Metropolitan Mortgage & Securities Co Inc · 10-K405/A · For 9/30/96

Filed On 6/18/97   ·   SEC File 0-22041   ·   Accession Number 65384-97-56

Amendment to Annual Report -- [X] Reg. S-K Item 405   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405/A   Amendment to Annual Report -- [X] Reg. S-K Item      171    616K 
                          405                                                    
 2: EX-12       Calculation of Earnings to Fixed Charges               1      6K 
 3: EX-21       Subsidiaries of Registrant                             1      4K 
 4: EX-27       Financial Data Schedule                                1      6K 

10-K405/A   ·   Amendment to Annual Report -- [X] Reg. S-K Item 405
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SECURITIES AND EXCHANGE COMMISSION                
Washington, D.C. 20549                
AMENDMENT NO. 1 TO                
FORM 10-K               

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

For the fiscal year ended September 30, 1996.               

OR                

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

For the transition period from          to                

Commission file number 2-63708.               

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

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

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

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

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

Preferred Stock Series:                                                         

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

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

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

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

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

Class A Common Stock: 130                                             

Documents incorporated by reference:  None                

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PART I                

ITEM 1.   BUSINESS:                                                             

Terms:                                                                          

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

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

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

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

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

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

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

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

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

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

Arizona Life:   Arizona Life Insurance Company                                  

Summit:   Summit Securities, Inc.                                               

MIS:   Metropolitan Investment Securities, Inc.                                 

Summit PD:   Summit Property Development, Inc.                                  

Old Standard:   Old Standard Life Insurance Company.                            

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

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

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

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

BUSINESS                
OVERVIEW                                                                        

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

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

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

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

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

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

RECEIVABLE INVESTMENTS                                                          

Introduction                                                                    

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

Types of Receivables:                                                 

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

Secondary Mortgage Markets:                                           

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

Loan Originations:                                                    

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

Receivable servicing and collections:                                 

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

Receivable Acquisition Volume:                                        

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

Receivables Acquisitions: Sources, Strategies and Underwriting                  

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

Private Secondary Mortgage Market Sources                                       

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

Private Market Acquisition Strategies                                           

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

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

1)   Centralization of acquisition activities:                        

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

2) BrokerNet software:                                                

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

This  software was first available for online use by brokers          
in March 1996.  Current plans for enhancing the software include:               
preparing  the  legal  documents used to purchase  a  Receivable,               
providing  internet  compatibility, providing  submission  status               
tracking   (expected  to  be  available  mid  1997),  assist   in               
monitoring                                                                      

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the   closing  of  a  Receivable  purchase  and  ultimately,          
transfer   the  Receivable  data  directly  into  the  Receivable               
servicing and collection system.                                                

Currently,  approximately  35% of  the  privately  purchased          
Receivables are submitted to Metropolitan through BrokerNet.   It               
is  currently  used  by approximately 15% of  the  Metropolitan's               
brokers.   Management  believes that this  system  is  more  cost               
effective   than  paper  submissions.   Metropolitan   plans   to               
encourage  broker  use  of  BrokerNet through  various  financial               
incentive  programs.  The current goal is  to  have  50%  of  the               
brokers submitting through BrokerNet by the end of fiscal 1997.                 

3)   Development of flexible sales options:                           

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

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

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

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4) Development of faster closing programs:                            

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

5) Broker Incentive Programs:                                         

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

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

Private Secondary Mortgage Market Underwriting                        

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Institutional Secondary Mortgage Market Sources                       

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

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

These  acquisitions are typically negotiated through direct         
contact with the portfolio departments at the various selling                   

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

Institutional Secondary Mortgage Market Underwriting                  

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

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

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

Loan Originations Sources                                                       

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

Loan Originations Underwriting                                        

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

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

Lotteries, Structured Settlements and Annuities Sources               

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

Lottery, Structured Settlement and Annuity Underwriting               

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

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

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

Yield and Discount Considerations                                               

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

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

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

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

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

Current Mix of Receivable Investment Holdings                                   

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

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

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

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

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

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

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

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

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

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

c. Distribution of Assets                                                       

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

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

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

The following amounts are shown for the following states:             

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

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

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

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                                                        · Enlarge/Download Table
                                                                                              

                       Number of              Carrying     Delinquent   Non        Number of  
Description            Receivable  Interest   Amount of    Principal    Accrual    Non Accrual
                       s           Rates      Receivables  Amount       Principal  Receivables
                                                                        Amount                

RESIDENTIAL                        Principal                                                  
                                   ly                                                         
                                                                                              
First Mortgage >            738       6%-13%   $108,873,69  $ 5,687,601          $         7  
$100,000                                                 7               1,548,124            
First Mortgage >          2,500       6%-13%   161,285,463    7,443,607         --        --  
$50,000                                                                                       
First Mortgage <         13,568       6%-13%   261,018,755    9,129,035         --        --  
$50,000                                                                                       
Second or Lower >             1         7.5%       243,213           --         --        --  
$100,000                                                                                      
Second or Lower >             6       9%-10%       384,654           --         --        --  
$50,000                                                                                       
Second or Lower <           358       6%-13%     3,487,974      191,504         --        --  
$50,000                                                                                       
COMMERCIAL                                                                                    
First Mortgage >            248       6%-13%    52,072,095    1,248,896         --        --  
$100,000                                                                                      
First Mortgage >            252       6%-13%    18,218,639      500,571         --        --  
$50,000                                                                                       
First Mortgage <            447       6%-13%    11,837,475      107,111         --        --  
$50,000                                                                                       
Second or Lower >             4     9%-10.5%     1,564,708           --         --        --  
$100,000                                                                                      
Second or Lower>              3      8%-9.5%       204,917           --         --        --  
$50,000                                                                                       
Second or Lower <             9       8%-11%       192,717           --         --        --  
$50,000                                                                                       
FARM, LAND AND OTHER                                                                          
First Mortgage >             67       8%-12%    14,551,734    1,101,876  1,101,876         2  
$100,000                                                                                      
First Mortgage >            151       6%-13%     9,697,972      220,731         --        --  
$50,000                                                                                       
First Mortgage <          2,178       6%-13%    36,929,717      841,020         --        --  
$50,000                                                                                       
Second or Lower >             1          14%       100,000           --         --        --  
$100,000                                                                                      
Second or Lower>              2       9%-10%       164,743           --         --        --  
$50,000                                                                                       
Second or Lower <            40       9%-12%       349,674       28,048         --        --  
$50,000                                                                                       

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

Accrued Interest                                 8,362,559                                    
Receivables                                    -----------  -----------  ---------  --------  
                                                        --            -         --        --  
CARRYING VALUE                                 $650,933,33  $26,500,000  $2,642,00            
                                                         0  ===========          0            
                                               ===========               =========            
                                                         =                       =            

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                                                        · Enlarge/Download Table

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

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


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

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                                                        · Enlarge/Download Table
                                                                                                  


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

Unrealized discounts,                                                                             
net of unamortized                                                                                
acquisition costs, on                                                                             
receivables purchased                                 (37,354,378         --          --     --   
at a discount                                                   )                                 

Accrued Interest                                                                                  
Receivables                                             7,335,039         --         --      --   
                                                      -----------  ---------   --------  ------   
CARRYING VALUE                                        $587,493,61  $17,500,0   $868,500           
                                                                4         00   ========           
                                                      ===========  =========                      
                                                                =          =                      

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The  following  tables present certain statistical  information     
about  the Consolidated Group's Receivable investment activity during           
the three fiscal years ended September 30, 1996.                                

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

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

Average Annual Yield on                                                       

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

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

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

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

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

Servicing and Collection Procedures, and Delinquency Experience                 

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

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

The  principal  amount  of Receivables collateralized  by  real     
estate, held by the Consolidated Group (as a percentage of the total            

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

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

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

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

Allowance for Losses on Real Estate Assets                                      

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

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

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

The following table outlines the Consolidated Group's changes in      
the allowance for losses on real estate assets:                                 

                                                                · Download Table

                                   1996            1995           1994  
                                                                        
Beginning Balance             $ 8,116,065     $9,108,383    $10,598,491 
Provisions                      6,360,072      4,174,644      5,533,193 
Charge-Offs                    (4,283,553)    (5,166,962)    (7,023,301)
                               ----------     ----------     ---------- 
Ending Balance                $10,192,584     $8,116,065    $ 9,108,383 
                               ==========    ==========      ========== 
Percentage of Ending                                                    
Balance of Allowances                                                   
to Outstanding                                                          
Real Estate Assets                    1.4%           1.2%           1.4%
                                     ====           ====           ==== 

Ratio of Net Charge-Offs                                                
to Average Real Estate                                                  
Assets Outstanding                                                      
During the Period                     0.6%           0.8%           1.1%
                                     ====           ====           ==== 


Repossessions                                                                   

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

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

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                                                                · Download Table


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

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

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

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

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

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

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

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

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

Management & Receivable Acquisition Services                                    

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

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

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

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

Receivable Sales                                                                

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

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

Generally, a securitization involves the transfer of certain          
specified  Receivables  to  a single purpose  trust.   The  trust               
issues   certificates  which  represent  an  undivided  ownership               
interest  in  the  Receivables  transferred  to  the  trust.  The               
certificates consist of different classes, which include  classes               
of  senior  certificates, and a residual interest  and  may  also               
include  intermediate classes of subordinated certificates.   The               
rights of the senior certificate holders can be enhanced through                

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several methods which include subordination of the rights of          
the subordinate certificate holders to receive distributions,  or               
the   establishment  of  a  reserve  fund.  In  connection   with               
securitizations, the senior certificates are sold  to  investors,               
generally  institutional  investors.  The  companies  which  sold               
their   Receivables  to  the  trust  receive   a   cash   payment               
representing their respective interest in the sales price for the               
senior  certificates and any subordinate certificates sold.   The               
selling  companies receive an interest in any unsold  subordinate               
certificates,  and  also typically receive  an  interest  in  the               
residual  interest.   Such  interests are  generally  apportioned               
based  upon  the respective companies contribution of Receivables               
to the pool of Receivables sold to the trust.                                   

In  the  typical  securitization structure,  the  Receivable          
payments  are distributed first to the senior certificates,  next               
to  the  subordinated  certificates, if  any,  and  last  to  the               
residual  interests.  As a result, the residual interest  is  the               
interest  first  affected by any loss due to the failure  of  the               
Receivables  to  pay as scheduled.  The holders of  the  residual               
interest  values  such  interest on  their  respective  financial               
statements   based   upon  certain  assumptions   regarding   the               
anticipated  losses  and  prepayments.   To  the  extent   actual               
prepayments  and losses are greater or less than the assumptions,               
the  companies holding the residual interests will  experience  a               
loss or gain.                                                                   

In  the  securitizations which occurred in May and November         
1996,  the rights of the senior certificate holders were enhanced               
through  subordinating  the  rights  of  subordinate  certificate               
holders  to  receive distributions with respect to  the  mortgage               
loans  to such rights of senior certificate holders.  The selling               
companies  retained  their  respective  residual  interests.   At               
September   30,  1996,  the  residual  interests  held   by   the               
Consolidated  Group  for  the May 1996 securitization  aggregated               
approximately  $3.6 million.  At the close of the November  1996,               
securitization  the  Consolidated Group held  residual  interests               
aggregating approximately $7.1 million.                                         

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

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

LIFE INSURANCE AND ANNUITY OPERATIONS                                           

Introduction                                                                    

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

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

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

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

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

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

Annuities                                                                       

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

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

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

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

                                                                · Download Table

                                 1995            1994           1993       
Three Year                                                                 

Average                                                                    
                                 --------         ---------       ---------
----------                                                                 
                                                                           
                                                                           
Net Investment                                                             

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Earnings  Rate                    8.30%            8.49%            9.11%  
8.63%                                                                      

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

Spread                             2.24%            2.90%             2.73%
2.62%                                                                      

During 1996, 1995 and 1994, amortization of deferred policy         
acquisition  costs  was  $9.1 million,  $10.3  million  and  $7.0               
million, respectively.  All calculations have been reviewed by an               
independent actuary.                                                            

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

Life Insurance                                                                  

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

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

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                                                                · Download Table


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


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

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

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

Reinsurance                                                                     

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

Annuity Reinsurance                                                             

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

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Life Policy Reinsurance                                                         

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

Reserves                                                                        

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

SECURITIES INVESTMENTS                                                          

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

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

                                                                · Download Table
                                                                           
                                            Available        Held  To      
Total                                                                      
                                            For Sale      Maturity         
                                           Portfolio       Portfolio       
                                           ----------      --------      - 
-------  --------                                                          
                                            (Dollars in Thousands)         

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

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

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

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

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

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

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

METHOD OF FINANCING                                                             

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

The  following  table presents information about  the  debt         
securities issued by the Consolidated Group:                                    

                                                                · Download Table


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

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

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

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

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

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

                                                                · Download Table


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

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

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

REAL ESTATE DEVELOPMENT                                                         

Lawai Beach Resort                

Description                                                                     

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

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

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

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

Marketing                                                                       

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

Additional Information                                                          

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

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                                                                · Download Table

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

Receivable Financing                                                            

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

Skier's Edge Resort               

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

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

Other Development Properties                

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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                                                                · Download Table


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

COMPETITION                                                                     

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

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

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

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

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

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

REGULATION                                                                      

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

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

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

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

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

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

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

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

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

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

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

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

For statutory purposes, Western United's capital and surplus and      
its  ratio of capital and surplus to admitted assets were as  follows           
for the dates indicated:                                                        

                                                                · Download Table

                                             As of                  As of     
December 31,                                                                  
                                     September 30, 1996     1995        1994  
1993                                                                          
                                     -------------------   ------  -----------
---    ------                                                                 
                                                                              
                                                                              
         Capital and Surplus                                                  
           (Millions)                              $48.7            $46.2     
$43.8    $43.0                                                                
         Ratio of Capital and                                                 
         Surplus to Admitted                                                  
           Assets                                    5.2%            5.3%     
5.5%     5.7%                                                                 

Although  the  State of Washington requires only $4,000,000  in     
capital and surplus to conduct insurance business, Western United has           
attempted  to  maintain a capital and surplus ratio of  at  least  5%           
which   management  considers  adequate  for  regulatory  and  rating           
purposes.                                                                       

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

MANAGEMENT            

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

Name                 Age            Position                                  

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

Neil Fosseen           78    Honorary Director                                  

* Member of Executive Committee                                                 

Directors and officers are elected to one-year terms.                 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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EXECUTIVE COMPENSATION            

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

                                                                · Download Table


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

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

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

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

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

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

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


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION           

Metropolitan does not have a formal compensation  committee  of     
the board of directors.  Executive officer compensation is determined           
by  C. Paul Sandifur, Jr., Bruce J. Blohowiak and the Human Resources           
Manager  (currently Nobumichi Hara, formerly Paul  Chalmers).   There           
are  no compensation committee interlocks between the above described           
individuals and another entity's compensation committee.  None of the           
above  described individuals serve as an executive officer of another           
entity outside the Consolidated Group.                                          

Mr. Sandifur is the  sole                                               
shareholder  of  National  Summit, which in  turn  owns  Summit,  Old           
Standard  and  Arizona  Life.   The  Consolidated  Group  engages  in           
transactions  with these companies as more fully  set  forth  in  the           
following discussion.                                                           

CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS            

Transactions with and between Metropolitan and Subsidiaries.                    

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

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

Metropolitan charges Western United for Receivable  acquisition     
services. In 1996, 1995 and 1994, respectively, Metropolitan charged            

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

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

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

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

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

Transactions with affiliates.                                                   

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

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

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

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

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

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

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

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

OWNERSHIP OF MANAGEMENT           

The  following table sets forth certain information as to  each     
class  of  equity  securities of Metropolitan  and  its  subsidiaries           
beneficially owned by Metropolitan officers and directors as of March           
31, 1997.                                                                       

                                                                · Download Table

                                                              Number of       
                                                                Shares        
                                                             Beneficially     
Name                         Title of Class                Owned   %of Class  
                                                                              
C. Paul Sandifur, Jr.       Metropolitan Preferred                            
929 West Sprague            Stock All Series                246     0.05%     
Spokane, WA....             Metropolitan Class A                              
                            Common Stock                11.5258     8.84%     

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

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

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

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

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

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

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

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

PRINCIPAL SHAREHOLDERS            

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

                                                                · Download Table

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

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

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

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

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

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

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


INDEMNIFICATION           

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

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

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

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

ITEM 2.   PROPERTIES.                                                           

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

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

ITEM 3.   LEGAL PROCEEDINGS.                                                    

There are no material pending legal proceedings.                      

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

N/A                                                                   

PART II           

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

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

(b)  There were 8 Class A Common stockholders                         

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

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ITEM 6.   SELECTED FINANCIAL DATA.                                              

SELECTED CONSOLIDATED FINANCIAL DATA

                                                        · Enlarge/Download Table
               The  consolidated financial data shown below as of September  30,              
1996  and 1995 and for the years ended September 30, 1996, 1995, and 1994 (other              
than  the Ratio of Earnings to Fixed Charges and preferred stock dividends) have              
been  derived  from,  and  should  be read in conjunction  with,  Metropolitan's              
consolidated  financial  statements, related notes, and Management's  Discussion              
and  Analysis  of  Financial  Condition  and  Results  of  Operations  appearing              
elsewhere  herein.  The consolidated financial data shown as  of  September  30,              
1994,  1993  and 1992 and for the years ended September 30, 1993 and  1992  have              
been  derived  from  audited  financial  statements  not  included  herein.  The              
consolidated  financial statements as of and for the years ended  September  30,              
1996,  1995,  1994 and 1993 have been audited by Coopers & Lybrand  L.L.P.   The              
consolidated  financial statements as of and for the year  ended  September  30,              
1992 has been audited by BDO Seidman.                                                         

                          Six Months Ended                                                    
                             March 31,                                                        
                            (Unaudited)                   Year Ended September 30,            
                        --------  ---------   ----------------------------------------------- 
                                              ----------                                      
                          1997       1996       1996      1995      1994      1993      1992  
                                                (Dollars in Thousands                         
                                              Except Per Share Amounts)                       
                                                                                              
CONSOLIDATED                                                                                  
STATEMENTS OF INCOME                                                                          
DATE                                                                                          
Revenues                 $74,349     $72,079   $156,672  $138,107  $138,186  $133,113  $121,22
                                                                                             1
                         =======     =======   ========  ========  ========  ========  =======
                                                                                             =
Income before minority                                                                        
interest,                                                                                     
extraordinary item and                                                                        
cumulative effect of                                                                          
change in accounting      $5,063      $1,473   $  8,146  $  6,376  $  5,702  $  8,558        $
principle                                                                                3,290

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Income allocated to                                                                           
minority interests           (62)        (36)      (108)      (73))    (224)     (255)   (363)
                         --------    --------   --------   -------- --------  -------- -------
                                                                                             -
Income before                                                                                 
extraordinary item and                                                                        
cumulative effect of                                                                          
change in accounting       5,001       1,437      8,038     6,303     5,478     8,303    2,927
for income taxes                                                                              
Extraordinary item (1)        --          --         --        --        --        --      651
Cumulative effect of                                                                          
change in accounting                                                                          
for income taxes (2)          --          --         --        --        --    (4,300)      --
                        --------    --------   --------  --------  --------   -------- -------
                                                                                             -
Net income                 5,001       1,437      8,038     6,303     5,478     4,003    3,578

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

Income (loss)                                                                                 
applicable to common      $2,964       $(387)    $4,170    $2,265    $2,055   $   690        $
stockholders            ========      =======  ========  ========  ========  ========      179
                                                                                       =======
                                                                                             =

Ratio of Earnings to                                                                          
Fixed Charges               1.74        1.06       1.46      1.35      1.29      1.43     1.21
Ratio of Earnings to                                                                          
Fixed Charges and                                                                             
Preferred Stock             1.33                   1.14      1.03      1.04      1.17         
Dividends (4)                                                                                 
PER COMMON SHARE DATA                                                                         
(3):                                                                                          
Income (loss) before                                                                          
extraordinary item and                                                                        
cumulative effect of                                                                          
change in accounting     $22,801     $(2,974)   $32,073  $ 17,288  $ 14,996  $ 37,239  $(3,579
principle                                                                                    )
Extraordinary items           --          --         --        --        --        --    4,932
(1)                                                                                           

Cumulative effect of                                                                          
change in accounting          --          --         --        --        --   (32,089)      --
principle (2)           --------    --------   --------  --------  --------   -------- -------
                                                                                             -

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Income (loss)                                                                                 
applicable to common     $22,801     $(2,974)   $32,073  $ 17,288   $14,996   $ 5,150        $
stockholders (5)        ========     ========  ========  ========  ========  ========    1,353
                                                                                       =======
                                                                                             =
Weighted Average                                                                              
Number of Common                                                                              
Shares Outstanding(3)        130         130        130       131       137       134      132
                        ========    ========   ========  ========  ========  ========  =======
                                                                                             =

Cash Dividends Per                                                                            
Common Share            $     --    $     --   $     --  $  3,800  $    675  $    675  $     -
                        ========    ========   ========  ========  ========  ========        -
                                                                                       =======
                                                                                             =
CONSOLIDATED BALANCE                                                                          
SHEET DATA:                                                                                   

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


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

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

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

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

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

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

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

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

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

Introduction                                                                    

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

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

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

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

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

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

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

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

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

Revenues and Expenses                                                           

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

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

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

Interest Sensitive Income and Expense                                           

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

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

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

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

                                                        · Enlarge/Download Table


                                                                 Interest Rate Change             
                            Carrying    Fair Value   Decrease   Decrease   Increase 1%   Increase 
                            Amounts                     1%         2%                       2%    
                                                    (Dollars in Thousands)                        
                                                                                                  
Financial Assets:                                                                                 
Cash and cash equivalents     $167,879    $167,879    $167,879    $167,879    $167,879    $167,879
Investments                    163,303     157,755     170,612     178,393     156,442     149,990
Real estate contracts                                                                             
 and mortgage notes            642,571     668,373     691,541     716,159     646,543     625,954
Other receivable               107,494     109,258     114,885     120,916     104,077      99,232
 investments                ----------  ----------  ----------  ----------  ----------  ----------
                            $1,081,247  $1,103,265  $1,144,917  $1,183,347  $1,074,941  $1,043,055
                            ==========  ==========  ==========  ==========  ==========  ==========

Financial Liabilities:                                                                            
Annuity reserves              $837,366    $837,366    $865,487    $894,936    $810,506    $784,842
Debentures payable             189,321     191,631     193,584     195,566     189,703     187,803
Debt payable                    38,450      38,486      39,822      41,266      37,141      35,895
Securities sold-not owned      132,652     132,652     137,386     142,363     128,135     123,836
                            ----------  ----------  ----------  ----------  ----------  ----------
                            $1,197,789  $1,200,135  $1,236,279  $1,274,131  $1,165,485  $1,132,376
                            ==========  ==========  ==========  ==========  ==========  ==========

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

Real Estate Sales                                                                                 

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

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

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

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

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

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

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

                                                                · Download Table
                                  For the Fiscal Year Ended   
                                         September 30,        
                                     1996       1995     1994 
                                       (Dollars in Thousands) 
                                                              
Amount of delinquencies over                                  
  three months at fiscal year end   $26,500    $17,500 $19,000

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

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

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

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

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

Provision for Losses on Real Estate Assets                                      

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

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Non-Interest Income and Expense                                                 

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

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

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

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

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

Asset/Liability Management                                                      

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

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

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

Effect of Inflation                                                             

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

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

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New Accounting Rules                                                            

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

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

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

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

Liquidity and Capital Resources                                                 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ITEM 8. Financial Statements and Supplementary Data                             

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

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

REPORT OF INDEPENDENT ACCOUNTANTS                                     

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

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

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

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

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

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

Spokane, Washington                                                   
December 6, 1996                                                      

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METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES         
CONSOLIDATED BALANCE SHEETS                                           
September 30, 1996 and 1995                                           

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

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

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METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES         
CONSOLIDATED BALANCE SHEETS, CONTINUED                                
September 30, 1996 and 1995                                           

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

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

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

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

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

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

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

                                                        · Enlarge/Download Table
                                                                                                                     
                                                                                                                
                                                                      Additional    Net Unrealized              
                                          Preferred     Common        Paid-in       Gains (Losses)  Retained    
                                          Stock         Stock         Capital       on Investments  Earnings    
                                          -----------   -----------   -----------   --------------  ----------- 
                                                                                                                
Balance, September 30, 1993               $21,402,599   $   310,485   $ 9,754,510    $   535,635    $   778,260 
Net income                                                                                            5,477,756 
Net change in unrealized (losses) on                                                                            
  available-for-sale securities, net                                                                            
  of income taxes of $1,721,435                                                       (3,371,012)               
Cash dividends, common ($675 per share)                                                                 (87,012)
Cash dividends, preferred (variable rate)                                                            (3,423,326)
Redemption and retirement of stock                                                                              
  (14,470 shares)                            (144,699)                   (353,743)                              
Redemption and retirement of stock                                                                              
  (6 shares) and change in minority                                                                             
  interest                                                  (13,864)      (12,914)                              
Sale of variable rate preferred stock,                                                                          
  net (17,901 shares)                         179,010                   1,593,639                               
                                          -----------   -----------   -----------    -----------    ----------- 
Balance, September 30, 1994                21,436,910       296,621    10,981,492     (2,835,377)     2,745,678 
Net income                                                                                            6,302,646 
Net change in unrealized gains on                                                                               
  available-for-sale securities, net                                                                            
  of income taxes of $1,018,219                                                        2,005,960                
Cash dividends, common ($3,800 per share)                                                              (501,582)
Cash dividends, preferred (variable rate)                                                            (4,037,921)
Redemption and retirement of stock (2                                                                           
  shares) and change in minority interest                    (3,204)     (123,551)                              
Redemption and retirement of stock                                                                              
  (27,637 shares)                            (276,376)                     13,120                               
Sale of variable rate preferred stock,                                                                          
  net (46,657 shares)                         466,572                   4,046,721                               
Excess sales price over historical cost                                                                         
  basis of subsidiaries sold to related                                                                         
  parties                                                                                                52,733 
                                          -----------   -----------   -----------    -----------    ----------- 
Balance, September 30, 1995                21,627,106       293,417    14,917,782       (829,417)     4,561,554 
                                                                          
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METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES         
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY, CONTINUED            
for the years ended September 30, 1996, 1995 and 1994                 

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

                                                                · Download Table
                                                                                         
                                                                                    
                                           1996           1995            1994      
                                       -------------  -------------   ------------- 
                                                                                    
Cash flows from operating activities:                                               
  Net income                           $   8,037,664  $   6,302,646   $   5,477,756 
  Adjustments to reconcile net income                                               
    to net cash provided by operating                                               
    activities:                                                                     
      Proceeds from sale of trading                                                 
        securities                        67,093,831    515,677,468   1,064,997,088 
      Purchase of trading securities     (67,448,595)  (515,570,230) (1,064,712,932)
      Realized net gains on sales of                                                
        investments and receivables      (11,866,135)    (4,440,903)     (3,081,881)
      Gain on sales of real estate        (1,737,610)    (2,938,777)     (1,527,198)
      Gain on insurance settlement                          (50,922)       (203,691)
      Provision for losses on real                                                  
        estate assets                      6,360,072      4,174,644       5,533,193 
      Provision for losses (recover-                                                
        ies) on other assets                  70,500        (35,657)        204,650 
      Depreciation and amortization        4,617,664      3,023,233       2,066,365 
      Minority interests                     108,681         73,197         224,529 
      Deferred income tax provision        3,640,356      2,747,990       2,644,170 
      Changes in assets and liabili-                                                
        ties, net of effects from                                                   
        sale of subsidiaries:                                                       
          Life insurance and annuity                                                
            reserves                      45,782,339     42,033,038      39,322,517 
          Deferred costs, net                 (8,558)    (3,034,857)     (1,349,405)
          Compound and accrued                                                      
            interest on bonds              4,642,760     (2,214,261)     (2,096,810)
          Securities sold, not owned     132,652,334                                
          Other                           (6,089,670)    (4,910,909)     (1,537,118)
                                       -------------  -------------   ------------- 
              Net cash provided by                                                  
                operating activities     185,855,633     40,835,700      45,961,233 
                                       -------------  -------------   ------------- 
Cash flows from investing activities:                                               
  Proceeds from sale of subsidiaries,                                               
    net of cash                                          (1,406,873)                
  Change in restricted cash and cash                                                
    equivalents                         (132,652,334)                               
  Principal payments on real estate                                                 
    contracts and mortgage notes                                                    
    receivable                           107,702,333    118,869,137     107,040,612 
  Principal payments on other                                                       
    receivable investments                 6,049,097      1,664,132                 
  Proceeds from sales of real estate                                                
    contracts and mortgage notes                                                    
    receivable and other receivable                                                 
    investments                          182,177,259     72,914,006      20,407,270 
  Acquisition of real estate contracts                                              
    and mortgage notes receivable       (282,313,300)  (203,525,666)   (142,479,298)
  Acquisition of other receivable                                                   
    investments                          (99,804,805)   (56,229,758)                
  Proceeds from insurance settlement                         50,922         203,691 
  Proceeds from sales of real estate       6,545,323      5,285,839       6,562,008 
  Proceeds from maturities of held-                                                 
    to-maturity investments                2,598,081      4,696,003       8,875,268 
                                                                          
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METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES       
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED                    
for the years ended September 30, 1996, 1995 and 1994               

                                                                · Download Table
                                                                                         
                                                                                   

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

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

                                                                          
See Note 16 for supplemental cash flow information.                 

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

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METROPOLITAN MORTGAGE & SECURITIES CO., INC. AND SUBSIDIARIES         
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            

1.  SUMMARY OF ACCOUNTING POLICIES:                                 

BUSINESS AND ORGANIZATION                               

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED                 

1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

BUSINESS AND ORGANIZATION, CONTINUED                    

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

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

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

PRINCIPLES OF CONSOLIDATION                             

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

CASH AND CASH EQUIVALENTS                               

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED                 

1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

INVESTMENTS                                             

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

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

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED                 

1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE     

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

 REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE, HELD
FOR SALE                                                

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

OTHER RECEIVABLE INVESTMENTS                            

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED                 

1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

REAL ESTATE HELD FOR SALE AND DEVELOPMENT               

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED                 

1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

ALLOWANCE FOR LOSSES ON REAL ESTATE ASSETS              

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

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

DEFERRED COSTS                                          

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED                 

1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

LAND, BUILDINGS AND EQUIPMENT                           

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

COMPUTER SOFTWARE COSTS                                 

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

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

INSURANCE AND ANNUITY RESERVES                          

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

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1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

RECOGNITION OF INSURANCE AND ANNUITY REVENUES           

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

GUARANTY FUND ASSESSMENTS                               

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

INTEREST COSTS                                          

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

INCOME TAXES                                            

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED                 

1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

INCOME TAXES, CONTINUED                                 

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

EARNINGS PER COMMON SHARE                               

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

HEDGING ACTIVITIES                                      

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

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

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1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

HEDGING ACTIVITIES, CONTINUED                           

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

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

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

INTEREST RATE RISK                                      

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

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1.  SUMMARY OF ACCOUNTING POLICIES, CONTINUED:                      

ESTIMATES                                               

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

RECLASSIFICATIONS                                       

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

2.  REAL ESTATE CONTRACTS AND MORTGAGE NOTES RECEIVABLE:            

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4.  OTHER RECEIVABLE INVESTMENTS:                                   

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

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

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4.  OTHER RECEIVABLE INVESTMENTS, CONTINUED:                        

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

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

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

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

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

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

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

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

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

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4.  OTHER RECEIVABLE INVESTMENTS, CONTINUED:                        

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

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

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5.  REAL ESTATE HELD FOR SALE AND DEVELOPMENT:                      

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

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

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

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6.  ALLOWANCE FOR LOSSES ON REAL ESTATE ASSETS:                     

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

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

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

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

7.  LAND, BUILDINGS AND EQUIPMENT:                                  

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

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

     Land                                $