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                                    FORM 10-K/A-1

                United States Securities and Exchange Commission
                             Washington, D.C. 20549



(Mark One)

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

For the fiscal year ended June 30, 1997
                                       or

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

For the Transition Period from _____ to _____

Commission File Number:   0-26412


                          UNION ACCEPTANCE CORPORATION
             (Exact name of registrant as specified in its charter)


           Indiana                                        35-1908796
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                        Identification Number)
         


250 N. Shadeland Avenue, Indianapolis, IN                      46219
 (Address of principal executive office)                     (Zip Code)

Registrant's telephone number, including area code:  317-231-6400

Securities Registered Pursuant to Section 12(b) of the Act:  NONE

Securities  Registered  Pursuant  to  Section  12(g) of the Act:  Class A Common
Stock, without par value

Indicate by check mark whether  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 filing requirements
for the past 90 days.     Yes (X) No ( )

Indicate by check mark if disclosure of delinquent  filers pursuant to Item 405,
Regulation S-K (Section  229.405 of this chapter) is not contained  herein,  and
will not be contained,  to the best of the 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. ( )

The  aggregate  market value of the  3,974,413  shares of the  issuer's  Class A
Common Stock held by  non-affiliates,  as of August 28, 1997,  was  $38,998,928.
There is no trading market for the issuer's Class B Common Stock.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

The  number of shares of Class A Common  Stock of the  Registrant,  without  par
value,  outstanding as of August 28, 1997, was 4,016,788  shares.  The number of
shares of Class B Common Stock of the Registrant,  without par value, as of such
date was 9,200,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 1997 Annual Meeting of Shareholders  are
incorporated into Part III.


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<PAGE>




<PAGE>




                  UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

                                    FORM 10-K

                                      INDEX


                                  PART II                                 Page

Item 6.     Selected Consolidated Financial Data.....................       3

Item 7.     Management's Discussion and Analysis of                         5
            Financial Condition and Results of Operations............

Item 8.     Financial Statements and Supplementary Data..............      19

                                      PART IV

Item 14.    Exhibits, Restated Financial Statement Schedules, and          
            Reports on Form 8-K......................................      41

SIGNATURES  .........................................................      42



Registrant  is  amending  this  report to give  effect to  previously  announced
restatement of its results of operations for the period covered by this report.

<PAGE>


                                     PART II

Item 6.  Selected Consolidated Financial Data

The following table sets forth certain selected financial information reflecting
the operations and financial  condition of the Company for each year in the five
year period ended June 30, 1997.  This data should be read in  conjunction  with
the Company's  consolidated  financial  statements and related notes thereto and
"Item 7.  Management's  Discussion  and  Analysis of Results of  Operations  and
Financial Condition" included herein.

<TABLE>
<CAPTION>


                                                                                       Year Ended June 30,
                                                              --------------------------------------------------------------------
                                                                  1997           1996           1995           1994         1993
                                                                                      (Dollars in thousands)
Income Statement Data:
<S>                                                           <C>            <C>            <C>            <C>          <C>       
Interest income ............................................  $   40,299     $   34,160     $   18,638     $   14,260   $   11,378
Interest expense(1) ........................................      25,688         22,275         12,961          7,769        7,177
                                                             ---------------------------------------------------------------------
  Net interest margin ......................................      14,611         11,885          5,677          6,491        4,201
Provision for credit losses ................................       4,188          2,875          1,074            484          436
                                                             ---------------------------------------------------------------------
  Net interest margin after provision ......................      10,423          9,010          4,603          6,007        3,765


Gain on sales of loans, net ................................         963         30,357          8,684          4,643        5,502
Servicing fees, net ........................................      25,344         16,926         14,628         11,570        7,149
Other revenue ..............................................       3,820          3,096          2,783          2,735        1,995
                                                             ---------------------------------------------------------------------
     Total revenues ........................................      40,550         59,389         30,698         24,955       18,411

Operating expenses .........................................      30,502         23,841         14,913          8,995        7,055
                                                             ---------------------------------------------------------------------
  Earnings before provision for income taxes ...............      10,048         35,548         15,785         15,960       11,356
  Provision for income taxes ...............................       4,166         14,406          6,396          6,384        4,542
                                                             ---------------------------------------------------------------------
     Net earnings ..........................................  $    5,882     $   21,142     $    9,389     $    9,576   $    6,814
                                                             =====================================================================

Operating Data:
Prime auto receivables acquired ............................  $1,076,064     $  994,834     $  766,972     $  614,627   $  435,227
Non-prime auto receivables acquired ........................      39,610         36,030         21,511             --           --
Marine receivables acquired ................................       6,590             50             --             --           --
                                                             ---------------------------------------------------------------------
     Total receivables acquired (dollars) ..................  $1,122,264     $1,030,914     $  788,483     $  614,627   $  435,227

Prime auto receivables acquired ............................  $   75,844     $   71,070     $   58,409     $   49,307   $   38,360
Non-prime auto receivables acquired ........................       3,050          2,870          1,770             --           --
Marine receivables acquired ................................         496              6             --             --           --
                                                             ---------------------------------------------------------------------
     Total receivables acquired (number of loans) ..........  $   79,390     $   73,946     $   60,179     $   49,307   $   38,360

Prime auto loans  securitized ..............................  $1,183,190     $  890,110     $  658,703     $  617,103   $  368,638
Non-prime auto loans securitized ...........................      31,108         34,488             --             --           --
                                                             ---------------------------------------------------------------------
     Total auto loans securitized ..........................  $1,214,298     $  924,598     $  658,703     $  617,103   $  368,638


Ratio of operating expenses as a % of
  average servicing  portfolio .............................        1.67%          1.73%          1.49%          1.21%        1.42%

Servicing fees, net, as a % of operating expenses ..........        83.1%          71.0%          98.1%         128.6%       101.3%


Prime credit losses as a % of avg. servicing portfolio .....        2.40%          1.58%          1.36%          0.69%        0.64%
Non-prime credit losses as a % of avg. servicing portfolio .        5.18%          2.37%          2.97%           N/A          N/A

Marine credit losses as a % of avg. servicing portfolio.....        0.25%           N/A            N/A            N/A          N/A

Prime delinquencies of 30 days or more as a
     % of servicing portfolio ..............................        2.96%          1.84%          1.40%          1.40%        0.93%
Non-prime delinquencies of 30 days or more as a
     % of servicing portfolio ..............................        6.18%          3.35%          1.25%           N/A          N/A
Marine deliquencies of 30 days or more as a
     % of servicing portfolio ..............................        0.10%           N/A            N/A            N/A          N/A

</TABLE>
<PAGE>


Item 6.  Selected Consolidated Financial Data (Continued)
<TABLE>
<CAPTION>


At June 30,                                                   1997           1996          1995          1994          1993
                                                              ----           ----          ----          ----          ----
                                                                                   (Dollars in thousands)
Balance Sheet Data(2):
<S>                                                        <C>           <C>           <C>           <C>           <C>
Loans, net ............................................    $  121,156    $  259,290    $  201,022    $   96,101    $  134,678
Excess servicing ......................................        99,047        83,434        60,662        41,265        31,575
Spread accounts .......................................        71,744        63,590        57,414        37,333        24,052
Total assets ..........................................       391,268       451,195       349,283       181,516       196,242
Due to Union Federal ..................................            --            --       338,958       177,577       171,896
Amounts due under warehouse facilities ................        44,455       187,756            --            --            --
Long-term debt ........................................       221,000       156,000            --            --            --
 Total shareholders' equity(3) ........................        86,848        78,624             2             2            --

Other Data:
Prime auto servicing portfolio ........................    $1,860,272    $1,548,538    $1,159,349    $  843,245    $  581,858
Non-prime auto servicing portfolio ....................        68,289        47,062        19,858            --            --
Marine servicing portfolio ............................         6,227            50            --            --            --
Other receivables serviced ............................         2,488         3,420         5,203            --            --
                                                           ------------------------------------------------------------------
     Total servicing portfolio ........................    $1,937,276    $1,599,070    $1,184,410    $  843,245    $  581,858
Average Prime auto servicing portfolio ................    $1,759,666    $1,343,770    $  982,875    $  744,149    $  496,758
Average Non-prime auto servicing portfolio ............        63,305        33,124         9,448            --            --
Average Marine servicing portfolio ....................         2,357            NM            --            --            --
Other receivables average servicing portfolio .........         2,799         4,222         6,643            --            --
                                                           ------------------------------------------------------------------
     Total average servicing portfolio ................    $1,828,127    $1,381,116    $  998,966    $  744,149    $  496,758
Number of Prime auto loans serviced (at period end) ...       173,693       147,722       117,837        91,837        71,301
Number of Non-prime auto loans serviced (at period end)         6,056         4,067         1,687            --            --
Number of Marine loans serviced (at period end) .......           472             6            --            --            --
Number of Other loans serviced (at period end) ........           402           537           836            --            --
                                                           ------------------------------------------------------------------
     Total number of loans serviced (at period end) ...       180,623       152,332       120,360        91,837        71,301
Number of dealers .....................................         3,204         2,523         1,604           884           831
Number of employees (full-time equivalents) ...........           387           313           215           142           115

</TABLE>

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

(1)  Interest  expense for the years  ended June 30,  1993,  1994 and 1995,  was
     based upon the  average  monthly  balance  "Due to Union  Federal" at Union
     Federal's all-inclusive cost of funds.

(2)  All  balance  sheet  amounts,  except the amounts  "Due to Union  Federal",
     represent actual recorded assets and liabilities of the Company's business.
     The amount Due to Union Federal includes  division funding by Union Federal
     as well as inter-company funding.

(3)  The  consolidated  financial  statements  reflect  no  allocation  of Union
     Federal's  historical  equity.  Earnings of the Company are  transferred to
     Union Federal  through the Due to Union  Federal  account at June 30, 1993,
     1994, and 1995.
<PAGE>

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

         Note: Certain  capitalized terms used but not otherwise defined in this
report are defined in the  "Glossary"  set forth at the  conclusion  of "Item 1.
Business."

General

         As  more  fully  described  in  Note  14  to   Consolidated   Financial
Statements, this report contains financial information which has been restated.
         The  Company  derives  substantially  all  of  its  earnings  from  the
purchase,  securitization  and  servicing  of  automobile  loans  originated  by
dealerships  affiliated with major domestic and foreign  manufacturers.  To fund
the purchase of loans prior to  securitization,  the Company utilizes  revolving
warehouse  credit  facilities,  discussed in "Liquidity and Capital  Resources."
Through  securitizations,  the Company  periodically  pools and sells loans to a
trust which issues Certificates to investors representing interests in the loans
sold.  When the Company sells loans in a  securitization,  it records a gain (or
loss) on the sale of loans and establishes excess servicing as an asset.  Excess
servicing  cash flows are received over the life of the related  securitization.
See the "Glossary"  under "Item 1. Business" for definitions of accounting terms
pertaining to securitizations.
         The following  table  illustrates  changes in the Company's  total loan
acquisition  volume and  information  with respect to Gain on Sales of Loans and
Securitizations  during  the  past  eight  quarters.   More  complete  quarterly
statements of earnings  information is set forth in Note 15 of the  Consolidated
Financial Statements.

<TABLE>
<CAPTION>


                                                                   Selected Quarterly Financial Information
                                                              For Quarters in the Fiscal Years Ended June 30,
                                    ------------------------------------------------------------------------------------
                                                                               1997                              
                                    ------------------------------------------------------------------------------------
                                       First           Second (3)               Third                    Fourth         
                                       -----           ----------               ------                   ------         
                                                                       (Dollars in thousands)
<S>                                   <C>               <C>                    <C>                        <C>           
Loans acquired                        $  296,601        $  307,420             $  279,847                 $  238,396    

Gain on Sales of Loans                     6,875             7,790                  9,783                      7,693 (5)
Impairment                                     -                -                 (15,951)  (4)              (15,227)   
                                    -------------  ----------------    -------------------     ----------------------   
Gain (Loss) on Sales of Loans, net         6,875             7,790                 (6,168)                    (7,534)    

Servicing portfolio
     at period end                     1,709,917         1,835,662              1,910,455                  1,937,276    

Selected
Securitization Data:                      1996-C       1996-D/1996-2             1997-A                     1997-B    
Original amount                         310,099       283,085/31,108            293,348                    295,758         
Weighted avg. loan rate                   13.26%        13.53%/19.65%             13.29%                     13.21%    
Weighted avg.
  remaining maturity (mos.)               67.41          67.75/62.70              71.35                      69.18     
Certificate rate                           6.44%          6.14%/6.40%              6.33%                      6.57%    
Gross spread (1)                           6.82%         7.39%/13.25%              6.96%                      6.64%    
Net spread (2)                             5.11%          5.37%/9.00%              5.43%                      5.15%    

</TABLE>

<TABLE>
<CAPTION>
                                                                          1996                                          
                                  --------------------------------------------------------------------------------------
                                         First                    Second                 Third (3)                  Fourth   
                                         -----                    ------                 ---------                  ------   
                                                                       (Dollars in thousands)
                                                                     
<S>                                   <C>                       <C>                    <C>                         <C>          
Loans acquired                        $  239,794                $  205,686             $  256,510                  $  328,924   
                                                                                                                                
Gain on Sales of Loans                     6,724                     8,483                  7,760                       7,390   
Impairment                                     -                         -                      -                           -   
                                                                                                                                
                                  ---------------    ----------------------   --------------------   -------------------------  
Gain (Loss) on Sales of Loans, net         6,724                     8,483                  7,760                       7,390   
                                                                                                                                
Servicing portfolio                                                                                                             
     at period end                     1,278,805                 1,344,914              1,445,517                   1,599,070   
                                                                                                                                
Selected                                                                                                                        
Securitization Data:                     1995-C                    1995-D             1996-A/1996-1                   1996-B   
Original amount                         236,410                   205,550            203,048/34,488                  245,102 
Weighted avg. loan rate                   14.08%                    13.74%             13.13%/19.87%                   12.96%   
Weighted avg.                                                                                                                   
  remaining maturity (mos.)               64.82                     67.62               66.01/56.90                    69.15   
Certificate rate                           6.42%                     5.97%               5.40%/6.87%                    6.45%   
Gross spread (1)                           7.65%                     7.77%              7.73%/13.00%                    6.51%   
Net spread (2)                             6.12%                     6.04%               5.68%/8.79%                    5.58%   
                                                                                              
</TABLE>

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

(1)      Difference between weighted average loan rate and Certificate Rate.

(2)      Difference between weighted average loan rate and Certificate Rate, net
         of upfront costs, servicing fees, ongoing surety bond and trustee fees,
         and hedging gains or losses.

(3)      Two securitizations  were effected during the presented quarters -- one
         public securitization (prime  securitization) and one private placement
         (non-prime securitization)

(4)      Impairment  was reduced by reserves taken during the first two quarters
         of fiscal 1997 of $3.6  million  and by  existing  reserves at June 30,
         1996 of $2.2 million.

(5)      Includes  $444,000 of previously  accrued loan sale expenses which were
         reversed in the current period


         Acquisition   Volume.  The  Company  currently  acquires  loans  in  51
metropolitan  areas in 29 states  from over 3,200  manufacturer-franchised  auto
dealerships.  The  Company  primarily  acquires  loans  on  automobiles  made to
borrowers who exhibit a favorable credit profile ("Prime lending").  The Company
also  offers a Non-prime  lending  program to  borrowers  with  adequate  credit
quality,  but who would not qualify for a loan under the Company's Prime lending
program  ("Non-prime  lending").  Over  the  past  year,  the  Company  has also
developed  a Marine  lending  program to fund loans to  borrowers  for boats and
personal  watercraft.  The Company's  focus is on the prime  automobile  lending
market; only 4.1% of total loan acquisitions represented loans made to borrowers
under the Non-prime and Marine  programs.  The Company  continued its geographic
expansion  during the year by entering  several new areas in Arizona,  Colorado,
Florida, Georgia, Illinois, Ohio, North Carolina, South Carolina, and Texas, and
also extended  operations  into the state of Nevada.  Additionally,  the Company
re-entered markets in Kentucky, Minnesota and Utah.

         The  Company's  total  loan  acquisitions  increased  8.9% to  $1,122.3
million for the year ended June 30, 1997, from $1,030.9  million in fiscal 1996.
The increase  resulted  primarily from the expansion into and the development of
new markets that were established in fiscal 1996 and 1997. Additionally,  growth
in the Marine and Non-prime  programs  contributed  to overall loan  acquisition
growth.  Marine loan  acquisitions  totaled $6.6 million for the year ended June
30,  1997,  compared to $50,000 for fiscal  1996.  Non-prime  loan  acquisitions
totaled  $39.6  million  for the year ended  June 30,  1997,  compared  to $36.0
million in fiscal 1996. The Company made some strategic decisions with regard to
pricing and underwriting  with a view to improving the overall credit quality of
the portfolio over the long-term. These changes coupled with intense competition
in the consumer-finance markets resulted in lower loan acquisition volume in the
third and fourth quarters of fiscal 1997. Because of the competitive environment
and tightened credit  standards,  the Company's loan  acquisition  growth in the
first  quarter  of fiscal  1998 was not  substantial.  The  Company's  servicing
portfolio  increased 21.2% to nearly $2.0 billion at June 30, 1997,  compared to
approximately  $1.6  billion at June 30,  1996.  Serviced  loans  increased as a
result of increased  loan  acquisition  volume in excess of loan  repayments and
gross charge-offs. The volume of loans sold in securitizations increased to $1.2
billion  for the year ended June 30,  1997,  from  $924.6  million for the prior
year.  The  increased  volume  of  loans  securitized  is a  combination  of the
increased volume in Prime loan  acquisitions,  and the timing of the fiscal 1997
fourth quarter securitization which included four months of loan volume compared
to only three months in the fourth quarter of fiscal 1996.  Management continues
to focus on controlled growth, recognizing that the underlying credit quality of
the portfolio is one of the most  important  factors  associated  with long-term
profitability.

Delinquency and Credit Loss Experience

         There has been a general  deterioration  in the consumer credit markets
over the past year  despite  relatively  good  economic  conditions.  Management
believes that this decline comes as a result of higher  consumer debt levels and
the  consumer's  increased  readiness  to declare  bankruptcy.  The  Company has
experienced  increased  delinquency as well as increased  credit  losses.  UAC's
prime servicing  portfolio has continued to suffer  deterioration since June 30,
1997, in delinquency  and credit losses,  especially  among loans  originated in
1995.  Management is making improvements in both the underwriting and collection
processes  to address  credit  quality.  The  Company has  tightened  its credit
standards and is utilizing new computerized  scoring tools to re-score  existing
portfolios which enhance the Company's ability to identify areas for improvement
on the  underwriting  side. The collection  staff  increased by nearly 60% since
June 30, 1996.  The new scoring  tools also allow the  collection  efforts to be
focused in the most effective manner.


         Set forth below is certain information concerning the experience of UAC
pertaining  to  delinquencies,  and credit losses on the Prime fixed rate retail
automobile,  light truck and van receivables serviced by the Company.  There can
be no  assurance  that  future  delinquency  and credit loss  experience  on the
receivables  will be  comparable  to that set forth below.  See  "Discussion  of
Forward-Looking Statements".

<TABLE>
<CAPTION>
                                             Prime Delinquency Experience
                                                     At June 30,
                                 ----------------------------------------------------
                                           1997                       1996
                                                (Dollars in thousands)
                                  Number of                    Number of
                                    Loans       Amount           Loans        Amount

<S>                                 <C>        <C>              <C>        <C>
Servicing portfolio ..........      173,693    $1,860,272       147,722    $1,548,538
Delinquencies
     30-59 days ..............        2,487        27,373         1,602        17,030
     60-89 days ..............        1,646        18,931           694         7,629
     90 days or more .........          723         8,826           333         3,811
Total delinquencies ..........        4,856        55,130         2,629        28,470
Total delinquencies
    as a percent of
    servicing portfolio.......         2.80%         2.96%         1.78%         1.84%
</TABLE>


         As  indicated  in  the  above  table,   delinquency  rates  based  upon
outstanding  loan  balances of accounts 30 days past due and over  increased  to
2.96% at June 30,  1997,  from  1.84% at June 30,  1996,  for the Prime  lending
portfolio.  The increased delinquency from a year ago is a product of changes in
consumer  credit  trends  as  discussed  above,  and,  to a lesser  extent,  the
tightening of the Company's  deferral policy  (effective in February 1997) which
applied more stringent standards for the deferment of delinquent accounts.  This
tightening  served to increase  delinquency and accelerate  credit losses in the
third and fourth quarters of fiscal 1997.

<TABLE>
<CAPTION>
                                                       Prime Credit Loss Experience
                                                        For the Years Ended June 30,
                             ------------------------------------------------------------------------------
                                     1997                       1996                       1995
                             ----------------------     ----------------------      -----------------------
                              Number                      Number                     Number
                             of Loans      Amount        of Loans     Amount         of Loan        Amount
                                                        (Dollars in thousands)
<S>                           <C>        <C>              <C>        <C>              <C>        <C>
Avg. servicing
   portfolio .............    164,858    $1,759,666       132,363    $1,343,770       104,455    $  982,875

Gross charge-offs ........      6,280        70,830         3,663        40,815         3,493        28,628
Recoveries ...............                   28,511                      19,543                      15,258
                                             ------                  ----------                  ----------
 Net credit losses .......               $   42,319                  $   21,272                  $   13,370
                                             ======                  ==========                  ==========

Gross charge-offs
   as a % of avg
   servicing portfolio ...       3.81%         4.03%         2.77%         3.04%         3.34%         2.91%
Recoveries as a %
    of gross charge-offs..                    40.25%                      47.88%                      53.30%
Net credit losses as a %
    of avg. servicing
    portfolio ............                     2.40%                       1.58%                       1.36%
</TABLE>

     As indicated in the table above,  credit losses on the prime auto portfolio
totaled  $42.3  million for the fiscal year ended June 30,  1997,  or 2.40% as a
percentage  of the average  servicing  portfolio,  compared to $21.3  million or
1.58% for the fiscal year ended June 30,  1996.  Increased  credit  losses are a
result of higher gross charge-off rates, as well as a decline in recovery rates.
Although  recovery  rates are down  compared  to last fiscal  year,  there was a
slight improvement in the fourth quarter of fiscal 1997 over the third quarter.

         The  allowance for  estimated  credit losses  inherent in loans sold is
included as an element of the fair market value of excess  servicing  cash flows
used to allocate the carrying amount of loans sold During the quarter ended June
30, 1997, the Company  recorded a pre-tax  charge of $15.2 million  primarily to
increase the  allowance  for  estimated  credit losses on those pools which were
deemed to have other than temporary  impairment.  Total additional provisions to
the allowance for estimated  credit losses for the year ended June 30, 1997 were
$34.9  million.  The  allowance  for  estimated  credit loss as a percentage  of
outstanding  securitized  loans was  4.40% and 3.22% at June 30,  1997 and 1996,
respectively.

<PAGE>


     Set forth below is information  pertaining to  delinquency  and credit loss
information on the Company's Non-prime portfolio. There can be no assurance that
future  delinquency  and  credit  loss  experience  on the  receivables  will be
comparable  to  that  set  forth  below.  See  "Discussion  of   Forward-Looking
Statements".

                                 Non-prime Delinquency Experience

                                             At June 30,
                              ----------------------------------------
                                       1997                1996
                              ------------------    ------------------
                                        (Dollars in thousands)
                              Number of             Number of
                                Loans     Amount      Loans    Amount
                                -----     ------      -----    ------
Servicing portfolio .......     6,056    $68,289      4,067    $47,062
Delinquencies
     30-59 days ...........       236      2,807         94      1,120
     60-89 days ...........       123      1,412         40        455
     90 days or more ......        --         --         --         --
Total delinquencies .......       359    $ 4,219        134    $ 1,575
Total delinquencies
    as a percent of
    servicing portfolio....      5.93%      6.18%      3.29%      3.35%


<TABLE>
<CAPTION>
                                              Non-prime Credit Loss Experience
                                                 For the Years Ended June 30,
                            --------------------------------------------------------------------
                                  1997                   1996                   1995
                            -----------------    ---------------------    ----------------------
                             Number               Number                   Number
                            of Loans   Amount    of Loans      Amount     of Loans    Amount
                            --------   ------    --------      ------     --------    ------
                                                (Dollars in thousands)
<S>                          <C>      <C>          <C>         <C>            <C>    <C>
Avg. servicing
   portfolio ............    5,491    $63,305      2,869       $33,124        797    $ 9,448
Gross charge-offs .......      379    $ 4,698        136         1,455         27        333
Recoveries ..............               1,420                      670                   146
                                      -------                  -------               -------
Net credit losses .......               3,278                      785                   187
                                      =======                  =======               =======
Gross charge-offs
   as a % of avg
   servicing portfolio ..     6.90%      7.42%      4.74%         4.39%      5.08%      5.29%(1)
Recoveries as a %
    of gross charge-offs.               30.23%                   46.07%                43.87%
Net credit losses as a %
    of avg. servicing
    portfolio ...........                5.18%                    2.37%                 2.97%(1)
</TABLE>
--------------------------------------------------------------------------------

(1)     Non-prime loans were only outstanding for eight (8) months during fiscal
        1995. Therefore, the percentages reflect an annualized calculation.

     Non-prime  portfolio  delinquency  was  6.18%  based  on  outstanding  loan
balances  of accounts  30 days past due and over at June 30,  1997,  compared to
3.35% at June 30, 1996. Credit losses during fiscal 1997 totaled $3.3 million or
5.18% as a percentage of the average Non-prime  servicing  portfolio compared to
2.37% in fiscal 1996.  The Company began  acquiring  Non-prime  loans in October
1994.  Management  expects  fluctuations in delinquency and credit loss rates on
the Non-prime portfolio as it becomes more seasoned.  The Non-prime  delinquency
and credit loss statistics are in line with management's  expectations,  and the
somewhat  greater credit risk  associated with a non-prime  product.  Additional
credit risk associated  with the Non-prime  product is considered in pricing and
underwriting.

<PAGE>

Marine Delinquency and Credit Loss

         Delinquency related to the newer Marine portfolio was minimal (.10%) as
the portfolio has not matured.  The Company began  acquiring the Marine  (prime)
loans in June 1996.  The credit  loss is .25% of the  average  marine  servicing
portfolio.  Management expects increases in marine delinquency and credit losses
as the portfolio becomes seasoned.

Results of Operations

     The following  table  illustrates the Company's  financial  results for the
past eight fiscal quarters.  More complete earnings  information can be found in
the Consolidated Financial Statements and the Notes thereto.

<TABLE>
<CAPTION>
                                               1997                                       1996
                           -----------------------------------------    ------------------------------------------
                             First     Second      Third     Fourth       First      Second     Third      Fourth
                           --------   --------   --------   --------    --------   --------   --------   --------
<S>                        <C>        <C>        <C>        <C>         <C>        <C>        <C>        <C>
Interest on loans ......   $  9,233   $  9,096   $  7,543   $  8,042    $  6,946   $  7,232   $  6,732   $  7,802
Interest on spread
      accounts and
      restricted cash ..      1,510      1,545      1,618      1,712       1,370      1,386      1,317      1,375
                           --------   --------   --------   --------    --------   --------   --------   --------
   Total interest income     10,743     10,641      9,161      9,754       8,316      8,618      8,049      9,177
Interest expense .......      6,410      6,265      6,118      6,895       5,289      5,556      5,359      6,071
                           --------   --------   --------   --------    --------   --------   --------   --------
   Interest margin .....      4,333      4,376      3,043      2,859       3,027      3,062      2,690      3,106
Provision for
      credit losses ....        855        993      1,180      1,160       1,150        300        600        825
                           --------   --------   --------   --------    --------   --------   --------   --------
   Net interest margin .      3,478      3,383      1,863      1,699       1,877      2,762      2,090      2,281
Gain (loss) on sales
      of loans, net ....      6,875      7,790     (6,168)   ( 7,534)      6,724      8,483      7,760      7,390

Servicing fees, net ....      5,826      6,258      6,854      6,406       3,966      2,584      4,796      5,580
Other revenues .........        934        910      1,011        965         750        724        798        824
Operating expenses .....      7,146      7,832      7,545      7,979       4,719      5,602      6,658      6,862
Net earnings/(loss) ....   $  5,918   $  6,193   $ (2,398)  $( 3,831)   $  5,116   $  5,246   $  5,313   $  5,467
</TABLE>

Years Ended June 30, 1997 and 1996

         Net earnings  decreased to $5.9 million or $0.45 per share for the year
ended June 30, 1997,  compared to $21.1  million or $1.60 per share for the year
ended June 30, 1996. The decrease in net earnings is primarily a result of third
and fourth  quarter  after-tax  charges of $9.5 and $9.0 million,  respectively,
($16.0 and $15.2 million  pre-tax,  respectively,)  for the impairment of Excess
Servicing related primarily to an increase in the allowance for estimated credit
losses on the  securitized  portfolio.  The  charge  was taken  based on current
trends with  respect to credit  loss and  delinquency  and their  effects on the
valuation of Excess Servicing on a pool by pool basis.  Exclusive of the pool by
pool impairment charges, net earnings would have been $24.4 million or $1.85 per
share.

         Net interest  margin after  provision  increased 15.7% to $10.4 million
for the year ended June 30, 1997,  compared to $9.0 million for fiscal 1996. The
increased interest margin as compared to prior year is a result of a combination
of factors but is  primarily  due to an  increase in the average  loans held for
sale  balance  and a decrease  in the cost of funds on the  average  outstanding
borrowings.

         Interest on loans  increased  18.1% to $33.9 million for the year ended
June 30, 1997, compared to $28.7 million for last year. The increase in interest
income  resulted  from an increase in the average  outstanding  balance of loans
held for sale to $228.3  million for the year ended June 30,  1997,  from $186.6
million  for fiscal  1996,  which was a result of  increased  loan  acquisitions
during the year and the timing of the fourth  quarter  securitization.  The 1997
fourth quarter  securitization  was effected in June instead of May (as compared
to previous years); therefore, an additional one month of interest was earned by
the  Company.  Interest  earned  on the Non  prime and  Marine  portfolios  were
approximately $3.8 million and $255,000, respectively.

         Interest  earned on spread accounts and restricted cash increased 17.2%
to $6.4 million for the year ended June 30,  1997,  compared to $5.4 million for
the year ended June 30,  1996.  The  increase is a result of  increased  average
balances on cash  collection and Spread  Accounts.  The average balance of these
accounts was $127.4 million in fiscal 1997, compared to $110.3 million in fiscal
1996. The increased  restricted  cash balances result from the increased size of
the securitized  servicing  portfolio.  Average  securitized  loan balances were
$1,445.4 million during the current fiscal year, compared to $1,179.4 million in
fiscal 1996. The average  interest  yield on the Spread  Accounts and restricted
cash accounts  improved  approximately 15 basis points which  contributed to the
increase as well.  Spread Account balances  represent credit  enhancement on the
securitized  pools; the Spread Account  requirements are affected by the size of
the securitized servicing portfolio as well as loss and delinquency trends which
may trigger  higher spread  requirements.  Cash  collection  accounts  represent
customer payments held in trust until  disbursement by the trustee.  Interest is
earned by the  Company on these  funds  prior to  distribution  of such funds to
investors  and  Servicer.  As a result of the  implementation  of SFAS 125,  the
Company   established  a  Servicing   Asset  related  to  the  1997A  and  1997B
securitization transactions of $743,000 and $750,000, respectively. Such amounts
equal  the  discounted  projected  cash  flow  of  the  interest  earned  on the
collection account and are deemed to be additional servicing compensation.  Such
amounts  were  recognized  as a component  of the gain on sale with the discount
being  accretive to income in the future.  Establishment  of the Servicing Asset
will have the effect of reducing  interest  earned on restricted  cash in future
periods, however, accretion of the discount on the Servicing Asset will somewhat
offset this decrease.

         Interest  expense  increased  15.3% to $25.7 million for the year ended
June 30, 1997, from $22.3 million for the year ended June 30, 1996. The increase
was primarily a result of an increase in the average  outstanding  borrowings to
$347.7  million for the year ended June 30,  1997,  from $288.4  million for the
year ended June 30,  1996,  offset by a decline in the average  cost of funds to
7.39% for the year ended June 30,  1997,  from 7.72% for the year ended June 30,
1996. Cost of funds in the prior year included  interest  expense in the form of
amortization   of  upfront   borrowing  fees  paid  in   conjunction   with  the
establishment of the Prime and Non-prime  Warehouse  Facilities.  The agreements
provided for an initial term of one year to be renewed annually;  therefore, the
total upfront fees paid to establish the Facilities were amortized during fiscal
1996.  Upfront  fees  paid in fiscal  1996  related  to the Prime and  Non-prime
Warehouse  Facilities  totaled  approximately  $1.5 million.  The renewal of the
Prime and Non-Prime  Warehouse  Facilities do not require  payment of additional
fees.  Interest  rates on the  Prime  and  Non-prime  Warehouse  Facilities  are
variable in nature and are affected by changes in market rates of interest.

         Provision for estimated credit losses increased to $4.2 million for the
year ended June 30,  1997,  compared to $2.9 million for the year ended June 30,
1996.  Increased  provisions were made in response to, and in  anticipation  of,
increased losses and delinquency trends being experienced by the Company and the
industry in general.

         Gain (loss) on sales of loans,  net and interest rate risk. Gain (Loss)
on Sales of Loans  continues to be a  significant  element of the  Company's net
earnings.  The Gain (Loss) on Sales of Loans is affected by several factors, but
is primarily affected by the amount of loans securitized and the net spread. The
Company  adjusts its pricing  frequently and employs a hedging  strategy to help
ensure an adequate net spread in the ensuing  securitization,  while  mitigating
the risks of increasing  interest rates and the volatility in net spreads.  Gain
(Loss) on Sales of Loans decreased to $963,000 for the year ended June 30, 1997,
from $30.4  million  for the year ended June 30,  1996.  The  decrease  in gains
recognized by the Company in the current  fiscal year is due to pre-tax  charges
of $31.2 million for the impairment of Excess Servicing primarily related to the
increase in allowance for estimated  credit  losses  related to its  securitized
portfolio.  Exclusive of the charges,  gains  recorded in  conjunction  with the
fiscal 1997  securitization  transactions  were $31.7 million  compared to $30.4
million in fiscal 1996 and  included  $1.5 million in  servicing  asset  income.
Although the volume of loans securitized increased 31.3% to $1,214.3 million for
the year ending June 30, 1997,  compared to $924.6  million in fiscal 1996,  the
weighted  average net spread on the  securitization  transactions  decreased  to
5.36% in fiscal  1997,  compared  to 5.96% in  fiscal  1996.  Additionally,  the
allowance for estimated  credit losses  established  at the time of the sale was
3.87%  (excluding  the charge) as a  percentage  of total loans  securitized  in
fiscal 1997,  compared to 3.57% in fiscal 1996.  Credit loss  assumptions on the
Tier I transactions  were 3.25%  throughout  most of fiscal 1997;  however,  the
Company  began  providing for losses at 3.50% on Tier I  securitizations  in the
fourth  quarter of fiscal  1997.  Allowance  for  estimated  credit  losses were
established  at 3.00% for the majority of fiscal 1996.  Allowance  for estimated
credit  losses  have   historically  been  made  at  10.00%  on  the  Non  prime
securitizations.

         Gross and net spreads. Market interest rates were higher in fiscal 1997
as  compared  to  the  corresponding   periods  of  fiscal  1996.  Market  rates
experienced an upward trend  beginning in the fourth quarter of fiscal 1996, but
demonstrated  relatively  small  fluctuations  throughout  fiscal 1997.  Because
changes in loan rates on  automobile  loans tend to lag behind  fluctuations  in
market  rates of  interest,  spreads  are  adversely  affected  in a rising rate
environment.  The  increased  market  rates in  fiscal  1997 had the  effect  of
reducing  gross and net  spreads on Tier I  securitizations  compared  to fiscal
1996.  Gross spread is defined as the  difference  between the weighted  average
loan rate and the  Certificate  rate. Net spread is defined as gross spread less
servicing fees, upfront costs, ongoing credit enhancement fees and trustee fees,
and hedging gains or losses.

         Management is currently targeting net spreads of 5.00% to 5.50% on Tier
I securitizations  (assuming a pricing spread for Asset-backed Certificates over
the  two-year  Treasury  Note of 50 basis  points) for fiscal  1998.  Management
believes that by targeting a spread of 7.00% to 7.50% between loan rates and the
two-year  treasury  rate that the net spread  targets can be achieved.  Although
management  believes these spreads can be achieved,  material factors  affecting
the  net  spreads  are  difficult  to  predict  and  could  cause   management's
projections to be materially inaccurate. These include current market conditions
with respect to market  interest  rates and demand for  Asset-backed  Securities
generally,  and  for  Certificates  representing  interests  in  Securitizations
sponsored by the Company. See "Discussion of Forward-Looking Statements."

         Servicing  fees,  net is  comprised  of fees  earned by the  Company as
Servicer  of the  securitized  loan  portfolio  (typically  1% per  annum),  the
scheduled  accretion of discount  established on Excess Servicing at the time of
securitization, and rebates received in excess of original estimates recorded in
the gain  calculation.  Servicing fees, net increased 49.7% to $25.3 million for
the year ended June 30, 1997,  compared to $16.9 million for the year ended June
30,  1996.  Servicing  fees,  net as a  percentage  of the  average  securitized
servicing  portfolio  increased to 1.75% for fiscal  1997,  from 1.42% in fiscal
1996.  The  increase in  servicing  fees,  net is  primarily a result of a 22.6%
increase  in the  average  securitized  loan  balances  in  fiscal  1997 to $1.4
billion,  compared  to $1.2  billion  in fiscal  1996.  Servicing  fees are also
impacted by the timing of Future Servicing Cash Flows and excess rebates. Excess
rebates received during fiscal 1997 were $2.3 million,  compared to $2.8 million
in fiscal  1996.  The  Company's  rebate  receivable  was  marked to market as a
component  of Excess  Servicing  in  accordance  with SFAS 125  during the third
quarter of fiscal 1997.

         Other revenues  increased 23.4% to $3.8 million for the year ended June
30, 1997,  from $3.1  million for the year ended June 30, 1996.  The increase in
the current year resulted  primarily from increases in late charge fee income to
$2.6 million from $1.9 million in the prior year.

         Salaries and benefits expense  increased 30.8% to $15.7 million for the
year ended June 30, 1997,  from $12.0  million for the year ended June 30, 1996.
This  increase  resulted  primarily  from an  increase in  full-time  equivalent
("FTE")  employees.  Average  FTE's for the year ended June 30,  1997,  were 333
compared to 270 for the year ended June 30,  1996.  The Company has  experienced
growth  in  credit,  sales  and  operations,  collections,  and  support.  These
increases are in response to, and in anticipation  of,  continued  expansion and
loan acquisition  growth as well as a growing  servicing  portfolio.  Additional
levels of management  and support staff have been added to ensure  efficiency in
operations as the Company's acquisition volume and servicing portfolio continues
to grow.  Increases in salary and benefit  expense were also due to annual merit
increases for the Company's existing employees.

         Other  operating  expenses  includes  occupancy  and  equipment  costs,
outside and professional services, loan expenses,  promotional expenses, travel,
office  supplies and other.  Other operating  expenses  increased 25.1% to $14.8
million for the year ended June 30, 1997,  from $11.9 million for the year ended
June  30,  1996.  Many of these  expenses  vary  directly  with  increased  loan
acquisition volume and the increased size of the servicing portfolio.  Both loan
acquisition  volume and the servicing  portfolio were increased  during the year
ended June 30, 1997, compared to the year ended June 30, 1996. Occupancy expense
increased  reflecting a full twelve months of rent expense in fiscal 1997 at the
Company's  new  headquarters,  compared  to only  six  months  in  fiscal  1996.
Equipment  expense  was  also  impacted  by a full  year  of  expense  from  its
collections and telephone systems  implemented at the Company's new headquarters
in January 1996.




Years Ended June 30, 1996 and 1995

         Net earnings  more than doubled to $21.1 million or $1.60 per share for
the year ended June 30,  1996,  compared to $9.4 million for the year ended June
30, 1995.

         Net Interest Margin After Provision increased 95.7% to $9.0 million for
the year  ended  June 30,  1996,  compared  to $4.6  million  for  fiscal  1995.
Increased Prime loan volume, growth in the Non-prime portfolio, and modification
of the securitization  structure during fiscal 1996 contributed to increased net
interest margin.

          Interest on loans  increased 95.3% to $28.7 million for the year ended
June 30, 1996, compared to $14.7 million for last year. The increase in interest
income  resulted,  in part,  from an increase in the average  monthly balance of
loans held for sale to $186.6  million  for the year ended June 30,  1996,  from
$127.1  million  for  fiscal  1995,   which  was  a  result  of  increased  loan
acquisitions  during the year. The Non-prime  portfolio also  contributed to the
increase  in  interest  income.  The  Company  carried  an average of over $22.2
million in Non-prime  receivables  held for sale during the year which  produced
over $4.4 million in interest income.  Further,  the current method with respect
to securitization  structure  implemented in fiscal 1996 increased the amount of
interest  income  recognized  relative  to  prior  periods.  The  change  in the
securitization   structure  significantly  impacted  both  interest  income  and
servicing  fees,  net.  All  of  the  fiscal  1996  Prime  securitizations  were
structured  such that the Company  continued  to earn  interest  income from the
cutoff date through the closing date (approximately  13-22 days), and therefore,
earned   servicing   fees  only  after  the  closing   date.   In  all  previous
securitizations,  the Company  began  earning  servicing  fees  beginning on the
cutoff date.  As a result,  the Company  reports more  interest  income and less
servicing fee income, and records a lower gain on sale. An estimated  additional
$6.1 million in interest on loans was  recognized  during fiscal 1996 due to the
new  securitization  structure.  The structure  was altered in  accordance  with
provisions of the Warehouse  Facility  Agreements which require that the Company
collect  and  remit  interest  on  loans  from  cutoff  date  to  closing  of  a
securitization  transaction to the warehouse provider.  The Company continues to
pay  interest on the amount  financed  with  respect to  warehoused  loans until
closing.

         Interest  earned on Spread Accounts and Restricted Cash increased 38.4%
to $5.4 million for the year ended June 30,  1996,  compared to $3.9 million for
the year ended June 30,  1995.  The  increase is a result of  increased  average
balances due to additional  securitizations during the year. The average balance
of these accounts was $108.8  million in fiscal 1996,  compared to $68.2 million
in fiscal  1995.  Earnings  on spread  accounts  relative  to the  growth in the
securitized  servicing  portfolio  were  somewhat  decreased  as a result of the
structuring  of  the  fiscal  1996  securitizations  whereby  additional  credit
enhancements   were  utilized  in  lieu  of  initial  spread  account  deposits.
Additionally  interest  earned on these  accounts were somewhat  lower in fiscal
1996 compared to fiscal 1995 as market rates of interest declined throughout the
latter half of fiscal 1995 and the first half of fiscal 1996.

          Interest  expense  increased 71.9% to $22.3 million for the year ended
June 30, 1996, from $13.0 million for the year ended June 30, 1995. The increase
was a result of both an increased  average cost of funds and  increased  average
outstanding  borrowings.  The average  cost of funds  increased to 7.72% for the
year ended June 30,  1996,  from  5.60% for the year  ended June 30,  1995.  The
increase  in cost of funds was a result  of the  Company  obtaining  alternative
financing sources after its Spin-off from its parent in August of 1995. Included
in fiscal 1996 interest  expense is the  amortization of upfront  borrowing fees
paid in conjunction with the establishment of the Prime and Non-prime  Warehouse
Facilities.  The agreements provided for an initial term of one year and must be
renewed  annually;  therefore,  the total  upfront  fees paid to  establish  the
Facilities were amortized  during fiscal 1996.  Upfront fees paid in fiscal 1996
related to the Warehouse Facilities totaled approximately $1.5 million. The fees
paid to secure the Warehouse Facilities are non-recurring in nature; the renewal
of such  agreements  does not require the payment of  additional  fees.  Average
outstanding  borrowings  increased to $288.4 million for the year ended June 30,
1996, from $231.4 million for the year ended June 30, 1995.

         Provision for estimated credit losses increased to $2.9 million for the
year ended June 30,  1996,  compared to $1.1 million for the year ended June 30,
1995. A large portion,  $1.1 million, of that provision was related to the newer
Non-prime portfolio. The additional provision related to the Non-prime portfolio
was a result of both the time period the  Non-prime  portfolio was held prior to
securitization,  as well as the increased  level of credit risk  associated with
the Non-prime loans as compared to the Prime loans.

         Gain on Sales of Loans  increased  249.6% to $30.4 million for the year
ended June 30, 1996, from $8.7 million for fiscal 1995. The increase in gain was
mainly due to improved  net spreads as well as  increased  volume of Prime loans
securitized.  The weighted average loan rate on the Prime  securitized loans was
13.48%  while the  weighted  average  certificate  rate was  6.09% The  weighted
average  gross and net  spreads  on the  fiscal  1996 loan  sales were 7.38% and
5.85%,  respectively,  compared to 5.92% and 4.26% in fiscal 1995. These spreads
earned the  Company a $29.5  million  gain in 1996 after net  hedging  losses of
approximately  $2.6 million.  The Company  securitized  $890.1  million in Prime
loans and $34.5  million in Non-prime  loans in fiscal 1996,  compared to $658.7
million in Prime loans in fiscal 1995.  Additionally,  the Company completed its
first Non-prime  securitization during the third quarter of 1996.  Approximately
$34.5 million in Non-prime automobile  receivables were securitized in a private
placement that earned the Company nearly $850,000 after a $112,000 hedging loss.
The weighted average loan rate on the Non-prime portfolio securitized was 19.87%
while the weighted average certificate rate was 6.87%. The gross and net spreads
on the sale were 13.00% and 8.79%, respectively.

         Servicing Fees, Net increased 15.7% to $16.9 million for the year ended
June 30,  1996,  compared  to $14.6  million  for the year ended June 30,  1995.
Although the average securitized  portfolio increased  significantly,  servicing
fees have not.  Servicing  fees, net as a percentage of the average  securitized
servicing  portfolio  decreased to 1.42% for fiscal  1996,  from 1.71% in fiscal
1995.  The  decrease in  servicing  fees  relative  to the  average  securitized
portfolio  resulted  primarily from the modified  securitization  structure,  as
discussed above.  Servicing fees on all fiscal 1996 Prime  securitizations  were
not earned until after the closing date of the securitization  transaction.  The
net effect is that  interest on loans was earned for an  additional  13-22 days,
and  servicing  fee  income was not earned for 13-22 days for each of the fiscal
1996  Prime  securitizations.  Additionally,  the  Company  recognized  somewhat
smaller  gains under this  structure.  Because  additional  interest  income was
earned on the loans to be securitized,  those loans generate lower Future Excess
Servicing  Cashflows  after the  securitization.  The net present value of these
future cash flows is recorded as an Excess Servicing asset as a component of the
gain calculation.

         The Company's  ratio of servicing  fees, net to operating  expenses was
71.0% and 98.1% for the years  ending  June 30,  1996,  and 1995,  respectively.
Although the securitization  structure  discussed above impacted this ratio, the
growth of the Non-prime program also impacted this ratio.  Because the Non-prime
receivables  had not been  securitized  until March 1996,  the Company earned no
servicing fees on this portfolio.  The impact of the additional costs to acquire
and service these loans were offset by increased  interest spreads earned on the
Non-prime  portfolio.  Increased salaries and benefits also affected this ratio.
The  Company  has added  significantly  to its  collections  staff over the past
several quarters in response to, and in anticipation of, continued growth in the
servicing  portfolio.  Additional  support staff in systems and accounting  have
also been added,  as well as additional  levels of management  needed to support
the Company's growth.

         Other Revenues  increased 11.2% to $3.1 million for the year ended June
30, 1996,  from $2.8 million for the year ended June 30, 1995.  The increase for
the year resulted primarily from increases in late charge fee income.

         Salaries and Benefits Expense  increased 81.0% to $12.0 million for the
year ended June 30,  1996,  from $6.6  million for the year ended June 30, 1995.
This increase resulted  primarily from increased  full-time  equivalent  ("FTE")
employees.  Average FTE's for the year ended June 30, 1996, were 270 compared to
169 for the year ended June 30, 1995. The Company  experienced growth in credit,
sales and operations, collections, and support. These increases were in response
to, and in anticipation of continued  expansion and loan  acquisition  growth as
well as a growing  servicing  portfolio.  Additional  levels of  management  and
support  staff were added to ensure  efficiency  in  operations as the Company's
acquisition  volume and  servicing  portfolio  continues  to grow.  Increases in
salary  and  benefit  expense  were  also due to  increased  profitability-based
incentives during the year ended June 30, 1996.

         Other Operating  Expense  increased 43.0% to $11.9 million for the year
ended June 30, 1996,  from $8.3 million for the year ended June 30, 1995.  Other
operating   expenses  include   occupancy  and  equipment  costs,   outside  and
professional  services,  loan expenses,  promotional  expenses,  travel,  office
supplies and other.  Many of these  expenses vary directly with  increased  loan
acquisition volume and the increased size of the servicing portfolio.  Both loan
acquisition  volume and the servicing  portfolio were increased  during the year
ended June 30,  1996,  compared to the year ended June 30, 1995.  Occupancy  and
equipment  costs were  increased  as a result of the  Company's  move to its new
headquarters  in fiscal 1996.  The employee  growth  experienced  by the Company
required both additional square footage and furniture and equipment. The Company
also  updated  its  phone  system  in  conjunction  with  the  move  to its  new
headquarters.  The Company obtained new equipment through an operating lease and
implemented a voice messaging system.  The Company also replaced its collections
system,  incurring a loss on the  disposal of the former  system.  Additionally,
increased  telephone usage  resulting from an increase in collections  staff and
collection hours contributed to increased office expense.


Financial Condition

         Loans, Net and Servicing  Portfolio.  Loans, net includes the principal
balance of loans held for sale,  net of  unearned  discount  and  allowance  for
credit  losses,  loans in  process,  and prepaid  dealer  premiums.  Loans,  net
decreased to $121.2  million at June 30, 1997,  from $259.3  million at June 30,
1996.  This decrease was due primarily to the decrease in loan  acquisitions  in
the fourth  quarter of fiscal  1997,  compared  to the fourth  quarter of fiscal
1996, and the timing of the securitization of loans in June 1997, as compared to
May 1996.  Loan  acquisitions  were $238.4  million during the fourth quarter of
fiscal 1997,  compared to $328.9  million in the fourth  quarter of fiscal 1996.
Allowance for credit losses on loans held for sale decreased  $319,000 from June
30, 1996.  The Company  serviced  $1.8  billion and $1.4 billion in  securitized
loans and the total servicing  portfolio was $1.9 billion and $1.6 billion as of
June 30, 1997, and June 30, 1996, respectively.

         Excess  Servicing  increased to $99.0  million at June 30,  1997,  from
$83.4  million  at  June  30,  1996.  This  balance  increased  by  the  amounts
capitalized upon consummation of the various Prime and Non-prime securitizations
(including  estimated dealer premium rebates).  Total amounts capitalized during
the year ended June 30, 1997 were $68.9 million.  The Excess  Servicing  balance
also increased by a pre-tax  unrealized  gain of $3.8 million in accordance with
SFAS 125. Excess  Servicing also increased by the change in accrued  interest of
$2.3  million.  The additions to Excess  Servicing  were offset by actual Excess
Servicing  cash flows  received  during the year ended June 30,  1997,  of $24.6
million  and by the  effect  of the $34.8  million  adjustments  for other  than
temporary impairment recorded during fiscal 1997. Allowance for estimated credit
losses on securitized  loans is included as a component of the Excess  Servicing
asset.  At June 30, 1997,  the  allowances  related to both Prime and  Non-prime
securitized  loans totaled $79.9 million or 4.40% of the total  securitized loan
portfolio, compared to $43.5 million or 3.22% at June 30, 1996. Accrued interest
due the Company at the cutoff date on securitized loan pools is also included as
a component of Excess Servicing.

         Spread Accounts increased to $71.7 million at June 30, 1997, from $63.6
million at June 30,  1996.  These  balances  were  increased  by the deposits of
Excess  Servicing  cash flows and have been reduced by any  withdrawal  of funds
from the Spread Accounts.  Withdrawals of spread account funds are made when the
balance of the Spread Accounts are in excess of the  requirements  stipulated in
the  servicing  agreement.  No  initial  spread  account  deposits  were made in
connection with the Prime  securitizations  as a result of the structuring which
utilized  alternative  credit  enhancements  in lieu of initial  spread  account
deposits.

         Amounts due under Warehouse Facilities and Long-term Debt. Beginning in
August 1995, after the Spin-off from its parent, the Revolving  Warehouse Credit
Facilities and Senior Notes  constituted the Company's  primary funding sources.
The Company issued in a private  placement $46.0 million in Senior  Subordinated
Notes in April 1996 and $65.0 million in Senior Notes in March 1997. The balance
of  the  Revolving  Warehouse  Credit  Facilities  and  the  Senior  and  Senior
Subordinated  Notes was $265.5  million  at June 30,  1997,  compared  to $343.8
million at June 30, 1996.

Liquidity and Capital Resources

         Sources and Uses of Cash in Operations. The Company's business requires
significant  amounts of cash to support  operations.  Its  primary  uses of cash
include:  (i) purchases and financing of loans; (ii) payment of Dealer Premiums;
(iii)  securitization  costs  including cash held in Spread Accounts and similar
cash  collateral  accounts under revolving  Warehouse  Credit  Facilities;  (iv)
servicer  advances of payments on securitized  loans pursuant to  securitization
trusts;  (v) losses on hedging  transactions  realized  in  connection  with the
closing of securitization transactions where interest rates have declined during
the period  covered by the hedge;  (vi)  operating  expenses;  (vii)  payment of
income taxes; and (viii) interest  expense.  The Company's  sources of cash from
operations include: (i) standard servicing fees; generally 1.0% per annum of the
Prime  securitized  portfolio;  (ii) Excess  Servicing Cash flows;  (iii) Dealer
Premium Rebates;  (iv) gains on hedging transactions realized in connection with
the closing of securitization  transactions  where interest rates have increased
during the periods  covered by the hedge;  (v)  interest  income;  (vi) sales of
loans  in  securitization   transactions;   and  (vii)  proceeds  from  sale  of
interest-only strips in conjunction with securitization  transactions.  Net cash
provided by operating  activities increased to $126.0 million for the year ended
June 30,  1997,  from a use of $55.8  million for the year ended June 30,  1996,
which was primarily attributable to an increase in loans securitized relative to
loans  acquired  and an  increase  in  proceeds  from the sale of  interest-only
strips.  Proceeds from the sale of interest-only  strips generated $31.8 million
in cash for the period  ended June 30, 1997,  compared to $26.7  million for the
period ended June 30, 1996. The Company realized a $11.1 million cash benefit by
doing so during  fiscal  1997.  Additionally,  the Company  continues to defer a
portion of the Gain on Sales of Loans for tax purposes.

         Hedging  transactions  may represent a source or a use of cash during a
given period depending on changes in interest rates. During fiscal 1997, hedging
transactions  have required a net use of cash of $6.3 million,  compared to $2.8
million used during fiscal 1996.

         Financing Activities and Credit Facilities.  Net cash used by financing
activities  for fiscal  1997 was $79.7  million,  compared  to a source of $61.1
million in the prior year. The decrease was a result of the Company's ability to
pay down its revolving credit  facilities due to increased cash from operations.
The  Company's  sources  of  liquidity  are  currently  funds  from  operations,
securitizations  and external financing sources.  Historically,  the Company has
used  the  securitization  of loan  pools as its  primary  source  of  long-term
funding,  and  intends  to  continue  to do so,  although  management  regularly
considers alternative funding mechanisms with a view to optimizing profitability
and cash flows.  Securitization  transactions  enable the Company to improve its
liquidity, to recognize gains from the sales of the loan pools while maintaining
the servicing rights to the loans, and to control interest rate risk by matching
the repayment of amounts due to investors in the securitizations with the actual
cash flows from the securitized assets.

         The Company has borrowing  arrangements  with an independent  financial
institution  for the Prime  Warehouse  Facility  of up to $350.0  million  and a
similar Non-prime Warehouse Facility of up to $50.0 million.  Additionally,  the
Company  has a  Marine  Warehouse  Facility  of up to  $50.0  million  that  was
established in April 1997. The Prime  Warehouse  Facility  provides  funding for
loan  acquisitions  at a  purchase  price  of up to  100.0%  of the  outstanding
principal  balance  of  eligible  loans at the time of  purchase  to the  extent
allocable to loans which, upon acquisition,  provided for 72 monthly payments or
less.  Additional  funding is provided for  eligible  loans with greater than 72
monthly  payments  at a  purchase  price of 92.0% of the  outstanding  principal
balance.  The advance rate is adjusted monthly based upon actual loss statistics
in order to maintain the necessary  enhancement  level. The Non-prime  Warehouse
Facility  provides funding for loan acquisitions at a purchase price of 87.0% of
the outstanding principal balance of eligible loans at the time of purchase. The
Marine Warehouse  Facility  provides funding for loan acquisitions at a purchase
price of 85.0% for any boat loan and 65.0% for personal watercraft loans with 49
- 60 scheduled monthly payments.  Additionally  funding is provided for eligible
loans  with less than 49 monthly  payments  at a  purchase  price of 80.0%.  The
Company  also  issued  $110.0  million in Senior  Notes in  connection  with the
Spin-off  of the  Company by Union  Federal  and the  Company's  initial  public
offering  and  completed  a  private   placement  of  $46.0  million  in  Senior
Subordinated  Notes in April 1996 and $65 million in Senior Notes in March 1997,
as discussed  below.  Between  securitization  transactions,  the Company relies
primarily on the  revolving  Warehouse  Credit  Facilities  to fund ongoing loan
acquisitions  (not including Dealer  Premiums).  In addition to loan acquisition
funding,  the Company also requires  substantial  capital on an ongoing basis to
fund  the  advances  of  Dealer  Premiums,   securitization   costs,   servicing
obligations and other cash  requirements  described above. The Company's ability
to borrow under the Credit  Facilities is dependent upon its compliance with the
terms  and  conditions  thereof.  The  Company's  ability  to  obtain  successor
facilities  or  similar  financing  will  depend on,  among  other  things,  the
willingness  of financial  institutions  to  participate  in funding  automobile
financing  businesses  and the  Company's  financial  condition  and  results of
operations.   Moreover,  the  Company's  growth  may  be  inhibited,   at  least
temporarily,  if the Company is not able to obtain  additional  funding  through
these or other  facilities  or if it is unable to  satisfy  the  conditions  for
borrowing under the Credit Facilities.

         To accommodate its anticipated cash and liquidity  requirements for the
near term, the Company  determined  during the third quarter to seek  additional
capital.  The Company  completed a private  placement of $65.0 million of Senior
Notes with an effective rate of 7.80% in March 1997. The securities have a 5 1/2
year average life and are due in December 2002. The securities were rated BBB by
Fitch  Investors  Service L.P.  The  additional  debt will affect the  Company's
weighted  average cost of funds as well as the interest  expense  recognized  in
future  periods.  The  proceeds  of the sale of the  securities  will be used to
enhance  liquidity  and  fund  the  Company's  continued  nationwide  expansion.
Management  believes  that  the  proceeds  from  the  Company's  initial  public
offering,  the Senior Notes,  the Senior  Subordinated  Notes,  the other Credit
Facilities  described above,  future earnings,  and periodic  securitization  of
loans should  provide the necessary  capital and  liquidity  for its  operations
during the remainder of fiscal 1998.

         The period during which its existing capital resources will continue to
be  sufficient  will,  however,  be  affected  by the  factors  described  above
affecting  the  Company's  cash  requirements.  A number  of these  factors  are
difficult  to  predict,   particularly  including  the  cash-effect  of  hedging
transactions,  the availability of outside credit enhancement in securitizations
or  other  financing  transactions  and  other  factors  affecting  the net cash
provided  by  securitizations.  Depending  on the  Company's  ongoing  cash  and
liquidity requirements, market conditions and investor interest, the Company may
seek to issue additional debt or equity securities in the near term. The sale of
additional  equity,  including  Class A Common Stock or preferred  stock,  would
dilute the interests of current shareholders.

Discussion of Forward-Looking Statements

         The above discussions  contain  forward-looking  statements made by the
Company regarding its results of operations, cash flow needs and liquidity, loan
origination  volume,  target spreads and other aspects of its business.  Similar
forward-looking  statements  may be made by the Company from time to time.  Such
forward-looking  statements  are subject to a number of  important  factors that
cannot be predicted  with  certainty and which could cause such  forward-looking
statements to be materially inaccurate. Among these factors are the following:

         Capital Requirements and Availability. The Company requires substantial
amounts of cash to support its business and growth as described  above. Its cash
requirements can vary depending on the cash-effect of hedging transactions,  the
availability  of  external  credit   enhancement  in  securitizations  or  other
financing  transactions  and the other factors that affect the net cash provided
by  securitizations  (at  closing  and over time) as well as the  percentage  of
principal  amount of loans  acquired for which the Company can obtain  Warehouse
financing.  The  Company's  ability to meet  these  ongoing  cash and  liquidity
requirements  depends  on several  factors.  First is the  Company's  ability to
effect  periodic  securitizations  of its loan  portfolio  and the terms of such
securitizations  which are  dependent on market  factors  generally,  changes in
interest rates, demand for asset-backed  securities and the Certificates offered
in the Company's securitizations  particularly.  Another important factor is the
Company's  ability to continue to comply with the terms of its Senior and Senior
Subordinated Notes and Warehouse facilities and/or its ability to obtain funding
to replace and/or  supplement such facilities  should it become  necessary to do
so. The Company's  ability to obtain successor  facilities or similar  financing
will depend on, among other things, the willingness of financial institutions to
participate  in  funding  automobile  financing  businesses  and  the  Company's
financial  condition and results of operations.  Moreover,  the Company's growth
may be  inhibited,  at least  temporarily,  if the Company is not able to obtain
additional  funding  through  these or other  facilities  or if it is  unable to
satisfy the conditions to borrow under the Credit Facilities.

         Loan  Acquisition  Volume,  Spread and Growth.  Many factors affect the
Company's loan acquisition  volume and spread,  which have significant impact on
the  Company's net  earnings.  Volume is affected by overall  demand for new and
used automobiles in the economy generally, the willingness of automobile dealers
to forward  prospective  borrowers' loan applications to the Company, as well as
the number of qualified  borrowers  whose loans are approved and whose loans are
ultimately  acquired by the Company.  Competition can impact  significantly both
acquisition  volume and the note rate at which loans are originated.  Generally,
competition  in the Company's  business is intense.  The Buy Rate offered by the
Company is a significant  competitive  factor. A competitor offering a lower Buy
Rate may be more likely to acquire a loan. The continued growth of the Company's
servicing  portfolio  will  depend  significantly  on  the  receptivity  to  the
Company's  program of new dealers in existing markets as well as new markets and
the continued stability of the Company's  relationships with its existing dealer
network.

         Interest  Rate Risk.  The  Company's  sources of funds  generally  have
variable rates of interest and its loan portfolio bears interest at fixed rates.
It therefore  bears interest rate risk on loans until they are  securitized  and
employs a hedging strategy to mitigate this risk. There is no assurance that its
strategy will completely  offset changes in interest rates. In particular,  such
strategy depends on management's estimates of loan acquisition volume.

         Loan Losses and Prepayment Rates. The Company bears the primary risk of
loss due to defaults in its servicing  portfolio.  Default and credit loss rates
are  impacted by general  economic  factors  that affect  borrowers'  ability to
continue to make timely payments on their indebtedness.  Prepayments on loans in
the  servicing  portfolio  reduce  the  size of the  portfolio  and  reduce  the
Company's  servicing income.  The Gain on Sales of Loans in connection with each
securitization transaction and the amount of Excess Servicing recognized in each
transaction reflect deductions for estimates of future defaults and prepayments.
The carrying value of Excess  Servicing may be adjusted  periodically to reflect
differences  between  estimated and actual credit losses and prepayments on past
securitizations. The Company's results of operations could be adversely affected
if default or prepayment  rates on securitized  loans  substantially  exceed the
estimated levels.

         Regulation.  The Company's  business is subject to numerous federal and
state consumer  protection laws and regulations  which,  among other things: (i)
require the Company to obtain and maintain certain licenses and  qualifications;
(ii) limit the interest rates,  fees and other charges the Company is allowed to
charge; (iii) limit or prescribe certain other terms of the Company's contracts;
(iv)  require  specified  disclosures;  and (v) define the  Company's  rights to
repossess and sell  collateral.  Changes in existing laws or regulations,  or in
the  interpretation  thereof,  or the  promulgation  of any  additional  laws or
regulation could have an adverse effect on the Company's business.

Other Matters

         As a part of the ongoing  development of its business plan, the Company
is researching the possibilities of engaging in other finance-related businesses
such as leasing and other non-auto consumer lending.  Additionally,  the Company
is  researching  the  possibility  of  expanding  its  dealer  base  to  include
nationally    recognized    used    rental   car    outlets    which   are   not
manufacturer-franchised  dealerships.  Based on this  research,  the Company may
expand  its   current   operations   to  include   some  or  all  of  the  above
finance-related  businesses. It is management's philosophy to continually search
for new products and markets to grow and expand the Company in order to maximize
profits and shareholder value.

Impact of Current Accounting Pronouncements

         In February  1997,  the FASB issued SFAS No. 128,  "Earnings Per Share"
("SFAS  128").  SFAS 128  provides  computation,  presentation,  and  disclosure
requirements  for earnings per share.  The current  presentation  of primary and
fully  diluted  earnings  per share  will be  replaced  with  basic and  diluted
earnings per share. The Statement is effective for financial statements for both
interim  and  annual  periods  ending  after  December  15,  1997,  and  earlier
application is not  permitted.  Basic earnings per share under SFAS 128 excludes
dilutive  securities.  Because  unexercised stock options do not have a dilutive
effect on the Company's earnings per share calculation,  management expects that
the new  basic  earnings  per share  will not be  significantly  different  than
primary earnings per share.

         In  connection  with  SFAS  128,  the FASB also  issued  SFAS No.  129,
"Disclosure of Information about Capital Structure" ("SFAS 129"). While SFAS 128
applies  only to public  companies,  SFAS 129 is  applicable  to both public and
nonpublic companies. This statement is not expected to have a material impact on
disclosures made by the Company.

         In June 1997,  the FASB issued SFAS No. 130,  "Reporting  Comprehensive
Income" ("SFAS 130"),  which establishes  standards for reporting and displaying
comprehensive   income  and  its   components  in  the   financial   statements.
Comprehensive  income is the total of net  income  and all  nonowner  changes in
shareholders'  equity.  This  Statement is effective for fiscal years  beginning
after December 15, 1997, with earlier application permitted.  The Statement will
require new  disclosures by the Company,  but is not expected to have a material
impact on the financial statements or the results of operations.

         In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related  Information"  ("SFAS 131"),  which  introduces new
guidance on segment  reporting.  The  Statement  is  effective  for fiscal years
beginning  after December 15, 1997,  with earlier  application  encouraged.  The
Statement is not expected to have a material  impact on the financial  condition
or results of operations of the Company.

<PAGE>




Item 8.           Financial Statements and Supplementary Data


Independent Auditors' Report
----------------------------


The Board of Directors
Union Acceptance Corporation:

We have  audited  the  accompanying  consolidated  balance  sheets  of the Union
Acceptance  Corporation  and  Subsidiaries  as of June 30,  1997 and  1996,  the
related consolidated statements of earnings and cash flows for each of the years
in the  three-year  period  ended  June 30,  1997 and the  related  consolidated
statement  of  shareholders'  equity for the years ended June 30, 1997 and 1996.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
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 consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of the Union Acceptance
Corporation  and  Subsidiaries  as of June 30, 1997 and 1996, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended June 30, 1997 in  conformity  with  generally  accepted  accounting
principles.

As discussed in note 1 to the  consolidated  financial  statements,  the Company
adopted the provisions of the Financial  Accounting  Standards Board's Statement
of Financial Accounting Standard No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, on January 1, 1997.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP
July 30, 1997
Indianapolis, IN

<PAGE>

UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 1997 and 1996

(in thousands, except share data)

<TABLE>
<CAPTION>




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

          Assets                                                                 June 30, 1997            June 30, 1996
-------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                <C>                  <C>                   
Cash                                                                               $         58,801     $               13,459
Restricted cash                                                                              16,657                     14,789
Loans, net                                                                                  121,156                    259,290
Accrued interest receivable                                                                   1,232                      2,127
Furniture and equipement, net                                                                 2,150                      2,026
Excess servicing                                                                             99,047                     83,434
Spread accounts                                                                              71,744                     63,590
Other assets                                                                                 20,481                     12,480
-------------------------------------------------------------------------------------------------------------------------------
               Total Assets                                                         $       391,268      $             451,195
===============================================================================================================================

          Liabilities
-------------------------------------------------------------------------------------------------------------------------------

Amounts due under warehouse facilities                                             $         44,455      $             187,756
Long term debt                                                                              221,000                    156,000
Accrued interest payable                                                                      5,793                      5,820
Amounts due to trusts                                                                        16,067                      7,931
Dealer premiums payable                                                                       1,372                      3,381
Other payables and accrued expenses                                                           1,874                      3,326
Deferred income tax payable                                                                  13,859                      8,357
-------------------------------------------------------------------------------------------------------------------------------
               Total Liabilities                                                            304,420                    372,571
-------------------------------------------------------------------------------------------------------------------------------

          Shareholders' Equity
-------------------------------------------------------------------------------------------------------------------------------

Preferred Stock, without par value, authorized 10,000,000 shares;
  none issued and outstanding
                                                                                                  -                          -

Class A Common Stock, without par value, authorized 30,000,000 shares; 4,016,788
 and 4,011,358 shares issued and outstanding at June 30, 1997
 and June 30, 1996, respectively                                                             58,270                     58,180

Class B Common Stock, without par value, authorized 20,000,000 shares; 9,200,000
 shares issued and outstanding at June 30, 1997 and June 30, 1996, respectively
                                                                                                  -                          -

Net unrealized gain on excess servicing                                                       2,252
                                                                                                                             -
Retained earnings                                                                            26,326                     20,444
-------------------------------------------------------------------------------------------------------------------------------
               Total Shareholders' Equity                                                    86,848                     78,624
-------------------------------------------------------------------------------------------------------------------------------

               Total Liabilities and Shareholders' Equity                           $       391,268      $             451,195
===============================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>

UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Earnings

Years ended June 30, 1997, 1996 and 1995

(in thousands, except share data)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                                 1997                 1996           1995
------------------------------------------------------------------------------------------------------------------------------


<S>                                                                         <C>                 <C>               <C>        
Interest on loans                                                           $       33,914      $     28,712      $    14,702
Interest on spread accounts and restricted cash                                      6,385             5,448            3,936
------------------------------------------------------------------------------------------------------------------------------
   Total interest income                                                            40,299            34,160           18,638
Interest expense                                                                    25,688            22,275           12,961
------------------------------------------------------------------------------------------------------------------------------
   Net interest margin                                                              14,611            11,885            5,677
Provisions for  losses                                                               4,188             2,875            1,074
------------------------------------------------------------------------------------------------------------------------------
   Net interest margin after provision                                              10,423             9,010            4,603

Gain on sales of loans                                                                 963            30,357            8,684
Servicing fees, net                                                                 25,344            16,926           14,628
Other                                                                                3,820             3,096            2,783
------------------------------------------------------------------------------------------------------------------------------

 Total revenues                                                                     40,550            59,389           30,698
------------------------------------------------------------------------------------------------------------------------------

Salaries and benefits                                                               15,673            11,985            6,622
Other                                                                               14,829            11,856            8,291
------------------------------------------------------------------------------------------------------------------------------
 Total operating expenses                                                           30,502            23,841           14,913
------------------------------------------------------------------------------------------------------------------------------

Earnings before provision for income taxes                                          10,048            35,548           15,785
Provision for income taxes                                                           4,166            14,406            6,396
------------------------------------------------------------------------------------------------------------------------------
 Net earnings                                                              $         5,882     $      21,142     $      9,389
==============================================================================================================================
Net earnings per common share                                              $          0.45     $        1.60          NM
==============================================================================================================================
Weighted average number of common shares outstanding                            13,215,112        13,209,378          NM
==============================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>


UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended June 30, 1997, 1996 and 1995

(in thousands)
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------
                                                                                   1997             1996             1995
-----------------------------------------------------------------------------------------------------------------------------

Cash flows from operating activities:
<S>                                                                            <C>               <C>             <C>        
    Net earnings                                                               $     5,882       $   21,142      $     9,389
       Adjustments to reconcile net earnings to net cash
       provided (used) by operating activities:
              Loan acquisitions in excess of liquidations                       (1,087,065)        (982,800)        (760,091)
              Dealer premiums paid in excess of dealer premium
                rebates received on loans held for sale                           (53,461)         (50,059)         (35,245)
              Securitization of loans held for sale                              1,214,298          924,598          658,703
              Gain on sales of loans                                              (46,713)         (37,900)         (16,935)
              Proceeds on sale of interest-only strip                               31,773           26,686                -
              Return of excess servicing cash flows,
                net of present value effect                                         24,738           37,871           30,049
              Impairment of Excess Servicing                                        34,828                -                -
              Provision for estimated credit losses                                  4,188            2,875            1,074
              Amortization and depreciation                                          3,979            4,395            2,049
              Spread accounts                                                      (8,154)          (6,176)         (20,081)
              Restricted cash                                                      (1,868)          (5,934)          (7,734)
              Other assets and accrued interest receivable                        (10,296)          (6,788)          (6,745)
              Amounts due to trusts                                                  8,136            2,030            3,761
              Other payables and accrued expenses                                    5,697           14,281              939
-----------------------------------------------------------------------------------------------------------------------------
                   Net cash provided (used) by operating activities                125,962         (55,779)        (140,867)
-----------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
    Purchase of fixed assets                                                         (967)          (1,347)            (995)
-----------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activites:
    Net change in warehouse credit facilities                                    (143,301)          187,756                -
    Proceeds from issuance of senior notes                                          65,000          110,000                -
    Proceeds from issuance of senior subordinated notes                                  -           46,000                -
    Payment of borrowing fees                                                      (1,352)          (3,231)            (647)
    Net proceeds from issuance of common stock                                           -           58,000                -
    Net change in Due to Union Federal, including
       regulatory equity distribution                                                    -        (337,423)          151,992
-----------------------------------------------------------------------------------------------------------------------------
                   Net cash provided (used) by financing activities                (79,653)          61,102          151,345
-----------------------------------------------------------------------------------------------------------------------------

Change in cash                                                                      45,342            3,976            9,483

Cash, beginning of period                                                           13,459            9,483                -
-----------------------------------------------------------------------------------------------------------------------------

Cash, end of period                                                             $   58,801       $   13,459      $     9,483
============================================================================================================================

Supplemental disclosures of cash flow information:

    Income taxes paid                                                          $     4,288       $   10,680      $     6,396
============================================================================================================================

    Interest paid                                                               $   26,475       $   15,648       $   12,961
============================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>

UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity

For the years ended June 30, 1997 and 1996

(in thousands, except share data)

<TABLE>
<CAPTION>
==============================================================================================================================
                                                                                         Net
                                                 Number of                            Unrealized
                                               Common Stock                            Gain on                   Total
                                             Shares Outstanding           Common        Excess    Retained    Shareholders'
                                            Class A        Class B         Stock      Servicing   Earnings       Equity
------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>              <C>           <C>          <C>          <C>
Balance at June 30, 1995                           1              1    $          2      $   -            -             2
                                                                                                
    Issuance of common stock                                                                    
       through initial public offering     4,000,000      9,200,000          58,000          -            -        58,000
                                                                                                
    Regulatory equity distributions                                                             
       related to spin-off                        (1)            (1)             (2)         -         (698)         (700)
                                                                                                
    Grants of common stock                    11,358              -             180          -            -           180
                                                                                                
    Net earnings                                   -              -               -          -       21,142        21,142
------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Balance at June 30, 1996                   4,011,358      9,200,000          58,180          -       20,444        78,624
                                                                                                
    Grants of common stock                     5,430              -              90          -            -            90
                                                                                                
    Net earnings                                   -              -               -          -        5,882         5,882
    Net unrealized gain on excess 
      servicing                                    -              -               -      2,252           -          2,252
------------------------------------------------------------------------------------------------------------------------------
                                                                                                
Balance at June 30, 1997                   4,016,788      9,200,000        $ 58,270     $2,252       26,326        86,848
==============================================================================================================================
</TABLE> 

                                                                  
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

(1)    Summary of Significant Accounting Policies

       Basis of Presentation

       Union Acceptance  Corporation and Subsidiaries  ("UAC" or the "Company"),
       formerly a division of Union Federal  Savings Bank of  Indianapolis  (the
       "Union Division"),  specializes in the acquisition, sale and servicing of
       prime retail installment loans (primarily automobile loans) acquired from
       a network of over 3,200 manufacturer-franchised  dealerships in 29 states
       from  whom  such  loans  are  regularly  purchased.  Loans  acquired  are
       subsequently  sold  to  investors  through  asset-backed   securitization
       transactions.

       In  contemplation  of a public  offering  to sell common  stock,  UAC was
       formed as a  wholly-owned  subsidiary  of Union  Federal  Savings Bank of
       Indianapolis  ("Union  Federal") in December  1993.  During  fiscal 1995,
       Union Acceptance Funding  Corporation,  UAC  Securitization  Corporation,
       Performance   Funding   Corporation   and   Performance    Securitization
       Corporation were formed as wholly-owned  subsidiaries of UAC and selected
       assets and operations of the Union  Division were  transferred to UAC. In
       August  of  1995,  the  Company  completed  an  initial  public  offering
       simultaneously  with a tax free spin-off from its parent,  Union Federal.
       During fiscal 1996,  UAC Boat Funding Corp.  was formed as a wholly-owned
       subsidiary of UAC. In fiscal 1997, UAC Finance  Corporation was formed as
       a wholly-owned subsidiary of UAC.

       The accompanying  consolidated  financial statements include the accounts
       of UAC and the Union  Division  prior to the transfer and  spin-off.  All
       significant  intercompany  accounts and transactions have been eliminated
       in the  consolidation.  The consolidated  financial  statements have been
       prepared in conformity with generally accepted accounting  principles and
       with those in the general practice of the consumer finance industry.

       The  consolidated  financial  statements  reflect no  allocation of Union
       Federal's historical equity.  Earnings of the Company were transferred to
       Union  Federal  through  the Due to Union  Federal  account  prior to the
       spin-off.

       Cash

       The Company  considers all investments with a maturity of three months or
       less when purchased to be cash equivalents.

       Restricted Cash

       Restricted cash primarily  consists of funds held in reserve  accounts in
       compliance with the terms of the Warehouse Facility Agreements.



                                                                     (Continued)

<PAGE>

UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

       Loans, Net

       All loans in the Company's  prime and non-prime  portfolios  are held for
       sale and include automobile, light-truck, van, and marine loans including
       dealer  premiums  (on prime  loans).  Such  loans are  packaged  and sold
       through asset-backed securitization transactions and are carried at their
       principal  amount  outstanding  (amortized  cost) which  approximates the
       lower of cost or market,  net of  unearned  discount.  Interest  on these
       loans is accrued and  credited to  interest  income  based upon the daily
       principal  amount  outstanding.  The Company  provides an  allowance  for
       credit losses from the date of origination to the date of securitization.
       The allowance is shown as a reduction to loans.

       Loans,  net includes dealer premiums which are incentives paid to dealers
       in connection with the acquisition of loans. Dealer premiums are deferred
       in accordance  with Statement of Financial  Accounting  Standards No. 91,
       Accounting for  Nonrefundable  Fees and Costs Associated with Originating
       or Acquiring  Loans and Initial Direct Costs of Leases.  A portion of the
       dealer  premiums  are  refundable  to the  Company  in the  event of loan
       prepayment or default.

       Accrued Interest Receivable

       Accrued interest receivable  represents interest earned but not collected
       on loans held for sale.

       Furniture and Equipment, Net

       Furniture and equipment are recorded at cost.  Depreciation is determined
       on accelerated  methods over the estimated useful lives of the respective
       assets.

       Excess Servicing

       In June 1996, the Financial  Accounting  Standards  Board issued SFAS No.
       125,  Accounting  for  Transfers  and  Servicing of Financial  Assets and
       Extinguishments of Liabilities ("SFAS 125"). SFAS 125 provides accounting
       and reporting  standards for transfers and servicing of financial  assets
       and  extinguishments of liabilities based on consistent  application of a
       financial  components  approach that focuses on control. It distinguishes
       transfers  of  financial  assets that are sales from  transfers  that are
       secured  borrowings.  The financial  components  approach  focuses on the
       assets and liabilities that exist after the transfer.  The  pronouncement
       prescribes the methodology for recognition of gain or loss upon the sales
       of  loans  as well as the  valuation  of  excess  servicing.  SFAS 125 is
       effective  for   transfers   and   servicing  of  financial   assets  and
       extinguishment  of liabilities  occurring after December 31, 1996, and is
       to be applied  prospectively.  Retroactive  application is not permitted.
       The Company adopted SFAS 125 on January 1, 1997. The adoption of SFAS 125
       had the effect of reducing  fiscal 1997 net  earnings  by  $1,311,000  or
       $0.10 per share and increasing retained earnings by $941,000.

                                                                     (Continued)


<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

       Excess servicing is the Company's retained interest in loans sold. Excess
       servicing is determined by allocating  the carrying  amount of loans sold
       based on the  relative  fair market  value of loans sold and the expected
       future  cash flows  discounted  at current  market  rates.  The  expected
       discounted  future  servicing  cash  flows  is the  projected  difference
       between  the  weighted  average  coupon  rate of the  loans  sold and the
       certificate  rate to investors less the Company's  contractual  servicing
       fee  (typically  1%), an allowance for estimated  credit losses and other
       trust and credit enhancement fees, plus dealer premium rebates. Allowance
       for  estimated   credit  losses  is  based  on  current  scoring  models,
       historical  loss rates and the loan  composition  of the  securitization.
       Allowance  for  estimated  credit  losses is deemed  adequate  for credit
       losses over the life of the respective  securitizations.  Market discount
       rates are based on current market  conditions and prepayment  assumptions
       are based on historical  experience.  The Company's contractual servicing
       fee approximates adequate compensation. Accrued interest through the date
       of  securitization,  which will be returned  to the  Company  through the
       securitization  trust is also  classified  as  excess  servicing.  Excess
       servicing  is reduced by excess cash flows as  received  over the life of
       the securitization.

       Excess servicing is classified as an  available-for-sale  security and is
       carried  at  its  market  value  based  on  the  application  of  current
       assumptions to the remaining cash flows.  Unrealized gains and losses are
       reported  net  of  related  income  taxes  as  a  separate  component  of
       shareholders'  equity  until  realized.   Excess  servicing  is  reviewed
       periodically for other than temporary  impairment on a disaggregate basis
       (the pool by pool method), with impairment, if any, charged to operations
       through gain on sales of loans, net.

       Gain on Sales of Loans, Net

       Gain on sales of loans,  net represents the difference  between the sales
       proceeds and the  carrying  amount of loans after  reduction  for amounts
       allocated  to excess  servicing,  less  expenses  of the sale and hedging
       gains and losses. Gains are credited to operations at the closing of each
       securitization.  The Company  retains the  servicing  rights on the loans
       sold.  Other than  temporary  impairment  adjustments  are  recorded as a
       component of Gain on Sales of Loans, net.

       Spread Accounts

       Spread accounts are intended to protect the securitization  investors and
       any letter of credit provider or credit  enhancer  against credit losses.
       The initial  deposit,  if required,  and net excess  servicing cash flows
       earned are  retained  for each  securitization  until the spread  account
       balance increases to a specified  percentage of the pool balance.  Spread
       account requirements vary with each securitization's delinquency and loss
       experience.  Funds in excess of specified percentages are remitted to the
       Company over the remaining life of the securitization.  Should the spread
       account be insufficient to cover losses,  each trust is further supported
       by additional credit enhancements.  Selected trusts are secured by either
       a letter of credit or surety bond  provided  by a financial  institution.
       Other trusts have been formed with a subordinated  class of  certificates
       whereby the senior  certificateholders  are protected  against  losses by
       having  their  interests  senior to the  subordinate  certificateholders'
       interests. Subordinated certificateholders assume a

                                                                     (Continued)


<PAGE>

UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

       higher risk of loss, but earn a higher yield on their  certificates.  For
       each trust,  there is no recourse  against the Company beyond the balance
       in the spread account and the trust's future earnings.


       Common Stock

       In  election  of  directors,  the  holders  of Class B Common  Stock  are
       entitled to five votes per share and Class A Common Stock are entitled to
       one vote per share.  On all matters other than the election of directors,
       holders  of Class B and A have one  vote per  share  and vote as a single
       class.

       Income Taxes

       Deferred tax assets and  liabilities  are  recognized  for the future tax
       consequences  attributable to differences between the financial statement
       carrying  amounts of existing assets and liabilities and their respective
       tax basis. Deferred tax assets and liabilities are measured using enacted
       tax rates expected to apply to taxable income in the years in which those
       temporary differences are expected to be recovered or settled. The effect
       on  deferred  tax  assets  and  liabilities  of a  change  in tax rate is
       recognized in income in the period that includes the enactment  date. Tax
       expense has been computed  assuming the Company was a stand-alone  entity
       (prior to spin-off).

       Amounts Due to Trusts

       Amounts  due to trusts  represent  monies  collected  but not paid to the
       trustee  for  principal  and  interest  remittances  as well as  recovery
       payments in respect of securitized  loans.  All amounts  collected by the
       Company  are  remitted  to the  trustee  within two  business  days,  and
       subsequently  distributed by the trustee to the investors,  servicer, and
       credit enhancers on a monthly basis.

       Servicing Fees, Net

       Servicing fees, net include the contractual fee,  typically 1% per annum,
       earned from each trust plus the accretion of discounted excess servicing,
       plus excess dealer premium rebates.

       Hedging


       Loan  production  is  hedged  periodically  to  such  time  as  the  next
       securitization  is  estimated  to  occur.  Securitizations  of the  prime
       portfolio  occur  approximately  every three months.  The primary hedging
       vehicle is a short sale of Treasury Notes having a maturity approximating
       the average  maturity of the loan production  during the relevant period.
       At such time as a  securitization  is committed,  the hedge is covered by
       the purchase of a like volume of Treasury  Notes.  Gains or losses on the
       hedge   are   recognized   concurrently   with   the   gain  or  loss  at
       securitization.

       Earnings Per Share

       The initial public offering was completed on August 7, 1995. Earnings per
       share  for the year  ended  June 30,  1997 and  1996,  were  computed  by
       dividing net earnings by the average common shares outstanding during the
       period.  Shares  outstanding from August 7, 1995,  through  September 30,
       1995,  were assumed to be  outstanding  for the entire three months ended
       September 30, 1995. The
                                                                     (Continued)

<PAGE>

UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES


Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

       effect of  unexercised  stock  options on earnings per share has not been
       included in the calculation because they are not dilutive.

       Use of 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 at
       the date of the financial statements and the reported amounts of revenues
       and expenses  during the reporting  period.  Actual  results could differ
       from those estimates.

(2)    Loans, Net

       Loans, net are as follows (in thousands, except average loan balance) at:
<TABLE>
<CAPTION>


                                                                    June 30,
                                                               1997         1996
----------------------------------------------------------------------------------
<S>                                                        <C>             <C>    
       Principal balance of prime loans held for sale,
        net of unearned discount                           $   90,331      228,391
       Principal balance of non-prime loans held for sale,
        net of unearned discount                               19,829       15,512
       Principal balance of marine loans held for sale          6,227           50
       Loans in process                                         1,189        5,363
       Dealer premiums                                          4,360       11,073
       Allowance for credit losses                               (780)      (1,099)
----------------------------------------------------------------------------------

                                                            $ 121,156      259,290
==================================================================================
       Weighted average interest rate (prime)                   13.18%       13.24%
       Weighted average interest rate (non-prime)               19.62        19.70
       Weighted average interest rate (marine)                  11.36        14.68
       Average loan balance (prime)                         $  10,710       14,049
       Average loan balance (non-prime)                        11,276       12,479
       Average loan balance (marine)                           13,192        8,304
</TABLE>

                                                  
       Allowance  for  estimated  credit  losses  on  loans  held  for  sale (in
thousands):
<TABLE>
<CAPTION>

                                                      Year ended June 30,
                                               1997         1996        1995
-------------------------------------------------------------------------------
<S>                                          <C>              <C>          <C>
Balance at the beginning of the period       $ 1,099          453          171
    Charge-offs                               (7,361)      (4,556)      (2,605)
    Recoveries                                 2,854        2,327        1,813
    Provision for estimated credit losses      4,188        2,875        1,074
                                               -----        -----        -----
Balance at the end of the period            $    780        1,099          453
================================================================================
</TABLE>
                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

The geographic concentration of loans serviced are as follows:

                                                       Percent of Total
                                                             June 30,
          State                                     1997             1996
     ---------------------------------------------------------------------------

     Texas                                          16.4%            18.2%
     North Carolina                                 11.0             11.2
     California                                     10.5              8.8
     Ohio                                            7.2              8.0
     Illinois                                        7.1              6.7
     Florida                                         7.0              6.1
     Virginia                                        6.2              5.5
     Oklahoma                                        5.7              7.2
     Arizona                                         5.1              6.9
     Indiana                                         4.7              5.8
     Georgia                                         2.5              2.2
     Missouri                                        2.5              3.0
     Colorado                                        2.2              3.2
     South Carolina                                  2.2              1.2
     Iowa                                            1.5              0.9
     Maryland                                        1.4              0.4
     Tennessee                                       1.2              0.4
     Wisconsin                                       1.2              1.0
     Michigan                                        1.1              0.2
     Kansas                                          0.8              0.9
     New Mexico                                      0.8              0.8
     Washington                                      0.6              0.5
     Oregon                                          0.4              0.5
     Kentucky                                        0.2              0.1
     Pennsylvania                                    0.2               -
     Minnesota                                       0.1              0.2
     Nebraska                                        0.1              0.1
     Nevada                                          0.1               -
     ---------------------------------------------------------------------------

                                                   100.0%           100.0%
     ===========================================================================



                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

================================================================================
Loans serviced are as follows (in thousands) at:

<TABLE>
<CAPTION>


                                                                         June 30,
                                                                   1997            1996
-----------------------------------------------------------------------------------------
<S>                                                         <C>                  <C>    
              Loans held for sale
                 Prime (net of unearned discount)           $      90,331        228,391
                 Non-prime (net of unearned discount)              19,829         15,512
                 Marine                                             6,227             50
-----------------------------------------------------------------------------------------
                                                                  116,387        243,953

              Securitized loans
                 Prime                                          1,769,903      1,319,930
                 Non-prime                                         48,460         31,550
-----------------------------------------------------------------------------------------
                                                                1,818,363      1,351,480

              Other loans serviced                                  2,526          3,637
-----------------------------------------------------------------------------------------

                                                            $   1,937,276      1,599,070
=========================================================================================
</TABLE>

       Notional  amounts and unrealized  losses  related to  outstanding  hedges
       follow (in thousands) at:


                                                               June 30,
                                                          1997         1996
-------------------------------------------------------------------------------

       Notional amounts outstanding                    $ 204,000      415,000
       Unrealized losses on hedging transactions             909          711
================================================================================

       Notional  amounts  of $180  million,  $18  million  and $6  million  were
       expected to be closed in September  1997,  December  1997 and March 1998,
       respectively,  for the amounts  outstanding  at June 30,  1997,  and $340
       million, $55 million and $20 million were closed in August 1996, November
       1996 and December 1996, respectively, for amounts outstanding at June 30,
       1996.

       Hedging  realized losses were  approximately  $6,293,000,  $2,733,000 and
       $5,515,000 during fiscal 1997, 1996 and 1995, respectively.



                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

================================================================================
 (3)   Furniture and Equipment, Net

       Furniture and equipment, net are as follows (in thousands) at:
<TABLE>
<CAPTION>


                                                                                                      June 30,
                                                                                              1997         1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>            <C>  
                 Furniture, equipment and leasehold improvements                            $ 4,724        3,858
                 Accumulated depreciation                                                    (2,574)      (1,832)
--------------------------------------------------------------------------------------------------------------------

                                                                                            $ 2,150        2,026
=====================================================================================================================
</TABLE>

(4)    Excess Servicing

       The carrying amount of excess servicing is as follows (in thousands) at:
<TABLE>
<CAPTION>


                                                                                                    June 30,
                                                                                            1997           1996
-------------------------------------------------------------------------------------------------------------------

              Estimated value of excess servicing cash flows,
<S>                                                                                    <C>                 <C>    
                 net of estimated prepayments                                          $    145,872        112,564
              Estimated dealer premium rebates                                               26,447         13,467
              Allowance for estimated credit losses on securitized loans                    (79,923)       (43,516)
              Discount to present value                                                      (9,941)        (9,535)
-------------------------------------------------------------------------------------------------------------------
                                                                                             82,455         72,980
              Accrued interest on securitized loans                                          12,807         10,454
-------------------------------------------------------------------------------------------------------------------
              Unrealized gains on excess servicing                                            3,785              -

                                                                                       $     99,047         83,434
===================================================================================================================

              Outstanding balance of loans serviced
                 through securitized trusts                                            $  1,818,363      1,351,480

              Allowance for estimated credit losses as a
                 percentage of securitized loans serviced                                    4.40%          3.22%


</TABLE>


                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

================================================================================
Excess servicing activity is as follows (in thousands):
<TABLE>
<CAPTION>


                                                                              Year ended June 30,
                                                                         1997        1996        1995
---------------------------------------------------------------------------------------------------------

<S>                                                                   <C>            <C>          <C>   
    Balance at beginning of period                                    $ 83,434       60,622       41,265

    Amounts capitalized (including estimated
        dealer rebates)                                                 68,922       56,436       47,693
    Change in accrued interest on securitized loans                      2,353        4,247        1,713
    Return of excess cash flows, net of present value effect           (24,619)     (37,871)     (30,049)
    Impairment of excess servicing asset                               (34,828)           -            -
    Unrealized gain attributable to the change in fair value             3,785            -            -
---------------------------------------------------------------------------------------------------------
    Balance at end of period                                          $ 99,047       83,434       60,622
=========================================================================================================
</TABLE>


       Because of current  trends with  respect to credit loss and  delinquency,
       and their effects on the  valuation of the excess  servicing  asset,  the
       Company recorded  pre-tax charges of approximately  $35.0 million for the
       impairment  of  the  excess   servicing  asset  in  accordance  with  the
       provisions of SFAS 125 during fiscal 1997.

 (5)   Spread Accounts

       The weighted average yield on spread accounts was 4.97% and 5.32% at June
       30, 1997 and 1996, respectively.

(6)    Other Assets

       Other assets are as follows (in thousands) at:

                                                      June 30,
                                                 1997         1996
----------------------------------------------------------------------

       Income tax receivable                  $   5,735        1,584
       Repossessed assets                         5,048        1,716
       Deferred borrowing fees                    3,078        2,173
       Accrued servicing fees                     2,511        5,131
       Advances of delinquent interest            1,056          506
       Other                                      3,053        1,370
---------------------------------------------------------------------
                                               $ 20,481       12,480
=====================================================================

                                                                     (Continued)



<PAGE>

UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

(7)     Amounts Due Under Warehouse Facilities

        At June 30, 1997, the Company, through its wholly-owned  special-purpose
        subsidiaries,  had borrowing  arrangements with a financial  institution
        which   provided  for  three   revolving   Warehouse   Facilities   (the
        "Facilities")  with an  aggregate  borrowing  capacity of $450  million.
        Borrowings  under these facilities are  collateralized  by certain loans
        held for sale.  There are separate  Facilities  for the funding of prime
        auto,   non-prime  auto,  and  marine  loan  acquisitions.   Outstanding
        borrowings   of  the   Facilities   at  June  30,  1997  and  1996  were
        approximately $44,455,000 and $187,756,000,  respectively.  The weighted
        average  cost of funds of the  Facilities  for the years  ended June 30,
        1997 and 1996 was 5.42% and 6.19%, respectively.

        The cost of funds includes a variable  interest rate on the  outstanding
        commercial   paper,  fees  on  the  used  and  unused  portions  of  the
        Facilities,  and the amortization of prepaid warehouse fees. The largest
        portion of the cost of funds  related to the  Facilities is the variable
        rate interest on the commercial  paper issued by the financing  conduit.
        The weighted average commercial paper rate on outstanding issues at June
        30, 1997 and 1996 was 5.66% and 5.40%,  respectively.  Upfront warehouse
        fees are  non-recurring  costs  related  to the  initial  set-up  of the
        Facilities. The Facilities agreements specify a term of one year and are
        renewable  annually.  Both the prime auto and non-prime auto  Facilities
        have been renewed for an  additional  year,  and expire in June and July
        1998, respectively. The marine Facility expires April 1998.

(8)     Long-term Debt

        In connection with the Company's  initial public  offering,  the Company
        issued, in a private  placement,  $110 million principal amount of 8.53%
        Senior  Notes  due  2002.  Interest  on  the  Senior  Notes  is  payable
        semi-annually  on February 1 and August 1 of each year, and commenced on
        February 1, 1996, with annual principal reductions  commencing on August
        1, 1998.  The Senior Notes are  redeemable,  in whole or in part, at the
        option of the Company,  in a principal  amount not less than $1 million,
        together with accrued and unpaid  interest to the date of redemption and
        a yield-maintenance premium as defined in the note agreement.

        In April 1996, the Company issued $46 million in a private  placement of
        9.99%  Senior  Subordinated  Notes  due  2003.  Interest  on the  Senior
        Subordinated  Notes is payable quarterly on March 30, June 30, September
        30 and December 30 of each year,  and  commenced  on June 30, 1996.  The
        Senior  Subordinated  Notes are redeemable,  in whole or in part, at the
        option of the Company,  in a principal  amount not less than $1 million,
        together with accrued and unpaid  interest to the date of redemption and
        a yield-maintenance premium as defined in the note agreement.






                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

        In March 1997, the Company issued, in a private  placement,  $50 million
        Series A 7.75%  Senior  Notes  due 2002 and $15  million  Series B 7.97%
        Senior  Notes  due  2002.  Interest  on  the  Senior  Notes  is  payable
        semi-annually  on March 15 and  September  15 of each  year,  commencing
        September 15, 1997,  with a principal  reduction  occurring on March 15,
        2002.  The  Senior  Notes are  redeemable,  in whole or in part,  at the
        option of the Company,  in a principal  amount not less than $1 million,
        together with accrued and unpaid  interest to the date of redemption and
        a yield-maintenance premium as defined in the note agreement.

       Scheduled  contractual  maturities  of  long-term  debt at June 30,  1997
       follows (in thousands):

               1998                                           $            -
               1999                                                     22,000
               2000                                                     22,000
               2001                                                     22,000
               2002                                                     43,667
               2003                                                    111,333
--------------------------------------------------------------------------------
                                                                     $ 221,000
================================================================================

(9)    Other Revenue and Expenses

       Other revenue and expenses follow (in thousands):
<TABLE>
<CAPTION>

                                                                Year ended June 30,
                                                          1997         1996        1995
--------------------------------------------------------------------------------------------

       Other revenues:
<S>                                                    <C>              <C>          <C>  
           Late charges                                $   2,618        1,922        1,447
           Origination fees                                1,019        1,072        1,210
           Other                                             183          102          126
--------------------------------------------------------------------------------------------

                                                       $   3,820        3,096        2,783
============================================================================================

       Other expenses:
           Loan expenses                                   2,948        2,202        1,841
           Outside services                                2,767        2,515        1,492
           Office, telephone and postage                   2,626        2,207        1,158
           Occupancy                                       1,433          891          396
           Equipment                                       1,013          839          511
           Other                                           4,042        3,202        2,893
--------------------------------------------------------------------------------------------

                                                        $ 14,829       11,856        8,291
============================================================================================
</TABLE>


                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

 (10)  Income Taxes

       The composition of income taxes follows (in thousands):

                                                      Year ended June 30,
                                               1997         1996        1995
--------------------------------------------------------------------------------

       Current expense (benefit)             $(1,644)       9,096        6,458
       Deferred expense (benefit)              5,810        5,310          (62)
--------------------------------------------------------------------------------

                                            $  4,166       14,406        6,396
--------------------------------------------------------------------------------

       The effective income tax rate for the year ended June 30, 1997, is 40.5%.
       Income taxes were allocated using statutory federal and state rates which
       resulted  in  effective  income tax rate of  approximately  40.5% for the
       years ended June 30, 1996 and 1995.

                                                         Year ended June 30,
              (Dollars in thousands)                       1997           1996
--------------------------------------------------------------------------------

              Deferred tax assets:
                  Net operating losses carryforward      $  1,841           -
                  Allowance for estimated credit losses       316         445
                  Mark to market and allowance for
                     credit losses                          2,073         912
--------------------------------------------------------------------------------
                                                            4,230       1,357
--------------------------------------------------------------------------------

              Deferred tax liabilities:
                  Excess servicing                         16,556       5,349
                  Unrealized gain on excess servicing       1,533           -
                  Mark to market - excess servicing             -       4,365
--------------------------------------------------------------------------------
                                                           18,089       9,714
--------------------------------------------------------------------------------

                      Deferred income tax payable        $ 13,859       8,357
================================================================================

(11)   Estimated Fair Value of Financial Instruments

       Loans  held for sale - Cost  approximates  fair  value as loans  are sold
       shortly after origination.

       Accrued interest receivable - Cost approximates fair value.

       Excess  servicing - In 1997,  amount  carried at fair value in accordance
       with SFAS 125. During 1996, cost approximated fair value determined based
       upon  discounting  future  cash flows at market  rates  using  historical
       prepayment speeds and loss provisions.

                                                                     (Continued)
<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

       Spread  accounts  - Cost  approximates  fair value as the  interest  rate
       earned is at a variable rate.

       Repossessed assets - Cost approximates fair market value.

       All liabilities, except long-term debt - Cost approximates fair value.

       Long-term debt - Carrying amount of $221,000,000 and $156,000,000 at June
       30, 1997 and 1996, respectively, has been calculated to have a fair value
       of  approximately   $221,000,000  and  $152,000,000,   respectively,   by
       discounting  the scheduled loan payments to maturity using rates that are
       believed  to be  currently  available  for  debt  of  similar  terms  and
       maturities.

(12)   Commitments and Contingencies

       Future minimum payments under noncancelable  operating leases on premises
       and  equipment  with terms of one year or more as of June 30, 1997 are as
       follows (in thousands):

                      1998                    $ 1,236
                      1999                      1,150
                      2000                        985
                      2001                        911
                      2002                        911
                      Thereafter                  759
------------------------------------------------------

                      Total                   $ 5,952
======================================================

       These agreements include,  in certain cases,  various renewal options and
       contingent rental  agreements.  Rental expense for premises and equipment
       amounted to  approximately  $1,640,000  and  $645,000 for the years ended
       June 30, 1997 and 1996,  respectively.  A majority of the rental  expense
       relates to the lease of the  Company's  principal  offices with a company
       owned by the majority shareholders of UAC.

       The  Company  is also  involved  as a party to certain  immaterial  legal
       proceedings incidental to its business.  Management of the Company, based
       on the  advice of  outside  counsel,  believes  that the  outcome of such
       proceedings  will  not  have a  material  effect  upon  its  business  or
       financial condition.

(13)   Stock-Based Compensation

       The Company has one  stock-based  compensation  plan,  which is described
       below.  The Company  applies APB  Opinion  No. 25,  Accounting  for Stock
       Issued to Employees and related  Interpretations  in accounting for these
       plans. Had  compensation  cost been determined based on the fair value at
       the grant date for awards under those plans consistent with the method of
       Statement of  Financial  Accounting  Standards  No. 123,  Accounting  for
       Stock-Based  Compensation  ("SFAS  123"),  the  Company's  net income and
       earnings  per share  would  have been  reduced  to the pro forma  amounts
       indicated below (in thousands, except share data):
                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

                                                           June 30,
For the Years Ended:                                1997         1996
--------------------------------------------------------------------------------

              Net income:
                 As reported                        $5,882       21,142
                 Pro forma                           4,543       19,449
              Earnings per share:
                 As reported                          0.45         1.60
                 Pro forma                            0.34         1.47
================================================================================

       The effects of  applying  SFAS 123 in this Pro Forma  disclosure  are not
       indicative  of future  amounts.  The  Statement  does not apply to awards
       prior to fiscal 1996, and additional awards in the future are expected.

       The Union  Acceptance  Corporation  1994 Incentive Stock Plan ("Incentive
       Stock Plan") is the Company's  long-term  incentive  plan for  directors,
       executive  officers and other key  employees.  The  Incentive  Stock Plan
       authorizes  the  Company's  Compensation  Committee  to  award  executive
       officers  and other  key  employees  incentive  and  non-qualified  stock
       options and restricted shares of Class A Common Stock. A total of 500,000
       shares of Class A Common Stock have been reserved for issuance  under the
       Incentive  Stock Plan,  of which  options  for 271,875  shares of Class A
       Common  Stock were  granted at an issue  price of $16 per share to senior
       officers upon  consummation  of the Company's  initial public offering of
       the Class A Common Stock.

       Options or other  grants to be  received by  executive  officers or other
       employees  in the  future  are within  the  discretion  of the  Company's
       Compensation  Committee and are not  determinable.  Stock options granted
       under the Incentive  Stock Plan are  exercisable at such times (not after
       ten years and one day from the date of the  grant)  and at such  exercise
       prices (not less than 85% of the fair market  value of the Class A Common
       Stock at date of grant) as the Committee  determines and will,  except in
       limited  circumstances,  terminate if the grantee's employment terminates
       prior to exercise.  The outstanding  options'  maximum term is ten years.
       Such options vest over a period of five years,  with  one-fifth  becoming
       exercisable on each anniversary of the option grant.

       The fair value of each  option  grant is  estimated  on the date of grant
       using the Black-Scholes options pricing model with the following weighted
       average  assumptions used for grants in 1997 and 1996;  dividend yield of
       0.0% for both years; expected volatility of 100% for both years; weighted
       average  risk-free  interest  rates of 6.55%  and 6.41% for 1997 and 1996
       grants, respectively; and expected lives of ten years for both years.




                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

       A summary of the status of the  Company's  stock  option plans as of June
       30,  1997 and 1996  changes  during  the  years  ended on those  dates is
       presented below:

<TABLE>
<CAPTION>


                                                                       1997                       1996
                                                         ---------------------------       ----------------------
                                                                         Weighted                        Weighted
                                                                          average                         average
                                                                         exercise                        exercise
                                                           Shares          price            Shares         price
-----------------------------------------------------------------------------------------------------------------

<S>                                                           <C>        <C>               <C>        <C>
              Options outstanding at beginning of
                 year                                         276,915    $ 16.03                   -  $     0.00   
              Options granted                                  39,750      16.00             280,600       16.04
              Options exercised                                     -       0.00                   -        0.00
              Options canceled                                  2,180      17.48               3,685       16.31
-----------------------------------------------------------------------------------------------------------------

              Options outstanding at end of year              314,485    $ 16.02             276,915     $ 16.03
=================================================================================================================
              Weighted average fair value of
                 options granted during the year                   $ 14.71                       $ 14.79
=================================================================================================================
</TABLE>

       The  following  table  summarizes  information  about fixed stock options
       outstanding at June 30, 1997:
<TABLE>
<CAPTION>


               Options Outstanding                                                            Options Exercisable
                                  Weighted average        Weighted                                        Weighted
       Range of                        number             remaining       Average           Number         average
       exercise                      outstanding         contractual     exercise         exercisable     exercise
       prices                        at 6/30/97             date           price          at 6/30/97        price
-------------------------------------------------------------------------------------------------------------------

<S>                                      <C>                 <C>         <C>                <C>           <C>    
       $16.00 - 16.00                    311,125             8.25        $ 16.00            54,375        $ 16.00
       $17.88 - 17.88                      3,360             8.25          17.88               672          17.88
-------------------------------------------------------------------------------------------------------------------

                                         314,485             8.25        $ 16.02            55,047        $ 16.03
===================================================================================================================
</TABLE>

       In addition  to the  options  outstanding  at June 30,  1997,  there were
       168,727  shares of Class A Common Stock  available  for future  grants or
       awards.

       The Incentive  Stock Plan also provides that each director of the Company
       who is not also an executive  officer is automatically  granted shares of
       Class A Common Stock with a fair market value of $15,000  following  each
       annual meeting of shareholders. Shares so granted have a six-month period
       of restriction  during which they may not be transferred.  Shares granted
       under this section of the  Incentive  Stock Plan totaled 5,430 and 11,358
       in fiscal 1997 and 1996,  respectively,  and  compensation  cost  charged
       against income was $90,000 and $180,000 in 1997 and 1996, respectively.

                                                                     (Continued)

<PAGE>



UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

(14)   Restatement of Consolidated Financial Statements

              The Company determined in August 1998 that it should measure other
        than temporary  impairment of Excess  Servicing on a disaggregate  basis
        (pool by pool). The adjustments  resulting from the measurement of other
        than  temporary  impairment on a  disaggregate  basis were of sufficient
        significance  to  require  restatement  of  the  consolidated  financial
        statements  since the  implementation  of SFAS 125. This restatement had
        the effect of reducing fiscal 1997 earnings by $1,890,000 (net of income
        taxes of $1,288,000) or $0.14 per share.  The  restatement had no effect
        on  shareholders'  equity  at June 30,  1997.  In  conjunction  with the
        restatement,  the  Company  made  other  adjustments,   which  were  not
        individually  significant,  that  increased  fiscal 1997 net earnings by
        $372,000  (net of  income  taxes of  $259,000)  or $0.03  per  share and
        increased shareholders' equity at June 30, 1997 by $733,000.

























                                                                     (Continued)

<PAGE>



<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
UNION ACCEPTANCE CORPORATION AND SUBSIDIARIES
------------------------------------------------------------------------------------------------------------------------------------

Notes to Consolidated Financial Statements

June 30, 1997, 1996 and 1995

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

 (15)  Quarterly Financial Information (unaudited)

       Quarterly financial information is as follows (in thousands, except share
data):

------------------------------------------------------------------------------------------------------------------------------------
                                                      First        Second        Third       Fourth       Total
------------------------------------------------------------------------------------------------------------------------------------
Year ended June 30, 1997
<S>                                                <C>              <C>          <C>          <C>         <C>   
Interest on loans                                  $   9,233        9,096        7,543        8,042       33,914
Interest on spread accounts and restricted cash        1,510        1,545        1,618        1,712        6,385
Interest expense                                      (6,410)      (6,265)      (6,118)      (6,895)     (25,688)
Provision for estimated credit losses on
     loans held for sale                                (855)        (993)      (1,180)      (1,160)      (4,188)
------------------------------------------------------------------------------------------------------------------------------------
     Net interest margin after provision               3,478        3,383        1,863        1,699       10,423
Gain (loss) on sales of loans                          6,875        7,790       (6,168)      (7,534)         963
Servicing fees, net                                    5,826        6,258        6,854        6,406       25,344
Other revenues                                           934          910        1,011          965        3,820
------------------------------------------------------------------------------------------------------------------------------------
     Total revenues                                   17,113       18,341        3,560        1,536       40,550
------------------------------------------------------------------------------------------------------------------------------------
Salaries and benefits                                  3,632        3,900        4,065        4,076       15,673
Other expenses                                         3,514        3,932        3,480        3,903       14,829
------------------------------------------------------------------------------------------------------------------------------------
     Operating expenses                                7,146        7,832        7,545        7,979       30,502
------------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes                             4,049        4,316       (1,587)      (2,612)       4,166
------------------------------------------------------------------------------------------------------------------------------------
     Net earnings (loss)                           $   5,918        6,193       (2,398)      (3,831)       5,882
------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share                   $    0.45         0.47        (0.18)       (0.29)        0.45
====================================================================================================================================

Weighted average common shares outstanding        13,211,358   13,215,515   13,216,788   13,216,788   13,215,112
====================================================================================================================================

Year ended June 30, 1996
Interest on loans                                  $   6,946        7,232        6,732        7,802       28,712
Interest on spread accounts and restricted cash        1,370        1,386        1,317        1,375        5,448
Interest expense                                      (5,289)      (5,556)      (5,359)      (6,071)     (22,275)
Provision for estimated credit losses on
     loans held for sale                              (1,150)        (300)        (600)        (825)      (2,875)
------------------------------------------------------------------------------------------------------------------------------------
     Net interest margin after provision               1,877        2,762        2,090        2,281        9,010
Gain on sales of loans                                 6,724        8,483        7,760        7,390       30,357
Servicing fees, net                                    3,966        2,584        4,796        5,580       16,926
Other revenues                                           750          724          798          824        3,096
------------------------------------------------------------------------------------------------------------------------------------
     Total revenues                                   13,317       14,553       15,444       16,075       59,389
------------------------------------------------------------------------------------------------------------------------------------
Salaries and benefits                                  2,321        3,059        3,232        3,373       11,985
Other expenses                                         2,398        2,543        3,426        3,489       11,856
------------------------------------------------------------------------------------------------------------------------------------
     Operating expenses                                4,719        5,602        6,658        6,862       23,841
------------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes                             3,482        3,705        3,473        3,746       14,406
------------------------------------------------------------------------------------------------------------------------------------
     Net earnings                                  $   5,116        5,246        5,313        5,467       21,142
------------------------------------------------------------------------------------------------------------------------------------
Earnings per common share                          $    0.39         0.40         0.40         0.41         1.60
====================================================================================================================================

Weighted average common shares outstanding        13,205,622   13,209,173   13,211,358   13,211,358   13,209,378
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>




<PAGE>

 
                                     PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)           List the following documents filed as part of the report:

              Financial Statements -- Included Under Item 8:

              Report of KPMG Peat Marwick LLP, Independent Auditors

              Consolidated Balance Sheets as of June 30, 1997 and 1996

              Consolidated Statements of Earnings (Loss) for the Years Ended
              June 30, 1997, 1996, 1995

              Consolidated Statements of Cash Flows for the Years Ended
              June 30, 1997, 1996, 1995

              Consolidated Statement of Shareholders' Equity for the Years
              Ended June 30, 1997 and 1996

(b)           Reports on Form 8-K

              Registrant filed no reports on Form 8-K during the quarter ended 
              June 30, 1997

(c)           The exhibits filed herewith or incorporated by reference
              herein are set forth  following the signature page which
              appears on page 56.



<PAGE>



SIGNATURES

       Pursuant  to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.

                                                UNION ACCEPTANCE CORPORATION

January 4, 1999              By:       /S/   Rick A. Brown
                                       --------------------
                                       Rick A. Brown
                                       Treasurer and Chief Financial Officer






<PAGE>



                                  EXHIBIT INDEX

Exhibit No.           Description                                 Page (Ex. No.
                                                             Cross Reference)(1)
-------------------------------------------------------------------------------
3.1         Registrant's  Articles of  Incorporation,  as amended       S-1, 3.1
            and restated.

3.2         Registrant's   Code  of   By-Laws,   as  amended  and       S-1, 3.2
            restated.

3.3         Form of Share Certificate for Class A Common Stock.         S-1, 3.3

4.1         Articles  V and VI of the  Registrant's  Articles  of       S-1, 4.1
            Incorporation  respecting  the  terms * of  shares of
            Common Stock,  are  incorporated  by reference to the
            Registrant's    Articles   of   Incorporation   filed
            hereunder as Exhibit 3.1

4.2         Article III -  "Shareholder  Meetings,"  Article VI -       S-1, 4.2
            "Certificates  for Shares,"  Article VII - "Corporate
            Books  and  Records  -  Section  3" and  Article  X -
            "Control   Share   Acquisitions   Statute"   of   the
            Registrant's  Code of  By-Laws  are  incorporated  by
            reference  to  the  Registrant's   Restated  Code  of
            By-Laws filed herewith as Exhibit 3.2.

4.3         Transfer   and    Administration    Agreement   among      S-1, 4.3
            Enterprise  Funding  Corporation,   Union  Acceptance
            Funding Corporation and Union Acceptance Corporation,
            dated as of June 27, 1995.

4.3(a)      Amendment  No.  1  to  Transfer  and   Administration       10Q 9/95
            Agreement dated September 8, 1995                             4.3(a)

4.3(b)      Amendment  No.  2  to  Transfer  and   Administration       10Q 9/95
            Agreement dated September 29, 1995                            4.3(b)

4.3(c)      Letter    Agreement     regarding     Transfer    and       10K 1996
            Administration Agreement dated November 13, 1995              4.3(c)

4.3(d)      Amendment  No.  3  to  Transfer  and   Administration       10K 1996
            Agreement dated March 1, 1996                                 4.3(d)

4.3(e)      Letter    Agreement     regarding     Transfer    and       10K 1996
            Administration Agreement dated May 30, 1996                   4.3(e)

4.3(f)      Amendment  No.  4  to  Transfer  and   Administration       10K 1996
            Agreement dated September 5, 1996                             4.3(f)

4.3(g)      Amendment  No.  5  to  Transfer  and   Administration           
            Agreement dated October 31, 1996*

4.3(i)      Amendment  No.  6  to  Transfer  and   Administration      10Q 12/96
            Agreement dated December 23, 1996                                4.1

4.3(h)      Amendment  No.  7  to  Transfer  and   Administration          
            Agreement dated March 31, 1997 *

4.3(j)      Letter  Agreement  No. 3 with respect to Transfer and           
            Administration Agreement, dated April 28, 1997 *

4.4         Note  Purchase  Agreement  between  Union  Acceptance       10K 1995
            Corporation and certain lenders dated as of August 7,            4.4
            1995.

4.4(a)      Amendment  No.  1 to Note  Purchase  Agreement  dated      10Q 12/95
            November 22, 1995                                             4.4(a)

4.5         Transfer   and    Administration    Agreement   among       S-1, 4.5
            Enterprise Funding  Corporation,  Performance Funding
            Corporation and Union Acceptance  Corporation,  dated
            as of July 24, 1995.


                                       57
<PAGE>

4.5(a)      Amendment  No.  1  to  Transfer  and   Administration      10Q 12/95
            Agreement dated September 8, 1995                             4.5(a)

4.5(b)      Letter    Agreement     regarding     Transfer    and       10K 1996
            Administration Agreement dated October 12, 1995               4.5(b)

4.5(c)      Amendment  No.  2  to  Transfer  and   Administration       10K 1996
            Agreement dated May 10, 1996                                  4.5(c)

4.5(d)      Letter    Agreement     regarding     Transfer    and       10K 1996
            Administration Agreement dated July 11, 1996                  4.5(d)

4.5(e)      Letter    Agreement     regarding     Transfer    and       10K 1996
            Administration Agreement dated August 20, 1996                4.5(e)

4.5(f)      Amendment  No.  3  to  Transfer  and   Administration      10Q 12/96
            Agreement,  dated  December  23, 1996                            4.2

4.5(g)      Letter    Agreement  No. 4  to   Transfer  and               
            Administration Agreement dated April 25, 1997 *

4.5(h)      Amendment  No.  5  to  Transfer  and   Administration       
            Agreement dated June 6, 1997 *

4.5(i)      Letter   Agreement   with  regard  to  Transfer   and      
            Administration Agreement dated June 24, 1997 *

4.5(j)      Amendment No. 6 to Transfer and Administration Agreement   
            dated as of July 29, 1997 *

4.6         Note  Purchase  Agreement  dated as of April 3,  1996       10Q 3/96
            among  Union   Acceptance   Corporation  and  several            4.1
            purchasers of Senior Subordinated Notes due 2003

4.7         Note Purchase Agreement,  dated March 24, 1997, among       10Q 3/97
            Union Acceptance  Corporation and certain  purchasers           10.1
            of Senior Notes, due 2002.

4.8(a)      Note  Purchase  Agreement,  dated April 3, 1997 among        
            UAC   Boat   Funding   Corp.,    Enterpirse   Funding
            Corporation and NationsBank, N.A. *

4.8(b)      Security Agreement, dated April 3, 1997, among UAC Boat      
            Funding Corp., Enterpirse Funding Corp., et. al. *

9(a)        Voting Trust Agreement  among Richard D.  Waterfield,      S-1, 9(a)
            as trustee,  and  certain  existing  shareholders  of
            Union Holding Company, Inc., dated June 10, 1994.

9(b)        First  Amendment to Voting Trust Agreement dated June      S-1, 9(b)
            1, 1995.

10.1        Remittance  Processing Agreement by and between Union     S-1, 10.5
            Federal  Savings  Bank  of  Indianapolis   and  Union
            Acceptance Corporation dated June 29, 1994.

10.2        Mail and Printing  Services  Agreement by and between     S-1, 10.6
            Union Federal Savings Bank of Indianapolis  and Union
            Acceptance Corporation dated June 29, 1994.

10.3        Telephone  Equipment  Lease  Agreement by and between     S-1, 10.7
            Union Federal Savings Bank of Indianapolis  and Union
            Acceptance Corporation dated June 29, 1994.

10.4        Telecommunications  Agreement  by and  between  Union     S-1, 10.8
            Federal  Savings  Bank  of  Indianapolis   and  Union
            Acceptance Corporation dated June 29, 1994.

10.5        Communications  Equipment and Software License by and     S-1, 10.9
            between  Union Federal  Savings Bank of  Indianapolis
            and Union Acceptance Corporation dated June 29, 1994.


                                       58
<PAGE>

10.6        Software  License and  Maintenance  Agreement  by and    S-1, 10.10
            between  Union Federal  Savings Bank of  Indianapolis
            and Union Acceptance Corporation dated June 29, 1994.

10.7        Loan Servicing Agreement by and between Union Federal    S-1, 10.11
            Savings  Bank of  Indianapolis  and Union  Acceptance
            Corporation dated June 29, 1994.

10.8        General  Subservicing  Agreement by and between Union    S-1, 10.12
            Federal  Savings  Bank  of  Indianapolis   and  Union
            Acceptance Corporation dated as of January 1, 1995.

10.9        Loan  Collection   Agreement  by  and  between  Union    S-1, 10.13
            Federal  Savings  Bank  of  Indianapolis   and  Union
            Acceptance Corporation dated June 29, 1994.

10.10       Letter  respecting  Terms of Bank Accounts from Union    S-1, 10.14
            Federal   Savings  Bank  of   Indianapolis  to  Union
            Acceptance Corporation dated May 25, 1994.

10.11       Supplement  to Account  Agreement  Re:  Drafts by and    S-1, 10.15
            between  Union Federal  Savings Bank of  Indianapolis
            and Union Acceptance Corporation dated June 29, 1994.

10.12       Tax Allocation Agreement by and between Union Holding    S-1, 10.16
            Company,  Inc. and its subsidiaries dated February 1,
            1991, as amended.

10.13       Form of Remote  Outsourcing  Agreement by and between    S-1, 10.18
            Systematics   Financial  Services,   Inc.  and  Union
            Acceptance Corporation.

10.13(a)    Letter Agreement by and among  Systematics  Financial  S-1, 10.18(a)
            Services,   Inc.,   Union  Federal  Savings  Bank  of
            Indianapolis and Union Acceptance  Corporation  dated
            July 13, 1994 respecting Provision of Data Processing
            Services.

10.13(b)    Memorandum respecting Billing Procedure in connection  S-1, 10.18(b)
            with Remote  Outsourcing  Agreement from  Systematics
            System  Financial  Services,  Inc.  to Union  Federal
            Savings  Bank of  Indianapolis  and Union  Acceptance
            Corporation dated October 25, 1994.

10.14       Union  Acceptance  Corporation  Annual Bonus Plan For     S-1, 10.23
            Senior Officers.


                                       59
<PAGE>

10.15   Union Acceptance Corporation Incentive Stock Plan.            S-1, 10.24

10.16   Letter  respecting  Access  to  Records  from  Union          S-1, 10.25
        Acceptance Corporation to Union Federal Savings Bank
        of Indianapolis dated September 13, 1994.

10.17   Letter   Agreement  by  and  between  Union  Federal         S-1,  10.26
        Savings Bank of  Indianapolis  and Union  Acceptance
        Corporation  dated  December  14, 1994  amending and
        initiating    terms   of    certain    Inter-Company
        Agreements.

10.18   Letter  respecting  terms  and  conditions  of  bank          S-1, 10.27
        accounts   from  Union   Federal   Savings  Bank  of
        Indianapolis to Union Acceptance  Corporation  dated
        December 16, 1994.

10.19   Lease Agreement between Waterfield Mortgage Company,           10Q 12/95
        Incorporated, and Union Acceptance Corporation dated               10.19
        as of November 1, 1995

10.20   Purchase  Agreement among Union  Acceptance  Funding            10Q 3/96
        Corporation,  Union Acceptance Corporation and Union                10.1
        Federal  Savings  Bank of  Indianapolis  dated as of
        January 18, 1996

10.21   Sublease    Agreement   between   Union   Acceptance            10K 1996
        Corporation   and  Union  Federal  Savings  Bank  of               10.26
        Indianapolis dated as of August 1, 1996

21      Subsidiaries of the Registrant *

23      Consent of KPMG Peat Marwick LLP. (Updated)                        _____

27      Financial Data Schedule   (Restated)                               _____

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

(1)  Exhibits  set  forth  above  that are not  included  with this  filing  are
     incorporated by reference to the Registrant's previously filed registration
     statement or reports (and the indicated exhibit number) as indicated in the
     right hand column above, as follows:

     S-1 -- Refers to Registrant's  Registration Statement on Form S-1 (Reg. No.
     33-82254

     10K 1995 -- Refers to  Registrant's  Form 10-K for the year  ended June 30,
     1995

     10K 1996 -- Refers to  Registrant's  Form 10-K for the year  ended June 30,
     1996

     10Q (month/year) -- Refers to Registrant's  Form 10-Q for the quarter ended
     at the end of such month in such calendar year

*    Previously filed