended  Statement  of  Rights,
                Designations   and  Preferences  of   Variable   Rate
                Preferred   Stock,  Series  E-2  (Exhibit   4(a)   to
                Registration No. 33-25702).

                              4(h).        Statement    of    Rights,
                Designations   and  Preferences  of   Variable   Rate
                Preferred   Stock,  Series  E-3  (Exhibit   4(a)   to
                Registration No. 33-32586).

                              4(i).        Statement    of    Rights,
                Designations   and   Preference  of   Variable   Rate
                Cumulative Preferred Stock, Series E-4 (Exhibit  4(h)
                to Registration No. 33-40221).

                           4(j).      Form  of Statement  of  Rights,
                Designations   and  Preferences  of   Variable   Rate
                Preferred  Stock,  Series  E-5.   (Exhibit  4(i)   to
                Registration No. 33-57396.)

                           4(k).      Form  of Statement  of  Rights,
                Designations   and  Preferences  of   variable   rate
                cumulative Preferred Stock, Series E-6.

                           9.    Irrevocable Trust Agreement (Exhibit
                9(b) to Registration No. 2-81359).

                           11.   Statement Indicating Computation  of
                Per-Share  Earnings.   (SEE  "CONSOLIDATED  FINANCIAL
                STATEMENTS".)

                          *12. Statement Re computation of ratios.

                          *21. Subsidiaries of Registrant

                          *27. Financial Data Schedule

(b)    Reports on Form 8-K.

          No  Form  8-K filings were made during the last quarter  of
       the  period  covered  by this report.  A Form  8-K  was  filed
       December  10, 1996, subsequent to the period covered  by  this
       report  which  disclosed the sale through a securitization  of
       approximately   115.47  million  in  first  lien   residential
       mortgages, as more fully described in such Form 8-K.
                                  
<PAGE>                        Page 102
                                  
                  REPORT OF INDEPENDENT ACCOUNTANTS
                                  
                  ON FINANCIAL STATEMENT SCHEDULES

The Directors and Stockholders
Metropolitan Mortgage & Securities Co., Inc.

Our  report  on the consolidated financial statements of Metropolitan
Mortgage & Securities Co., Inc. and subsidiaries is included in  Item
8   herein.    In  connection  with  our  audits  of  such  financial
statements,  we  have  also audited the related  financial  statement
schedules listed in Item 14 of this Form 10-K.

In  our opinion, the financial statement schedules referred to above,
when  considered in relation to the basic financial statements  taken
as a whole, present fairly, in all material respects, the information
required to be included therein.


                    /s/ COOPERS & LYBRAND L.L.P.


                      Coopers & Lybrand L.L.P.


Spokane, Washington
December 6, 1996



<PAGE>                        Page 103

Schedule I

                       SUMMARY OF INVESTMENTS
              OTHER THAN INVESTMENTS IN RELATED PARTIES
            METROPOLITAN MORTGAGE & SECURITIES CO., INC.
                         September 30, 1996
<TABLE>
<CAPTION>
Column A                           Column B      Column C     Column D
                                                             Amount At
                                                            Which Shown
                                  Amortized       Market     On Balance
                                     Cost         Value        Sheet
TYPE OF INVESTMENTS

<S>                                           <C>           <C>            <C>
FIXED MATURITIES
Investments:
  U.S. Government and Government
    Agencies and Authorities   $ 71,938,231  $ 67,466,222  $ 71,460,561
  Corporate Bonds                32,287,052    31,649,223    31,851,940
  Utility Bonds                   7,992,386     7,766,837     7,956,489
  Mortgage and Asset Backed Bonds
    and pass through certificates52,030,232    50,868,534    52,030,232
                               ------------  ------------  ------------
TOTAL FIXED MATURITIES          $164,247,901  $157,750,816  $163,299,222
                               ============  ============  ============
Equity Securities               $      1,592  $      3,766  $      3,766
                               ============  ============  ============
Real Estate Contracts and
  Mortgage Notes
  Receivables                  $650,933,330                $650,933,330
Real Estate Held for Sale and
  Development (Including
  $36,158,099 Acquired in
  Satisfaction of Debt)          84,333,288                  84,333,288
                               ------------                ------------

Total Real Estate Assets         735,266,618                 735,266,618

Less Allowances for Losses on
  Real Estate Assets           (10,192,584)                (10,192,584)
                               ------------                ------------
NET REAL ESTATE ASSETS          $725,074,034                $725,074,034
                               ============                ============

OTHER RECEIVABLE INVESTMENTS    $107,494,150                $107,494,150
                                ===========                 ===========
OTHER ASSETS - POLICY LOANS     $ 15,379,159                $ 15,379,159
                                ===========                 ===========

  TOTAL INVESTMENTS          $1,012,196,836              $1,011,250,331
                               ============                ============

<PAGE>                        Page 104

</TABLE>


<PAGE>                        Page 105


                                                         Schedule III


    METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                                  
                 SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
                                        Future
                                        Policy
                                       Benefits                 Other
                         Deferred      Losses,                  Policy
                          Policy        Claims                Claims and
                       Acquisition     and Loss    Unearned    Benefits
                           Cost        Expenses    Premiums    Payable
<S>                                    <C>        <C>          <C>         <C>
September 30, 1996

Life Insurance
and Annuities            $71,932,884  $837,366,108 $      ---  $     ---
                        ===========  ============  =========   ========
September 30, 1995

Life Insurance
and Annuities            $71,131,059  $781,716,153 $      ---  $     ---
                        ===========  ============  =========   ========
September 30, 1994

Life Insurance
and Annuities            $71,074,642  $744,644,625  $     ---  $     ---
                        ===========  ============  =========   ========
</TABLE>

<PAGE>                        Page 106

                                                         Schedule III

    METROPOLITAN MORTGAGE & SECURITIES CO., INC AND SUBSIDIARIES
                                  
                 SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
                                       Benefits  Amortization
                                        Claims   of Deferred
                             Net      Losses and    Policy     Other
              Premium     Investment  Settlement Acquisition Operating
              Revenue       Income     Expenses     Costs     Expenses
             =========    ==========  ========== =========== =========
<S>            <C>        <C>          <C>         <C>        <C>
September 30, 1996
 Life Insurance
 and Annuities$3,000,000 $65,560,704  $48,301,010$ 9,140,559 $4,352,018
              ========== ===========  ====================== ==========
September 30, 1995
 Life Insurance
 and Annuities$3,000,000 $64,970,470  $45,483,802$10,300,547 $3,164,390
              ========== ===========  =========== ========== ==========
September 30, 1994
 Life Insurance
 and Annuities$2,958,000 $65,944,437  $41,918,907 $7,015,570 $2,866,794
              ========== ===========  =========== ========== ==========
</TABLE>

<PAGE>                        Page 107

                                                        Schedule IV


    METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                SUPPLEMENTARY REINSURANCE INFORMATION
<TABLE>
<CAPTION>
                                                               Percentage
                               Ceded to    Assumed             of Amount
                    Gross       Other     From Other    Net     Assumed
                    Amount    Companies   Companies    Amount    to Net
Year Ended
<S>             <C>          <C>           <C>      <C>           <C>


September 30, 1996
 Life Insurance
 in Force.......$354,371,000 $58,679,000  $    --  $295,692,000      --
               ============ ============  =======  ============  ======
Premiums
 Life Insurance..$  3,354,830$   354,830  $    --  $  3,000,000      --
               ============ ============  =======  ============  ======

September 30, 1995
 Life Insurance
 in Force      $373,573,000  $62,906,000  $   ---  $310,667,000     ---
               ============  ===========  =======  ============   =====
 Premiums
 Life Insurance$  3,364,553  $   364,553  $   ---  $  3,000,000     ---
               ============  ===========  =======  ============   =====
September 30, 1994
 Life Insurance
 in Force      $395,837,000  $69,311,000  $   ---  $326,526,000     ---
               ============  ===========  =======  ============   =====
 Premiums
 Life Insurance$  3,345,503  $   387,503  $   ---  $  2,958,000     ---
               ============  ===========  =======  ============   =====
</TABLE>

<PAGE>                        Page 108

Schedule II
    METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
           VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                  
            Years Ended September 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
                                       Additions
                                      (Reductions) Deductions
                           Balance at  charged to     and
                           beginning   costs and    accounts   Balance at
    Description             of year     expenses  written off end of year
<S>                       <C>         <C>         <C>         <C>
Allowance for probable
  losses on
  real estate contracts
  and mortgage notes
  deducted from real estate
  assets in balance sheet
    1996                 $6,276,183  $3,295,694  $1,626,316  $7,945,561
    1995                  7,199,984   (190,470)     733,331   6,276,183
    1994                  5,738,188   1,040,913   (420,883)   7,199,984


Allowance for probable
  losses on
  real estate held
  for sale deducted
  from real estate
  assets in balance
  sheet
    1996                 $1,839,882  $3,064,378  $2,657,237  $2,247,023
    1995                  1,908,399   4,365,114   4,433,631   1,839,882
    1994                  4,860,303   4,492,280   7,444,184   1,908,399


Allowance for losses
  on accounts and
  notes receivable
  deducted from
  other assets in
  balance sheet
    1996                 $   77,039  $   70,500 $  (33,415)  $  180,954
    1995                    193,497    (35,657)      80,801      77,039

<PAGE>                        Page 109

    1994                    172,843     204,650     183,996     193,497

</TABLE>
                                                          Schedule IV

    METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                        LOANS ON REAL ESTATE
                         September 30, 1996
Real  estate contracts and mortgage notes receivable include  mortgages
collateralized  by property located throughout the United  States.   At
September  30,  1996, the Consolidated Group held first position  liens
associated  with contracts and mortgage notes receivable  with  a  face
value  of approximately $675 million (99%) and second or lower position
liens  of approximately $6 million (1%). Approximately 23% of the  face
value  of  the  Company's  real  estate contracts  and  mortgage  notes
receivable  are  collateralized  by property  located  in  the  Pacific
Northwest   (Washington,   Alaska,   Idaho,   Montana   and    Oregon),
approximately  20%  by  property  located  in  the  Pacific   Southwest
(California,  Arizona and Nevada), approximately 10% in  the  Southeast
(Florida,  Georgia, North Carolina and South Carolina) ,  approximately
10%   in  Atlantic  Northeast  (New  York,  Pennsylvania,  New  Jersey,
Connecticut and Maryland) and approximately 16% by property located  in
the  Southwest  (Texas and New Mexico).  The face  value  of  the  real
estate  contracts and mortgage notes receivable range principally  from
$15,000  to  $300,000  with  52 receivables, aggregating  approximately
$29.4 million in excess of this range.  No individual contract or  note
is  in  excess  of  0.4%  of the total carrying value  of  real  estate
contracts  and  mortgage notes receivables, and less  than  3%  of  the
contracts are subject to variable interest rates.  Contractual interest
rates principally range from 6% to 13% per annum with approximately 91%
of the face value of these receivables within this range.  The weighted
average contractual interest rate on these receivables at September 30,
1996 is approximately 9.4%.  Maturity dates range from 1996 to 2026.

<TABLE>
<CAPTION>
                      Number                         Carrying  Delinquent
                        of     Interest             Amount of  Principal
Description        Receivables  Rates              Receivables   Amount

RESIDENTIAL                  Principally
<S>                   <C>   <C>                 <C>          <C>
First Mortgage >$100,000738   6%-13%           $108,873,697$  5,687,601
First Mortgage > $50,0002,500 6%-13%            161,285,463   7,443,607
First Mortgage < $50,00013,5686%-13%            261,018,755   9,129,035
Second or Lower>$100,000  1     7.5%                243,213          --
Second or Lower> $50,000  6   9%-10%                384,654          --

<PAGE>                        Page 109

Second or Lower< $50,000358   6%-13%              3,487,974     191,504
COMMERCIAL
First Mortgage >$100,000248   6%-13%             52,072,095   1,248,896
First Mortgage > $50,000252   6%-13%             18,218,639     500,571
First Mortgage < $50,000447   6%-13%             11,837,475     107,111
Second or Lower>$100,000  4 9%-10.5%              1,564,708          --
Second or Lower> $50,000  3  8%-9.5%                204,917          --
Second or Lower< $50,000  9   8%-11%                192,717          --
FARM, LAND AND OTHER
First Mortgage >$100,000 67   8%-12%             14,551,734   1,101,876
First Mortgage > $50,000151   6%-13%              9,697,972     220,731
First Mortgage < $50,0002178  6%-13%             36,929,717     841,020
Second or Lower>$100,000  1      14%                100,000          --
Second or Lower> $50,000  2   9%-10%                164,743          --
Second or Lower< $50,000 40   9%-12%                349,674      28,048

Unrealized discounts, net
of unamortized acquisition
costs, on receivables
purchased at a discount                        (38,607,376)

Accrued Interest Receivable                                   8,362,559
                                               ------------ -----------
CARRYING VALUE                                 $650,933,330 $26,500,000
                                               ========================
</TABLE>


<PAGE>                        Page 111


<TABLE>
<CAPTION>
The  contractual  maturities  of the aggregate amounts  of  Receivables  (face
amount) are as follows:

                              Residential      Commercial   Farm, Land, other    Total
                                 Principal       Principal      Principal      Principal
                                  --------        -------        --------      ---------
<S>                            <C>            <C>            <C>            <C>
October 1996 - September 1999 $ 43,589,264    $10,647,400    $10,083,453    $ 64,320,117
October 1999 - September 2001   50,673,223     10,160,940      8,005,953      68,840,116
October 2001 - September 2003   53,408,352      8,270,489      5,145,528      66,824,369
October 2003 - September 2006   62,945,018     15,076,814     10,890,593      88,912,425
October 2006 - September 2011  100,196,799     13,896,939     13,898,207     127,991,945
October 2011 - September 2016   72,017,732      7,719,548      6,273,944      86,011,224
October 2016 - Thereafter      152,463,368     18,318,421      7,496,162     178,277,951
                               -----------    -----------     ----------     -----------
                              $535,293,756    $84,090,551    $61,793,840    $681,178,147
                               ===========    ===========     ==========     ===========
</TABLE>

<PAGE>                        Page 112


                                                        Schedule  IV

    METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES
                        LOANS ON REAL ESTATE
                         September 30, 1996

 The principal amounts of Receivables subject to delinquent principal or
interest is defined as being in arrears for more than three months.
<TABLE>
<CAPTION>
                                       For the Years Ended September 30,
                                     1996          1995          1994
<S>                             <C>           <C>           <C>
Balance at beginning of
period:                         $587,493,614  $567,256,298  $562,440,005
                                ------------  ------------  ------------
Additions during period:

New Receivables - cash:          282,313,300   203,525,666   142,479,298

Loans to facilitate the sale of
real estate held - non cash:      39,102,941    34,102,247    33,461,966

Assumption of other debt payable
in conjunction with acquisition
of non receivables - non cash:     3,633,657       526,868       191,213

Increase in Accrued Interest:      2,109,831       912,348            --
                                ------------  ------------  ------------

Total Additions:                 327,159,729   239,067,129   176,132,477
                                ------------  ------------  ------------
Deductions During Period:

Collections of Principal -
cash:                            107,702,333   118,869,137   107,040,612

Cost of Receivables Sold:        141,636,670    54,387,414    18,437,363

Reduction in Net Receivables
Associated with Sale of
Subsidiary - non cash                     --    32,391,856    27,267,736
Foreclosures - non cash:          14,381,010    13,181,406    17,720,145

<PAGE>                        Page 113


Decrease in Accrued Interest:             --            --       850,328

                                ------------  ------------  ------------
Total Deductions                 263,720,013   218,829,813   171,316,184
                                ------------  ------------  ------------
Balance at End of Period        $650,933,330  $587,493,614  $567,256,298
                                ============  ============  ============
</TABLE>

                                  
<PAGE>                        Page 114
                                  
                             SIGNATURES
   Pursuant  to  the  requirements of section  13  or  15(d)  of  the
Securities Exchange Act of 1934, the registrant has duly caused  this
report  to be signed this 18th day of June 1997 on its behalf by  the
undersigned, thereunto duly authorized.

                 METROPOLITAN MORTGAGE & SECURITIES CO., INC.

                 By /s/ C. PAUL SANDIFUR, JR.
                 _____________________________________________
                 C. Paul Sandifur, Jr., Chief Executive Officer

   Pursuant  to the requirements of the Securities Act of 1934,  this
report  has been signed below by the following persons on  behalf  of
the registrant in the capacities and on the dates indicated.

 Signature                 Title                          Date

/s/ C. PAUL SANDIFUR, JR. President, Director and
                          Chief Executive Officer      June 18, 1997

________________________
C. Paul Sandifur, Jr.

/s/ Bruce J. Blohowiak    Chief Operating Officer
                          Executive Vice President,    June 18, 1997
                          Director
________________________


/s/ STEVEN CROOKS         Controller and Vice
                          President, Principal
                          Financial Officer            June 18, 1997
________________________
Steven Crooks


/s/ REUEL SWANSON         Secretary and Director       June 18, 1997


________________________
Reuel Swanson

/S/ Irv Marcus            Director                     June 18, 1997

________________________
Irv Marcus

<PAGE>                        Page 115