UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2007

or

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

For the transition period from _________ to __________

Commission file number: 0-4408

RESOURCE AMERICA, INC.

(Exact name of registrant as specified in its charter)

Delaware	72-0654145
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
One Crescent Drive, Suite 203
Navy Yard Corporate Center
Philadelphia, PA	19112
(Address of principal executive offices)	(Zip code)

Registrant's telephone number, including area code: (215) 546-5005

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. x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨ Yes x No

The number of outstanding shares of the registrant’s common stock on August 1, 2007 was 17,499,199.

RESOURCE AMERICA, INC. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

		PAGE
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets – June 30, 2007 (unaudited) and September 30, 2006	3
	Consolidated Statements of Income Three Months and Nine Months Ended June 30, 2007 and 2006 (unaudited)	4
	Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income − Nine Months Ended June 30, 2007 (unaudited)	5
	Consolidated Statements of Cash Flows Nine Months Ended June 30, 2007 and 2006 (unaudited)	6
	Notes to Consolidated Financial Statements – June 30, 2007 (unaudited)	7 – 27
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28 − 48
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	50
PART II	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 4.	Submission of Matters to a Vote of Security Holders	51
Item 6.	Exhibits	52
SIGNATURES		53

PART I.                      FINANCIAL INFORMATION

Item 1.                 Financial Statements

RESOURCE AMERICA, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	June 30, 2007			September 30, 2006
	(unaudited)
ASSETS
Cash	$	17,169		$	37,622
Restricted cash		15,906			8,103
Receivables		15,671			2,312
Receivables from managed entities		22,579			8,795
Investments in commercial finance		313,900			108,850
Loans held for investment		414,290			69,314
Investments in real estate		47,097			50,104
Investment securities available-for-sale		67,487			64,857
Investments in unconsolidated entities		35,039			26,626
Property and equipment, net		11,725			9,525
Deferred income taxes		18,577			6,408
Goodwill		12,692			−
Other assets		27,599			24,237
Total assets	$	1,019,731		$	416,753
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable, accrued expenses and other liabilities	$	59,142		$	29,526
Payables to managed entities		950			1,579
Borrowings		748,631			172,238
Deferred income tax liabilities		3,246			10,746
Minority interests		8,750			9,602
Total liabilities		820,719			223,691
Commitments and contingencies		−			−
Stockholders’ equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized; none outstanding		-			-
Common stock, $.01 par value, 49,000,000 shares authorized; 26,702,748 and 26,401,708 shares issued, respectively		267			264
Additional paid-in capital		264,461			259,882
Retained earnings		36,268			25,464
Treasury stock, at cost; 9,207,618 and 9,110,290 shares, respectively		(99,522	)		(96,960	)
ESOP loan receivable		(446	)		(465	)
Accumulated other comprehensive (loss) income		(2,016	)		4,877
Total stockholders’ equity		199,012			193,062
	$	1,019,731		$	416,753

See accompanying notes to consolidated financial statements

3

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
REVENUES
Financial fund management	$	19,094		$	7,376		$	47,511		$	20,669
Real estate		7,008			4,500			18,580			18,360
Commercial finance		12,808			5,885			28,461			16,483
		38,910			17,761			94,552			55,512
COSTS AND EXPENSES
Financial fund management		5,925			2,700			15,878			7,764
Real estate		3,971			3,286			10,179			8,265
Commercial finance		5,416			3,911			13,607			10,382
General and administrative		3,526			2,127			9,114			7,588
Depreciation and amortization		728			681			2,156			2,355
		19,566			12,705			50,934			36,354
OPERATING INCOME		19,344			5,056			43,618			19,158
OTHER INCOME (EXPENSE)
Interest expense		(10,176	)		(1,894	)		(22,461	)		(5,559	)
Minority interests		(980	)		(465	)		(2,255	)		(1,236	)
Other income, net		2,079			809			6,418			3,644
		(9,077	)		(1,550	)		(18,298	)		(3,151	)
Income from continuing operations before income taxes and cumulative effect of a change in accounting principle		10,267			3,506			25,320			16,007
Provision for income taxes		4,312			393			9,477			2,579
Income from continuing operations before cumulative effect of a change in accounting principle		5,955			3,113			15,843			13,428
(Loss) income from discontinued operations, net of tax		(1,450	)		(113	)		(1,506	)		977
Cumulative effect of a change in accounting principle, net of tax		−			−			−			1,357
NET INCOME	$	4,505		$	3,000		$	14,337		$	15,762
Basic earnings per common share:
Continuing operations	$	0.34		$	0.18		$	0.91		$	0.76
Discontinued operations		(0.08	)		(0.01	)		(0.09	)		0.05
Cumulative effect of accounting change		−			−			−			0.08
Net income	$	0.26		$	0.17		$	0.82		$	0.89
Weighted average shares outstanding		17,569			17,536			17,463			17,727
Diluted earnings per common share:
Continuing operations	$	0.31		$	0.16		$	0.83		$	0.70
Discontinued operations		(0.07	)		−			(0.08	)		0.05
Cumulative effect of accounting change		−			−			−			0.07
Net income	$	0.24		$	0.16		$	0.75		$	0.82
Weighted average shares outstanding		19,210			19,107			19,215			19,191
Dividends declared per common share	$	0.07		$	0.06		$	0.20		$	0.18

See accompanying notes to consolidated financial statements

4

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME

NINE MONTHS ENDED JUNE 30, 2007

(in thousands)

(unaudited)

	Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			ESOP Loan Receivable			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Comprehensive Income
Balance, October 1, 2006	$	264	$	259,882	$	25,464		$	(96,960	)	$	(465	)	$	4,877		$	193,062
Net income		-		-		14,337			-			-			-			14,337		$	14,337
Treasury shares issued		-		394		-			215			-			-			609			−
Stock-based compensation		-		685		-			-			-			-			685			−
Restricted stock awards		-		689		-			-			-			-			689			−
Issuance of common shares		3		924		-			-			-			-			927			−
Tax benefit from employee stock options		−		1,887		−			−			−			−			1,887			−
Purchase of treasury shares		-		-		-			(2,777	)		-			−			(2,777	)		−
Other comprehensive loss, net		-		-		-			−			-			(6,893	)		(6,893	)		(6,893	)
Cash dividends		-		-		(3,533	)		-			-			-			(3,533	)		−
Repayment of ESOP loan		-		-		-			-			19			-			19			−
Balance, June 30, 2007	$	267	$	264,461	$	36,268		$	(99,522	)	$	(446	)	$	(2,016	)	$	199,012		$	7,444

See accompanying notes to consolidated financial statements

5

RESOURCE AMERICA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended June 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	14,337		$	15,762
Adjustments to reconcile net income to net cash used in operating activities:
Cumulative effect of a change in accounting principle, net of tax		−			(1,357	)
Depreciation and amortization		2,712			2,355
Discount on receivables from managed entities		344			−
Equity in earnings of unconsolidated entities		(11,637	)		(6,497	)
Minority interests		2,255			1,236
Distributions from unconsolidated entities		12,995			9,824
Loss (income) from discontinued operations		1,506			(977	)
Gain on sale of assets		(6,783	)		(6,971	)
Deferred income tax (benefit) provision		(6,884	)		1,981
Non-cash compensation on long-term incentive plans		1,983			1,346
Non-cash compensation issued		1,630			1,614
Non-cash compensation received		(1,550	)		(1,259	)
Increase in commercial finance investments		(137,620	)		(49,444	)
Changes in operating assets and liabilities		(1,734	)		(15,999	)
Net cash used in operating activities of continuing operations		(128,446	)		(48,386	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(3,406	)		(3,674	)
Payments received on real estate loans and real estate		15,703			30,623
Investments in real estate		(16,245	)		(32,531	)
Purchase of investments		(19,821	)		(34,380	)
Proceeds from sale of investments		6,158			5,415
Increase in restricted cash		(7,166	)		−
Net cash paid for acquisition		(20,708	)		−
Increase in other assets		(3,423	)		(1,676	)
Net cash used in investing activities of continuing operations		(48,908	)		(36,223	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings		559,278			397,187
Principal payments on borrowings		(395,169	)		(336,925	)
Dividends paid		(3,533	)		(3,206	)
Distributions paid to minority interest holders		(2,040	)		(1,274	)
Proceeds from issuance of stock		927			125
Purchase of treasury stock		(2,777	)		(13,458	)
Tax benefit from the exercise of stock options		1,887			−
Net cash provided by financing activities of continuing operations		158,573			42,449
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Operating activities		(527	)		13
Investing activities		−			39,842
Financing activities		(1,145	)		−
Net cash (used in) provided by discontinued operations		(1,672	)		39,855
Net cash retained by entities previously consolidated		−			(3,825	)
Decrease in cash		(20,453	)		(6,130	)
Cash at beginning of period		37,622			30,353
Cash at end of period	$	17,169		$	24,223

See accompanying notes to consolidated financial statements

6

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007

(unaudited)

NOTE 1 – MANAGEMENT’S OPINION REGARDING INTERIM FINANCIAL STATEMENTS

Resource America, Inc. (the "Company" or “RAI”) is a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for the Company and for outside investors in the financial fund management, real estate and commercial finance sectors.  As a specialized asset manager, the Company seeks to develop investment vehicles in which outside investors invest along with the Company and for which the Company manages the assets acquired pursuant to long-term management and operating agreements.  The Company limits its investment vehicles to investment areas where it owns existing operating companies or has specific expertise.

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned except for certain financial fund management entities and LEAF Financial Corporation (“LEAF”) in which the senior executives of LEAF hold a 14.9% interest.

In addition, in accordance with Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) 46-R, “Consolidation of Variable Interest Entities,” the Company consolidated certain variable interest entities (“VIEs”) as to which it has determined that it is the primary beneficiary.  Due to the timing of the receipt of financial information from third parties, the Company accounts for these entities’ activities on a one quarter lag, except when adjusting for the impact of significant events such as a refinance or sale.  The assets, liabilities, revenues and costs and expenses of the VIEs that are included in the consolidated financial statements are not those of the Company.  The liabilities of the VIEs will be satisfied from the cash flows of the VIE, not from assets of the Company which has no legal obligation to satisfy those liabilities.

The consolidated financial statements and the information and tables contained in the accompanying notes as of June 30, 2007 and for the three and nine months ended June 30, 2007 and 2006 are unaudited.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.  However, in the opinion of management, these interim financial statements include all the necessary adjustments to fairly present the results of the interim periods presented.  The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006 (“fiscal 2006”).  The results of operations for the three and nine months ended June 30, 2007 may not necessarily be indicative of the results of operations for the full fiscal year ending September 30, 2007 (“fiscal 2007”).

Certain reclassifications have been made to the fiscal 2006 consolidated financial statements to conform to the fiscal 2007 presentation.

7

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Supplemental Cash Flow Information

Supplemental disclosure of cash flow information (in thousands):

	Nine Months Ended June 30,
	2007		2006
Cash paid during the period for:
Interest	$	14,161	$	7,610
Income taxes	$	1,614	$	3,053
Non-cash activities include the following:
Conversion of notes (see Note 4):
Increase in minority interest	$	−	$	259
Net reduction of equity	$	−	$	250
Transfer of loans held for investment (see Note 10):
Reduction of loans held for investment	$	418,809	$	219,448
Termination of associated secured warehouse credit facilities	$	418,292	$	219,474
Activity on secured warehouse facilities related to loans held for investment:
Purchase of loans	$	881,126	$	317,597
Borrowings to fund purchases	$	763,226	$	289,747
Proceeds from sale of loans	$	78,576	$	18,821
Principal payments on loans	$	49,608	$	6,702
Use of funds held in escrow for purchases of loans	$	−	$	2,608
Gain on sale of loans	$	−	$	281
Receipt of a note upon resolution of a real estate investment and a FIN 46-R asset	$	−	$	5,000

Recently Issued Financial Accounting Standards

In June 2007, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position (“SOP”) 07-1, “Clarification of the Scope of the Audit and Accounting Guide “Investment Companies” and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.”  This SOP provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (the “Guide”).  Additionally, it provides guidance as to whether a parent company or an equity method investor can apply the specialized industry accounting principles of the Guide (referred to as investment company accounting).  This SOP is effective for fiscal years beginning on or after December 15, 2007, with early application encouraged (for the Company, its fiscal year beginning October 1, 2008).  The Company is currently evaluating the impact, if any, the adoption of SOP 07-1 may have on its financial statements.

In May 2007, the FASB issued Staff Position (“FSP”) FIN 46-R(7), “Application of FASB Interpretation 46-R to Investment Companies.”  FSP FIN 46-R(7) amends the scope of the exception to FIN 46-R to state that investments accounted for at fair value in accordance with investment company accounting are not subject to consolidation under FIN 46-R.  This interpretation is effective for fiscal years beginning on or after December 15, 2007 (for the Company, its fiscal year beginning October 1, 2008).  Certain consolidated subsidiaries currently apply the investment company accounting.  The Company is currently evaluating the impact, if any, the adoption of this interpretation will have on its financial statements.

8

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Recently Issued Financial Accounting Standards − (Continued)

In March 2007, the FASB ratified Emerging Issues Task Force (“EITF”) Issue 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.”  EITF 06-11 requires companies to recognize the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for nonvested equity-classified employee share-based payment awards as an increase to additional paid-in capital.  EITF 06-11 is effective for fiscal years beginning after September 15, 2007 (for the Company, its fiscal year beginning October 1, 2007).  The Company does not expect EITF 06-11 will have a material impact on its financial position, results of operations or cash flows.

In February 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of SFAS 115," which permits entities to choose to measure many financial instruments and certain other items at fair value.  The fair value option established by SFAS 159 permits all entities to choose to measure eligible items at fair value at specified election dates.  Entities choosing the fair value option would be required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  Adoption is required for fiscal years beginning after November 15, 2007 (for the Company, its fiscal year beginning October 1, 2008).  The Company is currently evaluating the expected effect of SFAS 159 on its consolidated financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements,” which provides guidance on measuring the fair value of assets and liabilities.  SFAS 157 will apply to other accounting pronouncements that require or permit assets or liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances.  This standard will also require additional disclosures in both annual and quarterly reports.  SFAS 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Company in the first quarter of its fiscal year 2009.  The Company is currently determining the effect, if any, the adoption of SFAS 157 will have on its financial statements.

In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.”  SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.  It establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company's financial statements and the related financial statement disclosures.  SAB 108 is effective for the Company’s current fiscal year ending September 30, 2007.  The Company does not believe adoption of SAB 108 will have a material impact on the its consolidated financial statements.

On July 13, 2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes - An Interpretation of SFAS 109.”  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109, “Accounting for Income Taxes.”  FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The new accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  The provisions of FIN 48 are effective as of the beginning of the first fiscal year beginning after December 15, 2006 with early adoption permitted if no interim financial statements have been issued.  The Company will not elect early adoption of FIN 48; accordingly, the provisions of FIN 48 will be implemented in the Company’s fiscal quarter ending December 31, 2007.  The Company is currently determining the effect, if any, the adoption of FIN 48 will have on its financial statements.

9

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES − (Continued)

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of periodic temporary investments of cash and cash equivalents.  The Company places its temporary cash investments in high-quality, short-term money market instruments and deposits with high-quality financial institutions and brokerage firms.  At June 30, 2007, the Company had $24.0 million in deposits at various banks, of which $20.9 million was over the insurance limit of the Federal Deposit Insurance Corporation.  No losses have been experienced on such investments.

NOTE 3 − COMPREHENSIVE INCOME

Comprehensive income includes net income and all other changes in the equity of a business from transactions and other events and circumstances from non-owner sources.  These changes, other than net income, are referred to as “other comprehensive income” and for the Company include changes in the fair value, net of reclassification adjustments for realized gains/losses and taxes, of its investment securities available-for-sale and derivative instruments that qualify as cash flow hedges.

Assets and liabilities in foreign currencies are translated into U.S. dollars at the rate of exchange prevailing at the balance sheet date.  Revenues and expenses are translated at the average rate of exchange for the period.  The resulting translation adjustment is also included in comprehensive income.

The following table reflects the changes in comprehensive income (in thousands):

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Net income	$	4,505		$	3,000		$	14,337		$	15,762
Other comprehensive income:
Unrealized (losses) gains on investment securities available-for-sale, net of tax (1) of $(3,137), $(700), $(3,571) and $370		(4,332	)		(831	)		(5,505	)		349
Less:  reclassification for gains  realized in net income, net of tax of $363, $5, $1,269 and $5		(501	)		(8	)		(1,753	)		(8	)
		(4,833	)		(839	)		(7,258	)		341
Unrealized gains on hedging contracts, net of tax (1) of $383, $0, $199 and $0		530			−			275			−
Foreign currency translation (loss) gain		(133	)		−			90			−
Comprehensive income	$	69		$	2,161		$	7,444		$	16,103

(1) Reflects the cumulative adjustment for changes in the Company’s effective tax rate through the respective periods presented.

10

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 3 − COMPREHENSIVE INCOME − (Continued)

The Company had no cash flow hedge activity in fiscal 2006.  During fiscal 2007, the changes in accumulated other comprehensive income associated with cash flow hedge activities (see Note 11) were as follows (in thousands):

	Three Months Ended June 30, 2007			Nine Months Ended June 30, 2007
Balance at beginning of period	$	(255	)	$	−
Current period changes in fair value, net of tax of $383 and $199		530			275
Balance at June 30, 2007	$	275		$	275

NOTE 4 − EARNINGS PER SHARE

Basic earnings per share (“Basic EPS”) is determined by dividing net income by the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share (“Diluted EPS”) is computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding after giving effect to the potential dilution from the exercise of securities, such as stock options, into shares of common stock as if those securities were exercised as well as the dilutive effect of other award plans, including restricted stock and director units.

Diluted income from continuing operations and diluted net income for the nine months ended June 30, 2006 includes $35,000 of minority interest, net of tax, related to the assumed conversion of notes into LEAF common stock.  These notes were converted on February 1, 2006 and, accordingly, minority interest for subsequent periods has been reflected in reported operating results.

The following table presents a reconciliation of the shares used in the computation of Basic EPS and Diluted EPS (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2007		2006		2007		2006
Shares(1)
Basic shares outstanding		17,569		17,536		17,463		17,727
Dilutive effect of stock options and other equity awards		1,641		1,571		1,752		1,464
Dilutive shares outstanding		19,210		19,107		19,215		19,191

(1) As of June 30, 2007, options to purchase 57,500 shares were outstanding but were excluded from the computation of Diluted EPS as their effect would have been antidilutive.  The exercise prices on those options ranged from $24.28 to $27.84 per share.  As of June 30, 2006, options to purchase 20,000 shares at an exercise price of $20.19 per share were determined to be antidilutive.

NOTE 5 − INVESTMENTS IN COMMERCIAL FINANCE

The Company’s investments in commercial finance include the following (in thousands):

	June 30,		September 30,
	2007		2006
Notes receivable, net	$	187,306	$	74,864
Direct financing leases, net		125,805		32,275
Assets subject to operating leases, net of accumulated depreciation of $19 and $46		789		1,711
Investments in commercial finance	$	313,900	$	108,850

11

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 5 − INVESTMENTS IN COMMERCIAL FINANCE − (Continued)

The components of direct financing leases are as follows (in thousands):

	June 30,			September 30,
	2007			2006
Total future minimum lease payments receivable	$	139,431		$	37,398
Initial direct costs, net of amortization		1,578			598
Unguaranteed residual		1,040			362
Unearned income		(16,244	)		(6,083	)
Investments in direct financing leases	$	125,805		$	32,275

Although the terms of the leases and notes extend over many years, the Company routinely sells without recourse the leases and notes it acquires or originates to investment entities it manages shortly after their acquisition or origination in accordance with agreements with each party.  As a result of these routine sales of leases and notes as well as the Company’s credit evaluations, management concluded that no allowance for loan and lease losses was deemed necessary at June 30, 2007.

Acquisition of Leasing Division of Pacific Capital Bank

On June 19, 2007, LEAF acquired the leasing division of Pacific Capital Bank, N.A. (“PCB”) based in Santa Barbara, CA.  The acquisition included a portfolio of small ticket leases and loans, customer lists, a lease origination team (20 persons), business platform and other intangibles and significantly expanded LEAF’s third-party lease origination capability and assets under management.  LEAF will continue to operate the third-party business from Santa Barbara, CA to originate lease assets for the investment partnerships it sponsors.

In conjunction with the PCB acquisition, LEAF assigned to its investment partnerships the rights to acquire $201.7 million of PCB’s leases and notes.  The total purchase price for PCB of $282.2 million has been allocated based on the estimated fair value of the assets and liabilities acquired at the date of the acquisition.  Management is in the process of evaluating the deferred income tax consequences of the acquisition and the allocation of the acquired goodwill and other intangibles.  This acquisition did not trigger the requirements of furnishing pro-forma financial information as governed by Securities and Exchange Commission Regulation S-X.

LEAF funded its $80.5 million portion of the acquisition with $59.8 million of borrowings under a new $100.0 million short-term revolving credit facility (see Note 10) and with $20.7 million of cash.  The following table summarizes the preliminary allocation of estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):

	Amount
Leases and notes	$	67,816
Goodwill, customer lists, business platform and other intangibles		12,692
Acquired by LEAF		80,508
Leases and notes acquired by LEAF’s investment partnerships		201,665
Total purchase price, including acquisition costs	$	282,173

12

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 6 − LOANS HELD FOR INVESTMENT

The Company typically funds the initial acquisition of portfolio assets for issuers of collateralized debt obligations (“CDOs”) it sponsors through a secured warehouse credit facility prior to closing the offering of the CDO.  In those transactions in which the Company is deemed to be the primary beneficiary (as defined by FIN 46-R), the assets and liabilities of the CDO issuer are consolidated.  Upon the execution of the CDO, the warehouse facility is refinanced (see Notes 10 and 16) through the issuance of CDOs and the CDO issuer is no longer consolidated with the Company.

The following is a summary of the secured bank loans held for investment by CDO issuers that the Company consolidates in accordance with FIN 46-R (in thousands):

	June 30,			September 30,
	2007			2006
Principal	$	412,604		$	69,312
Unamortized premium		1,829			18
Unamortized discount		(143	)		(16	)
Loans held for investment (see Notes 10 and 16)	$	414,290		$	69,314

At June 30, 2007, the portfolio of secured bank loans consisted of floating rate loans at various London Inter-Bank Offered Rates (“LIBOR”), including European LIBOR rates, plus 1.38% to 8.50%, with maturity dates ranging from December 2007 to June 2022.  At September 30, 2006, the portfolio consisted of floating rate loans at various LIBOR rates plus 1.75% to 4.25%, with maturity dates ranging from October 2012 to March 2016.  There were no fixed rate loans at June 30, 2007 or September 30, 2006.

All of the loans held for investment were current with respect to their scheduled payments of principal and interest.  In reviewing the portfolio of loans and the observable secondary market prices, the Company did not identify any loans with characteristics indicating that impairment had occurred.  Accordingly, as of June 30, 2007, management of the Company determined that no allowance for possible loan losses was needed.

NOTE 7 – INVESTMENTS IN REAL ESTATE

The following is a summary of the changes in the carrying value of the Company’s investments in real estate (in thousands):

	June 30,						September 30,
	2007			2006			2006
Real estate loans:
Balance, beginning of period	$	28,739		$	25,923		$	25,923
New loans		−			5,000			5,109
Additions to existing loans		42			2,338			2,310
Collection of principal		(3,374	)		(2,846	)		(5,068	)
Other		576			382			465
Balance, end of period		25,983			30,797			28,739
Real estate:
Ventures		9,681			9,643			9,519
Owned, net of accumulated depreciation of $2,028, $1,638 and $1,736		12,203			12,512			12,616
Total real estate		21,884			22,155			22,135
		47,867			52,952			50,874
Allowance for loan losses		(770	)		(770	)		(770	)
Investments in real estate	$	47,097		$	52,182		$	50,104

13

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 8 − INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The Company’s investment securities available-for-sale are carried at fair value based on market quotes.  Unrealized gains or losses, net of tax, are included in accumulated other comprehensive income (loss) in stockholders’ equity.

The Company has invested in two affiliated publicly-traded companies, Resource Capital Corp. (“RCC”) (NYSE: RSO), and The Bancorp, Inc. (“TBBK”) (Nasdaq: TBBK), in addition to its investments in CDO securities, as follows (in thousands):

	June 30,		September 30,
	2007		2006
Investment in RCC, including net unrealized losses of $1,959 and net unrealized gains of $879	$	27,071	$	29,588
Investment in TBBK, including net unrealized gains of $2,089 and $5,696		3,763		9,132
Investments in CDO securities, including net unrealized losses of $7,908 and $1,471		36,653		26,137
Investment securities available-for-sale	$	67,487	$	64,857

RCC is a specialty finance real estate investment trust (“REIT”) that the Company sponsored in fiscal 2005.  The Company, through its indirect wholly-owned subsidiary, Resource Capital Manager, Inc. (“RCM”), provides investment management and administrative services to RCC under a management agreement between RCM and RCC.

The Company held approximately 1.9 million shares of RCC at June 30, 2007 and September 30, 2006.  In addition, the Company held options to acquire 2,166 shares (at an average price per share of $15.00) and warrants to acquire an additional 100,088 shares (at $15.00 per share) of RCC common stock at June 30, 2007 and September 30, 2006.

The Company held 168,290 and 358,290 shares of TBBK at June 30, 2007 and September 30, 2006, respectively.  During the three and nine months ended June 30, 2007, the Company sold 60,000 and 190,000 its shares of its TBBK stock for $1.5 million and $4.8 million, respectively, and realized gains of $864,000 and $3.0 million, respectively (see Note 15).  Included in other assets are an additional 123,719 shares of TBBK that are held in a supplemental employment retirement plan for the Company’s former Chief Executive Officer.

Investments in CDO securities represent investments in the CDO issuers that the Company has sponsored and manages.  Investments in 17 and 10 CDOs at June 30, 2007 and September 30, 2006, respectively, were held directly through the Company’s financial fund management entities and indirectly through the consolidation of the Structured Finance Fund partnerships (“SFF Funds”), which held investments in four of the CDOs totaling $9.7 million as of June 30, 2007.  Interests owned by third parties of the SFF Funds are reflected as a minority interest holding on the consolidated balance sheet and totaled $7.6 million as of June 30, 2007.

Certain of these investment securities available-for-sale collateralize the Company’s revolving credit facility with Commerce Bank, N.A. (see Note 10).

14

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 9 − INVESTMENTS IN UNCONSOLIDATED ENTITIES

As a specialized asset manager, the Company develops various types of investment vehicles, including partnerships and tenant-in-common (“TIC”) programs, which it manages under long-term management agreements or similar arrangements.  These investments are accounted for using the equity method because of the Company’s ability to exercise significant influence over their operating and financial decisions.  The following table details the Company’s investments in these vehicles, including the range of partnership interests owned (in thousands, except percentages):

	June 30,		September 30,		Range of Combined
	2007		2006		Partnership Interests
Trapeza entities	$	15,729	$	15,007	13% to 50%
Financial fund management partnerships		6,673		5,772		10%
Real estate investment partnerships		5,103		3,927	5% to 10%
Commercial finance investment partnerships		2,177		1,353	1% to 5%
TIC property interests (1)		5,357		567	N/A
Investments in unconsolidated entities	$	35,039	$	26,626

(1) As of June 30, 2007, the Company held an interest in one TIC property.

Trapeza entities

Historically, the Company had presented its equity in the earnings and losses of the Trapeza entities on a one-quarter delay as permitted under GAAP.  Improvements in the timeliness and availability of financial data from the Trapeza entities allowed the Company to report its share in those earnings on a current basis as of October 1, 2005.  As a result of this change, the Company’s equity in the earnings of the Trapeza entities of $1.4 million, net of tax of $983,000, for the three months ended September 30, 2005 was reported as a cumulative change in accounting principle as of October 1, 2005.

The Company has equity interests of 50% and 33.33% in the managers of the Trapeza CDO entities, Trapeza Capital Management, LLC and Trapeza Management Group, LLC, respectively.  The Company does not consolidate these entities since it does not have control over them.  The following summarizes the operating data for these entities (in thousands):

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
Trapeza Capital Management, LLC
Management fees	$	2,648		$	1,709		$	10,322		$	5,004
Operating expenses		(585	)		(514	)		(2,256	)		(1,183	)
Other expense		(69	)		(13	)		(57	)		(113	)
Net income	$	1,994		$	1,182		$	8,009		$	3,708

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
Trapeza Management Group, LLC
Management fees	$	679		$	680		$	2,039		$	2,044
Operating expenses		(51	)		(51	)		(168	)		(201	)
Other expense		(1	)		(20	)		(18	)		(54	)
Net income	$	627		$	609		$	1,853		$	1,789

15

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 10 – BORROWINGS

The credit facilities of the Company, as well as those of the financial fund management CDO issuers that the Company consolidates under FIN 46-R, and related borrowings outstanding are as follows:

	As of June 30, 2007				Balance at
	Amount of Facility		Balance		September 30, 2006
	(in millions)		(in thousands)		(in thousands)
Financial fund management - Secured warehouse credit facilities consolidated under FIN 46-R	$	539.0	$	209,855	$	−
		400.0		204,376		2,900
		−		−		66,397
	$	939.0		414,231		69,297
Commercial finance - Secured revolving credit facilities	$	100.0		66,500		−
		33.0		−		−
		250.0		117,192		−
		150.0		97,300		86,400
	$	533.0		280,992		86,400
Corporate– Secured revolving credit facilities	$	50.0		28,500		−
		14.0		7,500		−
	$	64.0		36,000		−
Other debt				17,408		16,541
Total borrowings outstanding			$	748,631	$	172,238

Financial fund management - Secured warehouse credit facilities

The Company is a party to various warehouse credit agreements for facilities which provide funding for the purchase of bank loans in the U.S. and Europe.  Borrowings under these facilities are consolidated by the Company in accordance with FIN 46-R while the assets accumulate on the CDO.  Upon the closing of the CDO, the facility is terminated and the interest is paid.  The following facilities were in place as of at June 30, 2007:

 In January 2007, a EUR 400.0 million (approximately $539.0 million at June 30, 2007) facility was opened with affiliates of Morgan Stanley Bank (“Morgan Stanley”).  The associated CDO is anticipated to close in fiscal 2008.  The interest rate is European LIBOR plus 75 basis points.  The facility provides for a guarantee by the Company as well as an escrow deposit (see Note 16).  Average borrowings for the three and nine months ended June 30, 2007 were $141.6 million and $58.5 million, respectively, at average interest rates of 4.98% and 4.94%, respectively.

 In August 2006, a facility was opened with affiliates of Credit Suisse Securities (USA) LLC (“Credit Suisse”) for up to $400.0 million.  The associated CDO is anticipated to close in fiscal 2008.  The interest rate is LIBOR plus 62.5 basis points.  The facility provides for a guarantee by the Company as well as an escrow deposit (see Note 16).  Average borrowings for the three and nine months ended June 30, 2007 were $167.1 million and $125.0 million, respectively, at an average interest rate of 5.98%.

16

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 10 – BORROWINGS − (Continued)

Commercial finance - Secured revolving credit facilities

In June 2007, LEAF entered into a $100.0 million short-term revolving credit facility with a commercial bank that will be repaid by the August 31, 2007 expiration date.  Interest is charged at one of three rates:  (i) LIBOR plus 1.75%, (ii) one-month LIBOR divided by the sum of 1 minus the LIBOR reserve percent, plus 1.75%; and (iii) the higher of the lender’s base rate or the federal funds rate plus 50 basis points.  Weighted average borrowings were $6.0 million and $2.0 million for the three and nine months ended June 30, 2007, respectively, at an effective interest rate of 7.34%.

In March 2007, a $33.0 million credit facility was opened with a financial institution to fund advances on business credit card receipts in connection with a new subsidiary formed by LEAF, Merit Capital Advance, LLC (“Merit”).  Interest is charged at a rate of LIBOR plus 8.5%.  The facility terminates in September 2008 with an option to extend for additional one-year periods at the discretion of the lender.  The assets of a newly-formed subsidiary of LEAF collateralize the borrowings (see “Other debt–subordinated note”).

 In December 2006, LEAF assumed an unused $250.0 million line of credit with Morgan Stanley from RCC.  As part of the agreement, LEAF reimbursed RCC $125,000 for the commitment fees it had paid and assumed a liability for an additional $725,000 of commitment fees and other costs.  The facility is non-recourse to the Company and expires in October 2009.  The underlying equipment being leased or financed collateralizes the borrowings.  Interest is charged at one of two rates based on the utilization of the facility:  (i) one-month LIBOR plus 60 basis points on borrowings up to $100.0 million and (ii) one-month LIBOR plus 75 basis points on borrowings in excess of $100.0 million.  Interest and principal payments are due monthly.  The Company utilizes interest rate swap agreements to mitigate fluctuations in LIBOR (see Note 11).  The swap agreements terminate at various dates ranging from November 2011 to November 2020.  Weighted average borrowings were $117.1 million and $66.1 million for the three and nine months ended June 30, 2007, respectively, at effective interest rates of 5.98% and 5.94%, respectively.

In July 2006, LEAF entered into a $150.0 million revolving warehouse credit facility with a group of banks led by National City Bank that expires on July 31, 2009.  Interest is charged at one of two rates: (i) LIBOR plus 150 basis points, or (ii) the prime rate.  The underlying equipment being leased or financed collateralizes the borrowings.  Weighted average borrowings were $68.4 million and $82.8 million for the three and nine months ended June 30, 2007, respectively, at effective interest rates of 7.41% and 7.47%, respectively.  For the three and nine months ended June 30, 2006, weighted average borrowings were $37.6 million and $47.4 million, respectively, at effective interest rates of 7.56% and 7.01%, respectively.

Corporate – Secured revolving credit facilities

 Commerce Bank, N.A.  In May 2007, the Company entered into a $75.0 million revolving credit facility with Commerce Bank, N.A. expiring on May 23, 2012 which replaced an existing $25.0 million facility.  Up to $7.5 million of borrowings may be in the form of standby letters of credit.  Borrowings are secured by a first priority security interest in certain assets of the Company and certain subsidiary guarantors, including (i) the present and future fees and investment income earned in connection with the management of, and investments in, sponsored CDOs, (ii) a pledge of 153,758 shares of TBBK, and (iii) the pledge of an aggregate of 1,224,036 shares of RCC.  Availability under the facility is limited to the lesser value of (a) 75% of the net present value of future management fees to be earned plus 70% of the market value of the listed stock pledged or (b) $75.0 million.  Borrowing base availability was limited to $50.0 million until July 17, 2007, when it was increased to $75.0 million with the addition of U.S. Bank, N.A. as a participating lender.

17

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 10 – BORROWINGS − (Continued)

Corporate – Secured revolving credit facilities − (Continued)

Borrowings bear interest at one of two rates at the Company’s election: (i) the prime rate, as published in the Wall Street Journal, plus 1%; or (ii) LIBOR plus 2.25%.  Average borrowings were $3.0 million and $1.0 million for the three and nine months ended June 30, 2007, respectively, at an average rate of 9.25%.  Additionally, the Company is required to pay an unused facility fee of 25 basis points per annum, payable quarterly in arrears.  As of June 30, 2007, availability on this line was $21.3 million.

Sovereign Bank.  The Company has a $14.0 million revolving line of credit with Sovereign Bank that expires in July 2009.  The facility is secured by certain real estate collateral and certain investment securities available-for-sale.  Availability, limited based on the value of the collateral, was $3.8 million and $11.4 million, respectively, as of June 30, 2007 and September 30, 2006.

Interest is charged at one of two rates elected at the Company’s option:  (i) LIBOR plus 200 basis points, or (ii) the prime rate.  Weighted average borrowings were $6.8 million and $3.4 million for the three and nine months ended June 30, 2007, respectively, at effective interest rates of 7.47% and 7.64%, respectively.

Other debt

Subordinated note.  In March 2007, LEAF borrowed $1.5 million from a financial institution in the form of a subordinated convertible note.  Interest at a rate of 15% will be added to the outstanding principal balance.  The note matures in September 2008 and is convertible on or after September 15, 2007 into a 50% ownership interest in a newly-formed subsidiary of LEAF.

Annual principal payments on the Company’s aggregate borrowings over the next five years ending June 30 and thereafter are as follows (in thousands):

2008	$	215,697	(1)
2009		46,941
2010		58,561
2011		573
2012		12,099
Thereafter		529
	$	334,400

(1) Excludes $414.2 million related to borrowings under financial fund management secured warehouse credit facilities that will be transferred to the CDO issuer upon the closing of the associated CDO and will not have to be repaid by the Company.

Financial fund management − terminated warehouse credit facilities

A EUR 300.0 million facility with affiliates of Credit Suisse International was terminated in May 2007.  The interest rate was at European LIBOR plus 65 basis points.  Weighted average borrowings were $162.0 million and $153.1 million, at effective interest rates of 4.65% and 4.44% for the three and nine months ended June 30, 2007, respectively.

In January 2007, a $350.0 million facility with affiliates of Credit Suisse, which had outstanding borrowings of $149.3 million, was transferred to and assumed by RCC; accordingly, the escrow deposit was returned with interest to the Company.

18

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 10 – BORROWINGS − (Continued)

Covenants

At June 30, 2007, the Company was in compliance with all of the financial covenants under its various debt agreements.  These financial covenants are customary for the type and size of the related debt facilities and include minimum equity requirements as well as specified debt service coverage and leverage ratios.

NOTE 11 – DERIVATIVE INSTRUMENTS

The Company has implemented a hedging strategy using derivative financial instruments including interest rate swaps designated as a cash flow hedge for the LEAF facility with Morgan Stanley.  The Company does not use derivative financial instruments for trading or speculative purposes.  The Company manages the default credit risk in these derivative transactions by dealing exclusively with investment-grade rated counterparties.

Before entering into a derivative transaction for hedging purposes, the Company determines whether a high degree of effectiveness exists such that a change in the value of the derivative will be effectively offset by the change in the value of the hedged asset or liability.  The effectiveness of each hedge is measured throughout the hedge period.  Any hedge ineffectiveness, as defined by GAAP, will be recognized in the consolidated statements of operations.  No gain or loss was recognized during the three and nine months ended June 30, 2007 for hedge ineffectiveness.  There can be no assurance that the Company’s hedging strategies or techniques will be effective, that profitability will not be adversely affected during any period of change in interest rates, or that the costs of hedging will not exceed the benefits.

 At June 30, 2007, the notional amount of the interest rate swaps was $115.6 million.  Assuming market rates remain constant with the rates at June 30, 2007, $178,000 of net gains in accumulated other comprehensive income are projected to be recognized in earnings over the next 12 months.

NOTE 12 – STOCK-BASED COMPENSATION

Employee stock options

The Company follows SFAS 123R, “Accounting for Stock-Based Compensation” as revised.  Accordingly, employee stock option grants are being expensed over their respective vesting periods, based on the estimated fair value of each award as determined on the date of grant.  The Company’s calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions:

	Nine Months Ended June 30,
	2007			2006
Fair value of stock options granted	$	10.59		$	14.72
Expected life (years)		6.25			6.25
Expected stock volatility		31.49	%		27.75	%
Risk-free interest rate		4.72	%		3.97	%
Dividend yield		1.31	%		1.26	%

19

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 12 – STOCK-BASED COMPENSATION − (Continued)

Transactions involving employee stock options and restricted stock for the nine months ended June 30, 2007 are summarized as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Stock Options Outstanding
Outstanding – October 1, 2006		3,641,096		$	7.77
Granted		57,500		$	25.33
Exercised		(279,316	)	$	3.31
Forfeited		(1,000	)	$	20.19
Outstanding - end of period		3,418,280		$	8.43		5.01	$	41,917,948
Exercisable - end of period		3,095,723		$	7.41		4.71	$	40,857,664
Stock Options and Restricted Stock Available for Grant
Available for grant – October 1, 2006		705,853
Options −
Granted		(57,500	)
Forfeited		1,000
Restricted stock −
Issued		(129,446	)
Forfeited		−
Available for grant − end of period		519,907

The following table summarizes the activity for unvested employee stock options and restricted stock during the nine months ended June 30, 2007:

	Shares			Weighted Average Grant Date Fair Value
Unvested Stock Options
Outstanding – October 1, 2006		374,554		$	7.37
Granted		57,500		$	10.28
Vested		(108,497	)	$	7.55
Forfeited		(1,000	)	$	14.72
Outstanding – end of period		322,557		$	7.80

	Shares
Unvested Restricted Stock
Outstanding – October 1, 2006		83,519
Issued		129,446
Vested		(20,873	)
Forfeited		−
Outstanding – end of period		192,092

The $2.2 million of unamortized compensation cost at June 30, 2007, related to unvested stock options awards, is expected to be amortized over a weighted average period of 1.5 years.  The Company recorded option compensation expense for the three and nine months ended June 30, 2007 of $235,000 and $685,000, respectively.  Compensation expense was $284,000 and $831,000 for the three and nine months ended June 30, 2006, respectively.

20

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 12 – STOCK-BASED COMPENSATION − (Continued)

Restricted stock

The Company values the restricted stock it issues based on the closing price of the underlying stock on the date of the grant.  In January 2007, the Company issued 129,446 shares of restricted stock valued at $3.4 million, which vest 25% on January 3, 2008 and 6.25% on a quarterly basis thereafter through January 3, 2011.  In January 2006, the Company had issued 83,519 shares of restricted stock valued at $1.4 million, which vest 25% per year commencing on January 3, 2007.  For the three and nine months ended June 30, 2007, the Company recorded compensation expense related to restricted stock of $303,000 and $690,000, respectively.

In April 2007, LEAF issued 135,000 shares of its restricted stock valued at $39,000, which vest 25% per year commencing on April 1, 2007.  In February 2006, LEAF issued 300,000 shares of its restricted stock valued at $69,000, which vest at 50% per year commencing on February 1, 2007.  In December 2006, 100,000 of these shares were forfeited.  In March 2007, a majority-owned subsidiary of LEAF issued 8% of its units valued at $53,000.  These units vest immediately, except for those issued to one holder whose units vest 25% per year commencing March 1, 2007.  The Company recorded compensation expense related to the LEAF restricted stock and subsidiary units of $45,000 and $62,000, for the three and nine months ended June 30, 2007, respectively, and $13,000 and $22,000 for the three and nine months ended June 30, 2006, respectively.

NOTE 13 – INCOME TAXES

The Company recorded the following provision for income taxes, as follows (in thousands):

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2007		2006			2007			2006
Provision for income taxes, at estimated effective rate	$	4,312	$	1,346		$	10,634		$	6,723
Deferred tax benefit		−		(1,024	)		(58	)		(1,024	)
Net increase (decrease) in valuation allowance		−		71			(1,099	)		(3,120	)
Provision for income taxes	$	4,312	$	393		$	9,477		$	2,579

Net Operating Loss Carryforwards and Valuation Allowances.  The tax rates used to determine deferred tax assets or liabilities are the enacted tax rates in effect for the year in which the differences are expected to reverse.  Based on its evaluation of all available information, the Company recognizes future tax benefits, such as net operating loss carryforwards (“NOLs”), to the extent that realizing these benefits is considered more likely than not.  The Company continually evaluates its ability to realize the tax benefits associated with deferred tax assets by analyzing forecasted taxable income using both historical and projected future operating results, the reversal of existing temporary differences, taxable income in prior carryback years (if permitted) and the availability of tax planning strategies.  A valuation allowance is required to be established unless management determines that it is more likely than not that the Company will ultimately realize the tax benefit associated with a deferred tax asset.

During the nine months ended June 30, 2007, the Company estimated it would be able to utilize $13.0 million of its state and local NOLs prior to their expiration, and accordingly, reversed $1.1 million of the previously recorded valuation allowance associated with those NOLs.

21

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 13 – INCOME TAXES − (Continued)

During the nine months ended June 30, 2006, the Company reversed a net of $3.1 million of the valuation allowance relating to approximately $34.0 million of other state and local NOLs.  In addition, the Company recorded a $1.0 million deferred tax asset associated with approximately $15.5 million of state and local NOLs which management had previously believed were unrealizable prior to their expiration.

Management will continue to assess its estimate of the amount of NOLs that the Company will be able to utilize.  Furthermore, its estimate of the required valuation allowance could be adjusted in the future if estimates of taxable income are revised.

The Company is under examination by the Internal Revenue Service (“IRS”) for its 2004 and 2005 tax years.  At June 30, 2007, the Company recorded $970,000 of interest expense to discontinued operations associated with the 2004 tax assessment as a result of disallowed bad debt deductions taken on loans in its legacy portfolio.  In July 2007, the Company settled the 2004 examination and paid the tax assessment and interest.  The Company expects to file an NOL carryback claim for the 2004 tax year and anticipates recovering 100% of the tax assessment plus approximately $250,000 of interest as certain of the loans were resolved within the 2006 tax year.  The Company further anticipates that the 2005 examination will be concluded in fiscal 2008 and has recorded a liability and corresponding deferred tax asset for the proposed examination adjustments relating to similarly disallowed bad debt deductions taken in the 2005 tax year, including a $920,000 charge to discontinued operations for estimated interest expense (see Note 17).

NOTE 14 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of its business operations, the Company has ongoing relationships with several related entities.  The following table details the receivables and payables with these related parties (in thousands):

	June 30,		September 30,
	2007		2006
Receivables from managed entities and related parties:
Real estate investment partnerships and TIC property interests	$	8,983	$	952
Commercial finance investment partnerships		6,628		3,938
Financial fund management entities		4,486		2,064
RCC		2,117		1,409
Other		365		432
Receivables from managed entities and related parties	$	22,579	$	8,795
Payables due to managed entities and related parties:
Real estate investment partnerships and TIC property interests	$	950	$	1,325
Other		−		254
Payables to managed entities and related parties	$	950	$	1,579

22

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 14 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

The Company receives fees and expense reimbursements from several related/managed entities.  In addition, the Company reimburses another related entity for certain of its operating expenses.  The following table details these activities (in thousands):

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Financial fund management- fees from managed entities	$	2,844		$	2,395		$	9,663		$	6,639
Real estate– fees from investment partnerships and     TIC property interests		3,089			2,213			6,911			8,133
Commercial finance− fees from investment partnerships		6,509			2,383			11,283			4,408
RCC:
Management, incentive and servicing fees		2,179			1,815			7,549			5,929
Reimbursement of expenses from RCC		(11	)		559			1,263			1,087
Dividend income		794			687			2,368			2,013
Atlas America− reimbursement of net costs and expenses		225			281			868			958
Anthem Securities:
Payment of operating expenses		−			(287	)		−			(620	)
Reimbursement of costs and expenses		−			938			−			1,893
1845 Walnut Associates Ltd (1) - payment of rent and operating expenses		(76	)		(112	)		(347	)		(351	)
9 Henmar LLC– payment of broker/consulting fees		(176	)		(175	)		(392	)		(419	)
Ledgewood P.C. (2)– payment of legal services		(249	)		(119	)		(395	)		(365	)

⁽¹⁾Relationship with 1845 Walnut Associates Ltd.  In March 2007, the Company sold 15% of its remaining 30% interest in a real estate partnership that owns the building, in which it also leases office space.  The Company received $2.9 million and recorded a gain of $2.7 million on the transaction.  In March 2006, the Company received $4.0 million plus a $200,000 note receivable from the sale of 20% of its interest in the same property, resulting in a $4.2 million gain.

⁽²⁾Relationship with Ledgewood P.C.  Jeffrey F. Brotman was the managing member of Ledgewood, which provides legal services to the Company, until March 2006.  Mr. Brotman remained of counsel to Ledgewood through June 2007, at which time he became an Executive Vice President of the Company.  In connection with his separation, Mr. Brotman will be receiving payments from Ledgewood through 2013.

Relationship with RAIT Financial Trust.  On March 30, 2007, the Company purchased a trust preferred security issued by an unrelated third party from RAIT Financial Trust (“RAIT”) (NYSE: RAS), a related party (see Note 15 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for fiscal 2006), for $19.7 million and sold the security to a warehouse facility for $20.0 million, thereby recognizing a gain of $300,000.  The Company is the collateral manager for this warehouse facility.

Transactions between LEAF and RCC.  LEAF originates and manages commercial finance assets on behalf of RCC.  The leases and notes are sold to RCC at book value plus an origination fee not to exceed 1%.  LEAF sold $2.4 million and $10.6 million of leases and notes to RCC during the three and nine months ended June 30, 2007, respectively.  For the three and nine months ended June 30, 2006, LEAF sold RCC $4.7 million and $62.0 million in leases and notes, respectively.

23

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 14 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS − (Continued)

Transactions between LEAF and TBBK.  On June 15, 2007, Merit (a subsidiary of LEAF) entered into an agreement with TBBK under which TBBK provides banking and operational services to Merit.  As of June 30, 2007, no fees had been paid to TBBK.  In conjunction with this agreement, Merit has $2.3 million in cash on deposit at TBBK at June 30, 2007.

NOTE 15 − OTHER INCOME, NET

The following table details the Company’s other income, net (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Gain on sale of TBBK stock	$	864	$	−	$	3,016	$	−
RCC dividends		794		687		2,368		2,013
Litigation settlement		−		−		−		1,188
Interest, dividends and other income		421		122		1,034		443
Other income, net	$	2,079	$	809	$	6,418	$	3,644

In fiscal 2002, the Company had charged operations $1.0 million for its maximum exposure relating to the settlement of a lawsuit.  One of the insurance carriers refused to participate in the settlement.  The Company thereafter filed an action seeking recovery on its policy with that carrier.  In the second quarter of fiscal 2006, the Company prevailed in its action against the carrier, received a $200,000 reimbursement and reversed the $1.0 million accrual.

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Senior lien financing obtained with respect to certain acquired properties, TIC investment programs and real estate loans are with recourse only to the properties securing them, subject to certain standard exceptions.  The Company has provided guarantees on these senior liens, TIC programs, and loans totaling $549.3 million which expire as the related indebtedness is paid down over the next ten years.

The Company, through its financial fund management subsidiary, has commitments to purchase equity in all of the CDOs which are currently in their warehouse stage.  The estimated equity commitments, approximately $17.6 million in the aggregate as of June 30, 2007, are contingent upon the successful completion of the respective CDOs which are anticipated over the next twelve months.  The amount of equity the Company actually purchases may be less than the originally estimated commitment.

A May 2007 engagement letter, in connection with a warehouse agreement with Morgan Stanley, provides for a guarantee by the Company of $6.0 million of potential losses on a portfolio of bank loans.  There were no borrowings outstanding under this facility as of June 30, 2007.  Outstanding borrowings were approximately $117.0 million at July 31, 2007.

The January 2007 warehouse agreement with Morgan Stanley provides for a guarantee by the Company of $14.3 million of potential losses on a portfolio of bank loans.  This guarantee, secured by a $4.0 million escrow deposit, expires upon the closing of the associated CDO which is anticipated in fiscal 2008 (see Note 10).

The August 2006 warehouse agreement with Credit Suisse provides for a guarantee by the Company of $10.0 million of potential losses on a portfolio of bank loans.  This guarantee, secured by a $5.0 million escrow deposit, expires upon the closing of the associated CDO which is anticipated in fiscal 2008 (see Note 10).

24

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 16 - COMMITMENTS AND CONTINGENCIES − (Continued)

A subsidiary of LEAF has a $33.0 million non-recourse line of credit with a financial institution that expires on September 15, 2008.  LEAF has committed to a 9.1% participation in the borrowings on this line of credit, to a maximum of $3.0 million.  As of June 30, 2007, there were no outstanding borrowings on this facility.

The Company is a party to various routine legal proceedings arising out of the ordinary course of its business.  Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the Company’s financial condition or operations.

NOTE 17 − DISCONTINUED OPERATIONS

Based on the Company’s intent to sell its interests in certain entities, the respective operations of these entities have been classified as discontinued and the related assets and liabilities have been classified as held for sale.  Included in other assets is a held for sale property valued at $931,000 million at June 30, 2007.

Losses from discontinued operations for the three and nine months ended June 30, 2007 primarily reflect the $1.9 million of interest assessments related to the 2004 and 2005 IRS tax examinations.  Loss on disposal for the three and nine months ended June 30, 2007 includes a $374,000 write-down to market value of the property held for sale.

Summarized discontinued operating results are as follows (in thousands):

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
(Loss) income from discontinued operations before taxes	$	(1,945	)	$	297		$	(2,031	)	$	2,822
Loss on disposal		(286	)		(443	)		(286	)		(1,267	)
Benefit (provision) for income taxes		781			33			811			(578	)
(Loss) income from discontinued operations, net of tax	$	(1,450	)	$	(113	)	$	(1,506	)	$	977

25

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 18 − OPERATING SEGMENTS

The Company’s operations include three reportable operating segments that reflect the way the Company manages its operations and makes business decisions.  In addition to its reporting operating segments, certain other activities are reported in the “All other” category.  Summarized operating segment data are as follows (in thousands):

Three Months Ended June 30, 2007	Financial fund management			Real estate			Commercial finance			All other (1)			Total
Revenues from external customers	$	15,418		$	6,974		$	12,807		$	−		$	35,199
Equity in earnings of unconsolidated entities		3,676			34			1			−			3,711
Total revenues		19,094			7,008			12,808			−			38,910
Segment operating expenses		(5,925	)		(3,971	)		(5,416	)		−			(15,312	)
Depreciation and amortization		(16	)		(186	)		(286	)		(240	)		(728	)
Interest expense		(6,256	)		(252	)		(3,395	)		(273	)		(10,176	)
Other expense, net		(211	)		(6	)		(103	)		(1,127	)		(1,447	)
Minority interests		(664	)		−			(316	)		−			(980	)
Income (loss) before intercompany interest expense     and income taxes		6,022			2,593			3,292			(1,640	)		10,267
Intercompany interest expense		(1,554	)		−			(690	)		2,244			−
Income from continuing operations before        income taxes	$	4,468		$	2,593		$	2,602		$	604		$	10,267

Three Months Ended June 30, 2006
Revenues from external customers	$	4,385		$	5,276		$	5,891		$	−		$	15,552
Equity in earnings (losses) of unconsolidated entities		2,991			(776	)		(6	)		−			2,209
Total revenues		7,376			4,500			5,885			−			17,761
Segment operating expenses		(2,700	)		(3,286	)		(3,911	)		−			(9,897	)
Depreciation and amortization		−			(151	)		(364	)		(166	)		(681	)
Interest expense		(882	)		(64	)		(915	)		(33	)		(1,894	)
Other expense, net		(273	)		(25	)		(131	)		(889	)		(1,318	)
Minority interests		(429	)		−			(36	)		−			(465	)
Income (loss) before intercompany interest expense     and income taxes		3,092			974			528			(1,088	)		3,506
Intercompany interest expense		(2,543	)		(59	)		(397	)		2,999			−
Income from continuing operations before        income taxes	$	549		$	915		$	131		$	1,911		$	3,506

26

RESOURCE AMERICA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)

June 30, 2007

(unaudited)

NOTE 18 − OPERATING SEGMENTS − (Continued)

Nine Months Ended June 30, 2007	Financial fund management			Real estate			Commercial finance			All other (1)			Total
Revenues from external customers	$	35,770		$	18,662		$	28,483		$	−		$	82,915
Equity in earnings (losses) of unconsolidated entities		11,741			(82	)		(22	)		−			11,637
Total revenues		47,511			18,580			28,461			−			94,552
Segment operating expenses		(15,878	)		(10,179	)		(13,607	)		−			(39,664	)
Depreciation and amortization		(44	)		(549	)		(920	)		(643	)		(2,156	)
Interest expense		(13,184	)		(774	)		(8,076	)		(427	)		(22,461	)
Other expense, net		(830	)		87			(211	)		(1,742	)		(2,696	)
Minority interests		(1,833	)		−			(422	)		−			(2,255	)
Income (loss) before intercompany interest expense     and income taxes		15,742			7,165			5,225			(2,812	)		25,320
Intercompany interest expense		(4,500	)		−			(1,739	)		6,239			−
Income from continuing operations before         income taxes	$	11,242		$	7,165		$	3,486		$	3,427		$	25,320

Nine Months Ended June 30, 2006
Revenues from external customers	$	12,113		$	20,412		$	16,490		$	−		$	49,015
Equity in earnings (losses) of unconsolidated entities		8,556			(2,052	)		(7	)		−			6,497
Total revenues		20,669			18,360			16,483			−			55,512
Segment operating expenses		(7,764	)		(8,265	)		(10,382	)		−			(26,411	)
Depreciation and amortization		(15	)		(453	)		(1,406	)		(481	)		(2,355	)
Interest expense		(2,363	)		(198	)		(2,913	)		(85	)		(5,559	)
Other expense, net		(1,285	)		(260	)		(294	)		(2,105	)		(3,944	)
Minority interests		(1,215	)		−			(21	)		−			(1,236	)
Income (loss) before intercompany interest expense     and income taxes		8,027			9,184			1,467			(2,671	)		16,007
Intercompany interest expense		(2,543	)		(453	)		(1,112	)		4,108			−
Income from continuing operations before         income taxes	$	5,484		$	8,731		$	355		$	1,437		$	16,007

Segment assets
June 30, 2007	$	539,722	$	144,622	$	355,166	$	(19,779	)	$	1,019,731
June 30, 2006	$	257,663	$	145,400	$	109,344	$	(14,476	)	$	497,931

(1) Includes general corporate expenses and assets not allocable to any particular segment.

Geographic Information.  Revenues generated from the Company’s European operations totaled $5.6 million and $11.2 million for the three and nine months ended June 30, 2007.  The Company, through the CDO issuers it sponsors and consolidates pursuant to FIN 46-R, began to acquire European bank loans in the fourth quarter of fiscal 2006.  Included in segment assets as of June 30, 2007 and 2006 were $229.2 million and $813,000, respectively, of European assets, primarily loans held for investment.

27

ITEM 2.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

                                    RESULTS OF OPERATIONS  (unaudited)

This report contains certain forward-looking statements.  Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.  In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.  Such statements are subject to the risks and uncertainties more particularly described in Item 1A, under the caption “Risk Factors,” in our Annual Report on Form 10-K for the period ended September 30, 2006.  These risks and uncertainties could cause actual results to differ materially.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  We undertake no obligation to publicly release the results of any revisions to forward-looking statements which we may make to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, except as may be required under applicable law.

Overview of the Three and Nine Months Ended June 30, 2007 and 2006

We are a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for our own account and for outside investors in the financial fund management, real estate and commercial finance sectors.  As a specialized asset manager, we develop investment funds in each sector in which outside investors invest along with us and for which we provide asset management services.  As of June 30, 2007, we managed $16.8 billion of assets.

We limit our fund development and asset management services to asset classes in which we have specific expertise.  We believe this strategy enhances the return on investment we can achieve for ourselves and for the investors in our funds.  In our financial fund management operations, the asset classes on which we concentrate are trust preferred securities of banks, bank holding companies, insurance companies, real estate investment trusts, or REITs, and other financial companies, bank loans, asset-backed securities, known as ABS (principally residential and commercial mortgage-backed securities), and structured finance securities.  In our real estate operations, we concentrate on investments in multi-family and commercial real estate and real estate mortgage loans including whole loans, first priority interests in commercial mortgage loans, known as A notes, subordinated interests in first mortgage loans, known as B notes, and mezzanine loans.  In our commercial finance operations, we focus on originating small and middle-ticket equipment leases and commercial notes secured by business-essential equipment, including technology, commercial and industrial equipment and medical equipment.

We have continued to develop our existing operations with the sponsorship of new investment funds and tenant-in-common, or TIC, property programs.  Additionally, we have undertaken several initiatives to further expand the scope of our asset management operations, in particular through the sponsorship of a follow-on offering for Resource Capital Corp, or RCC, and through Resource Europe Management, Ltd., or Resource Europe, in the origination and management of international debt assets.

     Recently, the credit markets in the United States and elsewhere have been subject to substantial volatility and reduction in liquidity, principally as a result of conditions in the residential mortgage sector, particularly in the sub-prime sector.  As of the date of this report, we have not been materially effected by this situation.  We discuss funding availability in Note 10 to the notes to our consolidated financial statements included in this report.

28

Assets Under Management

We increased our assets under management by $6.3 billion to $16.8 billion at June 30, 2007 from $10.5 billion at June 30, 2006.  The growth in our assets under management was the result of:

· an increase in the financial fund management assets we manage on behalf of individual and institutional investors and RCC, both in the United States and in Europe;

· an increase in real estate assets managed on behalf of RCC and limited partnerships and TIC property interests that we sponsor; and

· an increase in commercial finance assets managed on behalf of the limited partnerships we sponsor, and RCC.

The following table sets forth information relating to our assets under management by operating segment and their growth from June 30, 2006 to June 30, 2007 (in millions):

	As of June 30,				Increase
	2007		2006		Amount		Percentage
Financial fund management	$	14,211	$	9,215	$	4,996		54%
Real estate		1,497		707		790		112%
Commercial finance		1,069		549		520		95%
	$	16,777	$	10,471	$	6,306		60%

Included in these assets at June 30, 2007 and 2006 were $13.5 billion and $7.6 billion of assets held through 30 and 18 issuers of collateralized debt obligations, or CDOs, we have sponsored, including $2.1 billion and $1.0 billion in six and three CDOs sponsored for RCC, respectively, and $1.4 billion held on warehouse facilities for CDOs which had not closed as of June 30, 2007 for which we have been engaged as the collateral manager.

Our assets under management are primarily managed through various investment vehicles including CDOs, public and private limited partnerships, TIC property interests, a REIT, and other investment funds.  All of our operating segments manage assets on behalf of RCC.  The following table sets forth the number of entities we manage by operating segment:

	CDOs		Limited Partnerships (1)		TIC Property Interests		Other Investment Funds
As of June 30, 2007
Financial fund management		28		12		−		−
Real estate		2		6		7		−
Commercial finance		−		3		−		1
		30		21		7		1
As of June 30, 2006
Financial fund management		18		11		−		−
Real estate		−		5		4		−
Commercial finance		−		2		−		2
		18		18		4		2

(1) Includes one real estate investment program structured as a limited liability company.

29

The assets we manage are classified as follows (in millions):

	As of June 30, 2007
	Assets Held by Resource America		Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities			Total
Asset-backed securities	$	−	$	5,048	$	391	$	−		$	5,439
Trust preferred securities		−		4,497		−		617			5,114
REIT trust preferred securities		−		−		−		267			267
Bank loans		−		1,858		938		509	(1)		3,305
Real properties		−		499		−		−			499
Mortgage and other real estate-related loans		99		−		899		−			998
Commercial finance assets		314		672		83		−			1,069
Private equity and hedge fund assets		−		86		−		−			86
	$	413	$	12,660	$	2,311	$	1,393		$	16,777

(1) Includes $414.3 million of bank loans which were reflected on our consolidated balance sheet at June 30, 2007, of which $209.9 million were European bank loans.

	As of June 30, 2006
	Assets Held by Resource America		Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total
Asset-backed securities	$	−	$	2,642	$	1,209	$	325	$	4,176
Trust preferred securities		−		3,537		−		279		3,816
Bank loans		−		389		605		171		1,165
Real properties		−		314		−		−		314
Mortgage and other real estate-related loans		100		−		293		−		393
Commercial finance assets		90		381		78		−		549
Private equity and hedge fund assets		−		58		−		−		58
	$	190	$	7,321	$	2,185	$	775	$	10,471

Employees

As of June 30, 2007, we employed 391 persons full-time, an increase of 172, or 79%, from 219 employees at June 30, 2006.  The following table summarizes our employees by operating segment:

	Total		Financial Fund Management		Real Estate		Commercial Finance		Corporate/ Other
June 30, 2007
Investment professionals		129		43		31		53		2
Other		262		24		16		184		38
Total		391		67		47		237		40
June 30, 2006
Investment professionals		65		22		18		24		1
Other		154		17		9		99		29
Total		219		39		27		123		30

30

Revenues

We generate revenues in each of our business segments from the fees we earn for structuring and managing the investment vehicles we sponsor on behalf of individual and institutional investors and RCC and from the income produced by the assets and investments we manage for our own account.  The following table sets forth the revenues we have recognized in each of these revenue categories (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Fund management revenues (1)	$	21,553	$	10,647	$	47,982	$	29,274
RCC management fees		2,016		1,223		5,749		3,389
Finance and rental revenues (2)		14,450		4,920		33,790		14,373
Gains on resolution of loans and other property interests (3)		280		135		2,991		4,584
Net gains on sale of TIC property interests (4)		229		199		315		795
Other (5)		382		637		3,725		3,097
	$	38,910	$	17,761	$	94,552	$	55,512

(1)   Includes fees earned from each of our financial fund management, real estate and commercial finance operations and our share of the income or loss from limited and general partnership interests we own in our financial fund management, real estate and commercial finance operations.

(2)Includes interest income on bank loans from our financial fund management operations, interest and accreted discount income from our real estate operations, interest and rental income from our commercial finance operations and revenues from certain real estate assets.

(3)Includes the resolution of loans we hold in our real estate segment.

(4)Reflects net gains (losses) recognized by our real estate segment on the sale of TIC property interests to outside investors.

(5)Includes the equity compensation we earned in connection with the formation of RCC and income realized from the disposition of leases and loans as well as other charges generated by our commercial finance operations.

A detailed discussion of the revenues generated by each of our business segments can be found under “Results of Operations:  Financial Fund Management”, “Real Estate” and “Commercial Finance.”

Results of Operations:  Financial Fund Management

We conduct our financial fund management operations through six principal subsidiaries:

· Apidos Capital Management, LLC, or Apidos, which invests in, finances, structures and manages investments in bank loans.

· Ischus Capital Management, LLC, or Ischus, which invests in, finances, structures and manages investments in asset-backed securities or ABS, including residential mortgage-backed securities, or RMBS, and commercial mortgage-backed securities, or CMBS.

· Trapeza Capital Management, LLC, or Trapeza, a joint venture between us and an unrelated third party, which originates, structures, finances and manages investments in trust preferred securities and senior debt securities of banks, bank holding companies, insurance companies and other financial companies.

· Resource Europe, which invests in, finances, structures and manages investments in international bank loans.

· Coredo Capital Management, LLC, or Coredo, which originates, structures, finances and manages trust preferred securities and other debt investments in real estate-related companies, including REITs, real estate operating companies and other companies.

· Resource Financial Institutions Group, Inc., or RFIG, which serves as the general partner for four company-sponsored affiliated partnerships which invest in financial institutions.

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   It is possible that due to volatility in the credit markets, our ability to obtain long-term CDO financing may be more difficult than it has been in the past and the terms may be less favorable.  This may effect our ability to sustain our historical growth in assets under management or in fee income.

    The following table sets forth information relating to assets managed by each of our principal financial fund management subsidiaries on behalf of institutional and individual investors and RCC (in millions):

	As of June 30, 2007
	Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total by Type
Apidos	$	1,507	$	938	$	243	$	2,688
Ischus		5,048		391		−		5,439
Trapeza		4,497		−		617		5,114
Resource Europe		351		−		266		617
Coredo		−		−		267		267
Other company-sponsored partnerships		86		−		−		86
	$	11,489	$	1,329	$	1,393	$	14,211

	As of June 30, 2006
	Institutional and Individual Investors		RCC		Assets Held on Warehouse Facilities		Total by Type
Apidos	$	389	$	605	$	171	$	1,165
Ischus		2,642		1,209		325		4,176
Trapeza		3,537		−		279		3,816
Other company-sponsored partnerships		58		−		−		58
	$	6,626	$	1,814	$	775	$	9,215

In our financial fund management segment, we earn fees on assets managed on behalf of institutional and individual investors as follows:

· Collateral management fees− We receive fees for managing the assets held by CDOs we sponsor.  These fees vary by CDO, with our annual fee ranging between 0.08% and 0.75% of the aggregate principal balance of the collateral securities owned by the CDO issuers; and

· Administration fees − We receive fees for managing the assets held by partnerships sponsored by us and for managing their general operations.  These fees vary by limited partnership, with our annual fee ranging between 0.75% and 2.00% of the partnership capital balance.

We also receive distributions on our investments in the entities we manage which vary depending on our investment and, with respect to particular limited partnerships, with the terms of our general partner interest.  We discuss the basis for our fees and revenues for each area in more detail in the following sections.

Apidos

We sponsored, structured and currently manage seven CDO issuers for institutional and individual investors and RCC which hold approximately $2.4 billion in bank loans at June 30, 2007, of which $938.1 million are managed on behalf of RCC through three CDOs.  In addition, at June 30, 2007, we managed $242.6 million of bank loans for one CDO currently in its accumulation stage, which we anticipate to close in fiscal 2008.

We derive revenues from our Apidos operations through base and incentive management fees of up to 0.75% of the aggregate principal balance of the collateral held by the CDO issuers, of which a portion is subordinated to debt service payments on the CDOs, and interest income earned on the assets of certain issuers during the warehousing period prior to execution of a CDO.

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Ischus

We sponsored, structured and currently manage eight CDO issuers for institutional and individual investors and RCC, which hold approximately $5.4 billion in primarily real estate ABS including RMBS, CMBS and credit default swaps, of which $390.6 million is managed on behalf of RCC.

We own a 50% interest in the general partner and manager of Structured Finance Fund, L.P. and Structured Finance Fund II, L.P., collectively referred to as the SFF partnerships.  These partnerships own a portion of the equity interests of three Trapeza CDO issuers and Ischus CDO I.  We also have invested as a limited partner in each of these limited partnerships.

We derive revenues from our Ischus operations through management and administration fees.  We also receive distributions on amounts we invest in the limited partnerships.  Management fees vary by CDO issuer, ranging from between 0.08% and 0.40% of the aggregate principal balance of the collateral held by the CDO issuer of which a portion is subordinated to debt service payments on the CDOs.

Trapeza

We have co-sponsored, structured and currently co-manage 12 CDO issuers holding approximately $4.5 billion in trust preferred securities of banks, bank holding companies, insurance companies and other financial companies.  In addition, at June 30, 2007, we managed $617.3 million in trust preferred securities for three CDOs, one of which we anticipate to close in fiscal 2007 and two of which we anticipate to close in fiscal 2008.

We own a 50% interest in an entity that manages 10 Trapeza CDO issuers and a 33.33% interest in another entity that manages two Trapeza CDO issuers.  We also own a 50% interest in the general partners of the limited partnerships that own the equity interests of five Trapeza CDO issuers.  We also have invested as a limited partner in each of these limited partnerships.

We derive revenues from our Trapeza operations through base and incentive management and administration fees.  We also receive distributions on amounts we have invested in limited partnerships.  Management fees, including incentive fees, vary by CDO issuer, but have ranged from between 0.25% and 0.60% of the aggregate principal balance of the collateral held by the CDO issuers of which a portion is subordinated.  These fees are also shared with our co-sponsors.  We are also entitled to incentive distributions in four of the partnerships we manage.

Resource Europe

In April 2006, we commenced our European bank loan operations based in London, England.  We sponsored, structured and currently manage one CDO issuer holding $351.2 million in bank loans at June 30, 2007.  In addition, at June 30, 2007, we managed $265.9 million of bank loans for one CDO currently in its accumulation stage, which we anticipate to close in fiscal 2008.

Coredo

In February 2007, we commenced our REIT preferred security operations.  At June 30, 2007, we managed $267.1 million of real estate trust preferred securities for two CDOs currently in their accumulation stage, both of which we anticipate to close in fiscal 2008.

We derive revenues from our Coredo operations through due diligence and placement fees associated with the origination of certain REIT preferred security transactions.  Due diligence and placement fees may vary by transaction and may cause significant variations in revenues during the warehouse period.  Upon the successful completion of a CDO, we will receive base and incentive management fees, which will vary by CDO issuer.

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Other Company-Sponsored Partnerships

We sponsored, structured and currently manage four affiliated partnerships for individual and institutional investors that invest in financial institutions.  We derive revenues from these operations through an annual management fee, based on 2.0% of equity.  We also have invested as the general partner of these partnerships and may receive a carried interest of up to 20% upon meeting specific investor return rates.

We have also sponsored, structured and currently manage another affiliated partnership organized as a hedge fund.  We derive revenues from this partnership through base and incentive management fees.  Base management fees are calculated monthly at 1/12^th of 2% of the partnership’s net assets.  Incentive management fees are calculated annually at 20% of cumulative annual net profits.  We also have invested as a limited partner in this partnership.

The following table sets forth certain information relating to the revenues recognized and costs and expenses incurred in our financial fund management operations (in thousands):

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2007		2006			2007		2006
Revenues:
Fund management fees	$	5,865	$	2,631		$	16,471	$	5,844
Interest income on loans		8,358		1,139			18,304		3,480
Due diligence and placement fees		1,863		−			1,901		−
Limited and general partner interests		1,234		1,530			3,800		4,469
Earnings on unconsolidated CDOs		729		177			1,753		310
RCC management fees and equity compensation		385		1,145			2,505		4,136
Earnings of Structured Finance Fund partnerships		507		571			1,567		1,662
Other		153		183			1,210		768
	$	19,094	$	7,376		$	47,511	$	20,669
Costs and expenses:
General and administrative expenses	$	5,505	$	2,345		$	14,266	$	6,691
Equity compensation expense		415		364			1,589		1,069
Expenses (reimbursements) of Structured Finance Fund partnerships		5		(9	)		23		4
	$	5,925	$	2,700		$	15,878	$	7,764

Fees and/or reimbursements that we receive vary by transaction and, accordingly, there may be significant variations in the revenues we recognize from our financial fund management operations from period to period.

Revenues - Three Months Ended June 30, 2007 as Compared to the Three Months Ended June 30, 2006

Revenues increased $11.7 million (159%) for the three months ended June 30, 2007.  We attribute the increase to the following:

· a $3.2 million increase in fund management fees principally as a result of the completion of nine new CDOs coupled with a full quarter of collateral management fees for two previously completed CDOs;

· a $7.2 million increase in interest income on loans held for investment resulting from the consolidation of one Apidos and two Resource Europe CDO issuers during the three months ended June 30, 2007 as compared to three Apidos CDO issuers during the three months ended June 30, 2006 in our financial statements while they accumulate assets through separate warehouse facilities.  In May 2007, we closed our first European CDO, Resource Europe I, and repaid all outstanding borrowings under the warehouse facility.  The weighted average loan balances of CDO issuers we consolidate for the three months ended June 30, 2007 and 2006 were $471.3 million and $62.7 million, respectively, (weighted average interest rates of 6.88% and 7.26%, respectively);

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· a $1.9 million increase in due diligence and placement fees, resulting primarily from the following:

- $1.3 million earned in due diligence and placement fees in connection with the origination of $310.0 million of REIT trust preferred securities for six Coredo transactions; and

- $538,000 earned in placement fees in connection with the origination of $215.0 million for four Trapeza trust preferred security transactions.

· a $296,000 decrease in revenues from our limited and general partner interests, primarily from a $202,000 decrease in net unrealized appreciation in the book value of the partnerships’ securities and swap agreements to reflect their current market value;

· a $552,000 increase in our earnings in unconsolidated CDOs as a result of our investment in one new CDO issuer and an increase in earnings from investments in eight previously sponsored CDO issuers; and

· a $760,000 decrease in RCC management fees and equity compensation, primarily due to a $465,000 decrease in management fees as a result of the sale of RCC’s agency RMBS portfolio in the fourth quarter of fiscal 2006.

Costs and Expenses – Three Months Ended June 30, 2007 as Compared to the Three Months Ended June 30, 2006

Costs and expenses increased $3.2 million (119%) for the three months ended June 30, 2007.  We attribute the increase to the following:

· a $3.2 million increase in general and administrative expenses, primarily from the following:

- a $1.6 million increase in wages and benefits as a result of the addition of personnel in response to our growing assets under management;

- a $535,000 increase in professional fees primarily due to an increase in consulting fees related to our European operations;

- a $459,000 decrease in reimbursed expenses from our Trapeza, Ischus and Apidos operations which vary based on the terms of each transaction;

- a $276,000 increase in other operating expenses, primarily from insurance costs, rent and other general and administrative expenses related to the addition of personnel; and

- a $192,000 decrease in reimbursed RCC operating expenses.

Revenues - Nine Months Ended June 30, 2007 as Compared to the Nine Months Ended June 30, 2006

Revenues increased $26.8 million (130%) for the nine months ended June 30, 2007.  We attribute the increase to the following:

· a $10.6 million increase in fund management fees, primarily from the following:

- a $9.0 million increase in collateral management fees principally as a result of the completion of nine new CDOs coupled with a full nine months of collateral management fees for six previously completed CDOs;

- a $1.7 million increase in portfolio management fees received in connection with the formation of Trapeza CDO XI and Trapeza CDO XII during the nine months ended June 30, 2007.  No such fees were received during the nine months ended June 30, 2006; and

- a $367,000 increase in management fees from our five company-sponsored unconsolidated partnerships, principally as a result of a full nine months of management fees for two of the partnerships;

These increases were partially offset by:

- a $550,000 increase in our share of the expenses for Trapeza Capital Management, LLC and Trapeza Management Group LLC.

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· a $14.8 million increase in interest income on loans held for investment resulting from the consolidation in our financial statements of two Apidos and two Resource Europe CDO issuers during the nine months ended June 30, 2007 as compared to three Apidos CDO issuers during the nine months ended June 30, 2006 while they accumulate assets through separate warehouse facilities.  In May 2007, we closed Apidos Cinco CDO and our first European CDO, Resource Europe I, and repaid all outstanding borrowings under their respective warehouse facilities.  The weighted average loan balances of CDO issuers we consolidate for the nine months ended June 30, 2007 and 2006 were $348.0 million and $68.4 million, respectively, (effective interest rates of 6.88% and 6.77%, respectively);

· a $1.9 million increase in due diligence and placement fees, primarily from the following:

- $1.3 million earned in due diligence and placement fees in connection with the origination of $310.0 million for six Coredo REIT trust preferred security transactions; and

- $575,000 earned in placement fees in connection with the origination of $225.0 million for five Trapeza trust preferred security transactions.

· a $669,000 decrease in revenues from our limited and general partner interests, primarily from the following:

- a $1.5 million decrease in net unrealized appreciation in the book value of the partnership securities and swap agreements to reflect current market value; offset in part by

- a $891,000 increase from our share of the operating results of unconsolidated partnerships we have sponsored.

· a $1.4 million increase in our earnings in unconsolidated CDOs as a result of our investments in six new CDO issuers and an increase in earnings from investments in five previously sponsored CDO issuers;

· a $1.6 million decrease in RCC management fees and equity compensation, reflecting a $981,000 decrease in management fees as a result of the sale of RCC’s agency RMBS portfolio; and

· a $442,000 increase in other revenue, primarily from a $300,000 gain on the sale of a security during the nine months ended June 30, 2007.  No such gain occurred during the nine months ended June 30, 2006.

Costs and Expenses − Nine Months Ended June 30, 2007 as Compared to the Nine Months Ended June 30, 2006

Costs and expenses increased $8.1 million (105%) for the nine months ended June 30, 2007.  We attribute the increase primarily to the following:

· a $7.6 million increase in general and administrative expenses, including the following:

- a $4.8 million increase in wages and benefits as a result of the addition of personnel in response to growth in our assets under management;

- a $1.1 million increase in other operating expenses, primarily from insurance costs, rent and other general and administrative expenses related to the addition of personnel; and

- a $691,000 decrease in reimbursed expenses from our Trapeza, Ischus and Apidos operations, which vary depending on the terms of the transaction;

- a $555,000 increase in professional fees primarily due to an increase in consulting fees related to our European operations; and

- a $407,000 decrease in reimbursed RCC operating expenses; and

· a $520,000 increase in equity compensation expense related to restricted shares and options of RCC that were held by RCM which have been transferred to members of management.

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Results of Operations: Real Estate

In our real estate segment, we manage three classes of assets:

· commercial real estate debt, principally A notes, whole loans, mortgage participations, B notes, mezzanine debt and related commercial real estate securities;

· real estate investment limited partnerships, limited liability company and TIC property interests; and

· real estate loans, owned assets and ventures, known collectively as our legacy portfolio.

	As of June 30,
	2007		2006
	(in millions)
Assets under management:
Commercial real estate debt	$	899	$	293
Real estate investment entities		499		314
Legacy portfolio		99		100
	$	1,497	$	707

During the three and nine months ended June 30, 2007, our real estate operations continued to be affected by two principal trends or events:

· the continued development of our commercial real estate debt platform; and

· growth in our real estate business through the sponsorship of real estate investment partnerships and the sponsorship of TIC property interests.

We support our real estate investment partnerships by making long-term limited partnership investments.  In addition, from time-to-time, we make bridge investments in the underlying partnerships and TIC property interests to facilitate acquisitions.  We record losses on these equity method investments primarily as a result of depreciation and amortization expense recorded by the partnerships and TIC property interests.  As additional investors are admitted to the partnerships and TIC programs, we transfer our bridge investment to new investors at our original cost and recognize a gain approximately equal to the previously recognized loss.

Gains on resolution of loans, FIN 46-R assets and other real estate assets (if any) and the amount of fees received (if any) vary from transaction to transaction.  There have been in the past, and we expect that in the future there will be, significant period-to-period variations in our gains on resolution and fee income.  Moreover, it is anticipated that gains on resolution will likely decrease in the future as we complete the resolution of our legacy portfolio.

In the twelve months ended June 30, 2007, we resolved loans with a combined book value of $4.9 million, realizing $5.2 million in net proceeds.  We reduced the number of loans in our portfolio from nine at June 30, 2006 to eight at June 30, 2007 through the repayment of one loan and sale of one loan, offset by the addition of one loan in conjunction with the resolution of one venture.  In addition, we sold a partial interest in a real estate venture and received net proceeds of $2.9 million.  As a result, the face value of the loans receivable that we manage in our legacy portfolio decreased from $77.0 million at June 30, 2006 to $76.0 million at June 30, 2007.

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The following table sets forth certain information relating to the revenues recognized and costs and expenses incurred in our real estate operations (in thousands):

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2007		2006			2007		2006
Revenues:
Fee income from sponsorship of  partnerships and TIC  property interests	$	2,555	$	1,592		$	5,258	$	6,676
REIT management fees from RCC		1,540		266			4,125		761
FIN 46 revenues and rental property income		1,444		1,469			3,659		3,549
Property management fees		144		645			997		1,698
Interest, including accreted loan discount		367		312			824		826
Gains on resolutions of loans and other property interests		280		135			2,991		4,584
Equity in income (losses) of unconsolidated entities		449		(118	)		411		(529	)
Net gain on sales of TIC property interests		229		199			315		795
	$	7,008	$	4,500		$	18,580	$	18,360
Costs and expenses:
General and administrative	$	3,102	$	2,483		$	7,816	$	6,110
FIN 46 operating and rental property expenses		869		803			2,363		2,155
	$	3,971	$	3,286		$	10,179	$	8,265

Revenues - Three Months Ended June 30, 2007 as Compared to the Three Months Ended June 30, 2006

Revenues increased $2.5 million (56%) for the three months ended June 30, 2007.  We attribute the increase to the following:

· a $1.0 million increase in fee income related to the purchase and third-party financing of three properties by two real estate investment partnerships and a TIC property interest that we sponsor.  We closed $7.7 million in TIC investments during the three months ended June 30, 2007 compared to $12.0 million in the three months ended June 30, 2006.  No properties were acquired during the three months ended June 30, 2006;

· a $1.3 million increase in REIT management fees due to an increase of $606.0 million to $899.0 million at June 30, 2007 from $293.0 million at June 30, 2006 in commercial real estate debt managed; and

· a $567,000 increase in our equity share of the operating results of unconsolidated real estate investments due to a reallocation of partnership income in a real estate venture.

These increases were partially offset by a $344,000 discount recorded in connection with property management fees we expect to receive in the future.

Costs and Expenses – Three Months Ended June 30, 2007 as Compared to the Three Months Ended June 30, 2006

Costs and expenses of our real estate operations increased by $685,000 (21%) for the three months ended June 30, 2007.  General and administrative expenses increased by $619,000 primarily due to increased wages and benefits as a result of the addition of personnel to manage our expanded real estate operations.

Revenues - Nine Months Ended June 30, 2007 as Compared to the Nine Months Ended June 30, 2006

Revenues increased $220,000 (1%) to $18.6 million for the nine months ended June 30, 2007.  We attribute the increase to the following:

· a $3.4 million increase in REIT management fees reflecting the increase of $606.0 million in commercial real estate debt managed to $899.0 million at June 30, 2007; and

· a $940,000 increase in our equity share of the operating results of unconsolidated real estate investments due to a reallocation of partnership income in a real estate venture.

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These increases were partially offset by:

· a $1.6 million decrease in gains on resolution of loans, FIN 46 assets and ventures.  During the nine months ended June 30, 2007, we received $2.9 million from the sale of a 15% interest in a real estate venture resulting in a gain of $2.7 million; for the nine months ended June 30, 2006, we received $4.0 million plus a $200,000 note receivable from the sale of a 20% interest in the same real estate venture, resulting in a gain of $4.2 million;

· a $1.4 million decrease in fee income related to the purchase and third-party financing of property through the sponsorship of real estate investment partnerships and TIC property interests.  We closed $14.0 million in TIC investments in the nine months ended June 30, 2007 compared to $21.9 million in the nine months ended June 30, 2006;

· a $480,000 decrease in net gains on sale of our real estate investment partnerships and TIC property interests; and

· a $344,000 discount recorded in connection with property management fees we expect to receive in the future.

Costs and Expenses − Nine Months Ended June 30, 2007 as Compared to the Nine Months Ended June 30, 2006

Costs and expenses increased by $1.9 million (23%) for the nine months ended June 30, 2007.  General and administrative expenses increased by $1.7 million, primarily due to increased wages and benefits corresponding to our expanded real estate operations.

Results of Operations: Commercial Finance

In June 2007, we acquired along with our investment partnerships, substantially all of the assets of the leasing division of Pacific Capital, N.A., or PCB, which included a portfolio of small ticket leases and loans, customer lists, lease origination team and business platform and other intangibles.  The total purchase price of $282.2 million included $269.5 million of equipment leases and notes, of which $201.7 million were acquired directly by our investment partnerships.

During the three and nine months ended June 30, 2007, we continued to expand our commercial finance operations by increasing our assets under management to $1.1 billion as of June 30, 2007 from $549.4 million as of June 30, 2006, an increase of $519.4 million (95%).  During the three and nine months ended June 30, 2007, we originated $396.9 million and $655.9 million in new equipment financing as compared to $117.7 million and $315.7 million for the three and nine months ended June 30, 2006, an increase of $279.2 million (237%) and $340.2 million (108%), respectively.  Our growth in commercial finance originations was driven by the PCB acquisition, our continued growth in new and existing vendor programs, the introduction of new commercial finance products and the expansion of our sales staff.

During the three and nine months ended June 30, 2007, we earned acquisition fees on $261.9 million and $401.5 million in commercial financing assets acquired by our investment entities as compared to $96.8 million and $276.9 million for the three and nine months ended June 30, 2006, an increase of $165.1 million (171%) and $124.6 million (45%), respectively.  The acquisition fees earned on the leases and notes sold to the funds in the PCB acquisition were $4.0 million for the three and nine months ended June 30, 2007.

In December 2006, LEAF Equipment Leasing Income Fund III, or LEAF III, an equipment leasing partnership we sponsor, began a public offering of up to $120.0 million of limited partnership interests.

In March 2007, we entered a new line of business, Merit Capital Advance, LLC, or Merit, to provide capital to small businesses through a credit card receipt advance program.  Merit’s capital needs are supported by a loan in the form of a $1.5 million subordinated convertible note and a $33.0 million line of credit with an international financial institution.  The subordinated convertible debt is convertible into a 50% ownership interest in Merit on or after September 15, 2007.  A subsidiary of LEAF has committed to a 9.1% (up to $3.0 million) participation in the $33.0 million credit facility.  We expect Merit to begin generating revenues in the fourth quarter of fiscal 2007.

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The following table sets forth information related to the assets our commercial finance operations manage (in millions):

	As of June 30,
	2007		2006
LEAF Financial	$	314	$	90
LEAF I		89		83
LEAF II		350		93
LEAF III		222		−
RCC		83		78
Merrill Lynch		11		205
	$	1,069	$	549

As of June 30, 2007, we managed approximately 26,187 leases and notes that have an average original finance value of $52,000 with an average lease term of 51 months.  The following table sets forth certain information related to the types of businesses in which our commercial finance assets are used and the concentration by asset type of our portfolio under management as of June 30, 2007:

Lessee business			Equipment under management
Services	40	%	Industrial	35	%
Finance/Insurance	12	%	Medical	19	%
Manufacturing services	10	%	Asset based lending	11	%
Transportation/Communication	10	%	Computers	11	%
Retail trade services	9	%	Restaurant equipment	5	%
Construction	7	%	Office equipment	4	%
Wholesaler trade	4	%	Garment care	3	%
Agriculture	4	%	Communication	3	%
Other	4	%	Software	2	%
	100	%	Other	7	%
				100	%

The revenues from our commercial finance operations consist primarily of finance revenues from leases and notes held by us prior to being sold, asset acquisition fees which we earn when we sell commercial finance assets to one of our investment partnerships and asset management fees we earn over the life of the lease or loan after it is sold.  The following table sets forth certain information relating to the revenues recognized and costs and expenses incurred in our commercial finance operations (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Revenues (1):
Finance revenues	$	4,281	$	2,000	$	11,003	$	6,518
Acquisition fees		5,019		1,585		7,252		4,768
Fund management fees		3,209		2,071		8,656		4,481
Other		299		229		1,550		716
	$	12,808	$	5,885	$	28,461	$	16,483
Costs and expenses:
LEAF costs and expenses	$	4,696	$	3,911	$	12,650	$	10,382
Merit costs and expenses		720		−		957		−
	$	5,416	$	3,911	$	13,607	$	10,382

(1) Total revenues include (i) RCC servicing and origination fees of $254,000 and $919,000 and for the three and nine months ended June 30, 2007, respectively, and $404,000 and $1.0 million for the three and nine months ended June 30, 2006, respectively; and (ii) Merit revenues of $12,000 for the three and nine months ended June 30, 2007.

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Revenues – Three and Nine Months Ended June 30, 2007 as Compared to the Three and Nine Months Ended June 30, 2006

Revenues increased $6.9 million (118%) and $12.0 million (73%) for the three and nine months ended June 30, 2007, respectively, as compared to the prior year period.  We attribute these increases to the following:

· a $2.3 million (114%) and $4.5 million (69%) increase, respectively, in commercial finance revenues due to the growth in lease originations and our decision to hold more direct financing leases and notes on our balance sheet.  We had $313.9 million in commercial finance assets at June 30, 2007 an increase of $205.1 million from June 30, 2006.  Our lease originations increased by $279.2 million (237%) and $340.2 million (108%) to $396.9 million and $655.9 million, for the three and nine months periods, respectively  The PCB acquisition accounted for $268.0 million of this increase;

· a $3.4 million (217%) and $2.5 million (52%), respectively, increase in asset acquisition fees resulting from the increase in leases sold.  We have sold $261.9 million and $ 401.5 million leases, respectively, for the three months ended June 30, 2007 as compared to $96.8 million and $276.9 million, respectively, for the three and nine months ended June 30, 2006, respectively.  We earned acquisition fees on the $201.7 million of PCB leases and notes acquired by our investment partnerships.

· a $1.1 million (55%) and $4.2 million (93%), respectively, increase in fund management fees resulting from an increase in assets under management to $1.1 billion at June 30, 2007 from $549.4 million at June 30, 2006; and

· a $70,000 (31%) and $834,000 (117%), respectively, increase in other income primarily resulting from gains on dispositions and document fee income, which may vary significantly from period to period.

Costs and Expenses – Three and Nine Months Ended June 30, 2007 as Compared to the Three and Nine Months Ended June 30, 2006

LEAF costs and expenses increased $785,000 (20%) and $2.3 million (22%), respectively, for the three and nine months ended June 30, 2007, primarily related to increased wages and benefits of $613,000 and $1.7 million, respectively, to support its expanded operations.  The number of LEAF employees increased by 114 (93%) to 237 at June 30, 2007, of which 35 were related to the new Merit operations, 20 were hired in conjunction with the PCB acquisition, 44 of additional sales personnel, and 15 of credit, operations and servicing staff.

Merit costs and expenses incurred in connection with the start-up of that operation were $720,000 and $957,000 for the three and nine months ended June 30, 2007, respectively, of which $384,000 and $544,000, related to wages and benefits.  There were no costs incurred in fiscal 2006.

Results of Operations: Other Costs and Expenses and Other Income (Expense)

General and administrative costs were $3.5 million and $9.1 million for the three and nine months ended June 30, 2007, respectively, an increase of $1.4 million (66%) and $1.5 million (20%) as compared to $2.1 million and $7.6 million for the three and nine months ended June 30, 2006, respectively.  Payroll and related benefit costs increased by $881,000 and $1.0 million for the three and nine months ended June 30, 2007, respectively, in conjunction with the growth in our asset management operations.

Depreciation and amortization expense was $728,000 and $2.2 million for the three and nine months ended June 30, 2007, an increase of $47,000 (7%) and a decrease of $199,000 (8%) as compared to $681,000 and $2.4 million for the three and nine months ended June 30, 2006, respectively.  Depreciation on capital expenditures increased by $163,000 and $41,000 for the three and nine months ended June 30, 2007, respectively, offset by a decrease in depreciation of $116,000 and $240,000 for the three and nine months ended June 30, 2007, respectively, due to a reduction in the average balance of operating leases held.

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Interest expense increased by $8.3 million (437%) and $16.9 million (304%) for the three and nine months ended June 30, 2007, respectively.  The following table reflects interest expense (exclusive of intercompany interest charges), as reported by segment (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2007		2006		2007		2006
Financial fund management	$	6,256	$	882	$	13,184	$	2,363
Real estate		252		64		774		198
Commercial finance		3,395		915		8,076		2,913
Other		273		33		427		85
	$	10,176	$	1,894	$	22,461	$	5,559

The increase in interest expense primarily reflects the increased borrowings by our financial fund management and commercial finance businesses to fund their expanded operations.  Facility utilization (in millions) and interest rates for our financial fund management and commercial finance operations are as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2007			2006			2007			2006
Financial fund management
Average borrowings	$	470.6		$	58.6		$	339.8		$	67.1
Average interest rates		5.2	%		6.0	%		5.1	%		4.6	%
Commercial finance
Average borrowings	$	191.5		$	47.3		$	150.9		$	53.6
Average interest rates		6.5	%		7.5	%		6.8	%		7.1	%

Interest expense for our financial fund management business increased by $5.4 million and $10.8 million, respectively, for the three and nine months ended June 30, 2007.  Increased borrowings were principally used to fund the purchase of loans held for investment, as reflected by the increase in average borrowings of $412.0 million and $272.7 million for the three and nine months ended June 30, 2007, respectively.  These loans, and their associated debt, are held by CDO issuers which we consolidate while the assets accumulate on the warehouse facilities.

Interest expense for our commercial finance operations increased by $2.5 million and $5.2 million, respectively, for the three and nine months ended June 30, 2007 due primarily to an increase in borrowings, offset in part, by a decrease in interest rates.  LEAF increased its borrowings to fund its growth in commercial note and loan originations, the assets acquired from PCB, and its entry into new lines of business, primarily asset-backed lending and credit card advances.  Accordingly, LEAF’s average borrowings increased by $144.2 million and $97.3 million for the three and nine months ended June 30, 2007, respectively.

For the three and nine months ended June 30, 2007, our operations reflected a charge to earnings of $980,000 and $2.3 million, respectively, for minority interests comprised of the following (in thousands):

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
SFF partnerships	$	378	$	429	$	1,150	$	1,215
Commercial finance minority ownership		316		36		422		21
Warehouse providers		286		−		683		−
	$	980	$	465	$	2,255	$	1,236

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At June 30, 2007, we owned a 15% and 36% limited partner interest in SFF I and SFF II, respectively, which invest in the equity of certain of the CDO issuers we have formed.  In addition, certain warehouse providers are entitled to receive 10% to 15% of the interest spread earned on their respective warehouse facilities which hold Apidos and Resource Europe bank loan assets during their accumulation stage.  The 14.9% minority interest in LEAF at June 30, 2007 includes the LEAF stock issued upon the conversion of a note in fiscal 2006 and the issuance by LEAF of its restricted stock in fiscal 2006 and 2007.

Other income, net, was $2.1 million and $6.4 million for the three and nine months ended June 30, 2007, respectively, an increase of $1.3 million (157%) and $2.8 million (76%) as compared to $809,000 and $3.6 million for the three and nine months ended June 30, 2006, respectively.  The principal components of other income, net, are as follows:

· during the three and nine months ended June 30, 2007, we recorded gains of $864,000 and $3.0 million, respectively, from the sale of 60,000 and 190,000 shares, respectively, of The Bancorp, Inc. common stock.  No shares were sold in the prior year periods;

· an increase of $107,000 and $355,000 in dividends earned on our shares of RCC; and

· in fiscal 2002, we charged operations $1.0 million, which was the amount of our maximum exposure relating to the settlement of a lawsuit.  One of the insurance carriers refused to participate in the settlement.  In the second quarter of fiscal 2006, we prevailed in our action against the carrier, received a $200,000 reimbursement and reversed the $1.0 million accrual.

Our effective tax rate (income taxes as a percentage of income from continuing operations before taxes) increased to 42% for the three months ended June 30, 2007 from 11% for the three months ended June 30, 2006.  In the three months ended June 30, 2006, the lower tax rate reflects having recorded a $1.0 million net deferred tax asset.

Our effective tax rate for the nine months ended June 30, 2007 was 37% reflecting the reversal of $1.1 million of valuation allowance, as compared to 16% for the nine months ended June 30, 2006, reflecting the reversal of $3.1 million of valuation allowance having recorded the $1.0 million deferred tax asset.

We project our effective tax rate for our fourth fiscal quarter ended September 30, 2007 to be 42%, resulting in a 39% projected annual effective tax rate for fiscal 2007.

We are under examination by the Internal Revenue Service, or IRS, for our 2004 and 2005 tax years.  At June 30, 2007, we recorded $970,000 of interest expense to discontinued operations associated with the 2004 tax assessment as a result of disallowed bad debt deductions taken on loans in our legacy portfolio.  In July 2007, we settled the 2004 examination and paid tax assessment and interest.  We expect to file an net operating loss, or NOL, carryback claim for the 2004 tax year and anticipate recovering 100% of the tax assessment plus approximately $250,000 of interest as certain loans were resolved within the 2006 tax year.  We further anticipate the 2005 examination will be concluded in fiscal 2008 and have recorded a liability and corresponding deferred tax asset for the proposed examination adjustments relating to similarly disallowed bad debt deductions taken in the 2005 tax year, including a $920,000 charge to discontinued operations for estimated interest expense.

Discontinued Operations

In accordance with Statement of Financial Accounting Standards, or SFAS, 144, "Accounting for the Impairment or Disposal of Long Lived Assets," our decision to dispose of certain entities has resulted in the presentation of these operations as discontinued.

Losses from discontinued operations for the three and nine months ended June 30, 2007 primarily reflect the $1.9 million of interest assessments related to the 2004 and 2005 IRS tax examinations.  Loss on disposal for the three and nine months ended June 30, 2007 includes a $374,000 write-down to market value of a property held for sale.

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Discontinued operations, principally from our real estate segment, were as follows (in thousands):

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Operating (loss) income (period prior to disposition)	$	(1,945	)	$	297		$	(2,031	)	$	2,822
Loss on disposal		(286	)		(443	)		(286	)		(1,267	)
Benefit (provision) for income taxes		781			33			811			(578	)
Discontinued (loss) income, net of tax	$	(1,450	)	$	(113	)	$	(1,506	)	$	977

The activity in the number of real estate investments held for sale, including FIN 46-R entities and owned properties, was as follows:

	Three Months Ended					Nine Months Ended
	June 30,					June 30,
	2007		2006			2007		2006
Balance, beginning of period	$	1	$	3		$	1	$	6
Net additions		−		−			−		1
Resolved		−		(2	)		−		(6	)
Balance, end of period	$	1	$	1		$	1	$	1

Cumulative Effect of Change in Accounting Principle

Historically, we presented our equity in the earnings and losses of the Trapeza entities on a one-quarter lag as permitted under generally accepted accounting principles.  Improvements in the timeliness and availability of financial data from the Trapeza entities allowed us to report our share in the earnings of these entities on a current basis as of October 1, 2005.  As a result of this change, our equity in the earnings of the Trapeza entities of $1.4 million, net of tax of $983,000 for the three months ended September 30, 2005 has been reflected in the consolidated statements of income as a cumulative change in accounting principle as of October 1, 2005.

Liquidity and Capital Resources

General.  Our major sources of liquidity have been from borrowings under our existing credit facilities, the resolution of our real estate legacy portfolio, and proceeds from the sale of the shares of The Bancorp, Inc. we hold.  We have employed these funds principally to expand our specialized asset management operations, including our sponsorship and investment in RCC and the repurchase of our common stock.  We expect to fund our asset management businesses from a combination of cash to be generated by operations, continued resolution of our legacy portfolio and expanded borrowings under our existing credit facilities.  The following table sets forth our sources and uses of cash for the periods presented (in thousands):

	Nine Months Ended
	June 30,
	2007			2006
Used in operating activities of continuing operations	$	(128,446	)	$	(48,386	)
Used in investing activities of continuing operations		(48,908	)		(36,223	)
Provided by financing activities of continuing operations		158,573			42,449
(Used in) provided by discontinued operations		(1,672	)		39,855
Cash retained by entities previously consolidated		−			(3,825	)
Decrease in cash	$	(20,453	)	$	(6,130	)

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We had $17.2 million in cash and cash equivalents at June 30, 2007, a decrease of $20.4 million (54%) from $37.6 million at September 30, 2006.  Our ratio of earnings from continuing operations before income taxes, minority interest and interest expense to fixed charges was 2.3 to 1.0 for the nine months ended June 30, 2007 as compared to 4.7 to 1.0 for the nine months ended June 30, 2006.  The decrease in this ratio reflects primarily the increase in interest expense associated with the increased utilization of secured warehouse credit facilities to purchase loans held for sale as well as increased borrowings under our commercial finance secured credit facilities to support the expanded operations of that segment.  This increase in debt is further reflected in the increase in our ratio of debt to equity to 376% at June 30, 2007 from 89% at September 30, 2006.

Cash Flows from Operating Activities. Net cash used in operating activities of continuing operations increased by $80.1 million for the nine months ended June 30, 2007, substantially as a result of an $88.2 million increase in investments in commercial finance in connection with the expanded operations of that segment.

Cash Flows from Investing Activities. Net cash used by the investing activities of our continuing operations increased by $12.7 million for the nine months ended June 30, 2007, primarily reflecting the following:

· $20.7 million paid to acquire the leasing assets of PCB in June 2007;

· a $14.9 million decrease in proceeds received from the sale of real estate properties, principally a $10.9 million decrease in proceeds from the sale of TIC property interests to investors; and

· a $7.2 million increase in restricted cash balances related to escrow deposits maintained on CDO and commercial finance warehouse facilities; and

· a $1.5 million use of cash related to an increase in other assets.

These increases in cash used by investing activities were offset, in part by:

· a $31.6 million decrease in purchases of investments, reflecting a $16.3 million decrease in investments in real estate, primarily TIC properties, and the prior year purchase of $13.5 million worth of RCC stock (900,000 shares at $15.00 per share).

Cash Flows from Financing Activities.  Net cash provided by the financing activities of our continuing operations increased by $116.1 million for the nine months ended June 30, 2007, principally due to the following:

· a $103.8 million increase in our borrowings, net of repayments, reflecting the additional net borrowings to fund the expanded operations of our commercial finance business in addition to its acquisition of the commercial finance assets acquired from PCB;

· a $10.7 million increase in cash as a result of the reduced number of our shares repurchased.  We repurchased 117,500 shares of treasury stock at a cost of $2.8 million in the nine months ended June 30, 2007 as compared to 277,414 shares at a cost of $13.5 million during the nine months ended June 30, 2006; and

· a $1.8 million tax benefit from the exercise of employee stock options in the nine months ended June 30, 2007; no benefit was recorded in the prior year period.

Cash Retained by Entities Previously Consolidated.  As of June 30, 2006, we ceased to consolidate two affiliated partnerships that invest in regional banks due to a change in the rights of the limited partners to remove us as the general partner.  Accordingly, the statement of cash flows for the nine months ended June 30, 2006 reflects the $3.8 million decrease in cash from these entities that had been previously consolidated.

Cash Flows from Discontinued Operations.  Net cash provided by discontinued operations decreased by $41.5 million, principally reflecting $36.0 million from the sale of four FIN 46-R assets during the nine months ended June 30, 2006.  There were no corresponding sales in the nine months ended June 30, 2007.  Additionally, the nine months ended June 30, 2007 includes $1.9 million in interest assessments from the 2004 and 2005 IRS tax examinations.

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Capital Requirements

The amount of funds we must commit to investments in our financial fund management, real estate and commercial finance operations depends upon the level of funds raised through financial fund management, real estate and commercial finance programs.  We believe cash flows from operations, cash and other working capital and amounts available under our credit facilities will be adequate to fund our contribution to these programs.  However, the amount of funds we raise and the level of our investments will vary in the future depending on market conditions.

Contractual Obligations and Other Commercial Commitments

The following tables summarize our contractual obligations and other commercial commitments at June 30, 2007 (in thousands):

			Payments Due By Period
Contractual obligations:	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Long-term debt (1)	$	17,279	$	825	$	3,253	$	12,672	$	529
Secured credit facilities (1)		316,992		214,834		102,158		−		−
Capital lease obligations (1)		129		38		91		−		−
Operating lease obligations		14,552		2,834		4,313		1,990		5,415
Purchase obligations		-		-		-		-		-
Other long-term liabilities		515		281		234		-		-
Total contractual obligations	$	349,467	$	218,812	$	110,049	$	14,662	$	5,944

(1) Not included in the table above are estimated interest payments calculated at rates in effect at June 30, 2007 as follows:  less than 1 year:  $29.3 million; 1-3 years:  $10.2 million; 4-5 years:  $3.4 million; and after 5 years: $43,000.

			Amount of Commitment Expiration Per Period
Other commercial commitments:	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		After 5 Years
Guarantees	$	34,962	$	34,962	$	−	$	−	$	−
Standby letters of credit		246		246		−		−		−
Standby replacement commitments		−		−		−		−		−
Other commercial commitments		569,956		23,068		168,867		7,281		370,740
Total commercial commitments	$	605,164	$	58,276	$	168,867	$	7,281	$	370,740

Senior lien financing obtained with respect to certain acquired properties, TIC investment programs and real estate loans are with recourse only to the properties securing them, subject to certain standard exceptions.  We provide guarantees on these senior liens, TIC programs, and loans totaling $549.3 million which expire as the related indebtedness is paid down over the next ten years.

Through our financial fund management subsidiary, we have commitments to purchase an equity interest in all of the CDOs currently in their warehouse stage.  These equity commitments, which total approximately $17.6 million as of June 30, 2007, are contingent upon the successful completion of the respective CDOs over the next twelve months.  Upon the close of each CDO, the amount of equity we actually purchase may be less than the originally estimated commitment.

The January 2007 warehouse agreement with Morgan Stanley provides for a guarantee by us of $14.3 million of potential losses on a portfolio of bank loans.  This guarantee, secured by a $4.0 million cash deposit, expires upon the closing of the associated CDO which we anticipate in fiscal 2008.

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The August 2006 warehouse agreement with Credit Suisse provides for a guarantee by us of $10.0 million of potential losses on a portfolio of bank loans.  This guarantee, secured by a $5.0 million cash deposit, expires upon the closing of the associated CDO which we anticipate in fiscal 2008.

A May 2007 engagement letter (in connection with a warehouse agreement) with Morgan Stanley provides a guarantee by us of $6.0 million of potential losses on a portfolio of bank loans.  As of June 30, 2007, there were no borrowings on this facility.  As of July 31, 2007, outstanding borrowings were approximately $117.0 million.

A subsidiary of LEAF has a $33.0 million non-recourse line of credit with a financial institution that expires on September 15, 2008.  LEAF has committed to a 9.1% participation in the borrowings on this line of credit, to a maximum of $3.0 million.  As of June 30, 2007, there were no outstanding borrowings under this line.

Critical Accounting Policies

We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.  In preparing these statements, we must make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and cost and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates, including those related to the provision for possible losses, deferred tax assets and liabilities and certain accrued liabilities.  We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

For a detailed discussion on the application of policies critical to our business operations and other accounting policies, see our Annual Report on Form 10-K for fiscal 2006, at Note 2 of the “Notes to Consolidated Financial Statements.”

Recently Issued Financial Accounting Standards

In June 2007, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants, or AICPA, issued Statement of Position, or SOP, 07-1, “Clarification of the Scope of the Audit and Accounting Guide “Investment Companies” and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies.”  This SOP provides guidance for determining whether an entity is within the scope of the AICPA Audit and Accounting Guide Investment Companies (the “Guide”).  Additionally, it provides guidance as to whether a parent company or an equity method investor can apply the specialized industry accounting principles of the Guide (referred to as investment company accounting).  This SOP is effective for fiscal years beginning on or after December 15, 2007, with early application encouraged (our fiscal year beginning October 1, 2008).  We are currently evaluating the impact, if any, the adoption of SOP 07-1 may have on our financial statements.

In May 2007, the Financial Accounting Standards Board, or FASB, issued a Staff Position, or FSP, FIN 46-R(7), “Application of FASB Interpretation 46-R to Investment Companies.”  FSP FIN 46-R(7) amends the scope of the exception to FIN 46-R to state that investments accounted for at fair value in accordance with investment company accounting are not subject to consolidation under FIN 46-R.  This interpretation is effective for fiscal years beginning on or after December 15, 2007 (our fiscal year beginning October 1, 2008).  Certain of our consolidated subsidiaries currently apply the investment company accounting.  We are currently evaluating the impact, if any, the adoption of this interpretation will have on our financial statements.

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In March 2007, the FASB ratified Emerging Issues Task Force, or EITF, Issue 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards.”  EITF 06-11 requires companies to recognize the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for nonvested equity-classified employee share-based payment awards as an increase to additional paid-in capital.  EITF 06-11 is effective for fiscal years beginning after September 15, 2007 (our fiscal year beginning October 1, 2007).  We do not expect EITF 06-11 will have a material impact on our financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of SFAS 115," which permits entities to choose to measure many financial instruments and certain other items at fair value.  The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates.  Entities choosing the fair value option would be required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  Adoption is required for fiscal years beginning after November 15, 2007.  We are currently evaluating the expected effect of SFAS 159 on our consolidated financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements,” which provides guidance on measuring the fair value of assets and liabilities.  SFAS 157 will apply to other accounting pronouncements that require or permit assets or liabilities to be measured at fair value but does not expand the use of fair value to any new circumstances.  This standard will also require additional disclosures in both annual and quarterly reports.  SFAS 157 will be effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by us in the first quarter of our fiscal year 2009.  We are currently determining the effect, if any, the adoption of SFAS 157 will have on our financial statements.

In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin, or SAB, 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.”  SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement.  It establishes an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the company's financial statements and the related financial statement disclosures.  SAB 108 is effective for our current fiscal year ending September 30, 2007.  Management does not believe adoption of SAB 108 will have a material impact on our consolidated financial statements.

On July 13, 2006, the FASB issued Interpretation, or FIN, 48, “Accounting for Uncertainty in Income Taxes - An Interpretation of SFAS 109.”  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109, “Accounting for Income Taxes.”  FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The new accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  The provisions of FIN 48 are effective as of the beginning of the first fiscal year beginning after December 15, 2006 with early adoption permitted if no interim financial statements have been issued.  We will not elect for early adoption of FIN 48; accordingly, the provisions of FIN 48 will be implemented in the quarter ending December 31, 2007.  We are currently determining the effect, if any, the adoption of FIN 48 will have on our financial statements.

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ITEM 3.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks.  The following discussion is not meant to be a precise indicator of expected future losses, but rather an indicator of reasonable possible losses.  This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures.  All of our market risk-sensitive instruments were entered into for purposes other than trading.

General

We are exposed to various market risks, principally fluctuating interest rates.  These risks can impact our results of operations, cash flows and financial position.  We manage these risks through regular operating and financing activities.

The following analysis presents the effect on our earnings, cash flows and financial position as if hypothetical changes in market risk factors occurred at June 30, 2007.  We analyze only the potential impacts of hypothetical assumptions.  Our analysis does not consider other possible effects that could impact our business.

Financial Fund Management

At June 30, 2007, we had two outstanding secured warehouse facilities to purchase bank loans with balances of $204.4 million and $209.9 million at interest rates of 5.99% and 4.58%, respectively.  A hypothetical 10% change in the interest rates on these facilities would change our annual interest expense by a total of approximately $712,000 based on projected CDO execution dates.

Real Estate

Portfolio Loans and Related Senior Liens.  As of June 30, 2007, we believe that none of the three loans held in our portfolio that have senior liens are sensitive to changes in interest rates since:

· the loans are subject to forbearance or other agreements that require all of the operating cash flow from the properties underlying the loans, after debt service on senior lien interests, to be paid to us and therefore are not currently being paid based on the stated interest rates of the loans;

· the senior lien interests ahead of our interests are at fixed rates and are not subject to interest rate fluctuation that would affect payments to us; and

· each loan has significant accrued and unpaid interest and other charges outstanding to which cash flow from the underlying property would be applied even if cash flows were to exceed the interest due, as originally underwritten.

FIN 46-R Loan.  A mortgage that we consolidate at June 30, 2007 as a result of FIN 46-R is at a fixed interest rate and, therefore, not subject to interest rate fluctuations.

Commercial Finance

At June 30, 2007, we had weighted average borrowings of $84.8 million under two secured revolving credit facility at an effective interest rate of 7.47%.  A hypothetical 10% change in the interest rate on these facilities would change our annual interest expense by $442,000.  In addition, we had weighted average borrowings of $66.1 million under a secured revolving credit facility with Morgan Stanley at June 30, 2007.  This facility is not subject to fluctuation in the interest rates because we have entered into interest rate swap agreements which in effect create a fixed interest rate.

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ITEM 4.                      CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our Chief Executive Officer and Chief Financial Officer and with the participation of our disclosure committee, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

During the three months ended June 30, 2007, there were no significant changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 2.                      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about purchases by us during the three months ended June 30, 2007 of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
April 1 to April 30, 2007		−	$	−		−	$	30,213,569
May 1 to May 31, 2007		50,000	$	23.47		50,000	$	29,042,828
June 1 to June 30, 2007		67,500	$	23.74		67,500	$	27,442,356
Total		117,500				117,500

(1) On September 21, 2004, the Board of Directors approved a share repurchase program under which we may repurchase our common stock up to an aggregate purchase price of $50.0 million.

In July 2007, the Board of Directors authorized a new share repurchase plan under which we may repurchase up to $50.0 million of our outstanding common stock.  The new plan replaces the plan authorized in September 2004.  These purchases may be made at any time in the open market or through privately-negotiated transactions.

(2) Through June 30, 2007, we have repurchased an aggregate of 1,221,139 shares at a total cost of approximately $22.6 million pursuant to our stock repurchase program, at an average cost of $18.52 per share.

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

At our Annual Meeting of Stockholders held on May 21, 2007, our stockholders re-elected two directors, Messrs. Michael J. Bradley and Andrew M. Lubin, to serve three-year terms expiring at the annual meeting of stockholders in 2010.  The voting results were 16,284,841 shares for and 274,313 shares withheld for Mr. Bradley and 16,151,700 shares for and 407,454 shares withheld for Mr. Lubin.  Messrs. Edward E. Cohen, Jonathan Z. Cohen, Carlos C. Campbell, Kenneth A. Kind, Hersh Kozlov and John S. White continue to serve their terms as directors of the Company.

Additionally, our stockholders approved other matters voted on at the meeting, specifically (a) the Annual Incentive Plan for Senior Executives (13,271,229 for, 300,745 against and 12,481 abstain) and (b) the Amended and Restated Omnibus Equity Compensation Plan (11,366,929 for, 2,653,444 against and 14,082 abstain).  There were 2,524,699 broker non-votes for each of the Annual Incentive Plan for Senior Executives and the Amended and Restated Omnibus Equity Compensation Plan.

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ITEM 6.                      EXHIBITS

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of Resource America. (1)
3.2	Amended and Restated Bylaws of Resource America. (1)
10.1	Loan and Security Agreement, dated May 24, 2007, between Resource America, Inc. and Commerce Bank, N.A. (5)
10.14	Form of Stock Award Agreement (2)
10.16	U.S. $250,000,000 Receivables Loan and Security Agreement, dated as of October 31, 2006, among Resource Capital Funding II, LLC, as the Borrower, and LEAF Financial Corporation, as the Servicer, and Morgan Stanley Bank, as a Lender and Collateral Agent, and U.S. Bank National Association, as the Custodian and the Lender’s Bank and Lyon Financial Services, Inc. (D/B/A U.S. Bank Portfolio Services), as the Backup Servicer. (3)
10.16(a)	First Amendment to Receivables Loan and Security Agreement, dated as of October 31, 2006. (3)
10.16(b)	Purchase and Sale Agreement, dated as of October 31, 2006. (3)
10.16(c)	First amendment to Purchase and Sale Agreement, dated as of December 21, 2006. (3)
10.16(d)	Morgan Stanley Bank, Fee Letter, dated October 31, 2006 (3)
10.17	Second Amendment to Credit Agreement, dated December 2006, between LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank. (3)
10.17(c)	Third Amendment to Credit Agreement, dated March 14, 2007, between LEAF Financial Corporation, LEAF Funding, Inc. and National City Bank. (4)
10.17 (d)	Credit Agreement, dated June 22, 2007, between LEAF Commercial Finance Co., LLC, Various Financial Institutions and Other Persons from Time to Time Parties thereto, and National City Bank.
10.18	Limited Liability Company Agreement of LEAF Ventures, LLC, dated March 2007, between LEAF Financial Corporation and Crit DeMent, Miles Herman, Robert Moskovitz, David English, Matthew Goldenberg and Nicholas Capparelli. (4)
10.19	Credit Agreement, dated March 15, 2007, between Merit Capital Advance, LLC and Deutsche Bank AG Cayman Islands (4)
10.19(a)	Limited Liability Company Agreement of Merit Capital Advance, LLC, dated March 15, 2007. (4)
10.19(b)	Merit Capital Advance, LLC 15% Subordinated Convertible PIK Note, dated March 15, 2007. (4)
10.20	Asset Purchase Agreement, dated June 19, 2007, between LEAF Funding, Inc., LEAF Financial Corporation and LEAF Commercial Finance Co., LLC and Pacific Capital Bank, N.A.
10.21	Loan and Security Agreement dated May 24, 2007 by and among Resource America, Inc., Commerce Bank, N.A. as Agent, Commerce bank, N.A. as issuing bank, and each of the financial institutions identified as lenders on Schedule A to the Loan and Security Agreement. (5)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 1350 18 U.S.C., as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended December 31, 1999 and by this reference incorporated herein.

(2) Filed previously as an exhibit to our Report on Form 8-K filed on February 15, 2005 and by this reference incorporated herein.

(3) Filed previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended December 31, 2006 and by this reference incorporated herein.

(4) File previously as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 and by this reference incorporated herein.

(5) Filed previously as an exhibit to our Report on Form 8-K filed on May 31, 2007 and by this reference incorporated herein.

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SIGNATURES

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

	RESOURCE AMERICA, INC.
	(Registrant)
Date: August 9, 2007	By:           /s/ Steven J. Kessler
	STEVEN J. KESSLER
	Executive Vice President and Chief Financial Officer

Date: August 9, 2007	By:           /s/ Arthur J. Miller
	ARTHUR J. MILLER
	Vice President and Chief Accounting Officer

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