<PAGE>
________________________________________________________________________________

                         SECURITIES EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

(MARK ONE)

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                                       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 NO. 333-3954
                            ------------------------

                              IMC MORTGAGE COMPANY
               (EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)

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

<TABLE>
<S>                                                        <C>
                         FLORIDA                                                  59-3350574
             (STATE OR OTHER JURISDICTION OF                                   (I.R.S. EMPLOYER
             INCORPORATION OR ORGANIZATION)                                 IDENTIFICATION NUMBER)

                3450 BUSCHWOOD PARK DRIVE
                     TAMPA, FLORIDA                                                  33618
        (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                                  (ZIP CODE)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 932-2211

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

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                      None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          Common Stock, $.01 par value
                                (TITLE OF CLASS)

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

     Indicate by check mark if disclosure  of delinquent filer pursuant to  Item
405 of Regulation 2-K is not contained herein, and will not be contained, to the
best   of  the  registrant's  knowledge,  in  definitive  proxy  or  information
statements incorporated  by reference  in Part  III  of this  Form 10-K  or  any
amendment to this Form 10-K. [x]

     The  aggregate market  value of Common  Stock held by  nonaffiliates of the
registrant, based on the closing price of Common Stock as reported by the Nasdaq
National Market  on  March 21,  1997  was  $342,431,860. For  purposes  of  this
computation,   all  officers,  directors,  and  10%  beneficial  owners  of  the
registrant are deemed to be affiliates. Such determination should not be  deemed
an  admission that  such officers,  directors or  10% beneficial  owners are, in
fact, affiliates of the registrant. As  of March 21, 1997, 21,949,142 shares  of
Common Stock were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

     Registrants  proxy statement to annual stockholders meeting incorporated by
reference in Part III.

________________________________________________________________________________

<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
                                     INDEX

<TABLE>
<S>        <C>                                                                                               <C>
           PART I.
Item 1.    Business.......................................................................................     1
Item 2.    Properties.....................................................................................    22
Item 3.    Legal Proceedings..............................................................................    22
Item 4.    Submission of Matters to a Vote of Security Holders............................................    22

           PART II.
Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters..........................    23
Item 6.    Selected Financial Data........................................................................    24
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations..........    26
Item 8.    Financial Statements and Supplementary Data....................................................    37
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........    61

           PART III.
Item 10.   Directors and Executive Officers of the Registrant.............................................    61
Item 11.   Executive Compensation.........................................................................    63
Item 12.   Security Ownership of Certain Beneficial Owners and Management.................................    66
Item 13.   Certain Relationships and Related Transactions.................................................    69

           PART III.
Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K................................    73
           Signatures.....................................................................................    74
</TABLE>

<PAGE>
ITEM 1. BUSINESS

     The  statements in this  Report which are not  merely reports of historical
facts are forward-looking statements and actual results could differ  materially
due  to  important  factors such  as  reduced demand  for  non-conforming loans,
competitive forces, too-high expectations of acquired companies, limitations  on
available  funds and market forces affecting the price of IMC Mortgage Company's
shares.

     IMC Mortgage Company is a  specialized consumer finance company engaged  in
purchasing,  originating,  servicing  and  selling  home  equity  loans  secured
primarily by  first liens  on one-  to four-family  residential properties.  The
Company  focuses on lending  to individuals whose  borrowing needs are generally
not being served by traditional financial institutions due to such  individuals'
impaired  credit profiles and other factors. Loan proceeds typically are used by
such individuals  to consolidate  debt,  to finance  home improvements,  to  pay
educational expenses and for a variety of other uses. By focusing on individuals
with  impaired  credit  profiles  and by  providing  prompt  responses  to their
borrowing requests, the Company  has been able to  charge higher interest  rates
for  its  loan  products than  typically  are charged  by  conventional mortgage
lenders. References herein to 'IMC' or the 'Company' mean IMC Mortgage  Company,
a  Florida corporation and its subsidiaries  on a consolidated basis, unless the
context otherwise requires.

     IMC purchases and  originates non-conforming  home equity  loans through  a
diversified network of correspondents (which includes the Industry Partners) and
mortgage  loan brokers and on a retail basis through its direct consumer lending
effort.  As  of  December  31,  1996,   IMC  had  a  network  of  374   approved
correspondents,  including the  Industry Partners, 1,693  approved mortgage loan
brokers and 17 Company-owned retail branches. During January and February  1997,
IMC   added  49  retail   branches  through  the   acquisition  of  four  retail
non-conforming mortgage lenders.  Since its  inception in August  1993, IMC  has
experienced  considerable growth  in loan  production, with  total purchases and
originations of $29.6 million, $282.9 million, $621.6 million and $1.77  billion
in  1993, 1994,  1995 and  1996, respectively.  IMC's network  of correspondents
accounted for 82.5%, 87.5% and 89.4% of IMC's loan production in 1994, 1995  and
1996,  respectively.  Through its  network  of mortgage  brokers,  IMC generated
17.5%,  10.7%  and  6.8%  of  its  loan  production  in  1994,  1995  and  1996,
respectively.  IMC's  direct  consumer  lending  effort,  which  began  in 1995,
contributed approximately 1.8%  and 3.8% of  loan production in  1995 and  1996,
respectively. IMC is continuing to expand its direct consumer lending by opening
branch  offices  and expanding  its use  of advertising,  direct mail  and other
marketing strategies, and through strategic acquisitions.

     As of December 31, 1996, a majority of the Industry Partners were  required
to  sell to  IMC, on  prevailing market  terms and  conditions, an  aggregate of
$162.0 million of  home equity loans  per year. IMC  has consistently  purchased
loan  production from the  Industry Partners in excess  of such aggregate annual
commitment. Actual  sales to  IMC  by the  Industry Partners  aggregated  $337.5
million  for the year ended December 31,  1996. As a result of IMC's acquisition
of two  of the  Industry  Partners (Mortgage  America  and Equity  Mortgage)  in
January  and February  1997, the  contractual annual  sales commitment  from the
Industry Partners  was reduced  by  $36.0 million  to  $126.0 million.  The  two
acquired Industry Partners originated an aggregate of approximately $284 million
residential loans in 1996. These acquisitions reflect IMC's business strategy to
increase  its retail  loan origination  channels through  acquisitions of retail
non-conforming lenders.

     IMC sells the majority of its loans through its securitization program  and
retains  rights  to  service such  loans.  Through  December 31,  1996,  IMC had
completed eight  securitizations totaling  $1.4 billion  of loans.  The  Company
earns  servicing  fees on  a  monthly basis  at  a rate  of  0.50% per  year and
ancillary fees  on the  loans it  services in  the securitization  pools. As  of
December  31, 1995 and 1996, IMC had a servicing portfolio of $535.8 million and
$2.15 billion, respectively.

     The Company's  total revenues  increased from  $19.7 million  for the  year
ended  December 31, 1995 to $65.7 million  for the year ended December 31, 1996,
while pro forma net income increased from $4.1 million to $17.9 million in those
periods. Gain on  sale of  loans, net, represented  $15.1 million,  or 76.9%  of
total  revenues,  for the  year ended  December  31, 1995  as compared  to $42.1
million, or  64.1% of  total revenues,  for the  year ended  December 31,  1996.
Servicing  income,  net  warehouse interest  income  and other  revenues  in the
aggregate increased from $4.5 million, or 23.1% of total revenues, for the  year
ended  December 31, 1995 to  $23.6 million, or 35.9%  of total revenues, for the
year ended December 31,

                                       1


<PAGE>
1996. IMC's strategy  is to  continue to  increase its  servicing portfolio  and
portfolio  of loans held for  sale in order to  generate increased revenues from
these two sources.

BUSINESS STRATEGY

     The Company utilizes the  following strategies to  maintain and expand  its
core business:

EXPANSION THROUGH ACQUISITIONS

     The  Company is  actively pursuing a  strategy of  acquiring originators of
non-conforming home equity loans. IMC's acquisition strategy focuses on entities
that originate non-conforming  mortgages either  directly from  the consumer  or
through  broker networks. In  1996, IMC acquired Equitystars  and in January and
February 1997 completed the acquisitions  of Mortgage America, CoreWest,  Equity
Mortgage  and  American  Reduction.  Equitystars,  Mortgage  America  and Equity
Mortgage were Industry  Partners. Management  believes that  the acquisition  of
non-conforming  home equity loan originators will benefit IMC by: (i) increasing
IMC's loan  production  volume  by  capturing  all  of  the  acquired  company's
production  instead of  only a portion;  (ii) improving  IMC's profitability and
profit margins because broker and direct-to-consumer originated loans  typically
result  in better profit margins than loans purchased from correspondents; (iii)
adding experienced management; and (iv) broadening IMC's distribution system for
offering new products. In order to incent management of the acquired  companies,
IMC  typically structures  its acquisitions to  include an  initial payment upon
closing of the transaction and to provide for contingent payments tied to future
production and profitability of the acquired company.

EXPANSION OF DIRECT CONSUMER LENDING

     IMC intends to continue  to expand its direct  consumer lending efforts  by
opening  additional branch offices  which will allow IMC  to focus on developing
contacts with individual borrowers, local  brokers and referral sources such  as
accountants,  attorneys and financial  planners. Through December  31, 1996, IMC
opened 17 retail  branch offices.  In January and  February 1997,  IMC added  49
retail  branches through acquisitions.  In addition, IMC's  direct consumer loan
expansion strategy involves: (i) targeting  cities where the population  density
and  economic indicators are favorable for  home equity lending, the foreclosure
rate is  within  normal ranges  and  the  non-conforming loan  market  has  been
underserved;  (ii) testing  the target  market prior  to the  establishment of a
branch office, where local regulations permit, via newspaper, radio, direct mail
advertising and  through  a toll-free  telephone  number which  routes  borrower
inquiries  directly to  a loan officer  in the Company's  Tampa, Florida office;
(iii) if  test  marketing  is  positive, establishing  a  small  branch  office,
generally with an initial staff of two business development representatives; and
(iv) setting up branch offices in executive office space with short-term leases,
which  eliminates  high  startup  costs  for  office  equipment,  furniture  and
leasehold improvements and allows  IMC to exit the  market easily if the  office
does not meet expectations.

EXPANSION OF CORRESPONDENT AND BROKER NETWORKS

     The   Company  intends  to  continue   to  increase  loan  production  from
correspondents and brokers  by increasing  its market  share through  geographic
expansion,  tailored  marketing strategies  and a  continued focus  on servicing
smaller correspondents  in  regions that  historically  have not  been  actively
served  by  non-conforming  home  equity lenders.  IMC  believes  that providing
attractive products  and  responsive  service  in  conjunction  with  consistent
underwriting   and  competitive   prices  strengthens   its  relationships  with
correspondents and brokers.

BROADENING OF PRODUCT OFFERINGS

     The Company  continues to  introduce new  non-conforming home  equity  loan
products  to meet the needs of its  correspondents, brokers and borrowers and to
expand its market  share to  new customers.  The Company  is in  the process  of
introducing  two such products,  HELOCs and secured  credit cards. See  ' -- New
Products and Services.'

                                       2


<PAGE>
STRATEGIC ALLIANCES AND JOINT VENTURES

     In order to increase the Company's volume and diversify its sources of loan
originations over  the long  term, the  Company seeks  to enter  into  strategic
alliances with selected mortgage lenders, pursuant to which the Company provides
working  capital  and  financing  arrangements  and  a  commitment  to  purchase
qualifying loans. In return, the Company  expects to receive a more  predictable
flow of loans and, in some cases, an option to acquire an equity interest in the
strategic partner. To date, the Company has entered into two strategic alliances
in the United States and a joint venture in the United Kingdom.

MAINTENANCE OF UNDERWRITING QUALITY AND LOAN SERVICING

     The Company's underwriting and servicing staff have extensive experience in
the  non-conforming home  equity loan industry.  The management  of IMC believes
that the depth and  experience of its underwriting  and servicing staff  provide
the  Company with the infrastructure necessary  to sustain its recent growth and
maintain  its  commitment  to  high  standards  in  its  underwriting  and  loan
servicing.  As  the  Company continues  to  grow,  it is  committed  to applying
consistent underwriting procedures and criteria and to attracting, training  and
retaining experienced staff.

MAXIMIZE FINANCIAL CASH FLOW AND IMPROVE CASH FLOW

     The  Company intends to  maximize its financial flexibility  in a number of
ways, including by maintaining a significant quantity of mortgage loans held for
sale on its balance sheet. Maintenance of a substantial amount of mortgage loans
held for sale,  which the Company  can sell when  necessary or desirable  either
through  securitizations or whole loans sales, permits IMC to improve management
of its  cash flow  by  increasing its  net interest  income  and to  reduce  its
exposure  to the  volatility of  the capital  markets. During  1996, the Company
securitized approximately 53% of its loan production.

LOANS

OVERVIEW

     IMC's  consumer  finance  activities   consist  primarily  of   purchasing,
originating,  selling and servicing  mortgage loans. The  vast majority of these
loans are non-conforming  mortgage loans  that are  secured by  first or  second
mortgages  on one- to  four-family residences with the  balance secured by small
multi-family residences and  mixed-use properties. Once  loan applications  have
been  received, the  underwriting process  completed and  the loans  funded, IMC
typically packages the  loans in  a portfolio  and sells  the portfolio,  either
through  a securitization  or on  a whole  loan basis  directly to institutional
purchasers. IMC retains the right to  service the loans that it securitizes  and
may  or may not  release the right to  service the loans  it sells through whole
loan sales.

LOAN PURCHASES AND ORIGINATIONS

     As of December 31,  1996, IMC purchased and  originated loans in 48  states
and the District of Columbia through its networks of 374 approved correspondents
and   1,693  approved  brokers  and  through   its  17  retail  branch  offices.
Additionally, 49 new retail branches were added through acquisitions in  January
and February of 1997.

                                       3


<PAGE>
     The  following table shows channels of  loan purchases and originations for
the periods shown:

<TABLE>
<CAPTION>
                                                              PERIOD FROM
                                                               INCEPTION
                                                           (AUGUST 12, 1993)           YEAR ENDED DECEMBER 31,
                                                          THROUGH DECEMBER 31,  ----------------------------------
                                                                 1993             1994        1995         1996
                                                           -----------------    --------    --------    ----------
                                                                           (DOLLARS IN THOUSANDS)

<S>                                                        <C>                  <C>         <C>         <C>
Correspondent(1):
     Principal balance..................................        $28,008         $233,460    $543,635    $1,582,048
     Average principal balance per loan.................             66               66          62            66
     Weighted average loan-to-value ratio(2)(3)(4)......           66.6%            69.2%       70.6%         72.8%
     Weighted average interest rate.....................           10.2%            11.2%       12.1%         11.5%
Broker:
     Principal balance..................................        $ 1,600         $ 49,376    $ 66,584    $  120,700
     Average principal balance per loan.................             55               56          47            54
     Weighted average loan-to-value ratio(2)(3)(4)......           70.9%            71.8%       72.6%         73.4%
     Weighted average interest rate.....................           11.2%            12.0%       12.0%         11.5%
Direct consumer loan originations:
     Principal balance..................................        $    --         $     88    $ 11,410    $   67,564
     Average principal balance per loan.................             --               88          49            58
     Weighted average loan-to-value ratio(2)............            0.0%            80.0%       72.6%         72.5%
     Weighted average interest rate.....................            0.0%            11.3%       11.7%         10.7%
Total loan purchases and originations:
     Principal balance..................................        $29,608         $282,924    $621,629    $1,770,312
     Average principal balance per loan.................             65               64          60            65
     Weighted average loan-to-value ratio(2)(3)(4)......           66.8%            69.7%       70.9%         72.9%
     Weighted average interest rate.....................           10.3%            11.4%       12.1%         11.5%
</TABLE>

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

(1) Includes purchases from  the Industry  Partners with  principal balances  of
    $14.3  million, or 48.3% of total purchases and originations, for the period
    ended December 31,  1993, $116.0 million,  or 41.0% of  total purchases  and
    originations, for the year ended December 31, 1994, $148.4 million, or 23.9%
    of  total purchases and  originations, for the year  ended December 31, 1995
    and $337.5 million, or  19.1% of total purchases  and originations, for  the
    year ended December 31, 1996.

(2) The  weighted  average loan-to-value  ratio  of a  loan  secured by  a first
    mortgage is determined by dividing the amount  of the loan by the lesser  of
    the  purchase  price or  the appraised  value of  the mortgaged  property at
    origination. The weighted average loan-to-value ratio of loans secured by  a
    second  mortgage is determined by taking the sum of the loans secured by the
    first and second mortgages and dividing by the lesser of the purchase  price
    or the appraised value of the mortgaged property at origination.

(3) The  weighted average  loan-to-value ratio  has increased  due to increasing
    competition in the non-conforming home equity  loan market and, to a  lesser
    extent, an increase between 1995 and 1996 in the percentage of the Company's
    loans  in the 'A' Risk category (see  ' -- Loans -- Loan Underwriting'). 'A'
    Risk loans are generally made to more credit worthy borrowers and  therefore
    typically  carry less  credit risk  and involve  higher loan-to-value ratios
    than other categories of non-conforming loans. The Company does not  believe
    that  these increases  in the  loan-to-value ratios  subject it  to material
    increased levels of  potential default and  foreclosure losses, although  no
    assurance can be given with respect thereto.

(4) Includes  loans with loan-to-value ratios between 80% and 100% in the amount
    of $173.1 million,  or 27.9% of  total purchases and  originations, for  the
    year ended December 31, 1995 and $700.4 million, or 39.6% of total purchases
    and  originations, for  the year  ended December  31, 1996.  The increase in

                                              (footnotes continued on next page)

                                       4


<PAGE>
(footnotes continued from previous page)
    loan purchases and  originations with loan-to-value  ratios between 80%  and
    100%  of $527.3 million during 1996 was primarily related to the increase in
    purchases and originations of 'A' Risk  loans of $607.0 million during  1996
    (loan  purchases and originations of 'A'  Risk loans were $276.1 million and
    $883.1  million  for   the  years   ended  December  31,   1995  and   1996,
    respectively).  The Company does not anticipate any material increase in the
    percentages of loans  purchased or originated  with loan-to-value ratios  in
    excess  of 80% solely as  a result of the  acquisitions completed in January
    and February 1997; however some of  the companies that the Company  acquired
    in  1997 originate or purchase loans  with loan-to-value ratios in excess of
    100%, but only when they have a prior 'take-out' commitment for such  loans.
    At  the present time neither the Company, nor the companies it acquired, has
    included such loans  in its securitized  pools or held  such loans for  more
    than thirty days.

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

     The  following table shows channels of loan purchases and originations on a
quarterly basis for the fiscal quarters shown:
<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                     ------------------------------------------------------------------------------------------
                                     MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,   MARCH 31,   JUNE 30,   SEPTEMBER 30,
                                       1995        1995         1995            1995         1996        1996         1996
                                     ---------   --------   -------------   ------------   ---------   --------   -------------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                  <C>         <C>        <C>             <C>            <C>         <C>        <C>
Correspondent(1):
    Principal balance..............  $103,296    $104,727     $ 133,857       $201,755     $236,537    $370,359     $ 428,136
    Average principal balance per
      loan.........................        66          58            60             64           65          66            67
    Weighted average loan-to-value
      ratio(2)(3)(4)...............      69.7%       70.1%         70.8%          71.2%        71.2%       71.9%         72.3%
    Weighted average interest
      rate.........................      12.5%       12.6%         12.1%          11.8%        11.5%       11.4%         11.6%
Broker:
    Principal balance..............  $ 14,948    $ 17,327     $  17,297       $ 17,012     $ 21,079    $ 25,098     $  30,625
    Average principal balance per
      loan.........................        52          46            45             48           54          53            53
    Weighted average loan-to-value
      ratio(2)(3)(4)...............      72.7%       72.5%         72.7%          72.6%        74.6%       72.8%         73.5%
    Weighted average interest
      rate.........................      12.5%       12.3%         11.8%          11.2%        11.2%       11.6%         11.8%
Direct consumer loan originations:
    Principal balance..............  $  1,141    $  2,613     $   3,836       $  3,820     $  6,371    $  6,780     $  21,471
    Average principal balance per
      loan.........................        52          47            49             50           48          52            59
    Weighted average loan-to-value
      ratio(2).....................      73.8%       70.0%         73.3%          73.2%        73.9%       73.7%         71.3%
    Weighted average interest
      rate.........................      12.4%       11.9%         11.6%          11.4%        11.1%       11.0%         11.0%
Total loan purchases and
  originations:
    Principal balance..............  $119,385    $124,667     $ 154,990       $222,587     $263,987    $402,237     $ 480,232
    Average principal balance per
      loan.........................        64          56            57             62           64          64            66
    Weighted average loan-to-value
      ratio(2)(3)(4)...............      70.1%       70.5%         71.0%          71.4%        71.5%       72.0%         72.2%
    Weighted average interest
      rate.........................      12.5%       12.5%         12.0%          11.8%        11.4%       11.4%         11.6%

<CAPTION>

                                     DECEMBER 31,
                                         1996
                                     ------------

<S>                                  <C>
Correspondent(1):
    Principal balance..............    $547,016
    Average principal balance per
      loan.........................          66
    Weighted average loan-to-value
      ratio(2)(3)(4)...............        74.7%
    Weighted average interest
      rate.........................        11.6%
Broker:
    Principal balance..............    $ 43,898
    Average principal balance per
      loan.........................          54
    Weighted average loan-to-value
      ratio(2)(3)(4)...............        73.1%
    Weighted average interest
      rate.........................        11.4%
Direct consumer loan originations:
    Principal balance..............    $ 32,942
    Average principal balance per
      loan.........................          63
    Weighted average loan-to-value
      ratio(2).....................        72.8%
    Weighted average interest
      rate.........................        10.4%
Total loan purchases and
  originations:
    Principal balance..............    $623,856
    Average principal balance per
      loan.........................          65
    Weighted average loan-to-value
      ratio(2)(3)(4)...............        74.4%
    Weighted average interest
      rate.........................        11.5%
</TABLE>

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

(1) Includes purchases  from the  Industry Partners  of an  aggregate  principal
    balance of $148.4 million, or 23.9% of total purchases and originations, for
    the  year ended  December 31,  1995 and  $337.5 million,  or 19.1%  of total
    purchases and originations, for the year ended December 31, 1996.

(2) The weighted  average loan-to-value  ratio  of a  loan  secured by  a  first
    mortgage  is determined by dividing the amount  of the loan by the lesser of
    the purchase  price or  the appraised  value of  the mortgaged  property  at
    origination.  The weighted average loan-to-value ratio of loans secured by a
    second mortgage is determined by taking the sum of the loans secured by  the
    first  and second mortgages and dividing by the lesser of the purchase price
    or the appraised value of the mortgaged property at origination.

                                              (footnotes continued on next page)

                                       5


<PAGE>
(footnotes continued from previous page)

(3) The weighted average  loan-to-value ratio  has increased  due to  increasing
    competition  in the non-conforming home equity  loan market and, to a lesser
    extent, an increase between 1995 and 1996 in the percentage of the Company's
    loans in the 'A' risk category (see  ' -- Loans -- Loan Underwriting').  'A'
    risk  loans are generally made to more credit worthy borrowers and therefore
    typically carry less  credit risk  and involve  higher loan-to-value  ratios
    than  other categories of non-conforming loans. The Company does not believe
    that these  increases in  the loan-to-value  ratios subject  it to  material
    increased  levels of potential  default and foreclosure  losses, although no
    assurance can be given with respect thereto.

(4) Includes loans with loan-to-value ratios between 80% and 100% in the  amount
    of  $173.1 million,  or 27.9% of  total purchases and  originations, for the
    year ended December 31, 1995 and $700.4 million, or 39.6% of total purchases
    and originations, for the year ended December 31, 1996. The increase in loan
    purchases and originations with loan-to-value ratios between 80% and 100% of
    $527.3 million  during  1996  was  primarily  related  to  the  increase  in
    purchases  and originations of 'A' Risk  loans of $607.0 million during 1996
    (loan purchases and originations of 'A'  Risk loans were $276.1 million  and
    $883.1   million  for   the  years  ended   December  31,   1995  and  1996,
    respectively). The Company does not anticipate any material increase in  the
    percentages  of loans purchased  or originated with  loan-to-value ratios in
    excess of 80% solely  as a result of  the acquisitions completed in  January
    and  February 1997; however some of  the companies that the Company acquired
    in 1997 originate or purchase loans  with loan-to-value ratios in excess  of
    100%,  but only when they have a prior 'take-out' commitment for such loans.
    At the present time neither the Company, nor the companies it acquired,  has
    included  such loans in  its securitized pools  or held such  loans for more
    than thirty days.

     The following table  shows lien position,  weighted average interest  rates
and loan-to-value ratios for the periods shown.

<TABLE>
<CAPTION>
                                                                   PERIOD FROM INCEPTION           YEAR ENDED
                                                                     (AUGUST 12, 1993)            DECEMBER 31,
                                                                          THROUGH           ------------------------
                                                                     DECEMBER 31, 1993      1994      1995      1996
                                                                   ---------------------    ----      ----      ----
<S>                                                                <C>                      <C>       <C>       <C>
First mortgages:
     Percentage of total purchases and originations.............            88.3%           82.4%     77.0%     90.3%
     Weighted average interest rate.............................            10.2            11.3      12.1      11.4
     Weighted average loan-to-value ratio(1)....................            67.3            69.8      70.7      72.6
Second mortgages:
     Percentage of total purchases and originations.............            11.7%           17.6%     23.0%      9.7%
     Weighted average interest rate.............................            11.1            11.7      12.4      12.2
     Weighted average loan-to-value ratio(1)....................            61.9            68.8      71.7      75.6
</TABLE>

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

(1) The  weighted  average loan-to-value  ratio  of a  loan  secured by  a first
    mortgage is determined by dividing the amount  of the loan by the lesser  of
    the  purchase  price or  the appraised  value of  the mortgaged  property at
    origination. The weighted average loan-to-value ratio of loans secured by  a
    second  mortgage is determined by taking the sum of the loans secured by the
    first and second mortgages and dividing by the lesser of the purchase  price
    or the appraised value of the mortgaged property at origination.

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

     Correspondents.  The  majority of  IMC's loan  volume is  purchased through
correspondents. For the year ended December  31, 1996, $1.6 billion or 89.4%  of
IMC's  total loan purchases and originations were purchased through the mortgage
correspondent network as compared  with $543.6 million or  87.5% of IMC's  total
loan  purchases and originations for  the year ended December  31, 1995. For the
year ended  December 31,  1994, $233.5  million  or 82.5%  of IMC's  total  loan
purchases  and originations were so  acquired. The Industry Partners contributed
$337.5 million or 19.1% of IMC's  total loan purchases and originations for  the
year   ended   December   31,   1996,   $148.4   million   or   23.9%   of  such

                                       6


<PAGE>
purchases and originations for the year ended December 31, 1995, $116.0  million
or 41.0% of such purchases and originations for the year ended December 31, 1994
and  $14.3 million or  48.3% of such  purchases and originations  for the period
ended December 31, 1993. The largest correspondent contributed 7.1% and 9.7%  of
total  loan production  in 1994  and 1995, respectively.  In 1996,  GMAC and its
wholly-owned subsidiary  Residential Funding  Corp. contributed  14.3% of  IMC's
total  loan production. No other correspondent  contributed 10% or more of IMC's
loan purchases and originations in 1996.

     IMC has a list of approved correspondents from which it will purchase loans
on a wholesale  basis. Prior to  approving a financial  institution or  mortgage
banker  as a loan  correspondent, IMC performs an  investigation of, among other
things, the proposed loan correspondent's  lending operations, its licensing  or
registration  and  the  performance  of  its  previously  originated  loans. The
investigation includes contacting  the agency  that licenses  or registers  such
loan  correspondent  and  other  purchasers  of  the  correspondent's  loans and
reviewing the  correspondent's  financial  statements.  IMC  requires  that  the
correspondent  remain current on all licenses required by federal and state laws
and regulations  and  that  it  maintain sufficient  equity  to  fund  its  loan
operations. IMC periodically reviews and updates the information it has relating
to each approved correspondent to insure that all legal requirements are current
and that lending operations continue to meet IMC's standards.

     Before  purchasing loans from  correspondents, IMC requires  that each loan
correspondent  enter  into  a  purchase   and  sale  agreement  with   customary
representations  and warranties  regarding such loans.  Correspondents will then
sell loans to IMC either on a flow basis or through block sales. IMC will make a
flow basis purchase when a correspondent approaches IMC with the application  of
a  prospective borrower. Because  the correspondent has not  yet granted a loan,
IMC has the opportunity to preapprove the loan. In the preapproval process,  the
correspondent   provides  IMC  with  information  about  the  borrower  and  the
collateral for the potential loan, including the applicant's credit,  employment
history,  current assets and liabilities,  a copy of recent  tax returns and the
estimated property value of  the collateral. If IMC  pre-approves the loan,  the
correspondent  lends to the  borrower pursuant to  certain IMC guidelines. After
the  correspondent  has  made  the  loan,  IMC  purchases  the  loan  from   the
correspondent.  A block purchase occurs when the correspondent has made numerous
loans without seeking preapproval from IMC. The correspondent offers a block  of
loans  to IMC  and IMC  will purchase  those loans  in the  block that  meet its
underwriting standards.

     Brokers. For the  years ended December  31, 1995 and  1996, IMC  originated
$66.6  million, or 10.7% of the total, and $120.7 million, or 6.8% of the total,
respectively,  of  the  loans  it   purchased  and  originated  through   broker
transactions. As with correspondents, IMC maintains an approved list of brokers.
Brokers  become part of IMC's network after  IMC performs a thorough license and
credit check. If a  broker is approved, IMC  will accept loan applications  from
the   broker  for  prospective  borrowers.   Because  brokers  may  submit  loan
applications to  several prospective  lenders  simultaneously, IMC  makes  every
effort  to provide a quick response.  IMC will process each application obtained
by a broker from a prospective  borrower and grant or deny preliminary  approval
of  the  application  generally within  one  business  day. In  the  case  of an
application denial, IMC will make all  reasonable attempts to ensure that  there
is no missing information concerning the borrower that might change the decision
on  the  loan.  In addition,  IMC  emphasizes  service to  the  broker  and loan
applicant by having loan processors follow the loan from the time of the initial
application, through  the underwriting  verification and  audit process  to  the
funding  and closing process.  IMC believes that  consistent underwriting, quick
response times and  personal service  are critical  to successfully  originating
loans through brokers.

     Direct  Consumer Loans. For the years ended December 31, 1995 and 1996, IMC
originated $11.4 million, or 1.8%  of the total, and  $67.6 million, or 3.8%  of
the  total,  respectively,  of loans  it  purchased and  originated  directly to
borrowers through its retail branch offices. As of December 31, 1996, IMC had 17
retail branch  offices  located  in  Arizona,  Arkansas,  California,  Colorado,
Florida,  Iowa, Kansas, Kentucky, Massachusetts, Missouri, Nebraska, New Mexico,
Oklahoma, Oregon and Wisconsin. Prior to  the establishment of a branch  office,
where local regulations permit, IMC tests the target market via newspaper, radio
and  direct  mail advertising  and through  a  toll-free telephone  number which
routes borrower inquiries  directly to a  loan officer in  the Company's  Tampa,
Florida  office. If test  marketing is positive, the  branch offices are staffed
with   two   business   development    representatives   and   established    in

                                       7


<PAGE>
executive office space with short-term leases, which eliminates the high startup
costs  for office equipment, furniture and leasehold improvements and allows IMC
to exit the market easily if the office does not meet expectations. IMC plans to
use the  branch office  network for  marketing to  and meeting  with  individual
borrowers, local brokers and referral sources such as accountants, attorneys and
financial  planners.  All advertising,  payment  of branch  expenses, regulatory
disclosure,  appraisals,  title  searches,  loan  processing,  underwriting  and
funding of branch office loans take place in the Tampa, Florida office of IMC or
other centralized underwriting locations. The centralization of loan origination
and  processing  allows IMC  to  control branch  expenses,  supervise regulatory
compliance and offer  consistent underwriting and  processing to its  customers.
IMC  believes that  this strategy  will result  in a  more efficient  use of its
capital and increased loan production. Negative pre-testing results could  limit
expansion  into  new locations,  but  should also  limit  the size  of potential
losses. IMC  plans  to  continue  to open  new  branch  offices  nationwide  and
estimates  that new branches will reach  a monthly operating break-even point by
the fourth  or  fifth month  of  operation.  The start-up  costs  and  operating
expenses  prior to this break-even  point are estimated to  be less than $50,000
per branch, with half  of that expense allocated  to marketing and  advertising.
Additionally,  IMC  feels that,  by centralizing  its marketing  and advertising
efforts in Tampa, Florida, economies of scale will be obtained and expenses will
be controlled.

     Since January  1,  1997, IMC  added  49  new retail  branches  through  the
acquisitions  of  American  Reduction, Equity  Mortgage,  CoreWest  and Mortgage
America. These acquired branches are  located in Arizona, California,  Colorado,
Delaware,  Florida, Georgia,  Illinois, Indiana,  Maryland, Michigan, Minnesota,
Missouri,  New  Jersey,  North  Carolina,  Ohio,  Oregon,  Pennsylvania,   South
Carolina, Tennessee, Utah, Washington and West Virginia.

     Because  borrowers  may  submit loan  applications  to  several prospective
lenders simultaneously, IMC makes every effort to provide a quick response.  IMC
will  process each  application from  a borrower  and grant  or deny preliminary
approval for the application generally within  one business day from receipt  of
the  application. In addition,  the borrower usually has  direct contact with an
underwriter in  the  Tampa,  Florida  office  who  follows  the  loan  from  the
application  to the closing process.  IMC believes that consistent underwriting,
quick  response  times  and  personal  service  are  critical  to   successfully
originating loans directly with potential borrowers.

     Geographic Distribution of Loans. Although IMC is licensed or registered in
48  states and  the District of  Columbia, it has  historically concentrated its
business in  the mid-Atlantic  states. While  this concentration  has  declined,
Maryland  and New York contributed 12.8% and 12.4%, respectively, of IMC's total
loan purchase and origination volume for  the year ended December 31, 1995,  and
New York and New Jersey contributed 14.0% and 7.6%, respectively, of such volume
for  the year ended December 31, 1996.  IMC intends to expand and geographically
diversify its  loan purchase  and origination  activities through  acquisitions,
strategic   alliances,  continued  correspondent  expansion,  expansion  of  its
nationwide retail  branch office  network, the  Preferred Partners  Program  and
opportunities   outside  the   United  States.  See   '  --   New  Products  and
Services -- Preferred Partners Program.'

                                       8


<PAGE>
     The following table  shows geographic  distribution of  loan purchases  and
originations for the periods shown.

<TABLE>
<CAPTION>
                                                                      PERIOD
                                                                  FROM INCEPTION           YEAR ENDED
                                                                 (AUGUST 12, 1993)        DECEMBER 31,
                                                                      THROUGH         --------------------
                                                                 DECEMBER 31, 1993    1994    1995    1996
                                                                 -----------------    ----    ----    ----

<S>                                                              <C>                  <C>     <C>     <C>
States(1):
     New York.................................................          17.5%         11.7%   12.4%   14.0%
     Michigan.................................................          10.0           7.3     8.8     7.8
     New Jersey...............................................           4.0           6.6     9.9     7.6
     Maryland.................................................          14.4          18.6    12.8     7.3
     Florida..................................................           1.8           4.2     6.2     6.7
     Georgia..................................................           5.6           3.2     3.5     5.2
     Illinois.................................................           0.1           2.0     3.0     4.3
     Ohio.....................................................           4.5           4.9     4.7     4.3
     Pennsylvania.............................................           3.3           5.3     4.3     3.8
     Virginia.................................................           2.0           5.4     3.8     3.0
     California...............................................            --            --     0.3     3.0
     All other states.........................................          36.8          30.8    30.3    33.0
</TABLE>

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

(1) States  are listed in order of percentage of loan purchases and originations
    for the year ended December 31, 1996.

LOAN UNDERWRITING

     IMC's origination volume is generated primarily from correspondents selling
loans to IMC either on a flow  basis or through block sales. For  correspondents
and  brokers that originate  loans on a  flow basis, IMC  provides them with its
underwriting guidelines.  Loan  applications received  from  correspondents  and
brokers  on a  flow basis  are classified  according to  certain characteristics
including available collateral, loan size,  debt ratio, loan-to-value ratio  and
the  credit history of the applicant. Loan applicants with less favorable credit
ratings generally  are  offered  loans  with higher  interest  rates  and  lower
loan-to-value  ratios than  applicants with  more favorable  credit ratings. IMC
also purchases  loans on  a block  sale basis,  in which  a correspondent  makes
several  loans without  the preapproval  of the Company  and offers  them to the
Company for  block  purchase. Because  IMC  only  chooses loans  that  meet  its
underwriting  requirements and reunderwrites  them, block loans  follow the same
underwriting guidelines as  flow loan purchases.  To date, the  Company has  not
made a material change in its underwriting standards.

     IMC  maintains a  staff of experienced  underwriters based  in its Florida,
Pennsylvania, New Jersey, Ohio, California, Michigan, Maryland and Rhode  Island
offices.  IMC's loan application and approval process generally is conducted via
facsimile submission  of  the  credit  application  to  IMC's  underwriters.  An
underwriter  reviews  the applicant's  credit history  based on  the information
contained in the application and reports available from credit reporting bureaus
in order to  determine if  the applicant's  credit history  is acceptable  under
IMC's  underwriting guidelines. Based on this  review, the underwriter assigns a
preliminary rating to the application. The  proposed terms of the loan are  then
communicated  to the correspondent or broker responsible for the application who
in turn  discusses  the proposal  with  the  loan applicant.  When  a  potential
borrower  applies  for a  loan  through a  branch  office, the  underwriter will
discuss the proposal directly with the applicant. IMC endeavors to respond,  and
in  most cases does respond, to the correspondent, broker or borrower within one
business day from when the application is received. If the applicant accepts the
proposed terms, the underwriter will contact the broker or the loan applicant to
gather additional information necessary for the closing and funding of the loan.

     All loan applicants  must have  an appraisal of  their collateral  property
prior  to  closing the  loan.  IMC requires  correspondents  and brokers  to use
licensed appraisers that are listed on or qualify for

                                       9


<PAGE>
IMC's approved appraiser list.  IMC approves appraisers based  upon a review  of
sample  appraisals,  professional experience,  education, membership  in related
professional organizations, client recommendations and review of the appraiser's
experience with the particular types  of properties that typically secure  IMC's
loans.  In the case of loans purchased  in blocks, if an appraisal was performed
by an appraiser that is not approved  by IMC, IMC will review the appraisal  and
accept it if the appraisal meets its underwriting standards.

     The  decision to provide a loan to an  applicant is based upon the value of
the underlying collateral, the applicant's creditworthiness and IMC's evaluation
of the applicant's ability to  repay the loan. A  number of factors determine  a
loan applicant's creditworthiness, including debt ratios (the borrower's average
monthly  expenses for debts, including fixed monthly expenses for housing, taxes
and installment debt, as a percentage of gross monthly income), payment  history
on  existing mortgages  and the  combined loan-to-value  ratio for  all existing
mortgages on a property.

     Assessment of  the applicant's  ability  to pay  is  one of  the  principal
elements  in  distinguishing IMC's  lending specialty  from methods  employed by
traditional lenders,  such  as thrift  institutions  and commercial  banks.  All
lenders  utilize debt ratios  and loan-to-value ratios  in the approval process.
Many lenders  simply  use software  packages  to  score an  applicant  for  loan
approval  and fund the loan after auditing the data provided by the borrower. In
contrast, IMC employs experienced  non-conforming mortgage loan underwriters  to
scrutinize  an applicant's  credit profile and  to evaluate  whether an impaired
credit history is  a result of  previous adverse circumstances  or a  continuing
inability  or  unwillingness  to meet  credit  obligations in  a  timely manner.
Personal  circumstances  including  divorce,  family  illnesses  or  deaths  and
temporary  job loss due to layoffs and corporate downsizing will often impair an
applicant's credit record. Among  IMC's specialties is  the ability to  identify
and assist this type of borrower in the establishment of improved credit.

     Upon  completion of the loan's underwriting  and processing, the closing of
the loan is  scheduled with a  closing attorney  or agent approved  by IMC.  The
closing  attorney or agent is responsible for completing the loan transaction in
accordance with applicable law and  IMC's operating procedures. Title  insurance
that  insures IMC's interest  as mortgagee and  evidence of adequate homeowner's
insurance naming IMC as an additional insured are required on all loans.

     IMC has established classifications with respect to the credit profiles  of
loans  based on certain of the  applicant's characteristics. Each loan applicant
is placed  into one  of four  letter ratings  'A' through  'D,' with  subratings
within  those categories. Ratings  are based upon a  number of factors including
the applicant's credit history,  the value of the  property and the  applicant's
employment   status,  and  are  subject  to  the  discretion  of  IMC's  trained
underwriting staff.  Terms  of  loans  made  by IMC,  as  well  as  the  maximum
loan-to-value  ratio and debt service-to-income coverage (calculated by dividing
fixed monthly debt payments  by gross monthly income),  vary depending upon  the
classification  of the borrower.  Borrowers with lower  credit ratings generally
pay higher  interest  rates and  loan  origination fees.  The  general  criteria
currently used by IMC's underwriting staff in classifying loan applicants are as
set forth below.

                                       10


<PAGE>

<TABLE>
<CAPTION>
                                               'A' RISK          'B' RISK          'C' RISK          'D' RISK
                                               --------          --------          --------          --------
<S>                                            <C>               <C>               <C>               <C>
General repayment............................  Has repaid        Has generally     May have          May have
                                               installment or    repaid            experienced       experienced
                                               revolving debt    installment or    significant past  significant past
                                                                 revolving credit  credit problems   credit problems

Existing mortgage loans......................  Current at        Current at        May not be        Must be paid in
                                               application time  application time  current at        full from loan
                                               and a maximum of  and a maximum of  application time  proceeds and no
                                               two 30-day late   three 30-day      and a maximum of  more than 149
                                               payments in the   late payments in  four 30-day late  days delinquent
                                               last 12 months    the last 12       payments and one  at closing and
                                                                 months            60-day late       an explanation
                                                                                   payment in the    is required
                                                                                   last 12 months

Non-mortgage credit..........................  Minor derogatory  Some prior        Significant       Significant
                                               items allowed     defaults allowed  prior             prior defaults
                                               with a letter of  but major credit  delinquencies     may have
                                               explanation; no   or installment    may have          occurred, but
                                               open collection   debt paid as      occurred, but     must demonstrate
                                               accounts or       agreed may        major credit or   an ability to
                                               charge-offs,      offset some       installment debt  maintain
                                               judgements or     delinquency;      paid as agreed    regularity in
                                               liens             open              may offset some   payment of
                                                                 charge-offs,      delinquency       credit
                                                                 judgments or      obligations in
                                                                 liens are         the future
                                                                 permitted on a
                                                                 case-by-case
                                                                 basis

Bankruptcy filings...........................  Discharged more   Discharged more   Discharged more   Discharged prior
                                               than four years   than two years    than one year     to closing
                                               prior to closing  prior to closing  prior to closing
                                               and credit        and credit        and credit
                                               reestablished     reestablished     reestablished

Debt service-to-income ratio.................  Generally 45% or  Generally 45% or  Generally 50% or  Generally 50% or
                                               less              less              less              less

Maximum loan-to-value ratio:

Owner-occupied...............................  Generally 80%     Generally 80%     Generally 75%     Generally 65%
                                               (or 90%*) for a   (or 85%*) for a   (or 80% for       (or 70% for
                                               one- to two-      one- to two-      first liens*)     first liens*)
                                               family            family residence  for a one- to     for a one- to
                                               residence; 75%                      two- family       four- family
                                               for a                               residence; 65%    residence; 60%
                                               condominium                         for a             for a three- to
                                                                                   condominium; 60%  four-family
                                                                                   for a three-to    residence or
                                                                                   four-family       condominium
                                                                                   residence

Non-owner-occupied...........................  Generally 70%     Generally 70%     Generally 60%     Generally 55%
                                               for a one- to     for a one- to     for a one- to     for a one- to
                                               four-family       two-family        two-family        four-family
                                               residence         residence         residence         residence
</TABLE>

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

*  On an exception basis.

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

     The Company uses the foregoing categories and characteristics as guidelines
only.  On a case-by-case  basis, the Company may  determine that the prospective
borrower warrants  an exception.  Exceptions  may generally  be allowed  if  the
application  reflects certain compensating factors  such as loan-to-value ratio,
debt ratio, length of employment and  other factors. For example, a higher  debt
ratio  may  be acceptable  with a  lower  loan-to-value ratio.  Accordingly, the
Company may classify in  a more favorable risk  category certain mortgage  loans
that,  in  the absence  of  such compensating  factors,  would satisfy  only the
criteria of a less favorable risk category.

                                       11


<PAGE>
     The following table sets  forth certain information  with respect to  IMC's
loan  purchases and originations by borrower classification, along with weighted
average coupons, for the periods shown.

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                   ---------------------------------------------------------------------------------------------------
                               1994                              1995                               1996
                   -----------------------------     -----------------------------     -------------------------------
                                        WEIGHTED                          WEIGHTED                            WEIGHTED
BORROWER                      % OF      AVERAGE                 % OF      AVERAGE                   % OF      AVERAGE
CLASSIFICATION      TOTAL     TOTAL      COUPON       TOTAL     TOTAL      COUPON        TOTAL      TOTAL      COUPON
-----------------  --------   -----     --------     --------   -----     --------     ----------   -----     --------
                                                         (DOLLARS IN THOUSANDS)

<S>                <C>        <C>       <C>          <C>        <C>       <C>          <C>          <C>       <C>
'A' Risk.........  $155,729    55.0%      10.6%      $276,120    44.4%      11.4%      $  883,094    49.9%      10.9%
'B' Risk.........    74,527    26.3       11.6        177,149    28.5       12.0          442,629    25.0       11.5
'C' Risk.........    38,022    13.5       13.0        125,811    20.2       13.0          338,330    19.1       12.3
'D' Risk.........    14,646     5.2       14.4         42,549     6.9       14.4          106,259     6.0       13.6
                   --------   -----                  --------   -----                  ----------   -----
     Total.......  $282,924   100.0%                 $621,629   100.0%                 $1,770,312   100.0%
                   --------   -----                  --------   -----                  ----------   -----
                   --------   -----                  --------   -----                  ----------   -----
</TABLE>

     The weighted  average  loan-to-value  ratio  of  the  Company's  loans  has
increased  due to increasing competition in  the non-conforming home equity loan
market and,  to a  lesser  extent, an  increase between  1995  and 1996  in  the
percentage  of the Company's loans in the  'A' Risk category. For the year ended
December 31, 1995, loans with loan-to-value ratios in excess of 80% amounted  to
$173.1  million, or 27.9% of total purchases  and originations in that year. For
the year ended December 31, 1996,  loans with loan-to-value ratios in excess  of
80%  amounted to $700.4 million, or 39.6% of total purchases and originations in
that year. The increase  in loan purchases  and originations with  loan-to-value
ratios  between 80% and 100% of $527.3 million during 1996 was primarily related
to the  increase in  purchases and  originations  of 'A'  Risk loans  of  $607.0
million  during 1996  (loan purchases  and originations  of 'A'  Risk loans were
$276.1 million and  $883.1 million  for the years  ended December  31, 1995  and
1996,  respectively).  The majority  of the  Company's loans  with loan-to-value
ratios in excess of 80% are 'A' Risk loans, and substantially all of such  loans
are  'A' risk or  'B' Risk loans.  The Company does  not anticipate any material
increase in the percentages of loans purchased or originated with  loan-to-value
ratios  in excess  of 80% solely  as a  result of the  acquisitions completed in
January and  February 1997;  however  some of  the  companies that  the  Company
acquired in 1997 originate or purchase loans with loan-to-value ratios in excess
of  100%, but only when they have  a prior 'take-out' commitment for such loans.
At the present  time neither  the Company, nor  the companies  it acquired,  has
included  such loans in its  securitized pools or held  such loans for more than
thirty days.

LOAN SALES

     Currently, IMC sells the  loans it purchases or  originates through one  of
two  methods: (i) securitization, which involves the private placement or public
offering of pass-through mortgage-backed securities; and (ii) whole loan  sales,
which  involve selling blocks of loans  to single purchasers. This dual approach
allows IMC the  flexibility to better  manage its cash  flow, take advantage  of
favorable  conditions in  either the  securitization or  whole loan  market when
selling its loan production, diversify its exposure to the potential  volatility
of  the capital markets  and maximize the  revenues associated with  the gain on
sale of loans given market conditions  existing at the time of disposition.  For
the  years ended  December 31,  1994, 1995  and 1996,  IMC sold  $261.9 million,
$458.8 million and $1.06 billion of loan production, respectively.

                                       12


<PAGE>
     The following table sets  forth certain information  with respect to  IMC's
channels of loan sales by type of sale for the periods shown.

<TABLE>
<CAPTION>
                                    PERIOD
                                FROM INCEPTION
                                  (AUGUST 12,
                                     1993)                            YEAR ENDED DECEMBER 31,
                                    THROUGH         ------------------------------------------------------------
                                 DECEMBER 31,
                                     1993                 1994                 1995                  1996
                                ---------------     ----------------     ----------------     ------------------
                                          % OF                 % OF                 % OF                   % OF
                                 TOTAL    TOTAL      TOTAL     TOTAL      TOTAL     TOTAL       TOTAL      TOTAL
                                -------   -----     --------   -----     --------   -----     ----------   -----
                                                             (DOLLARS IN THOUSANDS)

<S>                             <C>       <C>       <C>        <C>       <C>        <C>       <C>          <C>
Securitizations...............  $ --        0.0%    $ 81,637    31.2%    $388,363    84.7%    $  935,000    87.9%
Whole loan sales..............   21,636   100.0      180,263    68.8       70,400    15.3        128,868    12.1
                                -------   -----     --------   -----     --------   -----     ----------   -----
     Total loan sales.........  $21,636   100.0%    $261,900   100.0%    $458,763   100.0%    $1,063,868   100.0%
                                -------   -----     --------   -----     --------   -----     ----------   -----
                                -------   -----     --------   -----     --------   -----     ----------   -----
</TABLE>

     Securitizations.  Through December  31, 1996,  the Company  completed eight
securitizations  totaling   $1.4   billion.   The  securities   sold   in   each
securitization,  which were enhanced  by an insurance  policy, received a credit
rating of AAA by Standard and Poor's and Aaa by Moody's.

     During the year  ended December 31,  1996, IMC sold  $935.0 million of  its
loan  volume  through securitizations.  IMC markets  its loan  inventory through
securitization when management believes that employing this strategy will create
greater long-term economic benefit to IMC stockholders. IMC intends to  continue
to  conduct loan sales through securitizations,  either in private placements or
in public offerings, when market conditions are attractive for such loan  sales.
Of  IMC's  eight securitizations  through December  31,  1996, five  were public
offerings and three were private offerings. When IMC securitizes loans, it sells
a portfolio of loans to a  Real Estate Mortgage Investment Conduit (REMIC)  that
issues classes of certificates representing undivided ownership interests in the
REMIC. IMC may be required either to repurchase or to replace loans which do not
conform  to the representations  and warranties made  by IMC in  the pooling and
servicing agreements entered into  when a portfolio of  loans is sold through  a
securitization. In its capacity as servicer for each securitization, the Company
collects  and remits principal  and interest payments  to the appropriate REMIC,
which in turn  passes through payments  to certificate owners.  IMC retains  the
servicing rights and an interest in the I/O and residual classes of certificates
of the REMIC.

     Each  REMIC is supported  by an insurance policy  from a monoline insurance
company, which insures the timely payment  of interest and the ultimate  payment
of  principal of the AAA/Aaa-rated  interests in the REMIC.  In addition to such
insurance policies, credit  enhancement is  provided by  over-collateralization,
which  is intended to result in receipts  and collections on the loans in excess
of the amounts required to be  distributed to certificate holders of the  senior
interests.  Although expected loss is calculated  into the pricing of the REMIC,
to the extent that  borrowers default on the  payment of principal and  interest
above  the expected  rate of  default, such  loss will  reduce the  value of the
Company's residual class certificate. If  payment defaults exceed the amount  of
over-collateralization,  the insurance policy  maintained by the  REMIC will pay
any further losses experienced by certificate holders of the senior interests in
the REMIC.

     As  part  of   IMC's  cash   flow  management  strategy,   the  first   six
securitizations were structured so that ContiFinancial received a portion of the
I/O and residual interest in the related REMIC. See 'Management's Discussion and
Analysis  of Financial Condition and Results  of Operations -- Transactions with
ContiFinancial.'

     Whole Loan Sales.  Whole loan  sales represented  all of  IMC's loan  sales
during  1993. With the initiation of  the sale of loans through securitizations,
whole loan sales declined to 68.8%, 15.3% and 12.1% of total loan sales for  the
years  ended December 31, 1994, 1995 and  1996, respectively. Upon the sale of a
loan portfolio, IMC generally receives a premium, representing a value in excess
of the par value of the loans (par value representing the unpaid balance of  the
loan  amount). IMC maximizes its  premium on whole loan  sale revenue by closely
monitoring institutional investors' requirements and focusing on originating the
types of  loans  that  meet  those  requirements  and  for  which  institutional
purchasers tend to pay higher rates.

                                       13


<PAGE>
     IMC will sell some of its loan volume to various institutional investors on
a  non-recourse  basis with  customary  representations and  warranties covering
loans sold. IMC  may be  required to  repurchase a loan  in the  event that  its
representations   and  warranties  with  respect  to  such  loans  prove  to  be
inaccurate. Occasionally, IMC  will agree  to rebate  a portion  of the  premium
earned  if a loan is prepaid during a limited period of time after sale, usually
six months and no  more than one  year. For the years  ended December 31,  1994,
1995  and  1996, IMC  was required  to rebate  $287,347, $167,951,  and $99,578,
respectively, in premiums when certain loans were prepaid during the contractual
rebate period. In its purchase agreements with its correspondents, IMC  requires
its  correspondents to rebate premium payments if  loans sold to IMC are prepaid
within a specified period of time after  the sale. For the years ended  December
31,  1994, 1995 and 1996, premium rebates  due to IMC were $89,113, $1.4 million
and $2.9 million, respectively.

LOAN SERVICING AND COLLECTIONS

     IMC has  been  servicing  loans  since April  1994.  IMC's  loan  servicing
operation  is  divided into  three departments:  (i) collections;  (ii) customer
service for both borrowers and investors;  and (iii) tax, insurance and tax  and
insurance  escrow. These departments monitor loans, collect current payments due
from borrowers, remit principal and interest payments to current owners of loans
and pay taxes and  insurance. The collections  department furnishes reports  and
enforces   the  holder's  rights,   including  recovering  delinquent  payments,
instituting loan  foreclosures and  liquidating the  underlying collateral.  IMC
intends to increase its loan servicing operations and thus its revenue stream by
continuing  to  retain the  servicing rights  on all  its securitized  loans and
certain whole loan sales. IMC retained  the servicing rights to 87.3% or  $400.5
million of the loans it sold in 1995 and to 90.5% or $963.2 million of the loans
it sold in 1996.

     IMC  funds  and closes  loans  throughout the  month.  Most of  IMC's loans
require a  first payment  30 days  after funding.  Accordingly, IMC's  servicing
portfolio  consists of loans with payments due at varying times each month. This
system ameliorates the  cyclical highs  and lows that  some servicing  companies
experience as a result of heavily concentrated payment dates.

     As  of December 31, 1996, IMC was servicing loans representing an aggregate
of $2.15 billion. Revenues  generated from loan servicing  amounted to 7.8%  and
10.3%  of IMC's total revenues  for the years ended  December 31, 1995 and 1996,
respectively. IMC  anticipates  that loan  servicing  will contribute  a  larger
portion  of  total  revenues in  future  periods. Management  believes  that the
Company's loan servicing  provides a  consistent revenue stream  to augment  its
loan purchasing and originating activities.

     IMC's   collections  policy  is  designed   to  identify  payment  problems
sufficiently early to permit  IMC to address  delinquency problems quickly  and,
when  necessary,  to  act  to  preserve  equity  before  a  property  goes  into
foreclosure. IMC  believes that  these policies,  combined with  the  experience
level  of independent appraisers engaged by IMC, help to reduce the incidence of
charge-offs on a first or second mortgage loan.

     Collection procedures commence upon identification of a past due account by
IMC's automated servicing  system. If  the first  payment due  is delinquent,  a
collector  will telephone to remind the borrower of the payment. Five days after
any payment is due,  a written notice  of delinquency is  sent to the  borrower.
Eleven  days after payment  is due, the  account is automatically  placed in the
appropriate collector's queue and the collector  will send a late notice to  the
borrower.  During  the  delinquency  period,  the  collector  will  continue  to
frequently contact  the borrower.  Company collectors  have computer  access  to
telephone  numbers, payment histories, loan  information and all past collection
notes. All collection activity, including the date collection letters were  sent
and  detailed  notes on  the  substance of  each  collection telephone  call, is
entered into  a  permanent  collection  history  for  each  account.  Additional
guidance  with respect  to the  collection process  is derived  through frequent
communication with IMC's senior management.

     IMC's  loan  servicing  software  also  tracks  and  maintains  homeowners'
insurance  information.  Expiration  reports are  generated  weekly  listing all
policies scheduled to expire  within 30 days. When  policies lapse, a letter  is
issued  advising the borrower of the lapse and that IMC will obtain force-placed

                                       14


<PAGE>
insurance at the borrower's expense. IMC  also has an insurance policy in  place
that  provides coverage  automatically for  IMC in the  event that  IMC fails to
obtain force-placed insurance.

     Notwithstanding the above,  there are occasions  when a charge-off  occurs.
Prior to a foreclosure sale, IMC performs a foreclosure analysis with respect to
the  mortgaged property to determine the value of the mortgaged property and the
bid that IMC will make  at the foreclosure sale.  This analysis includes: (i)  a
current  valuation  of  the  property  obtained  through  a  drive-by  appraisal
conducted by an independent appraiser; (ii) an estimate of the sale price of the
mortgaged property  obtained  by  sending  two local  realtors  to  inspect  the
property;  (iii) an evaluation of the amount owed, if any, to a senior mortgagee
and for real  estate taxes;  and (iv) an  analysis of  marketing time,  required
repairs  and other costs, such as real estate broker fees, that will be incurred
in connection with the foreclosure sale.

     All foreclosures are assigned to outside counsel located in the same  state
as  the secured property.  Bankruptcies filed by borrowers  are also assigned to
appropriate local counsel who  are required to provide  monthly reports on  each
loan file.

     The  Company's servicing portfolio had  aggregate principal balances of $0,
$92.0 million, $535.8 million and $2.15 billion at December 31, 1993, 1994, 1995
and 1996, respectively.

     The following table provides certain delinquency and default experience  as
a  percentage of outstanding principal balances of IMC's servicing portfolio for
the periods shown.

<TABLE>
<CAPTION>
                                                                          AT DECEMBER 31,
                                                                      ------------------------
                                                                      1994      1995      1996
                                                                      ----      ----      ----

<S>                                                                   <C>       <C>       <C>
Delinquency percentages(1):
     30-59 days....................................................   0.72%     2.54%     3.01%
     60-89 days....................................................   0.15      0.59      1.01
     90+ days......................................................   0.00      0.30      1.28
                                                                      ----      ----      ----
          Total delinquency........................................   0.87%     3.43%     5.30%
                                                                      ----      ----      ----
Default percentages(2):
     Foreclosure...................................................   0.00%     0.75%     0.94%
     Bankruptcy....................................................   0.12      0.25      0.53
                                                                      ----      ----      ----
          Total default............................................   0.12%     1.00%     1.47%
                                                                      ----      ----      ----
Total delinquency and default......................................   0.99%     4.43%     6.77%
                                                                      ----      ----      ----
                                                                      ----      ----      ----
</TABLE>

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

(1) Represents the  percentages  of  account balances  contractually  past  due,
    exclusive  of home equity  loans in foreclosure,  bankruptcy and real estate
    owned.

(2) Represents the percentages of account  balances on loans in foreclosure  and
    bankruptcy, exclusive of real estate owned.

                                       15


<PAGE>
     The  following table provides certain delinquency and default experience as
a percentage  of  outstanding  principal  balance  for  each  of  the  Company's
securitization  trusts  completed  through  December  31,  1996,  prior  to  any
potential recoveries:

      DELINQUENCY AND DEFAULTS FOR THE COMPANY'S SECURITIZATIONS(1)(2)(3)
<TABLE>
<CAPTION>
                                                        1994-1                  1995-1                   1995-2
                                                 --------------------     -------------------     --------------------
<S>                                              <C>             <C>      <C>            <C>      <C>             <C>
As of March 31, 1996:
Delinquency:
30-59 days...................................    $ 1,316,812     2.07%    $2,286,637     2.80%    $ 1,028,339     0.99%
60-89 days...................................        273,899     0.43        242,681     0.30         580,192     0.56
90 days and over.............................         38,834     0.06        190,960     0.23         119,429     0.11
                                                 -----------     ----     ----------     ----     -----------     ----
 Total.......................................    $ 1,629,545     2.56%    $2,720,278     3.33%    $ 1,727,960     1.66%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
Total defaults...............................    $ 2,128,767     3.35%    $1,967,810     2.41%    $ 2,642,563     2.54%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
<CAPTION>
                                                      1995-3
                                               --------------------
As of March 31, 1996:
<S>                                              <C>           <C>
Delinquency:
30-59 days...................................  $ 2,451,357     1.74%
60-89 days...................................      102,685     0.07
90 days and over.............................      358,533     0.26
                                               -----------     ----
 Total.......................................  $ 2,912,575     2.07%
                                               -----------     ----
                                               -----------     ----
Total defaults...............................  $ 1,665,789     1.19%
                                               -----------     ----
                                               -----------     ----
<CAPTION>
                                                        1994-1                  1995-1                   1995-2
                                                 --------------------     -------------------     --------------------
<S>                                              <C>             <C>      <C>            <C>      <C>             <C>
As of June 30, 1996:
Delinquency:
30-59 days...................................    $ 1,001,798     1.74%    $1,678,736     2.33%    $ 3,232,465     3.37%
60-89 days...................................        386,579     0.67        238,285     0.33         800,972     0.84
90 days and over.............................        120,648     0.21        147,389     0.20           2,122     0.00
                                                 -----------     ----     ----------     ----     -----------     ----
 Total.......................................    $ 1,509,025     2.62%    $2,064,410     2.86%    $ 4,035,559     4.21%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
Total defaults...............................    $ 1,611,169     2.80%    $1,920,443     2.67%    $ 3,053,366     3.19%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
<CAPTION>
                                                      1995-3
                                               --------------------
As of June 30, 1996:
Delinquency:
30-59 days...................................  $ 5,086,087     3.86%
60-89 days...................................      505,242     0.38
90 days and over.............................      477,597     0.36
                                               -----------     ----
 Total.......................................  $ 6,068,926     4.60%
                                               -----------     ----
                                               -----------     ----
Total defaults...............................  $ 2,703,193     2.05%
                                               -----------     ----
                                               -----------     ----
<CAPTION>
                                                        1994-1                  1995-1                   1995-2
                                                 --------------------     -------------------     --------------------
<S>                                              <C>             <C>      <C>            <C>      <C>             <C>
As of September 30, 1996:
Delinquency:
30-59 days...................................    $ 2,131,473     4.01%    $1,602,212     2.45%    $ 2,541,594     2.96%
60-89 days...................................        299,147     0.56        321,059     0.49       1,150,718     1.34
90 days and over.............................        222,911     0.42        141,310     0.22         466,260     0.54
                                                 -----------     ----     ----------     ----     -----------     ----
 Total.......................................    $ 2,653,531     4.99%    $2,064,582     3.16%    $ 4,158,572     4.84%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
Total defaults...............................    $ 2,287,599     4.31%    $1,961,704     3.00%    $ 4,115,802     4.79%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
<CAPTION>
                                                      1995-3
                                               --------------------
<S>                                              <C>           <C>
As of September 30, 1996:
Delinquency:
30-59 days...................................  $   999,636     0.85%
60-89 days...................................      644,704     0.55
90 days and over.............................      340,822     0.29
                                               -----------     ----
 Total.......................................  $ 1,985,162     1.69%
                                               -----------     ----
                                               -----------     ----
Total defaults...............................  $ 3,072,556     2.62%
                                               -----------     ----
                                               -----------     ----
<CAPTION>
                                                        1994-1                  1995-1                   1995-2
                                                 --------------------     -------------------     --------------------
<S>                                              <C>             <C>      <C>            <C>      <C>             <C>
As of December 31, 1996:
Delinquency:
30-59 days...................................    $ 2,615,101     5.42%    $1,351,891     2.30%    $ 3,314,742     4.31%
60-89 days...................................        461,981     0.96        562,719     0.96         849,593     1.10
90 days and over.............................        264,199     0.55        103,720     0.18       1,527,337     1.99
                                                 -----------     ----     ----------     ----     -----------     ----
   Total.....................................    $ 3,341,281     6.93%    $2,018,330     3.44%    $ 5,691,672     7.40%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
Total defaults...............................    $ 2,568,471     5.32%    $2,229,011     3.80%    $ 3,597,044     4.68%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
<CAPTION>
                                                       1995-3
                                               --------------------
<S>                                              <C>           <C>
As of December 31, 1996:
Delinquency:
30-59 days...................................  $ 5,797,400     5.44%
60-89 days...................................      899,318     0.84
90 days and over.............................      702,633     0.66
                                               -----------     ----
   Total.....................................  $ 7,399,351     6.94%
                                               -----------     ----
                                               -----------     ----
Total defaults...............................  $ 3,319,749     3.11%
                                               -----------     ----
                                               -----------     ----


<CAPTION>
                                                        1996-1                  1996-2                   1996-3
                                                 --------------------     -------------------     --------------------
<S>                                              <C>             <C>      <C>            <C>      <C>             <C>
As of March 31, 1996:
Delinquency:
30-59 days...................................    $ 3,462,018     2.04%
60-89 days...................................        628,949     0.37
90 days and over.............................        533,810     0.31
                                                 -----------     ----
 Total.......................................    $ 4,624,777     2.72%
                                                 -----------     ----
                                                 -----------     ----
Total defaults...............................    $   484,716     0.29%
                                                 -----------     ----
                                                 -----------     ----

<CAPTION>
                                                      1996-4
                                               --------------------
<S>                                              <C>           <C>
As of March 31, 1996:
Delinquency:
30-59 days...................................
60-89 days...................................
90 days and over.............................

 Total.......................................

Total defaults...............................

<CAPTION>
                                                        1996-1                  1996-2                   1996-3
                                                 --------------------     -------------------     --------------------
<S>                                              <C>             <C>      <C>            <C>      <C>             <C>
As of June 30, 1996:
Delinquency:
30-59 days...................................    $ 3,544,403     2.20%    $4,045,730     2.09%
60-89 days...................................      1,090,040     0.68        916,283     0.47
90 days and over.............................        641,525     0.40        843,325     0.44
                                                 -----------     ----     ----------     ----
 Total.......................................    $ 5,275,968     3.28%    $5,805,338     3.00%
                                                 -----------     ----     ----------     ----
                                                 -----------     ----     ----------     ----
Total defaults...............................    $ 1,710,018     1.06%    $  470,978     0.24%
                                                 -----------     ----     ----------     ----
                                                 -----------     ----     ----------     ----
<CAPTION>
                                                      1996-4
                                               --------------------
<S>                                              <C>           <C>
As of June 30, 1996:
Delinquency:
30-59 days...................................
60-89 days...................................
90 days and over.............................

 Total.......................................

Total defaults...............................

<CAPTION>
                                                        1996-1                  1996-2                   1996-3
                                                 --------------------     -------------------     --------------------
<S>                                              <C>             <C>      <C>            <C>      <C>             <C>
As of September 30, 1996:
Delinquency:
30-59 days...................................    $ 5,206,575     3.44%    $3,598,472     1.96%    $ 6,948,738     2.88%
60-89 days...................................      1,665,750     1.10      1,451,115     0.79       3,222,051     1.34
90 days and over.............................        852,773     0.56      1,222,661     0.67       1,670,647     0.69
                                                 -----------     ----     ----------     ----     -----------     ----
 Total.......................................    $ 7,725,098     5.10%    $6,272,248     3.41%    $11,841,436     4.91%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
Total defaults...............................    $ 2,671,238     1.76%    $4,286,773     2.33%    $ 1,693,101     0.70%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
<CAPTION>
                                                      1996-4
                                               --------------------
<S>                                              <C>           <C>
As of September 30, 1996:
Delinquency:
30-59 days...................................
60-89 days...................................
90 days and over.............................

 Total.......................................

Total defaults...............................

<CAPTION>
                                                        1996-1                  1996-2                   1996-3
                                                 --------------------     -------------------     --------------------
<S>                                              <C>             <C>      <C>            <C>      <C>             <C>
As of December 31, 1996:
Delinquency:
30-59 days...................................    $ 8,386,098     6.10%    $3,661,557     2.17%    $ 3,324,516     1.46%
60-89 days...................................      2,462,853     1.79      1,635,260     0.97       3,404,998     1.50
90 days and over.............................      2,820,700     2.05      1,823,195     1.08       5,651,334     2.48
                                                 -----------     ----     ----------     ----     -----------     ----
 Total.......................................    $13,669,651     9.94%    $7,120,012     4.22%    $12,380,848     5.44%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
Total defaults...............................    $ 2,723,282     1.98%    $4,665,216     2.76%    $ 3,175,997     1.39%
                                                 -----------     ----     ----------     ----     -----------     ----
                                                 -----------     ----     ----------     ----     -----------     ----
<CAPTION>
                                                      1996-4
                                               --------------------
<S>                                              <C>           <C>
As of December 31, 1996:
Delinquency:
30-59 days...................................  $ 6,440,166     2.17%
60-89 days...................................    2,481,880     0.84
90 days and over.............................    4,942,472     1.67
                                               -----------     ----
 Total.......................................  $13,864,518     4.68%
                                               -----------     ----
                                               -----------     ----
Total defaults...............................  $   629,253     0.21%
                                               -----------     ----
                                               -----------     ----
</TABLE>

                                                        (footnotes on next page)

                                       16


<PAGE>
(footnotes from previous page)

(1) Delinquency is the dollar value of account balances contractually past  due,
    excluding loans in foreclosure, bankruptcy and real estate owned.

(2) Defaults  are the dollar value of account balances contractually past due on
    loans in foreclosure and bankruptcy, exclusive of real estate owned.

(3) The percentage  of loans  with  loan-to-value ratios  between 80%  and  100%
    included  in the 1994-1, 1995-1, 1995-2,  1995-3, 1996-1, 1996-2, 1996-3 and
    1996-4 securitization trusts, as of the closing date of each securitization,
    was 24.2%, 32.4%, 26.6%, 10.4%, 11.0% 12.2%, 15.7% and 18.3%,  respectively.
    The  LTV's are calculated as  of the origination date  of each mortgage loan
    based on the appraised value at the time of origination.

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

     The following  table  describes  certain  loan  loss  experience  of  IMC's
servicing portfolio of home equity loans for the fiscal years ended December 31,
1994, 1995 and 1996.

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                           -------------------------------------
                                                                            1994          1995           1996
                                                                           -------      --------      ----------
                                                                                  (DOLLARS IN THOUSANDS)

<S>                                                                        <C>          <C>           <C>
Average amount outstanding(1)...........................................   $52,709      $294,252      $1,207,172
Losses(2)...............................................................        --           279           1,580
Losses as a percentage of average amount outstanding....................      0.00%         0.09%           0.13%
</TABLE>

(1) Average  amount outstanding during  the period is  the arithmetic average of
    the principal balances of home equity loans outstanding on the last business
    day of each month during the period.

(2) Losses  are  actual  losses  incurred  on  liquidated  properties  for  each
    respective  period.  Losses  include all  principal,  foreclosure  costs and
    accrued interest to date.

MARKETING

     Correspondent and Broker Networks. Marketing to correspondents and  brokers
is  conducted through  IMC's business development  representatives who establish
and maintain relationships with  IMC's principal sources  of loan purchases  and
originations,   including  financial  institutions  and  mortgage  bankers.  The
business development representatives provide  various levels of information  and
assistance  to correspondents  and brokers  and are  principally responsible for
maintaining  IMC's  relationships  with   its  networks.  Business   development
representatives  endeavor  to  increase  the volume  of  loan  originations from
brokers and correspondents located within  the geographic territory assigned  to
that  representative. The representatives visit customers' offices, attend trade
shows  and   supervise   advertisements   in   broker   trade   magazines.   The
representatives  also provide  IMC with information  relating to correspondents,
borrowers and brokers and  products and pricing offered  by competitors and  new
market  entrants, all of which  assist IMC in refining  its programs in order to
offer  competitive  products.  The  business  development  representatives   are
compensated with a base salary and commissions based on the volume of loans that
are purchased or originated as a result of their efforts.

     Direct  Consumer  Lending. During  1996, IMC  marketed its  direct consumer
lending services  through  17 branch  offices.  IMC added  49  branches  through
acquisitions  in January and February  1997 and intends to  continue to open new
retail branches  during  1997. IMC's  direct  consumer loan  expansion  strategy
involves:  (i)  targeting  cities  where  the  population  density  and economic
indicators are favorable for home equity lending, the foreclosure rate is within
normal ranges  and the  non-conforming loan  market has  been underserved;  (ii)
testing  the target market  prior to the  establishment of a  branch office, and
where local regulations permit, via newspaper, radio and direct mail advertising
and through  a  toll-free  telephone  number  which  routes  borrower  inquiries
directly to a loan officer in the Company's Tampa, Florida office; (iii) if test
marketing  is positive,  establishing a small  branch office,  generally with an
initial staff of two business  development representatives; and (iv) setting  up
branch   offices  in  executive  office  space  with  short-term  leases,  which
eliminates high  startup costs  for office  equipment, furniture  and  leasehold
improvement  and allows  IMC to exit  the market  easily if the  office does not

                                       17


<PAGE>
meet expectations.  The branch  office  network is  used  for marketing  to  and
meeting with IMC's local borrowers and brokers.

ACQUISITIONS AND STRATEGIC ALLIANCES

     The  Company is  actively pursuing a  strategy of  acquiring originators of
non-conforming home equity loans. IMC's acquisition strategy focuses on entities
that originate non-conforming  mortgages either  directly from  the consumer  or
through  broker networks. In  1996, IMC acquired Equitystars  and in January and
February 1997 completed the acquisitions  of Mortgage America, CoreWest,  Equity
Mortgage  and  American  Reduction.  Equitystars,  Mortgage  America  and Equity
Mortgage were Industry  Partners. Management believes  that the acquisitions  of
these  and similar non-conforming home equity  loan originators will benefit IMC
by: (i) increasing IMC's loan production volume by capturing all of the acquired
company's  production  instead   of  only  a   portion;  (ii)  improving   IMC's
profitability   and  profit   margins  because   broker  and  direct-to-consumer
originated loans typically result in better profit margins than loans  purchased
from  correspondents; (iii)  adding experienced management;  and (iv) broadening
IMC's distribution  system  for  offering  new  products.  In  order  to  incent
management  of the acquired companies, IMC typically structures its acquisitions
to include an initial payment upon closing of the transaction and to provide for
contingent payments tied to future production and profitability of the  acquired
company.

     IMC  believes that by  using a 'family of  companies' approach to potential
acquisitions it is able to  differentiate itself from other potential  acquirers
competing  for  acquisitions  of  non-conforming  mortgage  lenders.  Under this
approach, IMC seeks to  derive the benefit of  the entrepreneurial energies  and
organizational  and marketing skills already  developed by existing companies by
allowing those  companies  to  operate  after  acquisition  by  the  Company  as
relatively  independent  lending units.  IMC believes  this approach  appeals to
owners of certain  existing companies who  see a number  of benefits from  IMC's
concept,  including: (i) the benefit  of being allowed to  continue to run their
companies as subsidiaries  or independent  divisions of  IMC after  acquisition;
(ii)  the  assurance  that the  previous  owner  controls the  employees  of the
acquired company following the acquisition;  and (iii) the benefit of  financial
support  from IMC, which provides warehouse  and working capital lines as needed
on an agreed business plan, thereby allowing the former owners to concentrate on
growing their business and obtaining  efficient execution of the loan  marketing
process.

     Pursuant  to this  strategy, IMC has  acquired during  January and February
1997 the outstanding common stock of CoreWest and all of the assets of  American
Reduction,  Equity Mortgage, and Mortgage America. During 1996, IMC acquired all
of the assets  of Equitystars  and also  formed a  joint venture  in the  United
Kingdom.  Each of  the foregoing  acquisitions will  be accounted  for under the
purchase method of accounting.  Most acquisitions include earn-out  arrangements
that  provide the sellers with additional  consideration if the acquired company
reaches certain performance targets after  the acquisition. Any such  contingent
payments  will result in an increase in the amount of goodwill recorded on IMC's
balance sheet related  to such  acquisition. Goodwill represents  the excess  of
cost over fair market value of the net tangible assets acquired and is amortized
through periodic charges to earnings for up to 30 years.

                                       18


<PAGE>
     The Company's acquisitions are summarized in the table below:

<TABLE>
<CAPTION>
                                                                                                      AMERICAN
                         EQUITYSTARS     MORTGAGE AMERICA       COREWEST        EQUITY MORTGAGE       REDUCTION
                       ----------------  -----------------  -----------------  -----------------  -----------------

<S>                    <C>               <C>                <C>                <C>                <C>
Industry Partner.....        Yes                Yes                No                 Yes                No
Effective date of
  acquisition........       1/1/96            1/1/97             1/1/97             1/1/97             2/1/97
Initial purchase
  price:
    Common Stock.....   239,666 shares   1,790,000 shares    488,404 shares           --                 --
    Cash.............         --                --                 --             $150,000 in        $9,150,000
                                                                                 excess of net
                                                                                    assets
Approximate 1996
  originations.......    $100 million      $248 million        $48 million        $36 million        $80 million
1996 originations
  purchased by IMC...        N/A            $45 million        $10 million        $12 million        $2 million
Headquarters.........   Providence, RI     Bay City, MI      Los Angeles, CA     Baltimore, MD    Owings Mills, MD
Retail branch
  offices............         2                 32                  9                  3                  5
Primary states of
  operations.........  CT, ME, MA, NH,    AZ, AK, CO, DE,    CA, CO, OR, UT,    DE, DC, GA, MD,        MD, PA
                            NY, RI        FL, GA, IL, IA,          WA               PA, VA
                                          IN, KS, KY, MD,
                                          MI, MN, MO, NJ,
                                          NC, OH, OK, PA,
                                          SC, TN, TX, VT,
                                          VA, WA, WV, WI,
                                                WY
</TABLE>

ACQUISITION OF EQUITYSTARS

     Effective  January 1, 1996, IMC acquired  all of the assets of Equitystars,
one of  the  Industry Partners.  Equitystars  is a  non-conforming  lender  that
purchases  and originates residential mortgage loans  in Rhode Island, New York,
Connecticut, Massachusetts, Maine and New Hampshire.

     The purchase price for all of the assets of Equitystars consisted of a $2.0
million base payment in the form of 239,666 shares of Common Stock, and up to an
aggregate of $2.55  million of contingent  payments, to be  paid over two  years
based on a formula keyed to the performance of the non-conforming and conforming
mortgage  loan  business  of  Equitystars during  the  two  years  subsequent to
closing.

ACQUISITION OF MORTGAGE AMERICA

     Effective January  1, 1997,  IMC acquired  all of  the assets  of  Mortgage
America,  an Industry Partner. Mortgage America is a non-conforming lender based
in Bay City, Michigan that originates residential mortgage loans from a  network
of 32 retail offices located in 29 states. Mortgage America originated over $248
million of residential mortgage loans in 1996, including over $69 million during
the  last quarter of  1996. IMC purchased $45.3  million of residential mortgage
loans from Mortgage America during 1996, including $21.1 million during the last
quarter of 1996.

     The purchase price for all of the assets of Mortgage America was an initial
payment of 1,790,000  shares of Common  Stock and assumption  of a stock  option
plan  which could result in  issuance of an additional  334,596 shares of Common
Stock and a contingent  payment of up to  2,770,000 additional shares of  Common
Stock  at  the end  of  three years  based on  the  growth and  profitability of
Mortgage America during that period.

ACQUISITION OF COREWEST

     Effective January 1, 1997, IMC acquired all of the outstanding common stock
of CoreWest, a non-conforming lender based in Los Angeles, California. CoreWest,
which commenced operations in early 1996, originates residential mortgage  loans
primarily  through a  network of  nine mortgage  centers located  in California,
Colorado, Washington, Utah and Oregon.  CoreWest originated over $48 million  of
residential  mortgage loans in 1996, including  over $22 million during the last
quarter of 1996. IMC

                                       19


<PAGE>
purchased $10.3 million of residential mortgage loans from CoreWest during 1996,
all of which was during the last quarter of 1996.

     The purchase price for all of the outstanding common stock of CoreWest  was
an initial payment of 488,404 shares of Common Stock and a contingent payment of
additional  shares of Common Stock at the end  of a two year period based on the
profitability of CoreWest during that period. There  is no cap on the number  of
shares which may be required to be issued as the contingent payment.

ACQUISITION OF EQUITY MORTGAGE

     Effective  January  1,  1997, IMC  acquired  all  of the  assets  of Equity
Mortgage, an Industry Partner. Equity  Mortgage is a non-conforming lender  that
originates  residential mortgage loans from its offices in the greater Baltimore
metropolitan region,  Delaware  and  Pennsylvania.  Equity  Mortgage  originated
approximately  $36 million of residential mortgage loans in 1996, including over
$11 million during  the last  quarter of 1996.  IMC purchased  $12.5 million  of
residential  mortgage  loans from  Equity Mortgage  during 1996,  including $3.3
million during the last quarter of 1996.

     The purchase price for  Equity Mortgage was a  cash payment of $150,000  in
excess  of  its net  assets.  In connection  with  the acquisition,  the Company
entered into a four  year employment agreement with  the former owner of  Equity
Mortgage,  Mr. Mark Greenberg, pursuant to which the Company is obligated to pay
Mr. Greenberg 1.5% of the principal amount of non-conforming loans originated by
the Equity Mortgage  division of the  Company during  such four years,  up to  a
maximum amount that does not exceed the net income of the division.

ACQUISITION OF AMERICAN REDUCTION

     Effective  February 1,  1997, IMC  acquired all  of the  assets of American
Reduction, a non-conforming  lender based  in Owings  Mills, Maryland.  American
Reduction  originates residential mortgage loans from  its main office in Owings
Mills, and four  satellite offices located  in Pennsylvania. American  Reduction
originated  over $80  million of residential  mortgage loans  in 1996, including
over $28  million during  the  last quarter  of 1996.  IMC  did not  purchase  a
significant  amount  of residential  mortgage loans  from American  Reduction in
1996.

     The purchase  price for  all of  the assets  of American  Reduction was  an
initial  payment  of $9.15  million and  a  cash contingent  payment based  on a
multiple of the  average after-tax earnings  of American Reduction  for the  two
year  period ending December 31, 1999. At the Company's election, the contingent
payment may be made in shares of Common Stock.

STRATEGIC ALLIANCES

     In order to increase the Company's volume and diversify its sources of loan
originations, the Company seeks to enter into strategic alliances with  selected
mortgage  lenders, pursuant  to which the  Company provides  working capital and
financing arrangements and a commitment to purchase qualifying loans. In return,
the Company expects to  receive a more  predictable flow of  loans and, in  some
cases,  an option  or obligation  to acquire an  equity interest  in the related
strategic  participant.  To  date,  the  Company  has  completed  two  strategic
alliances.

UK JOINT VENTURE

     In  April 1996, the Company formed Preferred Mortgages, a UK joint venture.
The Joint Venture Partners  are IMC, Foxgard  Limited ('Foxgard') and  Financial
Security Assurance Inc. ('FSA'). Preferred Mortgages is owned 45% by IMC, 45% by
Foxgard  and 10%  by FSA.  Through Preferred  Mortgages, IMC  intends to explore
opportunities to serve what management believes to be an underserved segment  of
the  home equity market in  the UK by lending  to borrowers with impaired credit
profiles similar to its  domestic customers. Preferred  Mortgages has a  `L'47.5
million  (approximately $76 million as of January  31, 1997) line of credit from
National Westminster  Bank, Plc  for the  purchase and  origination of  mortgage
loans  (the 'NatWest  Facility'), and  FSA has  provided an  insurance policy as
credit enhancement for  the NatWest Facility.  Preferred Mortgages is  currently
originating loans at a

                                       20


<PAGE>
rate  of approximately `L'1.2 million, (or $1.9 million, as of January 31, 1997)
per  month.  Additionally,  IMC  intends  to  explore  opportunities  to   serve
underserved  nonconforming segments  of the  home equity  loan markets  in other
locations outside the United States.

NEW PRODUCTS AND SERVICES

SECURED CREDIT CARDS

     In late 1996, IMC,  through its wholly owned  subsidiary, IMC Credit  Card,
Inc.  ('IMCCI'), entered into a joint  venture (the 'Credit Card Joint Venture')
with Lakeview Credit  Card Services,  Inc. ('Lakeview Credit'),  a wholly  owned
subsidiary  of Lakeview, the parent of one  of the Industry Partners. The Credit
Card Joint  Venture is  owned 50%  by IMCCI  and 50%  by Lakeview  Credit. If  a
customer  wishes to borrow an  amount less than that  permitted by the Company's
underwriting guidelines, the Company will  offer the borrower an opportunity  to
borrow an additional amount up to the limit permitted by underwriting guidelines
and  use the  excess proceeds  as collateral  for a  secured credit  card. Those
excess proceeds are deposited in an interest-bearing account at Lakeview and are
used as collateral for a secured credit card issued by IMCCI.

HOME EQUITY LINE OF CREDIT ('HELOC')

     In late 1996, IMC introduced the HELOC product, which enables customers  to
borrow  on a revolving basis against the  equity of their homes. After repayment
of the initial advance, the availability  of credit under the line increases  in
proportion  to the  amount repaid. In  the past,  this type of  product has been
offered primarily by commercial banks due  to the complexity of the  methodology
necessary  to process and  maintain the loans. IMC  developed the methodology to
facilitate the HELOC program through an agreement with a large commercial  bank.
This  new product offers the convenience of  a revolving mortgage credit line to
the non-conforming  borrower. IMC  offers  HELOCs to  borrowers using  the  same
general underwriting criteria IMC uses for its non-conforming lending business.

PREFERRED PARTNERS PROGRAM

     As originally conceived, the Preferred Partners Program was for the benefit
of  mortgage companies attempting to diversify  their product offering and enter
the non-conforming loan business. Now,  however, the Preferred Partners  Program
has  expanded to encompass  a diverse group  of projects with  a common goal: to
introduce certain entities not previously involved in non-conforming lending  to
the  business. The  entities taking part  in the Preferred  Partners Program now
include credit unions, banks and brokerage  houses. Under the program, IMC  acts
as  a  consultant  in  certain  aspects  of  the  non-conforming  loan business,
including marketing, regulatory compliance, underwriting, risk-adjusted pricing,
processing, funding, servicing  and selling  loans. Working  with the  companies
either  on-site or  out of  IMC's offices,  IMC helps  the entities  develop new
product lines that they would not typically underwrite on their own. In  return,
IMC  anticipates receiving a part of the  production generated by the entity. To
date, the Preferred Partners Program has  not generated a significant amount  of
loan production for the Company.

COMPETITION

     As  a purchaser and originator of mortgage  loans the proceeds of which are
used for a variety of purposes,  including to consolidate debt, to finance  home
improvements  and  to  pay  educational  expenses,  the  Company  faces  intense
competition primarily  from  other  mortgage banking  companies  and  commercial
banks,  credit  unions, thrift  institutions,  credit card  issuers  and finance
companies. Many  of these  competitors are  substantially larger  and have  more
capital  and  other  resources  than the  Company.  Furthermore,  numerous large
national finance companies and originators of conforming mortgages have expanded
from their conforming origination programs  and have allocated resources to  the
origination  of non-conforming loans. In addition, many of these larger mortgage
companies and commercial  banks have begun  to offer products  similar to  those
offered by the Company, targeting customers similar to those of the Company. The
entrance  of these competitors into the Company's market requires the Company to
pay higher  premiums  for  loans  it  purchases,  increases  the  likelihood  of

                                       21


<PAGE>
earlier  prepayments  through refinancings  and  could have  a  material adverse
effect on  the  Company's results  of  operations and  financial  condition.  In
addition,  competition could also result in the purchase or origination of loans
with lower interest rates  and higher loan-to-value ratios,  which could have  a
material  adverse effect  on the Company's  results of  operations and financial
condition. Premiums paid to  correspondents as a  percentage of loans  purchased
from  correspondents by the Company were 4.7%, 4.2%, 5.0% and 5.8% for the three
months  ended  March  31,  June  30,   September  30  and  December  31,   1996,
respectively.  The  weighted  average  interest  rate  for  loans  purchased  or
originated by the Company decreased from  12.1% for the year ended December  31,
1995  to  11.5% for  the year  ended  December 31,  1996. The  combined weighted
average loan-to-value  ratio of  loans purchased  or originated  by the  Company
increased  from 70.9% for the year ended December 31, 1995 to 72.9% for the year
ended December 31, 1996.

     Competition takes many  forms, including convenience  in obtaining a  loan,
service,  marketing and  distribution channels and  interest rates. Furthermore,
the current level of gains  realized by the Company  and its competitors on  the
sale  of the  type of  loans purchased  and originated  is attracting additional
competitors into this market, including at least one quasi-governmental  agency,
with  the effect of  lowering the gains that  may be realized  by the Company on
future loan sales. Competition may be affected by fluctuations in interest rates
and general economic  conditions. During  periods of  rising rates,  competitors
which  have 'locked  in' low borrowing  costs may have  a competitive advantage.
During periods  of  declining  rates,  competitors  may  solicit  the  Company's
borrowers to refinance their loans. During economic slowdowns or recessions, the
Company's  borrowers may have new financial difficulties and may be receptive to
offers by the Company's competitors.

     The Company depends  largely on brokers,  financial institutions and  other
mortgage  bankers for its purchases and originations of new loans. The Company's
competitors also seek to establish relationships with the Company's brokers  and
financial  institutions and other mortgage bankers. The Company's future results
may become more exposed to fluctuations in the volume and cost of its  wholesale
loans  resulting from  competition from other  purchasers of  such loans, market
conditions and other factors.

REGULATION

     IMC's  business  is  subject  to  extensive  regulation,  supervision   and
licensing by federal, state and local governmental authorities and is subject to
various laws and judicial and administrative decisions imposing requirements and
restrictions on part or all of its operations. IMC's consumer lending activities
are  subject to the Federal Truth-in-Lending Act and Regulation Z (including the
Home Ownership and  Equity Protection  Act of  1994), the  Federal Equal  Credit
Opportunity  Act, and Regulation B, as amended (ECOA), the Fair Credit Reporting
Act of 1970, as amended, Federal Real Estate Settlement Procedures Act  (RESPA),
and  Regulation  X,  the  Home  Mortgage Disclosure  Act  and  the  Federal Debt
Collection Practices  Act, as  well  as other  federal  and state  statutes  and
regulations  affecting IMC's  activities. IMC is  also subject to  the rules and
regulations of and examinations by  Department of Housing and Urban  Development
(HUD)  and state regulatory authorities with respect to originating, processing,
underwriting, selling and  servicing loans. These  rules and regulations,  among
other  things,  impose  licensing  obligations  on  IMC,  establish  eligibility
criteria for mortgage  loans, prohibit discrimination,  provide for  inspections
and  appraisals  of  properties,  require  credit  reports  on  loan applicants,
regulate assessment, collection, foreclosure and claims handling, investment and
interest payments  on  escrow balances  and  payment features,  mandate  certain
disclosures  and notices to  borrowers and, in some  cases, fix maximum interest
rates, fees and mortgage loan amounts. Failure to comply with these requirements
can lead to  loss of  approved status,  termination or  suspension of  servicing
contracts  without compensation to the servicer, demands for indemnifications or
mortgage loan  repurchases, certain  rights of  rescission for  mortgage  loans,
class  action  lawsuits and  administrative  enforcement actions.  IMC believes,
however, that  it is  in compliance  in all  material respects  with  applicable
federal and state laws and regulations.

ENVIRONMENTAL MATTERS

     To date, IMC has not been required to perform any investigation or clean up
activities, nor has it been subject to any environmental claims. There can be no
assurance, however, that this will remain the

                                       22


<PAGE>
case  in the future.  In the ordinary course  of its business,  IMC from time to
time forecloses on properties  securing loans. Although  IMC primarily lends  to
owners  of residential properties, there is a risk that IMC could be required to
investigate and clean up hazardous or  toxic substances or chemical releases  at
such  properties  after  acquisition by  IMC,  and  could be  held  liable  to a
governmental entity or to third parties for property damage, personal injury and
investigation and cleanup costs incurred by such parties in connection with  the
contamination.  In addition, the  owner or former owners  of a contaminated site
may be subject to common law claims by third parties based on damages and  costs
resulting from environmental contamination emanating from such property.

EMPLOYEES

     As of December 31, 1996, IMC had a total of 380 employees, 198 of whom were
working  at its Tampa, Florida headquarters.  None of IMC's employees is covered
by a  collective bargaining  agreement.  IMC considers  its relations  with  its
employees  to  be good.  Several members  of  senior management  have previously
worked as  a  team at  other  lending  institutions. Many  employees  have  been
associated with senior management in previous employment positions. IMC believes
that  these long-term working  relationships will continue  to contribute to its
growth and success. As a result  of its recent acquisitions, since December  31,
1996  IMC has  added in excess  of 500 employees.  IMC believes that  it will be
necessary to continue to increase its staff to support its growth.

ITEM 2. PROPERTIES

     IMC's  executive  and  administrative  offices,  including  its   servicing
operation and full-service production office, are located at 3450 Buschwood Park
Drive,  Suite 250, Tampa, Florida, where  IMC leases approximately 21,300 square
feet of office space at an aggregate annual rent of approximately $331,000.  The
lease  expires in August 1998  and the Company intends  to vacate these premises
when its new corporate headquarters are ready for occupation.

     In January 1997,  the Company purchased  a 60,000 square  foot building  in
Tampa,  Florida which will  serve as the  Company's corporate headquarters after
renovations are completed later in 1997. The purchase price for the building was
$2.6 million, and the Company anticipates  spending at least an additional  $2.2
million to renovate the space prior to occupation.

     IMC   maintains  full-service  offices  in  Ft.  Washington,  Pennsylvania;
Cincinnati, Ohio;  Cherry Hill,  New Jersey;  Lincoln, Rhode  Island;  Bellevue,
Washington; Roselle, Illinois; Baltimore, Maryland; Los Angeles, California; and
Bay  City, Michigan.  The Company  also maintains  short-term leases  for retail
branch offices in executive spaces in 66 locations throughout the United States.

ITEM 3. LEGAL PROCEEDINGS

     IMC 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
results of operations or financial condition of IMC.

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

     None.

                                       23

<PAGE>
                                    PART II.

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

     The Common Stock is traded on Nasdaq under the symbol 'IMCC.' The following
table  sets forth, for the  periods indicated, the high  and low sales price for
the Common Stock as reported on  Nasdaq, and reflects a two-for-one stock  split
paid on February 13, 1997 to stockholders of record on February 6, 1997.

<TABLE>
<CAPTION>
                                                                                         HIGH      LOW
                                                                                        ------    ------

<S>                                                                                     <C>       <C>
Fiscal 1996
     Second Quarter (from June 25, 1996)(1)..........................................   $11.50    $ 9.38
     Third Quarter...................................................................    17.44     10.75
     Fourth Quarter..................................................................    20.50     13.63
</TABLE>

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

(1) The Common Stock commenced trading on Nasdaq on June 25, 1996.

                            ------------------------
     As  of February 11, 1997, there were approximately 106 holders of record of
the Common Stock.

     As the Company intends to retain all of its future earnings to finance  its
operations, the Company has not paid, and currently has no intention to pay, any
cash  dividends on its  Common Stock. Any  decision to declare  dividends in the
future will be made by the Company's Board of Directors and will depend upon the
Company's future earnings, capital  requirements, financial condition and  other
factors  deemed  relevant  by the  Company's  Board of  Directors.  In addition,
certain agreements  to which  the  Company is  a  party restrict  the  Company's
ability to pay dividends on the Common Stock.

RECENT REGISTRATION AND SALES OF SECURITIES

     On  February 14, 1997, the Company  filed a Registration Statement with the
Securities and Exchange Commission to register 7,000,000 shares of common  stock
to  be offered to the public. Of the 7,000,000 shares of common stock, 5,600,000
shares are being offered by the  Company and 1,400,000 shares are being  offered
by  certain stockholders of the Company. The Company will not receive any of the
proceeds from  the sale  of shares  by the  selling shareholders.  Approximately
$27.0 million of the net proceeds from the proposed sale of the 5,600,000 shares
is  expected to be used to retire  or reduce certain indebtedness of the Company
incurred after December 31, 1996, including (i) repayment of up to $20.0 million
to Bank of Boston under the Bank  of Boston credit facility, and (ii)  repayment
of  up to $7.0 million to Lakeview under the Lakeview unsecured credit facility.
The remaining  net proceeds  from the  proposed offering  will be  used to  fund
future  loan purchases and originations, to support securitization transactions,
to fund acquisitions of non-conforming home equity loan originators and expenses
associated with the opening of new direct lending branch offices and for general
corporate purposes.

     In January  1997,  the Company  acquired  all  of the  assets  of  Mortgage
America, a non-conforming lender based in Bay City, Michigan. The purchase price
for  all of the  assets of Mortgage  America included the  issuance of 1,790,000
shares of Common Stock  to fewer than  10 persons, each  of which acquired  such
shares for investment purposes. The issuance of the Common Stock was exempt from
registration under the Securities Act by virtue of Section 4(2) thereof.

     In  January 1997,  the Company  acquired all of  the assets  of CoreWest, a
non-conforming lender based in Los  Angeles, California. The purchase price  for
all  the common  stock of  CoreWest included the  issuance of  488,404 shares of
Common Stock to fewer than  10 persons, each of  which acquired such shares  for
investment   purposes.  The  issuance  of  the  Common  Stock  was  exempt  from
registration under the Securities Act by virtue of Section 4(2) thereof.

     In June 1996,  the Company  sold 3,565,000 shares  of common  stock in  its
initial  public offering, the net proceeds  of which approximated $58.2 million.
Approximately $22.9 million  of the  net proceeds  were used  to reduce  certain
indebtedness  of the Company, and  the remaining net proceeds  were used to fund
loan purchases and originations, to support securitization transactions, to fund
acquisitions of loan

                                       24


<PAGE>
originators and  expenses associated  with  the opening  of new  direct  lending
branch offices and for general corporate purposes.

     In  March 1996, the  Company issued a  debenture due September  18, 1996 to
Rotch Property Group Limited for $1.8 million. Pursuant to the debenture,  Rotch
Property  Group Limited had  the right to  convert the debenture  into shares of
Common Stock of  the Registrant  and receive shares  of Common  Stock, $.01  par
value  per share,  at a price  equal to 93%  of the  price to the  public in the
Company's initial public offering.  The Company paid all  amounts due under  the
Rotch  Debenture from the  proceeds of the Company's  initial public offering in
June 1996. The  issuance of  the Rotch  Debenture was  exempt from  registration
under the Securities Act by virtue of Section 4(2) thereof.

     Pursuant  to the Pre-IPO Agreement, dated as of March 30, 1996, the Company
issued 6,150,000  shares of  Common Stock  (including 150,000  shares issued  in
exchange for limited partnership interests acquired upon exercise by Branchview,
Inc.  of a portion  of the Conti Option  acquired in a  transaction to which the
Company was not a party) to the Industry Partners and management in exchange for
their interests in the Partnership. The issuance of the Common Stock was  exempt
from registration under the Securities Act by virtue of Section 4(2) thereof.

     As  of  December  31, 1995,  the  Company  entered into  an  agreement with
ContiTrade Services  Corporation  in  which  the Company  issued  an  option  to
purchase  limited partnership interests  which became a  warrant for 3.0 million
shares of the  Registrant's Common  Stock, $.01 par  value per  share. Both  the
issuance  of  the Conti  Option  and its  exchange  for the  Conti  Warrant were
transactions exempt  from registration  under the  Securities Act  by virtue  of
Section 4(2) thereof.

                                       25


<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

     The  historical Statement  of Operations and  Balance Sheet  data set forth
below as of  and for  the period  from inception to  December 31,  1993 and  the
fiscal  years ended December 31, 1994, 1995  and 1996 have been derived from the
Consolidated Financial Statements and  Notes thereto of  the Company. This  data
should  be read  in conjunction  with 'Management's  Discussion and  Analysis of
Financial Condition and  Results of Operations'  and the Consolidated  Financial
Statements and Notes thereto.
<TABLE>
<CAPTION>
                                                                 PERIOD FROM
                                                                  INCEPTION
                                                                 (AUGUST 12,
                                                                1993) THROUGH             YEAR ENDED DECEMBER 31,
                                                                 DECEMBER 31,  --------------------------------------------
                                                                     1993         1994            1995            1995
                                                                  ----------   -----------    ------------    ------------
<S>                                                               <C>          <C>            <C>              <C>
STATEMENT OF OPERATIONS DATA:
  Revenues:
     Gain on sale of loans(1)(2)...............................   $ 438,774    $ 8,583,277    $20,680,848       $46,229,615
     Additional securitization transaction expense(3)..........       --          (560,137)    (5,547,037)       (4,157,644)
                                                                  ---------    -----------    -----------       -----------
         Gain on sale of loans, net............................     438,774      8,023,140     15,133,811        42,071,971
                                                                  ---------    -----------    -----------       -----------
     Warehouse interest income.................................      97,159      2,510,062      7,884,679        37,463,583
     Warehouse interest expense................................     (50,709)    (1,610,870)    (6,006,919)      (24,534,896)
                                                                  ---------    -----------    -----------       -----------
         Net warehouse interest income.........................      46,450        899,192      1,877,760        12,928,687
                                                                  ---------    -----------    -----------       -----------
     Servicing fees............................................       --            99,224      1,543,339         6,749,995
     Other.....................................................      28,235      1,072,855      1,117,903         3,903,638
                                                                  ---------    -----------    -----------       -----------
         Total servicing fees and other........................      28,235      1,172,079      2,661,242        10,653,633
                                                                  ---------    -----------    -----------       -----------
             Total revenues....................................     513,459     10,094,411     19,672,813        65,654,291
                                                                  ---------    -----------    -----------       -----------
  Expenses:
     Compensation and benefits.................................     507,904      3,348,236      5,139,386        16,006,553
     Selling, general and administrative expenses(2)...........     355,526      2,000,401      3,477,677        15,652,381
     Other.....................................................       --            14,143        297,743         2,321,413
     Sharing of proportionate value of equity(4)...............       --         1,689,000      4,204,000         2,555,000
                                                                  ---------    -----------    -----------       -----------
         Total expenses........................................     863,430      7,051,780     13,118,806        36,535,347
                                                                  ---------    -----------    -----------       -----------
  Pre-tax income (loss)........................................    (349,971)     3,042,631      6,554,007        29,118,944
  Pro forma provision (benefit) for income taxes...............    (134,000)     1,187,000      2,522,000        11,190,000
                                                                  ---------    -----------    -----------       -----------
  Pro forma net income (loss)(2)...............................   $(215,971)   $ 1,855,631    $ 4,032,007       $17,928,944
                                                                  ---------    -----------    -----------       -----------
                                                                  ---------    -----------    -----------       -----------
  Pro forma per share data:
     Pro forma net income per share(2).........................                                  $0.25             $0.94
     Weighted average number of shares outstanding.............                               15,871,504        19,165,304
</TABLE>

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                  ------------------------------------------------------------
                                                                     1993           1994           1995              1996
                                                                  ----------    -----------    -------------    --------------
<S>                                                               <C>           <C>              <C>            <C>
BALANCE SHEET DATA:
   Mortgage loans held for sale................................   $7,971,990    $28,995,750    $193,002,835     $  914,586,703
   Interest-only and residual certificates.....................       --          3,403,730      14,072,771         86,246,674
   Warehouse finance facilities................................    7,212,915     27,731,859     189,819,046        895,132,545
   Term debt...................................................        --            --          11,120,642         47,430,295
   Stockholders' equity........................................    1,449,092      5,856,011       5,608,844         89,336,582
   Total assets................................................    8,861,144     36,641,991     354,551,434      1,707,348,185
</TABLE>

<TABLE>
<CAPTION>
                                                                  PERIOD FROM
                                                                   INCEPTION
                                                                  (AUGUST 12,
                                                                 1993) THROUGH           YEAR ENDED DECEMBER 31,
                                                                  DECEMBER 31,     ----------------------------------
                                                                     1993            1994        1995         1996
                                                                 -------------     --------    --------    ----------
<S>                                                              <C>               <C>         <C>         <C>
OPERATING DATA (DOLLARS IN THOUSANDS):
   Loans purchased or originated...............................   $  29,608        $282,924    $621,629    $1,770,312
   Loans sold through securitization...........................       --             81,637     388,363       935,000
   Whole loan sales............................................      21,636         180,263      70,400       128,868
   Serviced loan portfolio (period end)........................       --             92,003     535,798     2,148,068
DELINQUENCY DATA:
   Total delinquencies as a percentage of loans serviced
     (period end)(5)(6)........................................        0.00%           0.87%       3.43%         5.30%
   Defaults as a percentage of loans serviced
     (period end)(6)(7)........................................        0.00            0.12        1.00          1.47
   Net losses as a percentage of average loans serviced
     for period(6).............................................        0.00            0.00        0.09          0.13
</TABLE>

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

(1) Prior  to  June  1996,  includes  interest-only  and  residual  certificates
    received  by  ContiFinancial  in   connection  with  IMC's  agreement   with
    ContiFinancial.    See   Item   1.   --   'Business   --   Loans   --   Loan
    Sales --  Securitizations'  and  Item 7.  --  'Management's  Discussion  and
    Analysis  of Financial Condition  and Results of  Operations -- Transactions
    with ContiFinancial -- Additional Securitization Transaction Expense.'

                                              (footnotes continued on next page)

                                       26


<PAGE>
(footnotes continued from previous page)

(2) Beginning January 1, 1996,  the Company adopted SFAS  122 which resulted  in
    additional  gain on sale of $7.8 million and additional amortization expense
    of $1.2  million  for  the year  ended  December  31, 1996.  The  effect  on
    unaudited pro forma net income and pro forma net income per common share for
    the  year ended December 31, 1996 was an increase of $4.1 million and $0.21,
    respectively.

(3) In 1994, 1995 and 1996,  ContiFinancial received interest-only and  residual
    certificates  with estimated values of $3.0 million, $25.1 million and $13.4
    million in exchange  for cash payments  of $2.1 million,  $18.4 million  and
    $8.6  million,  respectively.  In  addition,  ContiFinancial  paid  IMC $0.4
    million, $1.1 million and $0.7 million in 1994, 1995 and 1996, respectively,
    in expenses  related  to  securitizations.  See  Item  7.  --  'Management's
    Discussion   and   Analysis   of   Financial   Condition   and   Results  of
    Operations -- Transactions with ContiFinancial -- Additional  Securitization
    Transaction Expense.'

(4) Reflects  expenses  recorded  in connection  with  the Conti  VSA  which was
    terminated in March 1996. The Company's pre-tax income before the Conti  VSA
    for  1994, 1995 and 1996 was $4.7  million, $10.8 million and $31.7 million,
    respectively. See  Item  7.  -- 'Management's  Discussion  and  Analysis  of
    Financial   Condition  and  Results  of   Operations  --  Transactions  with
    ContiFinancial --  Sharing  of  Proportionate  Value  of  Equity,'  'Certain
    Accounting  Considerations Relating to the Conti VSA' and Note 5 of Notes to
    Consolidated Financial Statements set forth under Item 8.

(5) Represents the percentages  of account  balances contractually  past due  30
    days  or more, exclusive of home equity loans in foreclosure, bankruptcy and
    real estate owned.

(6) The  increases  in  total  delinquencies,  defaults  and  net  losses  as  a
    percentage  of loans serviced  have each trended  upward as a  result of the
    aging of the Company's  loan portfolios. The Company  does not believe  that
    this  trend should have a material  adverse effect on the Company's revenues
    and net income, although no assurance can be given with respect thereto.

(7) Represents the percentages of account  balances of loans in foreclosure  and
    bankruptcy, exclusive of real estate owned.

                                       27


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

     The   following  discussion  should   be  read  in   conjunction  with  the
Consolidated Financial Statements of the Company and the Notes thereto set forth
under Item 8.

GENERAL

     IMC is  a  specialized  consumer finance  company  engaged  in  purchasing,
originating,  servicing and selling home equity loans secured primarily by first
liens on  one- to  four-family residential  properties. The  Company focuses  on
lending  to individuals whose borrowing needs  are generally not being served by
traditional financial  institutions due  to  such individuals'  impaired  credit
profiles and other factors. Loan proceeds are typically used by such individuals
to  consolidate debt, to finance home  improvements, to pay educational expenses
and for a variety of other uses. By focusing on individuals with impaired credit
profiles and providing prompt responses to their borrowing requests, the Company
has been  able  to charge  higher  interest rates  for  its loan  products  than
typically are charged by conventional mortgage lenders.

CERTAIN ACCOUNTING CONSIDERATIONS

INTEREST-ONLY AND RESIDUAL CERTIFICATES

     The  Company  purchases  and  originates  loans  for  the  purpose  of sale
primarily through securitizations. In a securitization transaction, the  Company
sells  a pool of  mortgages to a  REMIC trust which  simultaneously sells senior
interests to third-party investors. The  Company retains the residual  interests
(or  a  portion  thereof) represented  by  residual class  certificates  and I/O
certificates. The Company retains  the rights to service  the pool of  mortgages
owned  by the REMIC. In addition,  by retaining the residual class certificates,
the Company  is entitled  to receive  the  excess cash  flows generated  by  the
securitized  loans calculated as the difference between (a) the monthly interest
payments from the loans  and (b) the  sum of (i)  pass-through interest paid  to
third-party  investors, (ii) trustee fees,  (iii) third-party credit enhancement
fees, (iv) servicing fees and (v)  anticipated loan losses. The Company's  right
to   receive  this   excess  cash  flow   stream  begins   after  certain  over-
collateralization requirements  have  been  met,  which  are  specific  to  each
securitization  and  are used  as a  means  of credit  enhancement. The  I/O and
residual classes  of  certificates  are  initially  recorded  based  upon  their
relative fair values as a percentage of the total cost of the securitized loans,
based  upon the  present value  of the  anticipated excess  cash flows utilizing
assumptions appropriate for each securitization. These assumptions relate to the
anticipated average lives  of the loans  sold and anticipated  loan losses.  The
weighted  average discount  rate used  to discount the  cash flow  for the years
ended December 31, 1995 and 1996 ranged from 11% to 11.5%, and the assumed  loss
rate was 0.50% per year.

MORTGAGE SERVICING RIGHTS

     Effective  January 1, 1996, the Company  adopted SFAS 122. Because SFAS 122
prohibited retroactive application,  the historical accounting  results for  the
periods  ended  December  31,  1994,  and  1995  have  not  been  restated  and,
accordingly, the accounting results for the year ended December 31, 1996 are not
comparable to any  previous period.  In June 1996,  the FASB  released SFAS  125
which superseded SFAS 122 effective January 1, 1997.

     SFAS  122 required that  a mortgage banking entity  recognize as a separate
asset the rights to service mortgage loans for others. Mortgage banking entities
that acquire or originate loans and subsequently sell or securitize those  loans
and retain the mortgage servicing rights are required to allocate the total cost
of  the loans between the mortgage servicing  rights and the mortgage loans. The
Company was also required  to assess capitalized  mortgage servicing rights  for
impairment based upon the fair value of those rights. The impact of the adoption
of SFAS 122 on the Company's Statement of Operations for the year ended December
31,  1996 resulted in additional operating  income of approximately $6.6 million
and an additional pro  forma provision for income  tax expense of  approximately
$2.6  million. The effect  on unaudited pro  forma net income  and pro forma net
income per common share for the year ended December 31, 1996 was an increase  of
$4.1 million and $0.21, respectively.

                                       28


<PAGE>
     SFAS   125  addresses  the  accounting  for  all  types  of  securitization
transactions,  securities  lending  and  repurchase  agreements,  collateralized
borrowing   arrangements  and  other  transactions  involving  the  transfer  of
financial assets. SFAS 125 distinguishes transfers of financial assets that  are
sales  from  transfers  that  are  secured  borrowings.  SFAS  125  is generally
effective for  transactions that  occur after  December 31,  1996, and  will  be
applied  prospectively. SFAS 125 requires the Company to allocate the total cost
of mortgage loans sold among the  mortgage loans sold (servicing released),  I/O
and  residual certificates  and servicing  rights based  on their  relative fair
values. The Company is required to assess the I/O and residual certificates  and
servicing  rights for impairment based upon the fair value of those assets. SFAS
125 also requires the Company to provide additional disclosure about the I/O and
residual certificates in  its securitizations  and to account  for these  assets
each  quarterly reporting period at fair value  in accordance with SFAS 115. The
Company will apply the  new rules prospectively beginning  January 1, 1997.  The
actual  effect of  implementing this  new statement  on the  Company's financial
condition and results of operations will depend on various factors determined at
the end  of a  reporting period,  including the  amount of  loans purchased  and
originated  during  the period,  the level  of interest  rates and  estimates of
future prepayment and loss rates.  Accordingly, the Company cannot determine  at
this  time the ultimate impact on its future earnings of applying the provisions
of SFAS 125, but does not expect the results under SFAS 125 to differ materially
from the  results which  would have  emerged under  SFAS 122.  There can  be  no
assurance,  however, that the implementation by the Company of SFAS 125 will not
reduce the Company's gain on sale of loans in the future or otherwise  adversely
affect the Company's results of operations or financial condition.

GAIN ON SALE OF LOANS, NET

     Gain  on sale of  loans, net, which  arises primarily from securitizations,
includes all related revenues  and costs, including the  proceeds from sales  of
residual  class certificates, the  value of such  certificates, hedging gains or
losses and underwriting fees and other related securitization expenses and fees.
See  '  --  Transactions   with  ContiFinancial  --  Additional   securitization
transaction expense.'

NET WAREHOUSE INTEREST INCOME

     Net  warehouse  interest  income  is  interest  earned  from  the Company's
mortgage loans which  generally carry  long-term interest  rates, less  interest
expense on borrowings to finance the funding of such mortgage loans. The Company
generally  sells loans in its inventory within  180 days and finances such loans
under its secured  borrowing facilities, which  bear short-term interest  rates.
Ordinarily,  short-term interest rates are  lower than long-term interest rates,
and the  Company earns  net interest  income from  this difference,  or  spread,
during the period the mortgage loans are held by the Company.

TRANSACTIONS WITH CONTIFINANCIAL

ADDITIONAL SECURITIZATION TRANSACTION EXPENSE

     IMC,  in conjunction  with the  start up  of its  operations, maintained an
investment banking relationship  with ContiFinancial  from August  1993 to  June
1996.  As  part  of  this relationship,  ContiFinancial  provided  warehouse and
revolving credit facilities to IMC and acted as placement agent and  underwriter
of  certain  of its  securitizations.  In addition,  as  part of  its  cash flow
management strategy,  the  first six  securitizations  were structured  so  that
ContiFinancial received, in exchange for cash, a portion of the I/O and residual
interest  in such securitizations. These transactions reduced IMC's gain on sale
of loans by approximately $0.6  million in 1994, $5.5  million in 1995 and  $4.2
million  in  1996. ContiFinancial  also has  a warrant  to purchase  2.7 million
shares of Common Stock (subject to certain adjustments) for a de minimis amount.
IMC continues to maintain a financing relationship with ContiFinancial.

SHARING OF PROPORTIONATE VALUE OF EQUITY

     Prior to March  26, 1996,  the Company's financing  and investment  banking
agreements   with  ContiFinancial  included  the  ContiFinancial  Value  Sharing
Arrangement (Conti VSA). The existence  of the Conti VSA  had no cash impact  on
the  Company, but resulted in reductions of  $1.7 million, $4.2 million and $2.6
million in the Company's pre-tax income  for the years ended December 31,  1994,
1995

                                       29


<PAGE>
and  1996, respectively.  The Conti VSA  was converted into  an option entitling
ContiFinancial on exercise to approximately 18% of the equity of the Partnership
for a de minimus  amount (the 'Conti Option')  on March 26, 1996.  Consequently,
subsequent  to March 26, 1996, no liability  has been reflected on the Company's
balance sheet  and  no  expense  has been  reflected  on  the  Company's  income
statement with respect to the Conti VSA subsequent to that date.

     The Company's pre-tax income before the Conti VSA were as follows:

<TABLE>
<CAPTION>
                                                                             YEAR ENDED
                                                                            DECEMBER 31,
                                                               ---------------------------------------
                                                                  1994          1995          1996
                                                               -----------   -----------   -----------

<S>                                                            <C>           <C>           <C>
Total revenues...............................................  $10,094,411   $19,672,813   $65,654,291
Total expenses...............................................    7,051,780    13,118,806    36,535,347
                                                               -----------   -----------   -----------
Pre-tax income (loss) after Conti VSA........................    3,042,631     6,554,007    29,118,944
Conti VSA....................................................    1,689,000     4,204,000     2,555,000
                                                               -----------   -----------   -----------
Pre-tax income (loss) before Conti VSA.......................  $ 4,731,631   $10,758,007   $31,673,944
                                                               -----------   -----------   -----------
                                                               -----------   -----------   -----------
</TABLE>

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

     Pro forma net income for the year ended December 31, 1996 was $17.9 million
representing an increase of $13.9 million or 344.7% over pro forma net income of
$4.0  million for  the year  ended December  31, 1995.  Pro forma  net income is
calculated on  the basis  of historical  net income,  adjusted for  a pro  forma
income tax expense as if the Company had been taxable as a corporation since its
inception.

     The increase in pro forma net income resulted principally from increases in
net  gain on sale of loans  of $27.0 million or 178.0%  to $42.1 million for the
year ended December 31, 1996 from $15.1 million for the year ended December  31,
1995.  Also contributing  to the increase  in pro  forma net income  was a $11.0
million or 588.5% increase in net warehouse interest income to $12.9 million for
the year ended December 31, 1996 from  $1.9 million for the year ended  December
31,  1995, a $5.2 million  or 337.4% increase in  servicing fees to $6.7 million
for the  year ended  December 31,  1996 from  $1.5 million  for the  year  ended
December  31, 1995 and  a $2.8 million  or 249.2% increase  in other revenues to
$3.9 million for the year ended December 31, 1996 from $1.1 million for the year
ended December 31, 1995.

     The increase in income  was partially offset by  a $10.9 million or  211.4%
increase  in  compensation and  benefits  to $16.0  million  for the  year ended
December 31, 1996 from  $5.1 million for  the year ended  December 31, 1995,  of
which increase $2.2 million related to the acquisition of Equitystars on January
1, 1996 (see 'Business -- Acquisitions and Strategic Alliances -- Acquisition of
Equitystars'),  $2.6 million related to the  payment of bonuses to the Company's
executives (see Item 11. --  'Executive Compensation -- Employment  Agreements')
and  the remainder  related primarily  to the  growth of  the Company  (see Item
1. -- 'Business -- Employees'). The increase in income was also partially offset
by a $12.2  million or 350.1%  increase in selling,  general and  administrative
expenses to $15.7 million for the year ended December 31, 1996 from $3.5 million
for  the year ended December 31, 1995.  The Company expects its compensation and
benefits  and  selling,   general  and  administrative   expenses  to   increase
substantially  in  1997 as  a result  of the  expansion of  the business  of the
Company and its recent acquisitions. See Item 1. -- 'Business -- Employees'  and
Item  1. -- 'Business -- Acquisitions  and Strategic Alliances.' The increase in
income was further offset by a $2.0 million or 679.7% increase in other  expense
to  $2.3 million for the year ended December 31, 1996 from $ 0.3 million for the
year ended December 31, 1995. Finally,  income was favorably affected by a  $1.6
million  or 39.2% decrease in  the Conti VSA to $2.6  million for the year ended
December 31, 1996 from $4.2  million for the year  ended December 31, 1995.  See
'  --  Transactions with  ContiFinancial --  Sharing  of Proportionate  Value of
Equity,' 'Certain Accounting Considerations Relating to the Conti VSA' and  Note
5 of Notes to Consolidated Financial Statements included under Item 8.

                                       30


<PAGE>
     Income  before taxes was reduced by pro forma provision for income taxes of
$11.2 million for the year ended December 31, 1996 compared to $2.5 million  for
the  year  ended  December  31,  1995, representing  an  effective  tax  rate of
approximately 38.5%. The provision for income  taxes prior to June 24, 1996  are
pro  forma  amounts  because  prior  to that  date  the  Company  operated  as a
partnership and did not pay income taxes.

Revenues

     The following  table sets  forth information  regarding components  of  the
Company's revenues for the years ended December 31, 1995 and 1996:

<TABLE>
<CAPTION>
                                                                          YEAR ENDED
                                                                         DECEMBER 31,
                                                                  --------------------------
                                                                     1995           1996
                                                                  -----------    -----------

<S>                                                               <C>            <C>
Gain on sale of loans..........................................   $20,680,848    $46,229,615
Additional securitization transaction expense..................    (5,547,037)    (4,157,644)
                                                                  -----------    -----------
Gain on sale of loans, net.....................................    15,133,811     42,071,971
                                                                  -----------    -----------
Warehouse interest income......................................     7,884,679     37,463,583
Warehouse interest expense.....................................    (6,006,919)   (24,534,896)
                                                                  -----------    -----------
Net warehouse interest income..................................     1,877,760     12,928,687
                                                                  -----------    -----------
Servicing fees.................................................     1,543,339      6,749,995
Other..........................................................     1,117,903      3,903,638
                                                                  -----------    -----------
Total revenues.................................................   $19,672,813    $65,654,291
                                                                  -----------    -----------
                                                                  -----------    -----------
</TABLE>

     Gain  on Sale of Loans, Net. For the  year ended December 31, 1996, gain on
sale of loans increased to $46.2 million  from $20.7 million for the year  ended
December  31, 1995, an increase of  123.5%, reflecting increased loan production
and securitizations for  the year ended  December 31, 1996  and the adoption  of
SFAS 122. The total volume of loans produced increased by 184.8% to $1.8 billion
for  the year ended December 31, 1996 as  compared with a total volume of $621.6
million for the  year ended  December 31,  1995. Originations  by the  Company's
correspondent  network  increased  191.0% to  $1.6  billion for  the  year ended
December 31, 1996  from $543.6  million for the  year ended  December 31,  1995,
while production from the Company's broker network and direct lending operations
increased  to $188.3 million or 141.4% for the year ended December 31, 1996 from
$78.0 million for the year ended December 31, 1995. Production volume  increased
during  the 1996 period  due to: (i)  the Company's expansion  program; (ii) the
increase of its securitization activity; (iii) the growth of its loan  servicing
capability;  and (iv) the acquisition of  the assets and business of Equitystars
in January 1996. For the year  ended December 31, 1996, the Company  experienced
higher  gains  as it  sold more  loans through  securitizations. Securitizations
increased by $555 million, an increase of  146.1%, to $935 million for the  year
ended  December 31, 1996 from $380 million for the year ended December 31, 1995.
The number  of approved  correspondents increased  by  161 or  75.6% to  374  at
December  31,  1996 from  213 at  December 31,  1995 and  the number  of brokers
increased by 595 or 54.2% to 1,693  at December 31, 1996 from 1,098 at  December
31,  1995. Additional securitization  expense decreased to  $4.2 million for the
year ended December 31,  1996, a decrease  of 25.0%, from  $5.5 million for  the
year ended December 31, 1995. For the year ended December 31, 1996, gain on sale
of  loans, net, increased to $42.1 million from $15.1 million for the year ended
December 31, 1995, an increase  of 178.0%, reflecting increased loan  production
and securitizations in the 1996 period.

     Net  Warehouse Interest Income. Net  warehouse interest income increased to
$12.9 million for the  year ended December  31, 1996 from  $1.9 million for  the
year  ended December 31, 1995,  an increase of 588.5%.  The increase in the 1996
period reflected higher interest income  resulting from increased mortgage  loan
production  and  mortgage loans  held  for sale  which  was partially  offset by
interest costs associated with warehouse facilities. The mortgage loans held for
sale increased to $914.6  million at December 31,  1996, an increase of  373.9%,
from $193.0 million at December 31, 1995.

     Servicing Fees. Servicing fees increased to $6.7 million for the year ended
December  31, 1996 from  $1.5 million for  the year ended  December 31, 1995, an
increase of 337.4%. Servicing fees for the year

                                       31


<PAGE>
ended December 31,  1996 were  positively affected  by an  increase in  mortgage
loans  serviced over  the prior period.  During 1996, the  Company increased its
servicing portfolio by $1.6  billion or 300.9% to  $2.15 billion as of  December
31, 1996, from $535.8 million as of December 31, 1995.

     Other.  Other  revenues,  consisting  principally of  interest  on  I/O and
residual certificates, increased  to $5.3 million  or 370.0% in  the year  ended
December  31, 1996 from  $1.1 million in the  year ended December  31, 1995 as a
result of increased securitization volume.

Expenses

     The following  table sets  forth information  regarding components  of  the
Company's expenses for the years ended December 31, 1995 and 1996.

<TABLE>
<CAPTION>
                                                                          YEAR ENDED
                                                                         DECEMBER 31,
                                                                  --------------------------
                                                                     1995           1996
                                                                  -----------    -----------

<S>                                                               <C>            <C>
Compensation and benefits......................................   $ 5,139,386    $16,006,553
Selling, general and administrative expenses...................     3,477,677     15,652,381
Other..........................................................       297,743      2,321,413
Sharing of proportionate value of equity.......................     4,204,000      2,555,000
                                                                  -----------    -----------
Total expenses.................................................   $13,118,806    $36,535,347
                                                                  -----------    -----------
                                                                  -----------    -----------
</TABLE>

     Compensation  and benefits  increased by $10.9  million or  211.4% to $16.0
million for the  year ended December  31, 1996  from $5.1 million  for the  year
ended  December  31, 1995,  principally  due to  an  increase in  the  number of
employees to  service  the Company's  increased  mortgage loan  production,  the
acquisition  of  the  assets and  business  of  Equitystars and  an  increase in
executive bonuses.  Compensation expense  related  to the  Equitystars  business
(which  was acquired January 1,  1996) for the year  ended December 31, 1996 was
$2.2 million,  and executive  bonuses  increased $2.6  million  in 1996.  It  is
anticipated  that the Company's  compensation and benefits  will increase as the
Company expands; however, the amount of executive bonuses is directly related to
increases in  the Company's  earnings  per share  (see  'Item 11.  --  Executive
Compensation -- Employment Agreements').

     Selling,  general and administrative expenses increased by $12.2 million or
350.1% to $15.7 million for the year  ended December 31, 1996 from $3.5  million
for  the year  ended December 31,  1995, principally  due to an  increase in the
volume of  mortgage loan  production, an  additional $2.0  million of  marketing
expenses  related to the expansion of  retail production, the acquisition of the
assets and business of Equitystars, an increase  of $2.5 million in the cost  to
carry  of securities purchased  under agreements to resell,  an increase in loan
losses of  $1.1 million  and  an increase  in  amortization expense  related  to
capitalized mortgage servicing rights of $1.2 million.

     Other  expenses increased by $2.0 million or 679.7% to $2.3 million for the
year ended December 31, 1996 from $0.3  million for the year ended December  31,
1995 principally as a result of increased term debt borrowings.

     The  sharing  of proportionate  value  of equity,  representing  the amount
payable under the Conti  VSA, decreased to  $2.6 million or  39.2% for the  year
ended  December 31, 1996 from $4.2 million for the year ended December 31, 1995.
The Company's obligation  to make  payments under  the Conti  VSA terminated  in
March 1996.

     Pro  Forma Income Taxes.  The effective pro  forma income tax  rate for the
year ended December 31,  1996 was approximately 38.5%,  which differed from  the
federal tax rate of 35% primarily due to state income taxes. The increase in pro
forma  provision for income taxes of $8.7 million or 343.7% to $11.2 million for
the year ended December 31, 1996 from  $2.5 million for the year ended  December
31, 1995 was proportionate to the increase in pre-tax income.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

     Pro forma net income for the year ended December 31, 1995 was $4.0 million,
representing  an increase of $2.1 million or 117.3% over pro forma net income of
$1.9 million  for the  year  ended December  31,  1994. This  increase  resulted
principally   from   a   $7.1   million   or   88.6%   increase   in   gain   on

                                       32


<PAGE>
sale of loans, net  of additional securitization  transaction expense, to  $15.1
million  for the  year ended December  31, 1995  from $8.0 million  for the year
ended December 31,  1994. Pro forma  net income  is calculated on  the basis  of
historical  net income, adjusted  for a pro  forma income tax  expense as if the
Company had been taxable  as a corporation since  its inception. In addition,  a
$1.0 million or 108.8% increase in net warehouse interest income to $1.9 million
for  the  year ended  December 31,  1995 from  $0.9 million  for the  year ended
December 31, 1994 and a $1.4 million  or 1,445.4% increase in servicing fees  to
$1.5 million for the year ended December 31, 1995 from $0.1 million for the year
ended  December  31, 1994  also contributed  to  the increase  in pro  forma net
income. The increase was partially offset by a $1.8 million or 53.5% increase in
compensation and benefits to $5.1 million  for the year ended December 31,  1995
from  $3.3 million for  the year ended December  31, 1994 and  a $1.5 million or
73.8% increase in selling, general  and administrative expenses to $3.5  million
for  the  year ended  December 31,  1995 from  $2.0 million  for the  year ended
December 31, 1994. The increase in pro forma net income was further offset by  a
$0.3  million increase  in other  expenses to  $0.3 million  for the  year ended
December 31, 1995 from a negligible amount for the year ended December 31, 1994,
a $2.5 million or 148.9% increase in the Conti VSA to $4.2 million for the  year
ended  December 31, 1995 from $1.7 million  for the year ended December 31, 1994
and a $1.3 million or  112.5% increase in pro forma  income tax expense to  $2.5
million  for the  year ended December  31, 1995  from $1.2 million  for the year
ended December 31, 1994.

Revenues

     The following  table sets  forth information  regarding components  of  the
Company's revenues for the years ended December 31, 1994 and 1995:

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED
                                                                                   DECEMBER 31,
                                                                            --------------------------
                                                                               1994           1995
                                                                            -----------    -----------

<S>                                                                         <C>            <C>
Gain on sale of loans....................................................   $ 8,583,277    $20,680,848
Additional securitization transaction expense............................      (560,137)    (5,547,037)
                                                                            -----------    -----------
     Gain on sale of loans, net..........................................     8,023,140     15,133,811
                                                                            -----------    -----------
Warehouse interest income................................................     2,510,062      7,884,679
Warehouse interest expense...............................................    (1,610,870)    (6,006,919)
                                                                            -----------    -----------
     Net warehouse interest income.......................................       899,192      1,877,760
                                                                            -----------    -----------
Servicing fees...........................................................        99,224      1,543,339
Other....................................................................     1,072,855      1,117,903
                                                                            -----------    -----------
     Total revenues......................................................   $10,094,411    $19,672,813
                                                                            -----------    -----------
                                                                            -----------    -----------
</TABLE>

     Gain  on  Sale of  Loans, Net.  Gain on  sale of  loans increased  to $20.7
million for the  year ended December  31, 1995  from $8.6 million  for the  year
ended  December  31,  1994, an  increase  of 140.9%,  reflecting  increased loan
production and securitizations  in the 1995  period. The total  volume of  loans
produced  increased by 119.7% to $621.6 million  for the year ended December 31,
1995 as  compared with  a total  volume of  $282.9 million  for the  year  ended
December 31, 1994. Originations by the correspondent network increased 132.9% to
$543.6  million for the year ended December 31, 1995 from $233.5 million for the
year ended December 31, 1994, while production from the Company's broker network
and direct lending operations increased to  $78.0 million or 57.6% for the  year
ended December 31, 1995 from $49.5 million for the year ended December 31, 1994.
Production  volume  increased  during  the  period  due  to:  (i)  the Company's
expansion program; (ii)  the development of  a securitization capability;  (iii)
the  development of a loan servicing  capability; and (iv) the Company's ability
to finance its growth. In 1995 the  Company experienced higher gains as it  sold
more  loans through securitizations. Securitizations increased by $290.0 million
or 322.2% to  $380.0 million for  the year  ended December 31,  1995 from  $90.0
million   for  the  year  ended  December  31,  1994.  The  number  of  approved
correspondents increased by 108 or 102.9% to  213 at December 31, 1995 from  105
at  December 31, 1994  and the number of  brokers increased by  600 or 120.5% to
1,098  at  December  31,  1995  from  498  at  December  31,  1994.   Additional
securitization  transaction expense increased by $5.0  million or 890.3% to $5.5
million for the  year ended December  31, 1995  from $0.6 million  for the  year

                                       33


<PAGE>
ended  December 31, 1994. For the year ended  December 31, 1995, gain on sale of
loans, net, increased  to $15.1  million from $8.0  million for  the year  ended
December  31, 1994, an  increase of 88.6%,  reflecting increased loan production
and  securitizations  in   the  1995   period.  See  '   --  Transactions   with
ContiFinancial -- Additional Securitization Transaction Expense.'

     Net  Warehouse Interest Income. Net  warehouse interest income increased to
$1.9 million for the year ended December 31, 1995 from $0.9 million for the year
ended December 31, 1994, an increase  of 108.8%. The increase in 1995  reflected
higher interest income resulting from increased mortgage loan production, offset
by  interest costs associated  with warehouse facilities.  The holding period of
loans increased in 1995 from  1994 as the Company  increased the portion of  its
loans sold through securitizations.

     Servicing Fees. Servicing fees increased to $1.5 million for the year ended
December  31, 1995 from  $0.1 million for  the year ended  December 31, 1994, an
increase of 1,455.4%. Servicing fees for  the year ended December 31, 1995  were
positively affected by an increase in loans serviced over the prior year.

     Other.  Other revenues increased by a negligible amount to $1.1 million for
the year ended December  31,1995 from $1.1 million  for the year ended  December
31, 1994.

Expenses

     The  following  table sets  forth information  regarding components  of the
Company's expenses for the years ended December 31, 1994 and 1995:

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                              -------------------------
                                                                                 1994          1995
                                                                              ----------    -----------

<S>                                                                           <C>           <C>
Compensation and benefits..................................................   $3,348,236    $ 5,139,386
Selling, general and administrative expenses...............................    2,000,401      3,477,677
Other......................................................................       14,143        297,743
Sharing of proportionate value of equity...................................    1,689,000      4,204,000
                                                                              ----------    -----------
     Total expenses........................................................   $7,051,780    $13,118,806
                                                                              ----------    -----------
                                                                              ----------    -----------
</TABLE>

     Compensation and  benefits  increased by  $1.8  million or  53.5%  to  $5.1
million  for the  year ended December  31, 1995  from $3.3 million  for the year
ended December  31,  1994, principally  due  to an  increase  in the  number  of
employees servicing the Company's increased loan production.

     Selling,  general and administrative expenses  increased by $1.5 million or
73.8% to $3.5 million for the year ended December 31, 1995 from $2.0 million for
the year ended December 31, 1994, principally  due to an increase in the  volume
of loan production.

     Other  expenses increased to  $0.3 million for the  year ended December 31,
1995 from a negligible amount for the  year ended December 31, 1994 as a  result
of increased loan production and securitization volume in 1995.

     The  sharing  of proportionate  value  of equity,  representing  the amount
payable under the Conti VSA, increased by $2.5 million or 148.9% to $4.2 million
for the  year ended  December 31,  1995 from  $1.7 million  for the  year  ended
December  31,  1994. See  ' --  Transactions with  ContiFinancial --  Sharing of
Proportionate Value of Equity,'  'Certain Accounting Considerations Relating  to
the Conti VSA' and Note 5 of Notes to Consolidated Financial Statements included
under Item 8.

     Pro  Forma Income Taxes.  The effective pro  forma income tax  rate for the
year ended December 31, 1995 was 38.5%  compared to the federal tax rate of  35%
primarily  due to state income taxes. The  increase in pro forma income taxes of
$1.3 million or 112.5% to $2.5 million for the year ended December 31, 1995 from
$1.2 million  for the  year ended  December 31,  1994 was  proportionate to  the
increase in pre-tax income.

FINANCIAL CONDITION

DECEMBER 31, 1996 COMPARED TO DECEMBER 31, 1995

     Mortgage  loans held  for sale  at December  31, 1996  were $914.6 million,
representing an increase of  $721.6 million or 373.9%  over mortgage loans  held
for sale of $193.0 million at December 31, 1995. This

                                       34


<PAGE>
increase  was  a result  of  increased loan  purchases  and originations  as the
Company expanded  into  new  states and  increased  purchasing  and  origination
efforts  in states in  which the Company  had an existing  market presence. This
increase was also a result of  the Company's strategy to increase its  financial
flexibility by increasing its balance of mortgage loans held for sale.

     I/O  and residual  certificates at  December 31,  1996 were  $86.2 million,
representing an  increase of  $72.1  million or  512.9%  over I/O  and  residual
certificates  of $14.1 million at December 31,  1995. This increase was a result
of the Company completing four securitizations, one in each of the four quarters
of 1996, for an aggregate of $935.0 million in securitizations for 1996.

     Borrowings under warehouse financing facilities  at December 31, 1996  were
$895.1  million,  representing  an increase  of  $705.3 million  or  371.6% over
warehouse financing  facilities of  $189.8 million  at December  31, 1995.  This
increase was a result of increased mortgage loans held for sale.

     Term  debt at December 31, 1996 was $47.4 million, representing an increase
of $36.3 million or 326.5% over term debt of $11.1 million at December 31, 1995.
This increase  was primarily  a result  of  financing the  increase in  I/O  and
residual certificates.

     Stockholders'   equity  as  of   December  31,  1996   was  $89.3  million,
representing an  increase of  $83.7 million  over stockholders'  equity of  $5.6
million  at  December 31,  1995. This  increase  was primarily  a result  of the
Company's initial public  offering of  7.1 million  shares of  common stock  for
$9.00  per  share, the  net proceeds  of  which amounted  to $58.2  million, the
conversion of the  Conti VSA  into the  Conti Option  of $8.5  million, and  net
income  for  the  year  ended  December 31,  1996,  offset  by  $9.8  million of
distributions to former partners of the  Partnership for taxes payable by  these
former partners with respect to the income of the Partnership.

DECEMBER 31, 1995 COMPARED TO DECEMBER 31, 1994

     Mortgage  loans held  for sale  at December  31, 1995  were $193.0 million,
representing an increase of  $164.0 million or 565.6%  over mortgage loans  held
for  sale of $29.0 million  at December 31, 1994. This  increase was a result of
increased loan  origination and  purchasing  as the  Company expanded  into  new
states  and increased its origination and  purchasing efforts in states in which
the Company had an existing market presence.

     I/O and  residual certificates  at December  31, 1995  were $14.1  million,
representing  an  increase of  $10.7  million or  313.5%  over I/O  and residual
certificates of $3.4 million at December 31, 1994. This increase was the  result
of the Company completing two securitizations.

     Warehouse  financing facilities at  December 31, 1995  were $189.8 million,
representing an increase of  $162.1 million or  584.5% over warehouse  financing
facilities  of $27.7 million at December 31, 1994. This increase was primarily a
result of the Company's increased loan purchases and originations.

     Term debt  at December  31,  1995 totaled  $11.1 million,  representing  an
increase  of $11.1 million over December 31, 1994. This increase was primarily a
result of the Company's securitizations and the financing thereof.

     Stockholders' equity at December 31, 1995 was $5.6 million, representing  a
decrease  of $0.3 million or  4.2% from stockholders' equity  of $5.9 million at
December 31, 1994. This decrease, which is negligible, represents the difference
between net income and distributions.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company  uses  its   cash  flow  from  the   sale  of  loans   through
securitizations,  whole loan sales, loan  origination fees, processing fees, net
interest income, servicing  fees and borrowings  under its warehouse  facilities
and term debt to meet its working capital needs. The Company's cash requirements
include  the funding  of loan  purchases and  originations, payment  of interest
costs,  funding  of  over-collateralization  requirements  for  securitizations,
operating expenses, income taxes, acquisitions and capital expenditures.

     The Company has an ongoing need for capital. Adequate credit facilities and
other  sources of funding, including  the ability of the  Company to sell loans,
are essential  to the  continuation of  the Company's  ability to  purchase  and
originate    loans.   As   a   result    of   increased   loan   purchases   and

                                       35


<PAGE>
originations and its growing securitization  program, the Company has  operated,
and  expects to continue to  operate, on a negative  cash flow basis. During the
year ended  December  31,  1996,  the  Company  used  cash  flow  for  operating
activities  of $776.7  million, an increase  of $611.4 million,  or 369.9%, over
cash flows used for operating activities of $165.3 million during the year ended
December 31, 1995. During the year ended December 31, 1996, the Company received
cash flows from financing  activities of $788.7 million,  an increase of  $621.0
million  or 370.3% over cash flows  received from financing activities of $167.7
million during  the  year ended  December  31, 1995.  The  cash flows  used  for
operating activities related primarily to the funding of mortgage loan purchases
or  originations  and  cash  flows received  from  financing  activities related
primarily to the funding of the mortgage loan purchases or originations and  net
proceeds  of $58.2  million from  the Company's  initial public  offering of 7.1
million shares in  June 1996. As  a result of  the aging of  the Company's  loan
portfolio,  it has experienced  an increase in loan  delinquency and loss rates;
however, to date, the increase in delinquency rates and loss rates has not had a
material effect on the Company's cash flows.

     The Company's  sale of  loans through  securitizations has  resulted in  an
increase  in  the  amount  of  gain  on  sale  recognized  by  the  Company. The
recognition of  this  gain on  sale  results  in significant  cash  costs  being
incurred  upon closing  of a securitization  transaction. The  Company does not,
however, receive the  cash representing the  gain until later  periods when  the
related  loans are repaid or otherwise collected. During the year ended December
31, 1996, the Company received cash of approximately $4.8 million related to I/O
and residual certificates. The  Company borrows funds on  a short-term basis  to
support the accumulation of loans prior to sale. These short-term borrowings are
made under warehouse lines of credit with various lenders.

     At  December 31, 1996, the Company had a $400 million uncommitted warehouse
facility with  Bear  Stearns  Home  Equity  Trust  1996-1  which  also  provides
additional  warehouse financing on an  as offered basis and  which may result in
amounts borrowed to be in excess  of $400 million. This facility bears  interest
at  LIBOR plus 0.875%.  Approximately $441.0 million  was outstanding under this
facility at  December  31, 1996.  In  March  1997, the  warehouse  facility  was
increased to $500 million and renewed to March 1998.

     Additionally,  at December 31,  1996, the Company  had approximately $580.6
million available under numerous  other warehouse lines  of credit, $60  million
which expired in January, 1997 and $280.6 million, $30 million, $100 million and
$110 million which will expire in August, September, November and December 1997,
respectively.  As  of  December  31,  1996,  approximately  $454.1  million  was
outstanding under these lines of credit. Interest rates ranged from 6.5% to 7.2%
as of December 31, 1996, and all borrowings mature within one year.  Outstanding
borrowings on the Company's warehouse financing facilities are collateralized by
mortgage  loans held for sale and warehouse financing due from correspondents at
December 31, 1996 and servicing rights on approximately $250 million of mortgage
loans. Upon the sale of these loans and the repayment of warehouse financing due
from correspondents,  the borrowings  under these  lines will  be repaid.  Since
December  31, 1996, the Company has renewed  and increased $110 million lines of
credit expiring  in  December  1997 to  $210  million  and entered  into  a  new
uncommitted line of credit for $400 million.

     At  December 31, 1996, the Company also  had term debt outstanding of $47.4
million which expire  through January 2000.  Outstanding borrowings under  these
facilities  are secured by I/O and  residual certificates and accrue interest at
rates ranging from 6.70% to 8.13%.

     In December 1996,  the Company executed  an agreement with  Bank of  Boston
pursuant  to which Bank of Boston will  provide a $25 million one year revolving
credit facility subject  to the following  sublimits and terms:  (i) $5  million
warehouse  line  of  credit due  June  30,  1998, (ii)  $25  million  to finance
interest-only and residual certificates, to  be repaid according to a  repayment
schedule  calculated by Bank of Boston  with a maximum amortization period after
the revolving period of three years;  and (iii) $20 million for acquisitions  or
bridge  financing due within six months from  the initial borrowing date of each
takedown of the bridge financing, but in  no event later than June 30, 1998.  No
amounts  were outstanding  under this  facility at January  31, 1997,  but it is
anticipated that amounts up to $20.0 million may be borrowed for an  acquisition
or on a bridge basis.

     The Company's warehouse lines and term debt contain various affirmative and
negative covenants customary for credit arrangements of their type and which the
Company believes will not have a

                                       36


<PAGE>
material  effect on its operations, growth and financial flexibility. The credit
facility with Bank of Boston also contains certain financial covenants requiring
the maintenance of certain debt-to-equity  or debt-to-net worth ratios, as  well
as  establishing  limits  on  the  ability of  the  Company  to  incur unsecured
indebtedness. The Company does not believe that the existing financial covenants
will restrict its operations within the next 12 months. Management believes  the
Company is in compliance with all such covenants under these agreements.

     The  Company's current  warehouse lines  generally are  subject to one-year
terms. Certain warehouse lines  have automatic renewal  features subject to  the
absence of defaults and permit the lender to terminate the facility on notice to
the  Company.  There  can be  no  assurance  either that  the  Company's current
creditors will renew their facilities as they expire or that the Company will be
able to obtain additional credit lines.

     On February 14, 1997, the Company  filed a Registration Statement with  the
Securities  and Exchange Commission to register 7,000,000 shares of common stock
to be offered to the  public (The Offering). Of  the 7,000,000 shares of  common
stock,  5,600,000 shares are  being offered by the  Company and 1,400,000 shares
are being offered by certain stockholders  of the Company. The Company will  not
receive any proceeds from the sale of shares by the selling stockholders.

     Funds  available  under the  Company's current  warehouse and  other credit
facilities and the net proceeds from the Offering are expected to be  sufficient
to  fund the Company's  liquidity requirements, including  the implementation of
its  business  strategy,  beyond  December   1997.  However,  the  Company   has
substantial  capital requirements and it anticipates that it may need to arrange
for additional external cash resources in 1998 through additional financings  or
offerings.

     The  Company purchases  and originates mortgage  loans and  then sells them
primarily through  securitizations.  At  the  time  of  securitization  and  the
delivery  of the loans, the Company recognizes gain on sale based on a number of
factors including the difference, or 'spread,' between the interest rate on  the
loans   and  the  interest  rate  on  the  treasury  security  with  a  maturity
corresponding to  the anticipated  life of  the loans.  If interest  rates  rise
between  the time the Company originates or purchases the loans and the time the
loans are priced at securitization, the  spread narrows, resulting in a loss  in
value of the loans. To protect against such losses, the Company hedges the value
of  the loans through the  short sale of treasury  securities. Prior to hedging,
the Company performs an analysis of  its loans taking into account, among  other
things,  interest rates  and maturities to  determine the  amount, type (usually
three and five years), duration (usually less than three months) and  proportion
of  each treasury security  to sell short so  that the risk to  the value of the
loans is more effectively hedged. The Company executes the sale of the  treasury
securities with large, reputable securities firms and uses the proceeds received
to acquire treasury securities under repurchase agreements. These securities are
designated  as hedges in the Company's records and are closed out when the loans
are sold.

     If the value of the hedges  decreases, offsetting an increase in the  value
of  the loans, the Company, upon settlement  with its counterparty, will pay the
hedge loss in cash and  realize the corresponding increase  in the value of  the
loans  as part of its I/O and residual certificates. Conversely, if the value of
the hedges  increase, offsetting  a decrease  in  the value  of the  loans,  the
Company,  upon settlement with its counterparty,  will receive the hedge gain in
cash and realize the corresponding decrease in the value of the loans through  a
reduction in the value of the corresponding I/O and residual certificates.

     The  Company believes that its hedging activities using treasury securities
are substantially similar in purpose,  scope and execution to customary  hedging
activities using treasury securities engaged in by many of its competitors.

INFLATION

     Inflation  historically has had no material effect on the Company's results
of operations. Inflation affects the Company  most significantly in the area  of
loan  originations and can have a substantial effect on interest rates. Interest
rates normally increase  during periods  of high inflation  and decrease  during
periods of low inflation.

     Profitability  may be  directly affected  by the  level and  fluctuation in
interest rates  which affect  the Company's  ability to  earn a  spread  between
interest received on its loans and the costs of its

                                       37


<PAGE>
borrowings.  The profitability of the Company is likely to be adversely affected
during  any  period  of  unexpected  or  rapid  changes  in  interest  rates.  A
substantial  and sustained increase in interest rates could adversely affect the
ability of the Company  to purchase and  originate loans and  affect the mix  of
first  and second mortgage  loan products. Generally,  first mortgage production
increases relative to  second mortgage  production in response  to low  interest
rates  and  second  mortgage  production increases  relative  to  first mortgage
production during  periods of  high  interest rates.  A significant  decline  in
interest rates could decrease the size of the Company's loan servicing portfolio
by  increasing  the  level  of loan  prepayments.  Additionally,  to  the extent
servicing rights and I/O and residual certificates have been capitalized on  the
books  of  the Company,  higher than  anticipated rates  of loan  prepayments or
losses could  require the  Company to  write down  the value  of such  servicing
rights  and I/O  and residual certificates  which would have  a material adverse
effect  on  the  Company's  results  of  operations  and  financial   condition.
Fluctuating interest rates also may affect the net interest income earned by the
Company  from the  difference between  the yield  to the  Company on  loans held
pending sales and the interest paid by the Company for funds borrowed under  the
Company's warehouse facilities. In addition, inverse or flattened interest yield
curves  could have an adverse impact on the profitability of the Company because
the loans pooled and sold by the Company have long-term rates, while the  senior
interests  in the related REMIC  trusts are priced on  the basis of intermediate
term rates.

RECENT EVENTS AND ACQUISITIONS

     Pursuant to the  Company's acquisition  strategy, in  January and  February
1997  IMC acquired the  outstanding stock of  CoreWest and all  of the assets of
American Reduction,  Equity  Mortgage and  Mortgage  America. During  1996,  IMC
acquired all of the assets of Equitystars and also formed a joint venture in the
United  Kingdom. Several acquisitions include earn-out arrangements that provide
the sellers  with  additional  consideration if  the  acquired  company  reaches
certain  performance targets after the acquisition. Any such contingent payments
will result in an increase in the  amount of goodwill recorded on IMC's  balance
sheet  related to each acquisition. Goodwill  represents the excess of cost over
fair market value of the net tangible assets acquired in each acquisition and is
amortized through periodic charges to  earnings for up to  30 years. See Item  1
'Business -- Acquisitions and Strategic Alliances.'

                                       38

<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----

<S>                                                                                                           <C>
Report of Independent Accountants..........................................................................    40
Financial Statements:
     Consolidated Balance Sheets as of December 31, 1995 and 1996..........................................    41
     Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996............    42
     Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and
      1996.................................................................................................    43
     Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996............    44
     Notes to Consolidated Financial Statements............................................................    45
</TABLE>

                                       39


<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders of
  IMC MORTGAGE COMPANY AND SUBSIDIARIES

     We  have  audited  the  accompanying  consolidated  balance  sheets  of IMC
Mortgage Company and  Subsidiaries as  of December 31,  1995 and  1996, and  the
related  consolidated statements  of operations, stockholders'  equity, and cash
flows for each of the three years  in the period ended December 31, 1996.  These
financial   statements  are   the  responsibility  of   IMC  Mortgage  Company's
management. Our  responsibility is  to  express an  opinion on  these  financial
statements based on our audits.

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

     In  our opinion, the financial statements referred to above present fairly,
in all material respects,  the consolidated financial  position of IMC  Mortgage
Company  and Subsidiaries as of December 31, 1995 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years  in
the  period  ended  December 31,  1996,  in conformity  with  generally accepted
accounting principles.

     As discussed in Note 4, effective  January 1, 1996 the Company changed  its
method of accounting for mortgage servicing rights.

                                          /S/ COOPERS & LYBRAND L.L.P.

Tampa, Florida
February 21, 1997

                                       40


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                  ------------------------------
                                                                                      1995             1996
                                                                                  ------------    --------------

<S>                                                                               <C>             <C>
                                    ASSETS
Cash and cash equivalents......................................................   $  5,133,718    $   13,289,128
Securities purchased under agreements to resell................................    138,058,262       659,490,000
Accrued interest receivable....................................................      1,872,129         8,311,530
Accounts receivable............................................................      1,179,907         3,689,540
Mortgage loans held for sale...................................................    193,002,835       914,586,703
Interest-only and residual certificates........................................     14,072,771        86,246,674
Warehouse financing due from correspondents....................................         53,200         5,045,385
Furniture, fixtures and equipment  -- net......................................        679,950         1,676,822
Capitalized mortgage servicing rights..........................................        --              6,621,347
Investment in joint venture....................................................        --              1,738,760
Goodwill.......................................................................        --              1,843,144
Other assets...................................................................        498,662         4,809,152
                                                                                  ------------    --------------
          Total................................................................   $354,551,434    $1,707,348,185
                                                                                  ------------    --------------
                                                                                  ------------    --------------

                     LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Warehouse finance facilities..............................................   $189,819,046    $  895,132,545
     Term debt.................................................................     11,120,642        47,430,295
     Accrued and other liabilities.............................................        547,707         7,766,858
     Accrued interest payable..................................................      1,055,550         4,077,744
     Securities sold but not yet purchased.....................................    139,200,000       661,061,161
     Amounts payable for taxes.................................................      1,306,645         2,543,000
     Accrual for sharing of proportionate value of equity (Note 5).............      5,893,000          --
                                                                                  ------------    --------------
          Total liabilities....................................................    348,942,590     1,618,011,603
                                                                                  ------------    --------------
Commitments (Note 15)
Stockholders' equity:
     Preferred stock, par value $.01 per share; 10,000,000 shares authorized;
       none issued and outstanding.............................................        --               --
     Common stock, par value $.01 per share; 50,000,000 authorized; 12,000,000
       and 19,669,666 shares issued and outstanding............................         60,000           196,696
     Additional paid-in capital................................................      3,844,601        76,489,738
     Retained earnings.........................................................      1,704,243        12,650,148
                                                                                  ------------    --------------
          Total stockholders' equity...........................................      5,608,844        89,336,582
                                                                                  ------------    --------------
          Total................................................................   $354,551,434    $1,707,348,185
                                                                                  ------------    --------------
                                                                                  ------------    --------------
</TABLE>

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

                                       41


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                            FOR THE YEAR ENDED DECEMBER 31,
                                                                       -----------------------------------------
                                                                          1994           1995           1996
                                                                       -----------    -----------    -----------
<S>                                                                    <C>            <C>            <C>
Revenues:
     Gain on sales of loans.........................................   $ 8,583,277    $20,680,848    $46,229,615
     Additional securitization transaction expense (Note 5).........      (560,137)    (5,547,037)    (4,157,644)
                                                                       -----------    -----------    -----------
          Net gain on sale of loans.................................     8,023,140     15,133,811     42,071,971
                                                                       -----------    -----------    -----------
     Warehouse interest income......................................     2,510,062      7,884,679     37,463,583
     Warehouse interest expense.....................................    (1,610,870)    (6,006,919)   (24,534,896)
                                                                       -----------    -----------    -----------
          Net warehouse interest income.............................       899,192      1,877,760     12,928,687
                                                                       -----------    -----------    -----------
     Servicing fees.................................................        99,224      1,543,339      6,749,995
     Other revenues.................................................     1,072,855      1,117,903      3,903,638
                                                                       -----------    -----------    -----------
          Total servicing fees and other............................     1,172,079      2,661,242     10,653,633
                                                                       -----------    -----------    -----------
          Total revenues............................................    10,094,411     19,672,813     65,654,291
                                                                       -----------    -----------    -----------
Expenses:
     Compensation and benefits......................................     3,348,236      5,139,386     16,006,553
     Selling, general and administrative expenses...................     2,000,401      3,477,677     15,652,381
     Sharing of proportionate value of equity (Note 5)..............     1,689,000      4,204,000      2,555,000
     Other..........................................................        14,143        297,743      2,321,413
                                                                       -----------    -----------    -----------
          Total expenses............................................     7,051,780     13,118,806     36,535,347
                                                                       -----------    -----------    -----------
     Income before income taxes.....................................     3,042,631      6,554,007     29,118,944
     Provision for income taxes.....................................       --             --          (4,206,000)
                                                                       -----------    -----------    -----------
Net income..........................................................   $ 3,042,631    $ 6,554,007    $24,912,944
                                                                       -----------    -----------    -----------
                                                                       -----------    -----------    -----------
Unaudited Pro Forma Data (giving effect to provision for income
  taxes):
     Income before provision for income taxes.......................                  $ 6,554,007     29,118,944
     Pro forma provision for income taxes (Note 4)..................                    2,522,000     11,190,000
                                                                                      -----------    -----------
     Pro forma net income...........................................                  $ 4,032,007     17,928,944
                                                                                      -----------    -----------
                                                                                      -----------    -----------
     Pro forma net income per common share..........................                  $      0.25    $      0.94
     Weighted average number of shares outstanding..................                   15,871,504     19,165,304
</TABLE>

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

                                       42


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                 COMMON STOCK         ADDITIONAL      RETAINED
                                            ----------------------      PAID-IN       EARNINGS
                                              SHARES       AMOUNT       CAPITAL       (DEFICIT)        TOTAL
                                            ----------    --------    -----------    -----------    -----------

<S>                                         <C>           <C>         <C>            <C>            <C>
Stockholders' equity at January 1,
  1994...................................    6,000,000    $ 60,000    $ 1,739,063    $  (349,971)   $ 1,449,092
Cash contributions.......................       --           --         1,554,959        --           1,554,959
Contributions in foregone premiums.......       --           --           530,579        --             530,579
Net income...............................       --           --           --           3,042,631      3,042,631
Distributions for taxes (Note 3).........       --           --           --            (721,250)      (721,250)
                                            ----------    --------    -----------    -----------    -----------
Stockholders' equity at December 31,
  1994...................................    6,000,000      60,000      3,824,601      1,971,410      5,856,011
Cash contributions.......................       --           --            20,000        --              20,000
Net income...............................       --           --           --           6,554,007      6,554,007
Distributions for taxes (Note 3).........       --           --           --          (6,821,174)    (6,821,174)
                                            ----------    --------    -----------    -----------    -----------
Stockholders' equity at December 31,
  1995...................................    6,000,000      60,000      3,844,601      1,704,243      5,608,844
Issuance of options to ContiFinancial
  (Note 5)...............................       --           --         8,448,000        --           8,448,000
Common stock issued in public offering...    3,565,000      35,650     58,167,727        --          58,203,377
Reclassification of partnership
  earnings...............................       --           --         4,124,456     (4,124,456)       --
Conversion of convertible preferred
  stock..................................      119,833       1,198      2,004,802        --           2,006,000
Stock options exercised..................      150,000       1,500         (1,500)       --             --
Net income...............................       --           --           --          24,912,944     24,912,944
Distributions for taxes (Note 3).........       --           --           --          (9,842,583)    (9,842,583)
Two-for-one stock split (Note 1).........    9,834,833      98,348        (98,348)       --             --
                                            ----------    --------    -----------    -----------    -----------
Stockholders' equity at December 31,
  1996...................................   19,669,666    $196,696    $76,489,738    $12,650,148    $89,336,582
                                            ----------    --------    -----------    -----------    -----------
                                            ----------    --------    -----------    -----------    -----------
</TABLE>

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

                                       43


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                              FOR THE YEAR ENDED DECEMBER
                                                                                                          31,
                                                                                             -----------------------------
                                                                                                 1994            1995
                                                                                             ------------    -------------
<S>                                                                                          <C>             <C>
Operating activities:
  Net income..............................................................................   $  3,042,631    $   6,554,007
Adjustments to reconcile net income to net cash used in operating activities:
  Sharing of proportionate value of equity................................................      1,689,000        4,204,000
  Foregone premiums.......................................................................        530,579         --
  Depreciation and amortization...........................................................         98,285          163,798
  Capitalized mortgage servicing rights...................................................        --              --
  Net loss in joint venture...............................................................        --              --
  Non-recurring benefit associated with the conversion of
  Partnership to C Corporation............................................................        --              --
  Deferred taxes..........................................................................        --              --
Net change in operating assets and liabilities, net of effects from purchase of Mortgage
  Central Corp.:
  Increase in mortgage loans held for sale................................................    (21,023,760)    (164,007,085)
  Decrease (increase) in securities purchased under agreement to resell and securities
    sold but not yet purchased............................................................        --             1,141,738
  Increase in accrued interest receivable.................................................       (175,470)      (1,653,412)
  Decrease (increase) in warehouse financing due from correspondents......................        --                 3,800
  Increase in interest-only and residual certificates.....................................     (2,953,130)     (10,669,041)
  (Increase) decrease in other assets.....................................................         13,338         (370,667)
  Increase in accounts receivable.........................................................       (292,053)        (884,904)
  Increase in accrued interest payable....................................................        486,828          546,974
  Decrease in deferred income.............................................................        --              (450,600)
  Increase in amounts payable for taxes...................................................        --              --
  Increase in accrued and other liabilities...............................................        185,596          141,762
                                                                                             ------------    -------------
  Net cash used in operating activities...................................................    (18,398,156)    (165,279,630)
                                                                                             ------------    -------------
Investing activities:
  Investment in joint venture.............................................................        --              --
  Purchase of furniture, fixtures and equipment...........................................       (292,809)        (391,132)
                                                                                             ------------    -------------
  Net cash used in investing activities...................................................       (292,809)        (391,132)
                                                                                             ------------    -------------
Financing activities:
  Issuance of common stock................................................................        --              --
  Contributions from partners.............................................................      1,554,959           20,000
  Distributions to partners for taxes.....................................................       (721,250)      (5,514,529)
  Borrowings -- warehouse.................................................................    288,530,292      711,907,906
  Borrowings -- term debt.................................................................        --            11,120,642
  Repayments of borrowings -- warehouse...................................................   (268,008,343)    (549,820,719)
  Repayments of borrowings -- term debt...................................................        --              --
                                                                                             ------------    -------------
  Net cash provided by financing activities...............................................     21,355,658      167,713,300
                                                                                             ------------    -------------
  Net increase in cash and cash equivalents...............................................      2,664,693        2,042,538
  Cash and cash equivalents, beginning of period..........................................        426,487        3,091,180
                                                                                             ------------    -------------
  Cash and cash equivalents, end of period................................................   $  3,091,180    $   5,133,718
                                                                                             ------------    -------------
                                                                                             ------------    -------------
Supplemental disclosure cash flow information: Cash paid during the year for interest.....   $  1,364,920    $   5,459,945
                                                                                             ------------    -------------
                                                                                             ------------    -------------
Cash paid during the year for taxes.......................................................   $    --         $    --
                                                                                             ------------    -------------
                                                                                             ------------    -------------
Supplemental disclosure of noncash financing and investing activities: Contributed capital
  via foregone premiums (Note 3)..........................................................   $    530,579    $    --
                                                                                             ------------    -------------
                                                                                             ------------    -------------
Acquisition of assets of Mortgage Central Corp. (Note 6)..................................   $    --         $    --
                                                                                             ------------    -------------
                                                                                             ------------    -------------
Amounts payable for taxes (Note 3)........................................................   $    --         $   1,306,645
                                                                                             ------------    -------------
                                                                                             ------------    -------------
Issuance of options to ContiFinancial.....................................................   $    --         $    --
                                                                                             ------------    -------------
                                                                                             ------------    -------------

<CAPTION>

                                                                                                  1996
                                                                                            ----------------
<S>                                                                                          <C>
Operating activities:
  Net income..............................................................................  $     24,912,944
Adjustments to reconcile net income to net cash used in operating activities:
  Sharing of proportionate value of equity................................................         2,555,000
  Foregone premiums.......................................................................         --
  Depreciation and amortization...........................................................         1,649,621
  Capitalized mortgage servicing rights...................................................        (7,861,913)
  Net loss in joint venture...............................................................           852,250
  Non-recurring benefit associated with the conversion of
  Partnership to C Corporation............................................................        (3,600,000)
  Deferred taxes..........................................................................           879,000
Net change in operating assets and liabilities, net of effects from purchase of Mortgage
  Central Corp.:
  Increase in mortgage loans held for sale................................................      (721,346,574)
  Decrease (increase) in securities purchased under agreement to resell and securities
    sold but not yet purchased............................................................           429,423
  Increase in accrued interest receivable.................................................        (6,439,401)
  Decrease (increase) in warehouse financing due from correspondents......................        (4,992,185)
  Increase in interest-only and residual certificates.....................................       (72,173,903)
  (Increase) decrease in other assets.....................................................        (1,610,356)
  Increase in accounts receivable.........................................................        (2,509,633)
  Increase in accrued interest payable....................................................         3,022,194
  Decrease in deferred income.............................................................         --
  Increase in amounts payable for taxes...................................................         2,543,000
  Increase in accrued and other liabilities...............................................         6,977,434
                                                                                            ----------------
  Net cash used in operating activities...................................................      (776,713,099)
                                                                                            ----------------
Investing activities:
  Investment in joint venture.............................................................        (2,591,010)
  Purchase of furniture, fixtures and equipment...........................................        (1,217,782)
                                                                                            ----------------
  Net cash used in investing activities...................................................        (3,808,792)
                                                                                            ----------------
Financing activities:
  Issuance of common stock................................................................        58,203,377
  Contributions from partners.............................................................         --
  Distributions to partners for taxes.....................................................       (11,149,228)
  Borrowings -- warehouse.................................................................     1,796,117,164
  Borrowings -- term debt.................................................................        51,065,610
  Repayments of borrowings -- warehouse...................................................    (1,090,803,665)
  Repayments of borrowings -- term debt...................................................       (14,755,957)
                                                                                            ----------------
  Net cash provided by financing activities...............................................       788,677,301
                                                                                            ----------------
  Net increase in cash and cash equivalents...............................................         8,155,410
  Cash and cash equivalents, beginning of period..........................................         5,133,718
                                                                                            ----------------
  Cash and cash equivalents, end of period................................................  $     13,289,128
                                                                                            ----------------
                                                                                            ----------------
Supplemental disclosure cash flow information: Cash paid during the year for interest.....  $     23,834,115
                                                                                            ----------------
                                                                                            ----------------
Cash paid during the year for taxes.......................................................  $        796,310
                                                                                            ----------------
                                                                                            ----------------
Supplemental disclosure of noncash financing and investing activities: Contributed capital
  via foregone premiums (Note 3)..........................................................  $      --
                                                                                            ----------------
                                                                                            ----------------
Acquisition of assets of Mortgage Central Corp. (Note 6)..................................  $      2,190,791
                                                                                            ----------------
                                                                                            ----------------
Amounts payable for taxes (Note 3)........................................................  $      --
                                                                                            ----------------
                                                                                            ----------------
Issuance of options to ContiFinancial.....................................................  $      8,448,000
                                                                                            ----------------
                                                                                            ----------------
</TABLE>

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

                                       44

<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

1. ORGANIZATION AND BASIS OF PRESENTATION

     IMC  Mortgage  Company (the  'Company') was  formed  in 1993  by a  team of
executives experienced  in the  non-conforming home  equity loan  industry.  The
Company  was originally structured as  a partnership, Industry Mortgage Company,
L.P. (the 'Partnership'), which became a wholly owned subsidiary of the  Company
in  June 1996 when the limited partners (the 'Partners') and the general partner
exchanged their partnership interests for  voting common shares (the  'exchange'
or  'recapitalization') of IMC Mortgage Company. The exchange was consummated on
an historical cost basis as all entities were under common control. Accordingly,
since June 1996,  IMC Mortgage  Company (the 'Company')  has owned  100% of  the
limited  partnership  interests  in  the Partnership  and  100%  of  the general
partnership interest  in the  Partnership.  At the  time  of the  exchange,  the
retained  earnings previously reflected  by the Partnership  were transferred to
additional paid-in capital.

     The accompanying consolidated financial statements include the accounts  of
the  Company, the Partnership and their  wholly owned subsidiaries, after giving
effect to the  exchange as if  it had occurred  at inception. All  inter-company
transactions  have been  eliminated in  the accompanying  consolidated financial
statements.

     On January 27, 1997, the Board of Directors declared a two-for-one split of
common stock  payable on  February 13,  1997  to stockholders  of record  as  of
February   6,  1997.  A  total  of   $98,348  was  transferred  from  additional
paid-in-capital to the stated value of common stock in connection with the stock
split. This transaction has been recorded herein in the year ended December  31,
1996.  The par value  of the common  stock remains unchanged.  All share and per
share amounts have been restated retroactively herein to reflect the stock split
except with  respect to  periods  presented in  the consolidated  statements  of
stockholders' equity prior to December 31, 1996.

2. NATURE OF BUSINESS

     The  Company purchases and originates mortgage  loans made to borrowers who
may  not  otherwise  qualify   for  conventional  loans   for  the  purpose   of
securitization  and sale. The Company securitizes  these mortgages into the form
of a Real Estate Mortgage Investment Conduit ('REMIC'). A significant portion of
the mortgages are sold on a servicing retained basis.

3. DESCRIPTION OF PARTNERSHIP AGREEMENT

CAPITAL CONTRIBUTIONS

     Each Partner owning a full  partnership share contributed $100,000 in  cash
and  was required  to make additional  contributions in either  loan volume (via
foregone premiums) or in cash until its respective capital contribution  reached
$380,000,  which occurred  in 1994.  Foregone premiums  represent the difference
between the amount paid  by the Partnership for  mortgage loans to Partners  who
opted to make additional contributions in loan volume and the value set forth in
a  pricing schedule (estimated fair value) delivered to the Partners at the time
of purchase.

PURCHASES FROM PARTNERS

     As of December 31, 1996, a majority  of the Partners were required to  sell
to the Company on prevailing market terms and conditions, an aggregate of $162.0
million  of home equity loans per year. As a result of the Company's acquisition
of two of the  Partners (Mortgage America  and Equity Mortgage  -- see Note  17)
effective  January  1,  1997, the  contractual  annual sales  commitment  of the
Partners was reduced by  $36.0 million to $126.0  million. Loans purchased  from
Partners  during 1994, 1995 and 1996 approximated $115,976,000, $148,420,000 and
$337,505,000, respectively.

                                       45


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

INCOME TAXES

     All the tax effects of the Partnership's income or loss were passed through
to the partners individually, therefore, no Federal income taxes were payable by
the Partnership. State  and Federal  income taxes related  to the  Partnership's
corporate subsidiaries were not material.

     Under  the terms of the partnership agreement, the Company was obligated to
make quarterly cash distributions  to the partners equal  to 45% of profits  (as
defined  in the partnership agreement) to enable  the partners to pay taxes with
respect to their  partnership interests.  Distributions to  partners for  income
taxes  were $721,250, $6,821,174 and $9,842,583 for the years ended December 31,
1994, 1995 and 1996, respectively.  Distributions include cash paid to  partners
as  well  as distributions  accrued  but not  yet  paid. The  amount  payable to
partners for  taxes (including  interest)  at December  31,  1995 and  1996  was
$1,306,645 and $0, respectively.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

     Cash  and  cash equivalents  consist  of cash  on  hand and  on  deposit at
financial institutions.  Cash  and  cash equivalents  include  interest  bearing
deposits   of  $5,133,718  and  $13,289,128  at  December  31,  1995  and  1996,
respectively.

INTEREST-ONLY AND RESIDUAL CERTIFICATES

     The  Company  originates  and  purchases  mortgages  for  the  purpose   of
securitization and whole loan sale. The Company securitizes these mortgages into
the  form  of  a REMIC.  A  REMIC is  a  multi-class security  with  certain tax
advantages  which  derives  its  monthly  principal  paydowns  from  a  pool  of
underlying  mortgages.  The senior  classes  of the  REMICs  are sold,  with the
subordinated classes (or a portion thereof) retained by the Company. The  amount
of  senior  classes of  REMICs outstanding  at  December 31,  1995 and  1996 was
$418,251,000 and $1,133,644,000, respectively.  The subordinated classes are  in
the form of interest-only and residual certificates. The documents governing the
Company's  securitizations require  the Company  to build over-collateralization
levels through retention of distributions  by the REMIC trust otherwise  payable
to  the  Company as  the  residual interest  holder.  This overcollateralization
causes the aggregate principal  amount of the loans  in the related pool  and/or
cash  reserves  to exceed  the aggregate  principal  balance of  the outstanding
investor certificates. Such excess amounts  serve as credit enhancement for  the
related  REMIC trust.  To the  extent that borrowers  default on  the payment of
principal or interest on the loans, losses will reduce the overcollateralization
and cash flows otherwise payable to the residual interest security holder to the
extent that  funds are  available.  If payment  defaults  exceed the  amount  of
overcollateralization,  as applicable,  the insurance  policy maintained  by the
related REMIC trust will  pay any further losses  experienced by holders of  the
senior  interests in  the related  REMIC trust.  The Company  does not  have any
recourse obligations for  credit losses  in the  REMIC trust.  During 1995,  the
Company securitized $380 million of loans through three REMICs and, during 1996,
the Company securitized $935 million of loans through four REMICs. See Note 11.

     The  Company  initially records  these securities  at their  allocated cost
based upon the present value of the  interest in the cash flows retained by  the
Company  after considering  various economic factors,  including interest rates,
collateral value and estimates of the value of future cash flows from the  REMIC
mortgage  pools under expected  loss and prepayment  assumptions discounted at a
market yield. The weighted  average rate used to  discount the cash flows  range
from 11% to 11.5%, and the assumed loss rate is 50 basis points per year.

     In  1994, the Company  adopted Statement of  Financial Accounting Standards
(SFAS)  No.  115,  'Accounting  for  Certain  Investments  in  Debt  and  Equity
Securities' ('SFAS 115'), which requires fair

                                       46


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

value accounting for these securities. In accordance with the provisions of SFAS
115,  the Company classifies interest-only and residual certificates as `trading
securities' and, as  such, they are  recorded at fair  value with the  resultant
unrealized  gain or loss recorded in the  results of operations in the period of
the change in value. The  Company determines fair value  at inception and on  an
ongoing  basis based  on a  discounted cash  flow analysis.  The cash  flows are
estimated as the excess of the weighted average coupon on each pool of  mortgage
loans  sold  over  the sum  of  the  pass-through interest  rate  plus  a normal
servicing fee, a trustee fee, an insurance fee and an estimate of annual  future
credit  losses related to  the mortgage loans  securitized over the  life of the
mortgage loans.

     These cash flows are  projected over the life  of the mortgage loans  using
prepayment,  default,  and interest  rate  assumptions that  market participants
would use for similar  financial instruments subject  to prepayment, credit  and
interest  rate risk. The fair valuation  includes consideration of the following
characteristics: loan type, size, interest  rate, date of origination, term  and
geographic  location. The Company also used  other available information such as
externally prepared  reports on  prepayment  rates, interest  rates,  collateral
value,  economic forecasts  and historical default  and prepayment  rates of the
portfolio under review.

CAPITALIZED MORTGAGE SERVICING RIGHTS

     Effective January 1, 1996, the Company adopted SFAS No. 122 'Accounting for
Mortgage Servicing Rights' ('SFAS 122'), superseded in June 1996 by SFAS No. 125
'Accounting for Transfers and Servicing  of Financial Assets and  Extinguishment
of  Liabilities' ('SFAS  125'), which is  effective in January  1997. The SFAS's
require that upon sale or securitization of mortgages, companies capitalize  the
cost associated with the right to service mortgage loans based on their relative
fair  values. The Company  determines fair value  based on the  present value of
estimated net future cash flows related to servicing income. The cost  allocated
to  the servicing rights  is amortized in  proportion to and  over the period of
estimated  net  future  servicing  fee  income.  Under  SFAS  122,  the  Company
capitalized and amortized approximately $7,818,000 and $1,197,000, respectively,
of  capitalized  mortgage servicing  rights,  resulting in  additional operating
income of approximately  $6,621,000 for the  year ended December  31, 1996.  The
effect  on unaudited pro  forma net income  and pro forma  net income per common
share for the year  ended December 31,  1996 was an  increase of $4,050,000  and
$0.21, respectively.

     Prior  to the adoption of SFAS  122, servicing rights acquired through loan
origination activities were recorded in the period the loans were serviced.

     The Company periodically reviews capitalized servicing fees receivable  for
impairment.   This  review  is  performed  on  a  disaggregated  basis  for  the
predominant risk characteristics of  the underlying loans  which are loan  type,
term,  credit  quality  and, to  a  lesser  extent, interest  rate.  The Company
generally makes  loans to  borrowers whose  borrowing needs  may not  be met  by
traditional  financial institutions  due to  credit exceptions.  The Company has
found that these borrowers are more payment sensitive rather than interest  rate
sensitive.   Impairment  is  recognized  in   a  valuation  allowance  for  each
disaggregated stratum  in  the period  of  impairment. The  carrying  amount  of
capitalized  mortgage servicing rights is deemed  to be a reasonable estimate of
their fair value.

SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL/SECURITIES SOLD BUT NOT YET
PURCHASED

     To hedge the interest rate risk on loan purchases, the Company sells  short
United  States Treasury  securities which match  the duration of  the fixed rate
mortgage loans held  for sale  and borrows  the securities  under agreements  to
resell.

     Securities  sold but not yet  purchased are recorded on  a trade date basis
and are  carried  at  market  value.  The  unrealized  gain  or  loss  on  these
instruments is deferred and recognized upon securitization

                                       47


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

as an adjustment to the carrying value of the hedged mortgage loans. The cost to
carry securities purchased under agreements to resell is recorded as incurred.

     Securities  purchased under  agreements to resell  are recorded  on a trade
date basis  and are  carried at  the amounts  at which  the securities  will  be
resold.

MORTGAGE LOANS HELD FOR SALE

     Mortgage  loans held for  sale are mortgages  the Company plans  to sell or
securitize. Mortgage loans held for sale  are stated at lower of aggregate  cost
or market. The cost is net of any deferred hedging gain or loss. Market value is
determined  by  outstanding  commitments  from  investors,  if  any,  or current
investor yield requirements  on the aggregate  basis. The amount  by which  cost
exceeds  market value is accounted for as  a valuation allowance. Changes in the
valuation allowance  are included  in the  determination of  net income  in  the
period of change.

REVENUE RECOGNITION

     Gains on the sale of mortgage loans representing the difference between the
sales  price and the net  carrying amount (which includes  any hedging gains and
losses) of the loan are recognized when mortgage loans are sold and delivered to
investors. For securitizations of  mortgage loans, the gain  on the sale of  the
loans  represents the present value of  the differential between interest earned
on the portion of loans sold and  interest paid to investors less related  costs
over  the  expected  life  of the  loans,  adjusted  for  projected prepayments,
expected charge-offs, foreclosure expenses and a normal servicing fee.

     Interest income on the interest-only and residual certificates, included in
other revenues in  the statement of  operations, is recognized  on the  interest
method  as earned  and deemed  collectible. Other  income consists  primarily of
interest on interest-only  and residual certificates  and earnings on  deposits.
Warehouse  interest income on mortgage loans held  for sale is recognized on the
accrual method.

     The Company  generally retains  servicing rights  and recognizes  servicing
income  from  fees, prepayment  penalties and  late  payment charges  earned for
servicing the loans owned by certificate holders and others. Servicing fees  are
generally  earned at a rate of approximately  1/2 of 1%, on an annualized basis,
of the  unamortized  loan  balance  being  serviced.  Servicing  fee  income  is
recognized as collected.

FURNITURE, FIXTURES AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

     Furniture,  fixtures and equipment are carried at cost and depreciated on a
straight-line basis over  the estimated  useful lives of  the assets.  Leasehold
improvements are amortized over the useful life of the improvements.

GOODWILL

     Goodwill  represents the  excess of  cost over  fair value  of net tangible
assets acquired by acquisition  through December 31, 1996.  Such excess of  cost
over  fair value of net tangible assets acquired in 1996 is being amortized on a
straight-line basis over twenty-five years. Amortization expense was $71,404 for
the year ended December 31, 1996. Management periodically reviews the  potential
impairment   of  goodwill  on  a  non-discounted   cash  flow  basis  to  assess
recoverability. If the estimated future cash flows are projected to be less than
the carrying amount, an impairment write-down (representing the carrying  amount
of  the goodwill  which exceeds the  present value of  estimated expected future
cash flows) would be recorded as a period expense.

                                       48


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1996, the Financial  Accounting Standards Board (FASB) issued  SFAS
125, which is effective for transactions that occur after December 31, 1996, and
will  be applied  prospectively. SFAS 125  requires the Company  to allocate the
total cost of mortgage loans sold  among the mortgage loans sold,  interest-only
and  residual certificates and servicing rights  based on their relative values.
The Company  will apply  the  new rules  prospectively  beginning in  the  first
quarter  of 1997. The  actual effect of  implementing this new  statement on the
Company's financial condition and results  of operations will depend on  various
factors  determined at the  end of a  reporting period, including  the amount of
originated and  purchased production,  the level  of interest  rates and  market
estimates  of future prepayment and loss rates. Accordingly, the Company can not
determine at this time  the ultimate impact on  its future earnings of  applying
the  provision of SFAS  125, but does not  expect the results  under SFAS 125 to
differ materially from results which would have emerged under SFAS 122.

USE OF ESTIMATES

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

RECLASSIFICATIONS

     Certain  amounts  in  the  1994 and  1995  financial  statements  have been
reclassified to conform with the 1996 classifications.

UNAUDITED PRO FORMA DATA

     The Partnership which is included in the consolidated financial  statements
became  a wholly  owned subsidiary  of the  Company after  the plan  of exchange
described in  Note 1  was consummated.  The Partnership  made no  provision  for
income taxes since the Partnership's income or losses were passed through to the
partners individually.

     The  Partnership became subject  to income taxes  as of June  24, 1996, the
effective date of  the exchange. The  unaudited pro forma  data included in  the
consolidated  statements  of  operations of  the  Company includes  a  pro forma
provision for income taxes to indicate what these taxes would have been had  the
exchange occurred in prior periods.

     The  following  unaudited pro  forma  information reflects  the  income tax
expense that the Company would have incurred  if it had been subject to  Federal
and state income taxes for the entire year ended December 31, 1995 and 1996.

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                             --------------------------
                                                                                1995           1996
                                                                             -----------    -----------

<S>                                                                          <C>            <C>
Pro forma current:
     Federal..............................................................   $ 3,904,000    $ 8,910,000
     State................................................................       649,000      1,894,000
                                                                             -----------    -----------
                                                                               4,553,000     10,804,000
                                                                             -----------    -----------
Pro forma deferred:
     Federal..............................................................    (1,843,000)       318,000
     State................................................................      (188,000)        68,000
                                                                             -----------    -----------
                                                                              (2,031,000)       386,000
                                                                             -----------    -----------
Pro forma provision for income taxes......................................   $ 2,522,000    $11,190,000
                                                                             -----------    -----------
                                                                             -----------    -----------
</TABLE>

                                       49


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

     The  following unaudited pro forma  information reflects the reconciliation
between the statutory  provision for income  taxes and the  pro forma  provision
relating  to the  income tax  expense the  Company would  have incurred  had the
Partnership been subject to federal and state income taxes.

<TABLE>
<CAPTION>
                                                                                 FOR THE YEAR ENDED
                                                                                    DECEMBER 31,
                                                                              -------------------------
                                                                                 1995          1996
                                                                              ----------    -----------

<S>                                                                           <C>           <C>
Income tax at federal statutory rate.......................................   $2,272,000    $10,192,000
State taxes, net of federal benefit........................................      232,000      1,310,000
Nondeductible expenses.....................................................       18,000         36,000
Other, net.................................................................       --           (348,000)
                                                                              ----------    -----------
Pro forma provision for income taxes.......................................   $2,522,000    $11,190,000
                                                                              ----------    -----------
                                                                              ----------    -----------
</TABLE>

PRO FORMA EARNINGS PER SHARE

     Pro forma net income per common share has been computed using the  weighted
average   number  of  common  shares   and  dilutive  common  share  equivalents
outstanding during  the  period  after giving  effect  to  the  recapitalization
described  in Note 1. Dilutive common share equivalents consist of stock options
(calculated using the  treasury stock method),  convertible preferred stock  and
the  stock warrant  issued to  ContiFinancial Corporation  described in  Note 5.
Pursuant to the requirements of  the Securities and Exchange Commission,  common
shares  and common equivalent shares issued  at prices below the public offering
price of $9 per share during the twelve months immediately preceding the date of
the initial  filing of  the Registration  Statement have  been included  in  the
calculation  of common shares  and common share  equivalents, using the treasury
stock method, as if they were outstanding for all periods presented.

     Weighted average number of shares outstanding is comprised of the following
for the years ended December 31:

<TABLE>
<CAPTION>
                                                                                  1995          1996
                                                                               ----------    ----------

<S>                                                                            <C>           <C>
Weighted average number of common shares outstanding........................   12,000,000    15,981,520
Additional shares deemed to be outstanding:
     Cheap stock............................................................    3,871,504     3,169,090
     Employee stock options.................................................       --            14,694
                                                                               ----------    ----------
Weighted average number of common shares and common share equivalents.......   15,871,504    19,165,304
                                                                               ----------    ----------
                                                                               ----------    ----------
</TABLE>

5. STRATEGIC ALLIANCE

     The Company relied on ContiFinancial  Corporation and its subsidiaries  and
affiliates  ('ContiFinancial')  to  provide  the  original  credit  facility for
funding its  loan purchases  and originations  as well  as their  expertise  and
assistance  in loan securitization. In 1994,  1995 and 1996, the securitizations
were structured  so  that  ContiFinancial  received, in  exchange  for  cash  of
$2,109,011, $18,424,827 and $8,632,647, respectively, interest-only and residual
certificates  with estimated values of  $3,035,000, $25,054,000 and $13,444,000,
respectively. In addition, ContiFinancial paid $365,852, $1,082,136 and $653,709
in expenses related to securitizations in 1994, 1995 and 1996, respectively. The
difference between  the  estimated  value  of  the  interest-only  and  residual
certificates  provided to ContiFinancial  and the total  amount of cash received
and  expenses  paid  by  ContiFinancial  amounts  to  $560,137,  $5,547,037  and
$4,157,644  in  1994, 1995  and  1996, respectively,  and  has been  recorded as
additional securitization transaction expense.

                                       50


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

     In August  1993, the  Company  entered into  a five-year  agreement  ('1993
Agreement') with ContiFinancial which provided the Company with a warehouse line
of  credit, a standby credit facility,  and certain investment banking services.
In compensation for these services, the  Company agreed to pay a commitment  fee
to  ContiFinancial equal to  0.50% of the  agreement limit ($10  million) in the
first year and 0.75% of the  agreement limit minus the weighted average  advance
balance  for the prior year,  payable on each anniversary  of the first purchase
date. Total  commitment  fees  paid  to  ContiFinancial  pursuant  to  the  1993
Agreement were $50,000 in 1994.

     Pursuant  to the 1993 Agreement,  the Company agreed to  share the value of
the partnership  through a  contingent fee  based on  a percentage  of  Residual
Company  Equity (as  defined in the  1993 Agreement) to  be paid in  cash at the
termination of  the agreement.  At  December 31,  1993,  there was  no  Residual
Company  Equity and accordingly no liability was recorded. At December 31, 1994,
the Company had Residual  Company Equity and accordingly  the Company accrued  a
liability  (sharing of proportionate value of  equity) to reflect the contingent
fee payable of $1,689,000  at December 31, 1994  with a corresponding charge  in
the statement of operations.

     On  January 12, 1995, the Company and ContiFinancial entered into a revised
ten-year agreement (the '1995 Agreement') which replaced the 1993 Agreement  and
provided  for contingent fees based on the  fair market value of the Company (as
defined). The amount of the  contingent fee ranged from 15%  to 25% of the  fair
market  value of  the Company  if ContiFinancial  or the  Company, respectively,
elected to terminate these arrangements. In the event that the agreement expired
with  neither  ContiFinancial  nor  the   Company  electing  to  terminate   the
arrangements,  the  fee would  have been  20% of  the fair  market value  of the
Company. If the Company made any distributions to the partners other than  those
made  as tax distributions and returns  of partnership equity, the Company would
have been required  to distribute an  amount to ContiFinancial  equal to 25%  of
these  other distributions. At December 31, 1995, the Company accrued $5,893,000
(based on an  independent appraisal  of the fair  market value  of the  Company)
representing the estimated amount that would have been payable to ContiFinancial
had  ContiFinancial elected to  terminate the 1995 Agreement  as of December 31,
1995. The increase in the amount of the accrual at December 31, 1995 related  to
the  1995 Agreement over the amount accrued  at December 31, 1994 related to the
1993 Agreement was recorded as a charge to earnings for 1995.

     In March 1996, the Company  and ContiFinancial replaced the 1995  Agreement
with  an  agreement  (the  '1996 Agreement')  which  eliminated  the  ability of
ContiFinancial to obtain or require a cash  payment as provided for in the  1993
and  1995 Agreements and provided ContiFinancial  options to acquire an interest
in the Company for a nominal amount. On June 24, 1996, the effective date of the
exchange  described  in  Note  1,  the  option  was  converted  into  a  warrant
exercisable for a de minimus amount for 3,000,000 shares of the Company's common
stock.  The warrant contains normal anti-dilution provisions. ContiFinancial has
certain rights to join in registration  of additional shares of stock and  under
certain  conditions after the expiration of  a four-year time period, to require
that shares subject to ContiFinancial's warrants be registered by the Company or
its successor. The liability that had been established under the 1995  Agreement
was  reclassified  to paid  in capital  in  March 1996  in conjunction  with the
issuance of the ContiFinancial option. The fair value of the option at the  date
of grant (March 26, 1996) was estimated to be $8,448,000 based on an independent
appraisal of the option. The Company recorded expense of $2,555,000 for the year
ended  December 31, 1996, representing the excess of the estimated fair value of
the option at the  date of grant  over the amount accrued  at December 31,  1995
pursuant to the 1995 Agreement.

6. ACQUISITION OF ASSETS OF MORTGAGE CENTRAL CORPORATION

     On January 1, 1996, the Company acquired certain assets of Mortgage Central
Corp.,  a Rhode Island corporation ('MCC'), a mortgage banking company which did
business under  the name  `Equitystars'  primarily in  Rhode Island,  New  York,
Connecticut and Massachusetts. The initial purchase

                                       51


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

price  ($2,006,000) for  certain assets of  MCC was  paid by delivery  to MCC of
Series A voting, convertible  preferred stock of  the Company, with  contingency
payments  (capped  at  $2,550,000)  over two  years  based  on  performance. The
preferred stock had a  liquidation preference of $100  per share plus  preferred
dividends accruing at 8% per annum from the date of issuance until redemption or
liquidation.  The  preferred  stock was  converted  into 239,666  shares  of the
Company's common stock upon closing of the Company's initial public offering  in
June 1996.

     The  acquisition was accounted for using  the purchase method of accounting
and, accordingly, the  purchase price of  $2,006,000 has been  allocated to  the
assets  purchased and the liabilities assumed based  upon the fair values at the
date of acquisition.  The excess of  the purchase price  of $2,006,000 over  the
fair  values of the net assets was  approximately $1,730,000 and was recorded as
goodwill. Additional purchase price consideration of approximately $185,000  was
recorded  as goodwill  in 1996  related to the  contingent payment  terms of the
acquisition.  Any  additional  consideration  will  also  be  accounted  for  as
goodwill.

     The  operating  results  of  MCC have  been  included  in  the consolidated
statement of income  from the date  of acquisition  on January 1,  1996. On  the
basis  of  a pro  forma consolidation  of the  results of  operations as  if the
acquisition had  taken  place  at  the beginning  of  1995,  consolidated  total
revenues  would have  approximated $24,193,000 for  the year  ended December 31,
1995. Consolidated  income would  not have  been materially  different from  the
reported  amount for  the year  ended December  31, 1995.  Such amounts  are not
necessarily indicative of  what the  actual consolidated  results of  operations
might have been if the acquisition had been effective at the beginning of 1995.

7. JOINT VENTURE

     In  March  1996, the  Company entered  into  an agreement  to form  a joint
venture (Preferred Mortgages  Limited) in  the United Kingdom  to originate  and
purchase  mortgages  made  to  borrowers  who  may  not  otherwise  qualify  for
conventional loans for the purpose of securitization and sale. The Company and a
second party each  own 45%  of the  joint venture, and  a third  party owns  the
remaining  10%.  The original  investment in  the  joint venture  represents the
acquisition of 675,000 shares  of the joint venture  stock for $1,031,737 and  a
note receivable from the joint venture for $1,031,737. Additionally, at December
31,  1996, the Company  had loaned to  the joint venture  $527,536. The note and
loan bear interest at 3% per annum above LIBOR. Principal repayment on the  note
is  to begin  when the  joint venture's Board  of Directors  determine the joint
venture has sufficient available  profits. The loan is  due upon demand. To  the
extent  not  previously repaid,  all  principal is  due  December 31,  2040. The
investment in the  joint venture is  accounted for under  the equity method  and
through December 31, 1996 was not material in relation to the financial position
or results of operations of the Company.

8. COLLATERALIZED OBLIGATIONS

WAREHOUSE FINANCE FACILITIES

     The  Company has  a $400 million  uncommitted warehouse  facility with Bear
Stearns Home  Equity  Trust  1996-1 which  also  provides  additional  warehouse
financing on an as offered basis and, which may result in amounts borrowed to be
in  excess of $400.0 million. This facility  bears interest at LIBOR plus 0.875%
and expires in March  1997. Approximately $441.0  million was outstanding  under
this facility at December 31, 1996. In February 1997, the warehouse facility was
increased to $500 million.

     Additionally,  the Company had approximately $580.6 million available under
numerous other warehouse lines of credit, of which approximately $454.1  million
was   outstanding   at   December   31,  1996   ($113.2   million   was  through
ContiFinancial). Interest rates ranged from 6.5% to 7.2% as of December 31, 1996
and all  borrowings  mature  within  one year.  Outstanding  borrowings  on  the
Company's

                                       52


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

warehouse  financing facilities  are collateralized  by mortgage  loans held for
sale and warehouse financing  due from correspondents at  December 31, 1996  and
servicing  rights on approximately $250 million of mortgage loans. Upon the sale
of these loans and the repayment of warehouse financing due from correspondents,
the borrowings under these lines will be repaid.

TERM DEBT

     The Company  has  available  a  line  of credit  under  a  term  debt  with
ContiFinancial  for $15,000,000, the  entire amount of  which was outstanding at
December 31,  1996. Outstanding  borrowings bear  interest based  on LIBOR  plus
1.70%  (which  was 7.3%  at December  31,  1996) and  are collateralized  by the
Company's interest  in certain  interest-only  and residual  certificates.  This
agreement terminates in January 2000.

     The  Company also has available a $20,000,000 credit facility which matures
in August 1999  and bears interest  at 2.75% per  annum in excess  of LIBOR.  At
December 31, 1996, $11,299,291 was outstanding under this credit facility and is
collateralized  by the Company's interest in  a residual certificate. In January
1997, the Company borrowed an additional $6,218,183 under this facility.

     In 1996, Bear, Stearns & Co. Inc. and its affiliates, Bear Stearns Mortgage
Capital Corporation and Bear, Stearns  International Limited, agreed to  provide
the  Company with  a $30 million  credit facility which  extends through October
1997 and is  collateralized by certain  interest-only and residual  certificates
owned  by the Company.  At December 31, 1996,  $14,127,595 was outstanding under
this credit  facility, which  bears interest  at 1.75%  per annum  in excess  of
LIBOR.  In January  1997, the Company  borrowed an  additional $15,250,000 under
this facility.

     At December 31, 1996, the Company had borrowed $7,003,409 under  agreements
which  mature through August 1998, bearing  interest at rates ranging from 1.25%
to 2.00%  per annum  in excess  of LIBOR  which were  collateralized by  certain
interest-only and residual certificates.

     The  Company also has available a  $7 million credit facility which matures
July 31,  1999 and  bears interest  at  10% per  annum from  an affiliate  of  a
stockholder. At December 31, 1996, no amounts were outstanding under this credit
facility.  In February 1997, the Company borrowed approximately $6,800,000 under
the facility.

     In December 1996, the Company executed an agreement with the Bank of Boston
whereby Bank of Boston provides a $25 million one year revolving credit facility
subject to the following sublimits and  terms: (i) $5 million warehouse line  of
credit due June 30, 1998, (ii) $25 million to finance interest-only and residual
certificates,  to be repaid according to a repayment schedule calculated by Bank
of Boston with a maximum amortization period after the revolving period of three
years; and (iii) $20 million for acquisition or bridge financing due within  six
months from the initial borrowing date of each takedown of the bridge financing,
but in no event later than June 30, 1998. No amounts were outstanding under this
credit facility at December 31, 1996.

     The  warehouse  notes  and term  debt  have requirements  that  the Company
maintain certain  debt to  equity  ratios and  certain agreements  restrict  the
Company's  ability to  pay dividends on  common stock.  Capital expenditures are
limited by certain agreements. Management believes the Company is in  compliance
with all such covenants of these agreements.

                                       53


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

9. OTHER ASSETS

     Other assets at December 31 consist of the following:

<TABLE>
<CAPTION>
                                                                         1995         1996
                                                                       --------    ----------

<S>                                                                    <C>         <C>
Prepaid expenses....................................................   $214,206    $  912,708
Real estate owned...................................................    141,840       460,280
Organization costs, net.............................................     54,014        33,148
Other assets........................................................     88,602       682,016
Net deferred tax asset..............................................      --        2,721,000
                                                                       --------    ----------
                                                                       $498,662    $4,809,152
                                                                       --------    ----------
                                                                       --------    ----------
</TABLE>

10. SERVICING PORTFOLIO

     The  total servicing portfolio of loans was approximately $92 million, $536
million and $2.15 billion at December 31, 1994, 1995 and 1996, respectively.

11. INTEREST-ONLY AND RESIDUAL CERTIFICATES

     Activity in  interest-only  and  residual  certificates  consisted  of  the
following for the years ended December 31:

<TABLE>
<CAPTION>
                                                                     1995           1996
                                                                  -----------    -----------

<S>                                                               <C>            <C>
Balance, beginning of year.....................................   $ 3,403,730    $14,072,771
Additions......................................................    11,835,997     77,010,992
Reductions (cash receipts).....................................    (1,166,956)    (4,837,089)
                                                                  -----------    -----------
Balance, end of year...........................................   $14,072,771    $86,246,674
                                                                  -----------    -----------
                                                                  -----------    -----------
</TABLE>

     The  Company has not recorded any direct write-downs for impairment for the
years ended December 31, 1995 and 1996.

12. FINANCIAL INSTRUMENTS AND OFF BALANCE SHEET ACTIVITIES

FINANCIAL INSTRUMENTS

     SFAS No. 105  'Disclosure of Information  about Financial Instruments  with
Off-Balance  Sheet Risks and Financial Instruments with Concentrations of Credit
Risk' and SFAS No. 119,  'Disclosure about Derivative Financial Instruments  and
Fair  Value of Financial Instruments' require  disclosure of the notional amount
or contractual amounts of financial instruments.

     The Company  regularly  securitizes  and  sells  fixed  and  variable  rate
mortgage  loan  receivables.  As  part  of  its  interest  rate  risk management
strategy, the Company may choose to hedge its interest rate risk related to  its
mortgage  loans  held for  sale by  utilizing  treasury securities.  The Company
classifies these transactions as hedges. The gains and losses derived from these
financial securities are deferred  and included in the  carrying amounts of  the
mortgage  loans  held for  sale  and ultimately  recognized  in income  when the
related mortgage loans are sold. Deferred losses on the treasuries used to hedge
the anticipated transactions amounted to approximately $1,140,000 and $1,571,000
at December 31, 1995 and 1996, respectively.

                                       54


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

MARKET RISK

     The Company is subject to market risk from financial instruments, including
short sales of  treasury securities, in  that changes in  market conditions  can
unfavorably affect the market value of such contracts.

FAIR VALUES OF FINANCIAL INSTRUMENTS

     SFAS  No. 107,  'Disclosures about  Fair Values  of Financial Instruments,'
requires disclosure  of  fair  value information  about  financial  instruments,
whether  or  not  recognized  in  the  financial  statements,  for  which  it is
practicable to estimate that value. In cases where quoted market prices are  not
available,  fair values  are based upon  estimates using present  value or other
valuation  techniques.  Those  techniques  are  significantly  affected  by  the
assumptions  used, including  the discount  rate and  the estimated  future cash
flows. In that regard, the derived fair value estimates cannot be  substantiated
by  comparison to independent markets and, in  many cases, could not be realized
in immediate  settlement  of  the  instrument. SFAS  No.  107  excludes  certain
financial  instruments  and all  non-financial  instruments from  its disclosure
requirements. Accordingly, the aggregate fair value amounts do not represent the
underlying value of the Company.

     The following methods and assumptions were used to estimate the fair  value
of  each class of financial instruments for  which it is practicable to estimate
the value:

          Cash and cash equivalents: The carrying amount of cash on hand and  on
     deposit at financial institutions is considered to be a reasonable estimate
     of fair market value.

          Accrued  interest  receivable  and accounts  receivable:  The carrying
     amounts are  considered to  approximate fair  value. All  amounts that  are
     assumed to be uncollectible within a reasonable time are written off.

          Mortgage  loans held for sale: The estimate of fair values is based on
     current pricing of whole  loan transactions that  a purchaser unrelated  to
     the  seller would demand for a similar loan. The fair value of the mortgage
     loans held for sale approximated $196,577,000 and $931,635,200 at  December
     31, 1995 and 1996, respectively.

          Interest-only  and residual certificates: The fair value is determined
     by discounting the  estimated cash flow  over the life  of the  certificate
     using  prepayment,  default,  and  interest  rate  assumptions  that market
     participants  would  use  for  similar  financial  instruments  subject  to
     prepayment,   credit  and  interest  rate  risk.  The  carrying  amount  is
     considered to be a reasonable estimate of fair market value.

          Collateralized  borrowings:  Collateralized   borrowings  consist   of
     warehouse   finance  facilities  and  term   debt.  The  warehouse  finance
     facilities have  maturities of  less than  one year  and bear  interest  at
     market  interest rates and,  therefore, the carrying  value is a reasonable
     estimate of fair value. The carrying amount of outstanding term debt, which
     bear market rates of interest, approximates its fair value.

CREDIT RISK

     The Company uses securities purchased under agreements to resell as part of
its interest rate management strategy.  These instruments expose the Company  to
credit  risk  which  is  measured  as  the  loss  the  Company  would  record if
counterparties failed  to perform  pursuant to  the terms  of their  contractual
obligations  and the value of  the collateral held, if  any, was not adequate to
cover such  losses.  The Company's  policy  is to  keep  the securities  at  the
financial  institution which instituted the trade  on behalf of the Company. The
Company monitors  the  market value  of  the  assets acquired  to  ensure  their
adequacy  as compared to the amount at  which the securities will be resold. The
interest rate of these

                                       55


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

instruments depends upon,  among other  things, the  underlying collateral,  the
term  of the agreement and  the credit quality of  the counterparty. The Company
transacts these resale agreements with institutional broker/dealers.

     The Company  is a  party to  financial instruments  with off-balance  sheet
credit  risk  in  the normal  course  of business.  These  financial instruments
include commitments to extend credit  to borrowers, and commitments to  purchase
loans  from correspondents. The Company  has a first or  second lien position on
all of  its  loans,  and  the  maximum  combined  loan-to-value  ratio  ('CLTV')
permitted  by the Company's underwriting guidelines is 100%. The CLTV represents
the combined first and second mortgage balances as a percentage of the lesser of
appraised value  or  the selling  price  of  the mortgaged  property,  with  the
appraised  value  determined  by  an  appraiser  with  appropriate  professional
designations. A title insurance policy is required for all loans.

     As of December 31, 1995 and  1996, the Company had outstanding  commitments
to  extend credit at fixed rates or purchase loans in the amounts of $92,397,000
and $121,000,000 respectively.

     Commitments to extend credit or to purchase a loan are granted for a period
of thirty  days  and  are  contingent  upon  the  borrower  and  the  borrower's
collateral  satisfying the Company's underwriting  guidelines. Since many of the
commitments are expected to expire without being exercised, the total commitment
amount does not necessarily represent future cash requirements or future  credit
risk.

     The  Company  is exposed  to on-balance  sheet credit  risk related  to its
mortgage loans held for  sale and interest-only  and residual certificates.  The
Company  is also exposed to off-balance sheet credit risk related to loans which
the Company has committed to originate or buy.

     Financial  instruments   which   potentially   subject   the   Company   to
concentrations  of credit risk consist principally of cash and cash equivalents,
mortgages held for sale,  securities purchased under  agreements to resell,  and
securities  sold but  not yet  purchased. The Company  places its  cash and cash
equivalents  with  what  management   believes  to  be  high-quality   financial
institutions  and thereby limits its exposure to credit risk. As of December 31,
1995 and 1996,  the majority of  mortgage loans  with on balance  sheet and  off
balance   sheet  risks  were   collateralized  by  properties   located  in  the
mid-atlantic region of the United States.

WAREHOUSE EXPOSURE

     The Company makes available  to certain correspondents warehouse  financing
which  bear interest at rates ranging from 1.75% to 2.50% per annum in excess of
LIBOR. As  of  December  31,  1996 the  Company  had  $23,000,000  of  committed
warehousing   available  to  these  correspondents,   of  which  $5,045,385  was
outstanding, including  $3,514,800 due  from a  stockholder. There  was  $53,200
outstanding  as  of  December  31,  1995  under  warehouse  facilities  due from
correspondents. Interest  income on  these  warehouse financing  facilities  was
$23,299 and $190,506 for 1995 and, 1996, respectively. The warehouse commitments
are  for  terms  of  less  than  one  year.  Mortgage  loans  originated  by the
correspondents remain in the warehouse  for a period of  30 days at which  point
the  mortgage  loans are  either purchased  by  the Company  or sold  to another
investor.

                                       56


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

13. FURNITURE, FIXTURES AND EQUIPMENT

     Furniture, fixtures and equipment at December 31 consists of the following:

<TABLE>
<CAPTION>
                                                                         1995         1996
                                                                       --------    ----------

<S>                                                                    <C>         <C>
Computer systems....................................................   $523,150    $1,089,375
Office equipment....................................................    174,107       589,041
Furniture...........................................................    196,283       484,956
Leasehold improvements..............................................     11,068        28,655
Other...............................................................      3,487         3,487
                                                                       --------    ----------
          Total.....................................................    908,095     2,195,514
Less accumulated depreciation.......................................   (228,145)     (518,692)
                                                                       --------    ----------
Furniture, fixtures and equipment, net..............................   $679,950    $1,676,822
                                                                       --------    ----------
                                                                       --------    ----------
</TABLE>

     Depreciation expense was $76,662, $142,932 and $316,785 for 1994, 1995  and
1996, respectively.

14. EMPLOYEE BENEFIT PLANS

DEFINED CONTRIBUTION PLAN

     The  Company adopted a defined contribution  plan (401(k)) for all eligible
employees during  August 1995.  Contributions to  the plan  are in  the form  of
employee  salary  deferrals  which  may  be  subject  to  an  employer  matching
contribution up  to a  specified limit  at the  discretion of  the Company.  The
Company's  contribution to the  plan amounted to $107,031  and $277,372 for 1995
and 1996, respectively.

KEY EMPLOYEE AND ADVISOR OPTIONS

     On December 11, 1995, the  Partnership adopted the Partnership Option  Plan
pursuant to which the Partnership was authorized to grant certain key employees,
directors   of   the   General  Partner   and   certain   non-employee  advisors
(collectively, 'Eligible Persons') options to acquire an equity interest in  the
Partnership.  In April 1996, the Company  adopted the Company Incentive Plan and
the Directors  Stock Option  Plan.  All options  granted under  the  Partnership
Option  Plan were assumed by the Company  pursuant to the Company Incentive Plan
and the  Directors Stock  Option  Plan. The  aggregate  equity interest  in  the
Company available under the Company Incentive Plan and the Director Stock Option
Plan  is not to exceed 12% of all equity interests in the Company as of the date
the plan was adopted.

     The Company applies Accounting Principles  Board Opinion No. 25 ('APB'  25)
and   related  interpretations  in  accounting  for  its  plans.  SFAS  No.  123
'Accounting for Stock-Based Compensation' ('SFAS 123') was issued by the FASB in
1995 and, if fully adopted, changes the method for recognition of cost on  plans
similar  to  those  of  the  Company. The  Company  has  adopted  the disclosure
alternative established by SFAS 123. Therefore  pro forma disclosures as if  the
Company  adopted the cost recognition requirements  under SFAS 123 are presented
below.

     The Company's  stock option  plans provide  primarily for  the granting  of
nonqualified  stock options to certain key employees, non-employee directors and
non-employee advisors. Generally, options outstanding under the Company's  stock
option  plans: (1) are granted at prices which  are equal to the market value of
the stock on the date of grant, (2)  vest at various rates over a three or  five
year period and (3) expire ten years subsequent to award.

                                       57


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

     A  summary of the status of the  Company's stock options as of December 31,
1995 and 1996 and the changes during the year is presented below:

<TABLE>
<CAPTION>
                                                                             1995                     1996
                                                                     ---------------------    ---------------------
                                                                                  WEIGHTED                 WEIGHTED
                                                                                  AVERAGE                  AVERAGE
                                                                                  EXERCISE                 EXERCISE
                                                                      SHARES       PRICE       SHARES       PRICE
                                                                     ---------    --------    ---------    --------

<S>                                                                  <C>          <C>         <C>          <C>
Outstanding at beginning of year..................................           0                1,150,866     $ 2.35
Granted...........................................................   1,150,866     $ 2.35       360,302     $10.00
Exercised.........................................................           0                        0
Canceled..........................................................           0                        0
                                                                     ---------                ---------
Outstanding at end of year........................................   1,150,866     $ 2.35     1,511,168     $ 4.18
                                                                     ---------                ---------
                                                                     ---------                ---------
Options exercisable at end of year................................     690,520                1,010,456
                                                                     ---------                ---------
                                                                     ---------                ---------
Options available for future grant................................     894,588                  534,286
                                                                     ---------                ---------
                                                                     ---------                ---------
Weighted average fair value of options granted during year........   $    1.10                $    5.75
                                                                     ---------                ---------
                                                                     ---------                ---------
</TABLE>

     The fair value of each option granted during 1996 is estimated on the  date
of  grant  using  the  Black-Scholes  option-pricing  model  with  the following
assumptions: (1) dividend  yield of zero,  (2) expected volatility  of 53%,  (3)
risk-free interest rate of 5.68% and (4) expected life of 4 years.

     The 1996 grants included 120,000 employee option shares granted at exercise
prices  less  than the  market price  of the  stock  on the  date of  grant. The
exercise price of the options, market price  of the common shares at grant  date
and  estimated fair value of  such options at grant  date were $8.00, $12.00 and
$8.11 per share, respectively. The Company records compensation expense for such
grants over  their vesting  periods  in accordance  with  APB 25.  Such  expense
totaled approximately $40,000 in 1996.

     The  1996 grants  also include 20,000  option shares which  were granted to
advisors to the  Company at exercise  prices equal  to the market  price of  the
stock  at  grant date.  Expense representing  the estimated  fair value  of such
grants of approximately $20,000 has been recognized in 1996 under the provisions
of SFAS 123.

     The following table summarizes information about stock options  outstanding
at December 31, 1996:

<TABLE>
<CAPTION>
                                                              OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE
                                                   ------------------------------------------    --------------------------
                                                                       WEIGHTED
                                                       NUMBER           AVERAGE      WEIGHED         NUMBER        WEIGHTED
                                                   OUTSTANDING AT      REMAINING     AVERAGE     EXERCISABLE AT    AVERAGE
                                                    DECEMBER 31,      CONTRACTUAL    EXERCISE     DECEMBER 31,     EXERCISE
                                                        1996             LIFE         PRICE           1996          PRICE
                                                   ---------------    -----------    --------    --------------    --------

<S>                                                <C>                <C>            <C>         <C>               <C>
Range of exercise prices
     $2.35......................................       1,150,866           9.0        $ 2.35          920,692       $ 2.35
     $8.00......................................         310,302           9.5        $ 8.00           87,092       $ 8.00
     $12.00 to $16.00...........................          50,000           9.7        $12.80            2,672       $12.00
                                                   ---------------                               --------------
          Total.................................       1,511,168           9.1        $ 4.18        1,010,456       $ 2.86
                                                   ---------------                               --------------
                                                   ---------------                               --------------
</TABLE>

                                       58


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

     Had   compensation  cost  for  the  Company's  1995  and  1996  grants  for
stock-based compensation plans  been determined  consistent with  SFAS 123,  the
Company's  pro forma net  income and pro  forma net income  per common share for
1995 and 1996 would approximate the pro forma amounts below.

<TABLE>
<CAPTION>
                                                                     YEAR ENDED                  YEAR ENDED
                                                                 DECEMBER 31, 1995           DECEMBER 31, 1996
                                                              ------------------------    ------------------------
                                                              AS REPORTED    PRO FORMA    AS REPORTED    PRO FORMA
                                                              -----------    ---------    -----------    ---------
                                                                      (IN MILLIONS EXCEPT PER SHARE DATA)

<S>                                                           <C>            <C>          <C>            <C>
Pro forma net income.......................................      $ 4.0         $ 3.6         $17.9         $17.3
Pro forma net income per common share......................      $0.25         $0.23         $0.94         $0.90
</TABLE>

     The effects  of applying  SFAS 123  in this  pro forma  disclosure are  not
indicative  of future amounts. There were no awards prior to 1995 and additional
awards in future years are anticipated.

15. COMMITMENTS

INDUSTRY PARTNERS INCENTIVE PLAN

     In 1996,  the Company  created an  incentive plan  (the 'Industry  Partners
Incentive  Plan')  to encourage  partners  to sell  more  mortgage loans  to the
Company  than  required  under  their  commitments.  Under  that  Plan,  options
exercisable  for five years after  grant to acquire a  total of 20,000 shares of
Common Stock  at $9.00  per share  were  awarded to  Industry Partners  for  the
quarter ended September 30, 1996. The market price of the stock at date of grant
was  $16.00 per  share. The 20,000  options were allocated  among those Industry
Partners that doubled their  commitments, pro rata, to  the extent the  Industry
Partners  exceeded that doubled commitment for the quarter. The plan was amended
and, for each quarter beginning December 31, 1996, Industry Partners that double
their commitments will be  eligible to receive  on a pro  rata basis fully  paid
shares  of Common  Stock equal to  $150,000 divided  by the market  price of the
Common Stock at the end of each  quarter. The fully paid shares of Common  Stock
will  be issued among those Industry Partners that double their commitments, pro
rata, to the extent the Industry Partner exceeded its doubled commitment for the
quarter. The  Industry Partners  Incentive Plan  continues through  the  quarter
ended  June  30, 2000.  Expense  recorded under  the  plan in  1996  amounted to
approximately $257,000.

OPERATING LEASES

     The Company leases  office space  in various cities  under operating  lease
agreements. The lease agreements have lease terms ranging from 6 to 36 months.

     Future  minimum  lease payments  under  noncancellable lease  agreements at
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING                                                                       OPERATING
DECEMBER 31,                                                                         LEASES
------------                                                                       ----------
<S>                                                                                <C>
1997............................................................................   $  931,715
1998............................................................................      748,739
1999............................................................................      369,530
                                                                                   ----------
                                                                                   $2,049,984
                                                                                   ----------
                                                                                   ----------
</TABLE>

     Rent expense under operating leases was $210,063, $362,946 and $753,197  in
1994, 1995 and 1996.

EMPLOYMENT AGREEMENTS

     Certain  members of management entered  into employment agreements expiring
through  2001  which,   among  other  things,   provide  for  aggregate   annual
compensation of approximately $1,175,000 plus

                                       59


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

bonuses  ranging from 5% to 15% of base salary in the relevant year for each one
percent by which the increase  in net income on an  earnings per share basis  of
the  Company over the prior year exceeds 10%,  up to a maximum of 300% of annual
compensation. Each employment  agreement contains a  restrictive covenant  which
prohibits  the executive  from competing  with the  Company for  a period  of 18
months after termination.

16. INCOME TAXES

     The Partnership which is included in the consolidated financial  statements
became  a wholly  owned subsidiary  of the  Company after  the plan  of exchange
described in Note  1 was  consummated.. The  Partnership made  no provision  for
income taxes since the Partnership's income or losses were passed through to the
partners individually. The Partnership became subject to income taxes as of June
24, 1996, the effective date of the exchange and began accounting for the effect
of income taxes under SFAS No. 109, 'Accounting for Income Taxes,' on that date.
Taxable  income for 1996 is  calculated on the days  method whereby the previous
partners are responsible for the tax liability generated through June 24, 1996.

     The components of the provision for  income taxes allocable to the  Company
consist of the following:

<TABLE>
<CAPTION>
                                                                                                1996
                                                                                             ----------

<S>                                                                                          <C>
Current income tax expense:
     Federal..............................................................................   $5,713,000
     State................................................................................    1,214,000
                                                                                             ----------
                                                                                              6,927,000
                                                                                             ----------
Deferred income tax expense:
     Federal..............................................................................      725,000
     State................................................................................      154,000
                                                                                             ----------
                                                                                                879,000
                                                                                             ----------
Non-recurring benefit associated with the conversion of Partnership to C Corporation......   (3,600,000)
                                                                                             ----------
Total provision for income taxes..........................................................   $4,206,000
                                                                                             ----------
                                                                                             ----------
</TABLE>

     Total  provision for  income taxes differs  from the amount  which would be
provided by applying  the statutory  federal income  tax rate  to income  before
income taxes as indicated below:

<TABLE>
<CAPTION>
Income tax at federal statutory rate....................................................   $ 10,192,000
<S>                                                                                        <C>
State income taxes, net of federal benefit..............................................      1,310,000
Non-recurring benefit associated with the conversion of the Partnership to a C
  Corporation...........................................................................     (3,600,000)
Nondeductible items.....................................................................         36,000
Other, net..............................................................................       (348,000)
Effect of applying statutory federal and state income tax rates to partnership income...     (3,384,000)
                                                                                           ------------
     Total provision for income taxes...................................................   $  4,206,000
                                                                                           ------------
                                                                                           ------------
</TABLE>

                                       60


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

     The effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
Deferred tax assets:
<S>                                                                                          <C>
     Stock warrants.......................................................................   $ 3,003,000
     Allowance for loan losses............................................................       435,000
     Interest-only and residual certificates..............................................       531,000
     REMIC income.........................................................................       322,000
     Loss on joint venture................................................................       320,000
     Amortization of mortgage servicing rights............................................       204,000
     Other................................................................................       246,000
Deferred tax liabilities:
     Securitization income................................................................    (1,228,000)
     Mortgage servicing rights............................................................      (934,000)
     Other................................................................................      (178,000)
                                                                                             -----------
     Net deferred tax asset...............................................................   $ 2,721,000
                                                                                             -----------
                                                                                             -----------
</TABLE>

17. SUBSEQUENT EVENTS

ACQUISITION OF AMERICAN MORTGAGE

     Effective  February  1, 1997,  the Company  acquired all  of the  assets of
American Mortgage  Reduction,  Inc.  (`American  Reduction'),  a  non-conforming
mortgage  lender based in Owings Mills, Maryland.  The purchase price for all of
the assets  of  American  Reduction  was an  initial  payment  of  approximately
$9,150,000  and a contingent payment based  on the average after-tax earnings of
American Reduction for the two year period ending December 31, 1999.

ACQUISITION OF EQUITY MORTGAGE

     Effective January 1, 1997, the Company acquired all of the assets of Equity
Mortgage Co., Inc. ('Equity Mortgage'),  a non-conforming mortgage lender  based
in  Baltimore, Maryland,  for a cash  payment of  $150,000 in excess  of the net
assets of Equity Mortgage.

ACQUISITION OF MORTGAGE AMERICA

     Effective January  1, 1997,  the  Company acquired  all  of the  assets  of
Mortgage  America, Inc.  ('Mortgage America'), a  non-conforming mortgage lender
based in  Bay City,  Michigan.  The purchase  price for  all  of the  assets  of
Mortgage  America was an initial payment of  1,790,000 shares of common stock of
the Company and assumption of a stock option plan which could result in issuance
of an additional 334,596 shares of IMC  stock and a contingent payment of up  to
2,770,000  additional shares of the  Company's common stock at  the end of three
years based on the future growth and profitability of Mortgage America.

ACQUISITION OF COREWEST

     Effective January  1, 1997,  the Company  acquired all  of the  outstanding
common  stock of  CoreWest Banc  ('CoreWest'), a  non-conforming mortgage lender
based in Los Angeles, California. The purchase price for all of the  outstanding
common  stock of  CoreWest was  an initial payment  of 488,404  shares of common
stock of  the Company  and a  contingent  payment of  additional shares  of  the
Company's  common stock  at the  end of a  two year  period based  on the future
profitability of CoreWest.

     The acquisitions of American Reduction, Equity Mortgage, Mortgage  American
and  CoreWest will be accounted for using the purchase method of accounting and,
accordingly, the purchase price will be

                                       61


<PAGE>
                     IMC MORTGAGE COMPANY AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

allocated to assets purchased and liabilities assumed based upon the fair values
at the date of  acquisition. The initial purchase  price for American  Reduction
and  Equity  Mortgage was  $9,300,000 in  cash. The  initial purchase  price for
Mortgage America  and  CoreWest was  valued  at $24,500,000  by  an  independent
appraiser.  The excess of  the purchase prices  over the fair  values of the net
assets will be recorded as goodwill.  The fair value of the acquired  companies'
assets  approximated the liabilities  assumed, and accordingly,  the majority of
the initial purchase prices is anticipated  to be recorded as goodwill and  will
be amortized for periods from 10 to 30 years.

     Most  of the  acquisitions include  earn-out arrangements  that provide for
additional consideration if  the acquired company  achieves certain  performance
targets  after the acquisition.  Any such contingent payments  will result in an
increase in the amount of recorded goodwill related to such acquisition.

RECENT SECURITIZATION

     In January 1997, the  Company completed a securitization  in the amount  of
$325   million,   its  ninth   securitization.  The   securities  sold   in  the
securitization were rated AAA/Aaa and were sold in a public offering.

18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following unaudited  quarterly results of  operations are presented  in
thousands, except earnings per share amounts.

<TABLE>
<CAPTION>
                                                                                      FISCAL QUARTER
                                                                         ----------------------------------------
                                 1996                                     FIRST     SECOND      THIRD     FOURTH
                                 ----                                    -------    -------    -------    -------

<S>                                                                      <C>        <C>        <C>        <C>
Revenues..............................................................   $11,456    $14,285    $19,766    $20,147
Pro forma net income (actual for third and fourth quarters)...........   $ 1,625    $ 3,653    $ 6,052    $ 6,599
Pro forma earnings per share (actual for third and fourth quarters)...   $  0.10    $  0.22    $  0.26    $  0.28
                                 1995
                                 ----
Revenues..............................................................   $ 3,432    $ 3,752    $ 6,226    $ 6,263
Pro forma net income..................................................   $   690    $   650    $ 1,458    $ 1,234
Pro forma earnings per share..........................................   $  0.04    $  0.04    $  0.09    $  0.08
</TABLE>

                                       62

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

TERMINATION OF INDEPENDENT ACCOUNTANT

     IMC  terminated  the engagement  of Deloitte  & Touche  LLP ('D&T')  as its
independent accountants, effective December 1995 after completing the audit  for
the  year ended December 31, 1994. The decision to terminate D&T was approved by
the Board of Directors of the general partner of the Partnership.

     The audit reports of D&T on the financial statements of IMC for the  period
from inception to December 31, 1993 and for the year ended December 31, 1994 did
not  contain  an adverse  opinion  or a  disclaimer  of opinion,  nor  were they
qualified or modified as to uncertainty, audit scope or accounting principles.

     There were no disagreements  with D&T during the  period from inception  to
December  31, 1993  or for the  fiscal year ended  December 31, 1994,  or in any
subsequent interim period through the date of their termination on any matter of
accounting principles or practices, financial statement disclosure, or  auditing
scope or procedure which, if not resolved to the satisfaction of D&T, would have
caused D&T to make reference to such disagreement in connection with its opinion
on IMC's financial statements.

ENGAGEMENT OF INDEPENDENT ACCOUNTANT

     Effective  December, 1995 IMC engaged Coopers  & Lybrand L.L.P. to serve as
independent  accountants  to  audit  and  certify  IMC's  financial  statements.
Pursuant  to  this  engagement,  Coopers  &  Lybrand  L.L.P.  has  audited IMC's
financial statements for the period from inception to December 31, 1993, and for
the years ended December 31, 1994, 1995 and 1996.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND REGISTRANT

DIRECTORS AND OFFICERS

     The directors and executive  officers of IMC and  their ages as of  January
31, 1997 and positions are:

<TABLE>
<CAPTION>
                   NAME                      AGE                      POSITION WITH THE COMPANY
------------------------------------------   ----  ---------------------------------------------------------------

<S>                                          <C>   <C>
George Nicholas...........................    54   Chairman of the Board of Directors, Chief Executive Officer and
                                                     Assistant Secretary, Member of the Compensation and Executive
                                                     Committees
Thomas G. Middleton.......................    50   Director, President, Chief Operating Officer and Assistant
                                                     Secretary, Member of the Compensation and Executive
                                                     Committees
Stuart D. Marvin..........................    37   Chief Financial Officer
Joseph P. Goryeb..........................    66   Director, Member of the Audit and Option Committees
Mitchell W. Legler........................    54   Director, Member of the Compensation and Audit Committees
Allen D. Wykle............................    50   Director, Member of the Audit and Option Committees
</TABLE>

     George  Nicholas has served as Chief  Executive Officer and Chairman of the
Board of IMC  since the formation  of the  corporation in December  1995 and  as
Assistant  Secretary  of  IMC  since  April  1996.  Since  his  founding  of the
Partnership in August 1993, Mr. Nicholas  has served as Chief Executive  Officer
of the Partnership and Chairman of the Board and sole stockholder of its general
partner. Mr. Nicholas' experience in the lending business spans 32 years. He has
previously  held positions at  General Electric Credit  Corp., Household Finance
Corp. and American Financial Corporation of Tampa ('AFC'), a company of which he
was owner and Chief Executive Officer from its formation in February 1986  until
it  was acquired  by Equibank  in 1988.  From February  1988 until  May 1992 Mr.
Nicholas was president of  AFC, a subsidiary of  Equibank which was a  wholesale
lending  institution  specializing in  the  purchase of  non-conforming mortgage
loans. From June 1992 until July 1993, Mr. Nicholas was an independent  mortgage
industry  consultant.  In 1993,  Mr.  Nicholas organized  the  original Industry
Partners and led negotiations with investment bankers for the Partnership.

                                       63


<PAGE>
     Thomas G.  Middleton has  served as  Director and  President of  IMC  since
December  1995 and as Assistant Secretary of IMC since April 1996. Mr. Middleton
has served as Chief Operating Officer  of the Partnership since August 1993  and
as  President of the Partnership since July  1995. Mr. Middleton has 26 years of
experience in  the lending  business. From  April 1992  until August  1993,  Mr.
Middleton  was Senior  Vice President of  Shawmut National  Corporation and from
February 1991  until April  1992, Mr.  Middleton was  Managing Director  of  SAG
Financial Inc. Mr. Middleton served as Executive Vice President and Chief Credit
Officer of Equimark Corp. from June 1987 until February 1991.

     Stuart  D.  Marvin joined  the Company  as its  Chief Financial  Officer on
August 1,  1996.  Mr. Marvin  is  a certified  public  accountant and  was  most
recently  a  partner  in the  Jacksonville,  Ft. Lauderdale  and  Miami, Florida
offices of Coopers  & Lybrand  L.L.P. Mr.  Marvin has  over 12  years of  public
accounting experience with Coopers & Lybrand L.L.P. and Arthur Young & Company.

     Joseph  P. Goryeb  has served as  a director  of IMC since  April 1996. Mr.
Goryeb is the  Chairman and  Chief Executive  Officer of  Champion Mortgage  Co.
Inc., a leading non-conforming residential mortgage institution that was founded
by  Mr.  Goryeb in  1981. His  40 years  of experience  in the  consumer lending
industry include previous positions with Beneficial Finance Company and Suburban
Finance Company.

     Mitchell W. Legler has served  as a director of  IMC since April 1996.  Mr.
Legler  is the sole stockholder of Mitchell W. Legler, P.A. and has been general
counsel to IMC since August  1995. Mr. Legler is  currently a director of  Stein
Mart, Inc. a Nasdaq listed company. From January 1991 to August 1995, Mr. Legler
was  a partner of Foley & Lardner, prior to which he was a partner of Commander,
Legler, Werver, Daws, Sadler & Howell, P.A.

     Allen D. Wykle has served as a director of IMC since April 1996. Mr.  Wykle
has  been the  Chairman of  the Board  and Chief  Executive Officer  of Approved
Financial   Corp.   (formerly   American   Industrial   Loan   Association),   a
non-conforming  mortgage lending  institution, since  1984, for  which Mr. Wykle
negotiated the  initial public  offering in  April 1992.  Mr. Wykle  was  owner,
President  and  Chief Executive  Officer  of Best  Homes  of Tidewater,  Inc., a
residential construction and remodeling company in Virginia from 1972 to 1986.

TERMS OF DIRECTORS AND OFFICERS

     The Company's Articles of Incorporation provide that the Company's Board of
Directors consists of such number of persons  as shall be fixed by the Board  of
Directors  from time to  time by resolution  and is divided  into three classes,
with each class to be  as nearly equal in number  of directors as possible.  The
Company's  Bylaws provide that the Board of  Directors shall consist of no fewer
than one nor more than 10 persons. Currently there are five directors. The  term
of  office of the directors  in each of the three  classes expires at the annual
meetings of stockholders in 1997  through 1999, respectively. Mr. Legler  serves
until  the 1997 annual  meeting of stockholders. Messrs.  Wykle and Goryeb serve
until the 1998 annual meeting  of stockholders. Messrs. Nicholson and  Middleton
serve until the 1999 annual meeting of stockholders. At each annual meeting, the
successors  to the class of directors whose term  expires at that time are to be
elected to hold office  for a term  of three years,  and until their  respective
successors are elected and qualified, so that the term of one class of directors
expires  at each such annual meeting. In the case of any vacancy on the Board of
Directors, including  a  vacancy  created  by  an  increase  in  the  number  of
directors,  the vacancy  shall be  filled by  the Board  of Directors,  with the
director so elected to serve until the next annual meeting of stockholders.  Any
newly-created  directorships or decreases in directorships are to be assigned by
the Board of Directors so  as to make all classes  as nearly equal in number  as
possible. Directors may be removed only for cause. Officers are elected annually
by the Board of Directors and serve at the discretion of the Board of Directors.

COMMITTEES OF THE BOARD

     Audit Committee. The Audit Committee consists of Messrs. Goryeb, Legler and
Wykle.  The Audit Committee  makes recommendations concerning  the engagement of
independent public accountants, reviews with the independent public  accountants
the  plans and results  of the audit  engagement, approves professional services
provided by the independent public accountants, reviews the indepen-

                                       64


<PAGE>
dence of the independent  public accountants, considers the  range of audit  and
non-audit  fees and  reviews the adequacy  of the  Company's internal accounting
controls.

     Compensation Committee.  The  Compensation Committee  consists  of  Messrs.
Nicholas,  Middleton  and  Legler.  The  Compensation  Committee  determines the
compensation of the Company's executive officers.

     Option Committee. The Option Committee consists of Messrs. Goryeb and Wykle
and has authority to  administer the Company's stock  option plans and to  grant
options thereunder.

     Other  Committees. The Board of Directors may establish other committees as
deemed necessary or appropriate  from time to time,  including, but not  limited
to, an Executive Committee of the Board of Directors.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

     Directors  who  are  not employees  of  the Company  receive  stock options
pursuant to the Directors'  Stock Option Plan (the  'Directors' Plan'). Each  of
Messrs.  Goryeb, Legler and Wykle has received options to purchase 12,932 shares
of Common Stock pursuant to the  Directors' Plan. The Company pays  non-employee
directors  $6,000 per year plus $2,500  for each meeting attended. All directors
receive  reimbursement  of   reasonable  out-of-pocket   expenses  incurred   in
connection  with  meetings of  the Board  of  Directors. No  director who  is an
employee of the Company will receive separate compensation for services rendered
as a director.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The following table sets  forth certain information regarding  compensation
paid and accrued during fiscal 1996 to the Company's Chief Executive Officer and
the other executive officers of the Company whose compensation exceeded $100,000
for that year (collectively, the 'Named Executive Officers').

<TABLE>
<CAPTION>
                                                                                                      LONG TERM
                                                                                                     COMPENSATION
                                                                                                        AWARDS
                                                             ANNUAL COMPENSATION                     ------------
                                             ----------------------------------------------------     SECURITIES
                                                                                   OTHER ANNUAL       UNDERLYING
       NAME AND PRINCIPAL POSITION           YEAR     SALARY         BONUS        COMPENSATION(1)     OPTIONS(2)
------------------------------------------   ----    --------    -------------    ---------------    ------------
<S>                                          <C>     <C>         <C>              <C>                <C>
George Nicholas, Chairman of the Board,
  Chief Executive Officer.................   1996    $475,000       $1,425,000        $ 6,500                --
Thomas G. Middleton, President, Chief
  Operating Officer.......................   1996     380,000        1,140,000          9,500                --
Stuart D. Marvin, Chief Financial
  Officer(3)..............................   1996     111,677           93,750             --           120,000
</TABLE>

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

(1) Represents  matching  contributions by  IMC under  the  IMC Savings  Plan, a
    defined contribution plan under Section 401(k) of the Internal Revenue Code,
    as amended.

(2) Represents number of shares of Common Stock underlying options.

(3) Represents compensation from commencement of  employment on August 1,  1996,
    and  includes  reimbursement  of  $17,927  for  relocation  costs  to Tampa,
    Florida.

                                       65


<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR

     The following table contains information concerning the stock option grants
made to Stuart  D. Marvin,  the only Named  Executive Officer  to receive  stock
options  during the year  ended December 31, 1996.  No stock appreciation rights
were granted during such year:
<TABLE>
<CAPTION>
                                  INDIVIDUAL GRANT                                        POTENTIAL REALIZABLE
                       --------------------------------------                               VALUE AT ASSUMED
                       NUMBER OF     PERCENT OF                                          ANNUAL RATES OF STOCK
                       SECURITIES   TOTAL OPTIONS                                        PRICE APPRECIATION FOR
                       UNDERLYING    GRANTED TO     PER SHARE                                OPTION TERM(2)
                        OPTIONS     EMPLOYEES IN    EXERCISE    EXPIRATION    --------------------------------------------
        NAME            GRANTED      FISCAL YEAR    PRICE(1)       DATE           0%              5%               10%
---------------------  ----------   -------------   ---------   ----------    --------        ----------        ----------

<S>                    <C>          <C>             <C>         <C>           <C>             <C>               <C>
Stuart D. Marvin.....    120,000         35.3%        $8.00       8/1/01      $480,000        $1,385,608        $2,774,989
</TABLE>

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

(1) The exercise price may be paid in cash, in shares of Common Stock valued  at
    fair market value on the date of exercise or pursuant to a cashless exercise
    procedure involving a same-day sale of the purchased shares. The Company may
    also  allow the optionee  to pay the  aggregate exercise price  plus any tax
    liability incurred in connection with  the exercise with a promissory  note.
    On  the date of grant  of this option, the market  price of the Common Stock
    was $12 per share.  Mr. Marvin received 120,000  options for restricted  and
    unregistered shares of common stock, the fair market value as estimated by a
    Committee  of the Board of  Directors to be $8.00 per  share, as part of the
    negotiated terms of his employment.

(2) The 5% and 10% assumed annual  rates of compounded stock price  appreciation
    are  permitted by rules of the Securities and Exchange Commission. There can
    be no assurance provided to any executive officer or any other holder of the
    Company's securities  that  the actual  stock  price appreciation  over  the
    10-year option term will be at the assumed 5% and 10% levels or at any other
    defined  level. Unless the market price of the Common Stock appreciates over
    the option term, no  value will be  realized from the  option grants to  the
    executive officers.

AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END VALUES

     The  following  table  sets  forth  information  concerning  the  value  of
unexercised options held by each of the Named Executive Officers at December 31,
1996. No options or stock appreciation rights were exercised during 1996 and  no
stock appreciation rights were outstanding at the end of that year.

<TABLE>
<CAPTION>
                                                             NUMBER OF SECURITIES              VALUE OF UNEXERCISED
                                                            UNDERLYING UNEXERCISED                 IN-THE-MONEY
                                                                  OPTIONS AT                        OPTIONS AT
                                                               FISCAL YEAR END                  FISCAL YEAR END(1)
                                                        ------------------------------    ------------------------------
                        NAME                            EXERCISABLE     UNEXERCISABLE     EXERCISABLE     UNEXERCISABLE
-----------------------------------------------------   ------------    --------------    ------------    --------------

<S>                                                     <C>             <C>               <C>             <C>
George Nicholas......................................      452,586          113,146        $ 6,517,238      $1,629,302
Thomas G. Middleton..................................      226,292           56,574          3,258,605         814,666
Stuart D. Marvin.....................................       10,000          110,000             87,500         962,500
</TABLE>

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

(1) Based on the closing price of $16.75 per share, adjusted for the two-for-one
    stock  split, of the Common  Stock on Nasdaq on  December 31, 1996, the last
    trading day of the Company's fiscal year.

EMPLOYMENT AGREEMENTS

     The Company has  employment agreements with  George Nicholas, its  Chairman
and  Chief  Executive  Officer, Thomas  G.  Middleton, its  President  and Chief
Operating  Officer,  and   Stuart  D.  Marvin,   its  Chief  Financial   Officer
('Employment Agreements').

     Mr. Nicholas' current Employment Agreement commenced on January 1, 1996 and
terminates  on  December 31,  2001 (subject  to automatic  five-year extensions,
unless either the  Company or  Mr. Nicholas gives  a notice  of termination  six
months  prior to the extension). The Employment Agreement provides for an annual
salary of $475,000, plus an increase each  year equal to the greater of (i)  the
change  in the cost of living in Tampa,  Florida, or (ii) an amount equal to 10%
of the base salary for the prior year,  but only if the Company has achieved  an
increase  in net income per share of 10%  or more in that year. In addition, the
Employment  Agreement  provides  for  payment  of  a  bonus  equal  to  15%   of

                                       66


<PAGE>
the  base salary of the relevant year for each one percent by which the increase
in net income per share exceeds 10% up to a maximum of 300% of his base  salary.
For  example, if the increase in net income per share for a particular year were
20%, the bonus payment would  equal 150% of the base  salary for such year.  The
Employment  Agreement also provides that the  Company shall use its best efforts
to elect Mr. Nicholas to the Company's  Board of Directors and to its  Executive
Committee,  if constituted.  Mr. Nicholas' employment  may be  terminated by the
Company at any  time for 'cause'  (including material breach  of the  Employment
Agreement,  certain  criminal or  intentionally  dishonest and  misleading acts,
breaches of confidentiality and failure to  follow directives of the Board).  If
Mr.  Nicholas is terminated  for cause or  voluntarily terminates his employment
(in the  absence of  a Company  breach or  a 'change  of control')  he does  not
receive  any  deferred  compensation.  Mr.  Nicholas  is  entitled  to  deferred
compensation upon (i)  his termination by  the Company without  cause, (ii)  the
Company's  failure to renew his Employment  Agreement on expiration, (iii) death
or disability,  (iv) voluntary  termination  by Mr.  Nicholas after  a  material
breach by the Company, and (v) voluntary termination after a 'change of control'
(defined  as any (A) acquisition of 25% or more of the voting power or equity of
the Company, (B) change in a majority of the members of the Board excluding  any
change approved by the Board, or (C) approval by the Company's stockholders of a
liquidation  or dissolution of the Company, the sale of substantially all of its
assets, or a merger in which the Company's stockholders own a minority  interest
of  the surviving entity). The amount,  if any, of deferred compensation payable
to Mr. Nicholas  will be  determined at  the time  of termination  equal to  the
greater of (i) his base salary for the remainder of the then-current term of the
Employment  Agreement, or (ii) an amount equal to 150% of the highest annualized
compensation earned by him during the preceding three years. Receipt of deferred
compensation is Mr. Nicholas' sole remedy in the event of a wrongful termination
by the  Company.  Mr.  Nicholas' Employment  Agreement  contains  a  restrictive
covenant prohibiting him, for a period of 18 months following the termination of
his  employment  for any  reason,  from competing  with  the Company  within the
continental United States or from soliciting any employees from the Company  who
are earning in excess of $50,000 per year. However, this restrictive covenant is
not  applicable if Mr.  Nicholas is terminated  without cause or  if the Company
defaults in the payment  of deferred compensation to  Mr. Nicholas or  otherwise
materially  breaches  the Employment  Agreement.  The Employment  Agreement also
provides that  the  Company  shall  indemnify  Mr.  Nicholas  for  any  and  all
liabilities  to which  he may  be subject  as a  result of  his services  to the
Company.

     Mr. Middleton's  Employment  Agreement commenced  on  January 1,  1996  and
contains  terms  that  are substantially  the  same  as those  of  Mr. Nicholas'
Employment Agreement, with the exception  that Mr. Middleton's annual salary  is
$380,000, plus increases as provided therein.

     Mr.  Marvin's Employment Agreement commenced on  August 1, 1996 and extends
until December 31, 1999.  The terms of the  Employment Agreement provide for  an
annual  salary  of $225,000  commencing August  1, 1996,  plus an  increase each
calendar year equal to the  greater of (i) the change  in the cost of living  in
Tampa,  Florida, or (ii) an amount equal to 10% of the base salary for the prior
year, but only if the Company has  achieved an increase in net income per  share
of  10% or greater. In addition, the Employment Agreement provides for a payment
of a bonus equal  to 5% of  the base salary  of the relevant  year for each  one
percent  by which  the increase  in net  income per  share exceeds  10% up  to a
maximum of 100% of his base salary.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     No  interlocking  relationship  exists  between  the  Company's  Board   of
Directors  or officers responsible  for compensation decisions  and the board of
directors or  compensation committee  of any  other company,  nor has  any  such
interlocking  relationship existed in the  past. Messrs. Nicholas, Middleton and
Legler serve on the  Compensation Committee and  Messrs. Nicholas and  Middleton
are executive officers of the Company.

PERFORMANCE GRAPH

     The  performance graph  required by  Item 402  of Regulation  S-K is hereby
incorporated  by  reference  to  the  Registrant's  proxy  statement  to  annual
stockholders meeting.

                                       67

<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the beneficial
ownership  of the Common Stock as of January  31, 1997 of: (i) each person known
by the  Company to  own beneficially  five percent  or more  of the  outstanding
Common  Stock; (ii)  each of  the Company's directors;  (iii) each  of the Named
Executive Officers; and (iv) all directors and executive officers of the Company
as a group.

<TABLE>
<CAPTION>
                                                                                    SHARES BENEFICIALLY
                                                                                           OWNED
                                                                                  -----------------------
                                                                                               PERCENT OF
                           NAME OF BENEFICIAL OWNER                                NUMBER        CLASS
-------------------------------------------------------------------------------   ---------    ----------
<S>                                                                               <C>          <C>
ContiTrade Services Corporation(1) ............................................   2,700,000       10.95%
  277 Park Avenue
  New York, New York 10172
Branchview, Inc.(2) ...........................................................   1,661,856        7.57
  989 McBride Avenue
  West Patterson, New Jersey 07424
Approved Financial Corp. ......................................................   1,205,018        5.49
  3420 Holland Road, Suite 107
  Virginia Beach, Virginia 23452
George Nicholas(3) ............................................................   1,543,496        6.89
  3450 Buschwood Park Drive
  Tampa, Florida 33618
Thomas G. Middleton(4) ........................................................     440,767        1.99
  3450 Buschwood Park Drive
  Tampa, Florida 33618
Stuart D. Marvin(5) ...........................................................      16,000       *
  3450 Buschwood Park Drive
  Tampa, Florida 33618
Joseph P. Goryeb(6)(7) ........................................................   1,183,460        5.39
  Waterview Corporate Centre
  20 Waterview Boulevard
  Parsippany, New Jersey 07054-1267
Allen D. Wykle(6)(8) ..........................................................      21,456       *
  3420 Holland Road
  Virginia Beach, Virginia 23452
Mitchell W. Legler(6)(9) ......................................................      90,062       *
  Independent Drive, Suite 3104
  Jacksonville, Florida 32202
Thomas P. LaPorte Trust(10) ...................................................   1,229,274        5.60
  2230 Groveland
  Bay City, MI 48708
Mary M. Reid Trust(10) ........................................................   1,229,270        5.60
  2230 Groveland
  Bay City, MI 48708
     All directors and executive officers as a group (6 persons)(11)...........   3,295,241       14.50%
</TABLE>

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

   * Represents less than one percent.

 (1) Consists of 2,700,000 shares of Common Stock issuable upon the exercise  of
     the Conti Warrant, which is currently exercisable for a de minimus amount.

 (2) Excludes 110,000 registered shares purchased by shareholders of Branchview,
     Inc. in the Company's intial public offering.

 (3) Includes  452,586  shares of  Common Stock  issuable  upon the  exercise of
     options under the Incentive Plan.

 (4) Includes 226,293  shares of  Common  Stock issuable  upon the  exercise  of
     options under the Incentive Plan.

                                              (footnotes continued on next page)

                                       68


<PAGE>
(footnotes continued from previous page)

 (5) Includes  16,000  shares  of Common  Stock  issuable upon  the  exercise of
     options under the Incentive Plan.

 (6) Includes 10,346  shares  of Common  Stock  issuable upon  the  exercise  of
     options under the Directors' Plan.

 (7) Includes 1,145,338 shares of Common Stock owned by JRJ Associates, Inc. Mr.
     Goryeb  has voting and investment control of  the Common Stock owned by JRJ
     Associates, Inc.

 (8) Excludes 1,199,768 shares of Common Stock and 5,250 shares of Common  Stock
     issuable  upon the  exercise of options  under the Incentive  Plan owned by
     Approved. Mr. Wykle,  who owns  32% of the  voting stock  of Approved,  has
     voting,  but not investment, control of the Common Stock owned by Approved.
     Mr. Wykle  disclaims beneficial  ownership of  the shares  of Common  Stock
     owned by Approved and issuable upon the exercise of such options.

 (9) Includes  48,940  shares  of Common  Stock  issuable upon  the  exercise of
     options under the Incentive Plan, 27,776 shares held by Mr. Legler  jointly
     with his spouse and 3,000 shares held in his IRA.

(10) Includes 4,282 shares of Common Stock issuable upon the exercise of options
     issued  to Mortgage America under the Incentive Plan. Thomas P. LaPorte and
     Mary M. Reid are husband and wife and have voting and investment control of
     the 4,282  shares of  Common  Stock issuable  upon  the exercise  of  these
     options. Each acts as co-trustee of the other's respective trust.

(11) See Notes (3)-(9).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Since its inception, the Company has had business relationships and engaged
in  certain  transactions with  affiliated  companies and  parties  as described
below. It is the policy  of the Company to  engage in transactions with  related
parties only on terms that, in the opinion of the Company, are no less favorable
to  the Company than  could be obtained  from unrelated parties  and each of the
transactions described below conforms to that policy.

AGREEMENTS WITH CONTIFINANCIAL

     Warehouse Facility. The Company and ContiFinancial are party to the Amended
and Restated  Loan  and  Security  Agreement, dated  as  of  September  1,  1995
(together with its predecessor agreement, the 'Warehouse Facility'). Pursuant to
the  Warehouse Facility, the Company has a $125.0 million line of credit that is
secured  by  its  mortgage  loans  and  expires  on  August  31,  1997.  Amounts
outstanding  under the Warehouse Facility bear interest  at a rate of LIBOR plus
1.5% per year. During  1994, 1995 and 1996,  the Company made interest  payments
under  the Warehouse  Facility of $0.5  million, $5.1 million  and $6.0 million,
respectively.

     Standby Agreement. The Company  and ContiFinancial are  party to a  Standby
Agreement  through which the Company funds the  income taxes payable as a result
of the recognition of the securitization gain on sale and other working  capital
needs  prior to  receipt of  any cash  flow from  the residual  interests in its
securitizations. Amounts borrowed under the Standby Agreement bear interest at a
rate of LIBOR plus 1.7% per annum. The Standby Agreement expires on January  12,
2000.  The  Company has  borrowed  the full  $15.0  million available  under the
Standby Agreement.  During  1994,  1995  and 1996,  the  Company  made  interest
payments  to ContiFinancial under the Standby  Agreement of $0, $0.2 million and
$1.4 million, respectively.

     Investment Banking Relationship. As part of the 1995 Agreement, the Company
and ContiFinancial entered  into an  agreement for  investment banking  services
dated  January  12, 1995  (the '1995  Investment  Banking Agreement').  The 1995
Investment Banking  Agreement replaced  a prior  agreement between  the  parties
under  the 1993 Agreement (together with  the 1995 Investment Banking Agreement,
the 'Investment Banking  Agreements'). Pursuant to  the 1995 Investment  Banking
Agreement,   unless  the  Company  determines,  in  its  sole  discretion,  that
materially better terms are  available from others,  ContiFinancial has a  right
(the 'Retention Right') to act as underwriter,

                                       69


<PAGE>
placement  agent or sponsor ('Mortgage Banker')  with respect to $2.0 billion of
placement or  underwriting of  securitizations and  whole loan  acquisitions  or
dispositions  of the Company's  mortgage loans (the  'Mortgage Transaction'). In
addition, ContiFinancial  may retain  all underwriting  fees from  the  Mortgage
Transaction in any instance in which it acts as Mortgage Banker for the Company,
receive information from the Company regarding any Mortgage Transaction in which
it  is  not  chosen  to  be the  Mortgage  Banker  and  receive  certain minimum
allocations of Retention Rights  on a per annum  basis which, if not  fulfilled,
are  rolled  over  into  the  minimum allocation  of  Retention  Rights  for the
following year. The 1995  Investment Banking Agreement  expires in 2000,  unless
extended  through  the mutual  agreement of  the  parties. Under  the Investment
Banking Agreements, the Company paid $0.3 million, $0.2 million and $0  million,
respectively,  to ContiFinancial for  services as Mortgage  Banker in 1994, 1995
and 1996, respectively.

     Conti Warrant. In August 1993, the Company entered into the 1993  Agreement
with  ContiFinancial which provided IMC with the $15.0 million Standby Agreement
to fund  retention of  I/O  and residual  classes  of certificates  and  certain
investment  banking  services and  also  committed ContiFinancial  to  provide a
warehouse facility to IMC,  subject to the  satisfaction of certain  conditions.
Pursuant to the 1993 Agreement, IMC agreed to share a portion of its equity with
ContiFinancial through an agent fee based on a percentage of increases in equity
(as  defined) at the termination of the 1993 Agreement. On January 12, 1995, IMC
and ContiFinancial  entered into  the  1995 Agreement  which replaced  the  1993
Agreement and provided for agent fees to ContiFinancial based on the fair market
value of the Company (as defined in the 1995 Agreement). The amount of the agent
fee  ranges  from 15%  of the  fair market  value  of the  Company in  the event
ContiFinancial elects to terminate the 1995 Agreement to 25% of the fair  market
value  of the Company in  the event IMC elects  to terminate the 1995 Agreement.
Pursuant to the 1995 Agreement, the Conti VSA was established. See 'Management's
Discussion   and   Analysis    of   Financial   Condition    and   Results    of
Operations -- Transactions with ContiFinancial -- Sharing of Proportionate Value
of  Equity.' A professional valuation firm valued the Company as of December 31,
1995 in order to calculate  the value of the Conti  VSA at that time. The  Conti
VSA  was valued  at $5.9  million. The  Conti VSA  was converted  into the Conti
Option effective December  31, 1995  by an  agreement executed  March 26,  1996.
Prior  to the Company's initial  public offering in June  1996, the Conti Option
was converted into the  Conti Warrant. The  Conti Warrant grants  ContiFinancial
certain  registration rights. The  Conti Warrant is  exercisable for 2.7 million
shares (after giving effect to ContiFinancial's sale in June 1996 of 10% of  its
interest  in the Conti Warrant) of Common Stock for a de minimus amount, subject
to adjustment if  the Company issues  Common Stock below  fair market value  and
certain anti-dilution adjustments.

ADDITIONAL SECURITIZATION TRANSACTION EXPENSE

     Through  June 1996, the Company had an I/O and residual certificate sharing
arrangement with ContiFinancial in connection with its securitizations  pursuant
to  which the Company arranged to have  issued to ContiFinancial a percentage of
the residual  interest  in  the  related  REMIC  trust  in  exchange  for  cash.
ContiFinancial  received 50% of the residual  interests (valued at $3.0 million)
in the Company's 1994-1 securitization in exchange for $2.1 million, 50% of  the
residual   interests  (valued   at  $4.2   million)  in   the  Company's  1995-1
securitization in  exchange for  $3.3 million,  100% of  the residual  interests
(valued at $12.4 million) in the Company's 1995-2 securitization in exchange for
$10.0  million, 55% of  the residual interests  (valued at $8.5  million) in the
Company's 1995-3  securitization  in  exchange  for $5.1  million,  50%  of  the
residual   interests  (valued   at  $9.5   million)  in   the  Company's  1996-1
securitization in exchange for  $6.2 million and 25%  of the residual  interests
(valued  at $3.9 million) in the Company's 1996-2 securitization in exchange for
$2.5 million. See Item 7 --  'Management's Discussion and Analysis of  Financial
Condition  and  Results  of  Operations -- Transactions  with  ContiFinancial --
Additional Securitization Transaction Expense.'

IMC ASSOCIATES, INC.

     IMC  Associates, Inc. ('IMC Associates') was formed to lease a skybox suite
in the Ice  Palace stadium  for games  of the  Tampa Bay  Lightning, a  national
hockey league franchise. The Company purchases tickets for the hockey games from
IMC Associates for an aggregate amount equal to the

                                       70


<PAGE>
$75,000  annual lease  cost of  the skybox.  IMC Associates  is owned  by George
Nicholas, the Chairman of the Board and Chief Executive Officer of the Company.

GENERAL COUNSEL

     The Company paid $230,000 in legal fees in 1996 to Mr. Legler who acted  as
general  counsel for the Company  through his professional association, Mitchell
W. Legler, P.A.  The Company has  an arrangement with  Mitchell W. Legler,  P.A.
pursuant  to which it pays that firm $17,500 per month for Mr. Legler's services
as general counsel.

     In addition,  Mitchell W.  Legler, P.A.  earns a  contingent cash  fee  for
acting  in the primary role in  identifying potential acquisition candidates and
in analyzing,  negotiating  and  closing acquisitions  of  other  non-conforming
lenders   and  strategic  alliances  with   other  non-conforming  lenders.  The
contingent fees are determined based on a percentage of the expected increase in
IMC's earnings per  share resulting  from an acquisition  or strategic  alliance
based  on the first year  following the closing of  the acquisition and based on
the first  three years  following the  closing of  a strategic  alliance.  Fifty
percent  of contingent fee as to acquisitions  is paid following the closing and
the remainder is  paid at  the end  of the first  year based  on actual  results
achieved. The contingent fee as to strategic alliances is paid at the end of the
first  three years following closing  based on actual results.  No fee is due to
Mitchell W.  Legler, P.A.  for unsuccessful  acquisition or  strategic  alliance
efforts.

     As  a result of  this contingent fee arrangement,  Mitchell W. Legler, P.A.
received fees in the aggregate of  $468,167 in connection with the  acquisitions
of  CoreWest,  Mortgage America,  American  Reduction and  Equity  Mortgage. The
balance of the fees, if any, due as a result of those acquisitions will be  paid
in 1998.

     In  addition,  on December  11,  1995, Mr.  Legler  was granted  options to
purchase 42,026 shares of Common Stock at  an exercise price of $2.35 per  share
pursuant  to the Incentive Plan for advisory services to the Company and options
to purchase 12,932  shares of Common  Stock at  an exercise price  of $2.35  per
share  pursuant to the Directors' Plan and  options to purchase 20,000 shares of
Common Stock at an exercise price of  $8.00 per share pursuant to the  Incentive
Plan.

TAX DISTRIBUTIONS

     Under the terms of the partnership agreement governing the Partnership, the
Company was obligated to make quarterly cash distributions to the partners equal
to  45%  of profits  (as defined  in  the partnership  agreement) to  enable the
partners  to  pay  taxes  in  respect  of  their  partnership  interests   ('Tax
Distributions').  Tax Distributions to  partners in 1996  related to partnership
income prior  to June  24,  1996, the  effective date  of  the exchange  of  the
partnership  interests for Common Stock of the Company, and included $790,281 to
George Nicholas, $898,703 to Mortgage America, $898,703 to JRJ Associates, Inc.,
$898,703 to Branchview, $898,703 to Approved and $898,703 to Cityscape Corp.

TRANSACTIONS WITH INDUSTRY PARTNERS

INDUSTRY PARTNERS' INCENTIVE PLAN

     At the  time  the Partnership  became  a  subsidiary of  the  Company,  the
Industry  Partners were given an opportunity to double the monthly dollar amount
of mortgage loans  which they  committed to sell  to the  Company. To  encourage
Industry  Partners to continue  to sell more mortgage  loans than required under
their commitments, the  Company created  an incentive option  plan for  Industry
Partners  (the 'Industry  Partners' Incentive  Plan'). Under  that Plan, options
exercisable for five years after  grant to acquire a  total of 20,000 shares  of
Common  Stock  at $9.00  per share  were  awarded to  Industry Partners  for the
quarter ending September 30, 1996. The 20,000 options were allocated among those
Industry Partners that doubled  their commitments, pro rata,  to the extent  the
Industry Partners exceeded that doubled commitment for the quarter. The plan was
amended and for each quarter beginning December 31, 1996, Industry Partners that
doubled  their commitments will be eligible to receive on a pro rata basis fully
paid shares of Common Stock equal to $150,000 divided by the market price of the
Common Stock at the end of each  quarter. The fully paid shares of Common  Stock
will be issued among

                                       71


<PAGE>
those  Industry Partners that doubled their commitments, pro rata, to the extent
the Industry  Partner  exceeded its  doubled  commitment for  the  quarter.  The
Industry  Partners Incentive Plan  continues through the  quarter ended June 30,
2000.

LAKEVIEW

     The Company  entered  into  the  Lakeview Facility  in  January  1996  with
Lakeview,  an affiliate of  Branchview, Inc., one of  the Industry Partners. The
Company repaid  all  outstanding amounts  under  the Lakeview  Facility  with  a
portion  of the proceeds of the Company's  initial public offering in June 1996.
The  Company  has  re-borrowed  approximately  $5  million  under  the  Lakeview
Facility,  effective in  January 1997.  In 1996,  IMC, through  its wholly owned
subsidiary, IMCCI,  entered into  the Credit  Card Joint  Venture with  Lakeview
Credit.  The Credit Card Joint Venture is owned 50% by IMCCI and 50% by Lakeview
Credit. See Item 1 -- 'Business --  New Products and Services -- Secured  Credit
Cards.'

JRJ ASSOCIATES INC.

     JRJ  Associates Inc. sold loans in the aggregate amount of $24.9 million to
the Company during 1996  and has agreed  to sell $24.0 million  in loans to  the
Company  in 1997.  Mr. Goryeb,  a member of  the Board  of Directors  of IMC, is
Chairman and Chief Executive Officer of Champion Mortgage Co. Inc., an affiliate
of JRJ Associates Inc.

CITYSCAPE CORP.

     Cityscape Corp. contributed $420,000 to  the Company in lieu of  additional
loan  sales in satisfaction of its aggregate  loan sale commitments for 1996 and
will contribute $360,000 in satisfaction of its commitments for 1997.

MORTGAGE AMERICA

     Effective January  1, 1997,  IMC acquired  all of  the assets  of  Mortgage
America,   one  of  the  Industry  Partners.  IMC  purchased  $45.3  million  of
residential mortgage loans from Mortgage America during 1996. The purchase price
for all of the assets  of Mortgage America was  an initial payment of  1,790,000
shares  of Common Stock and assumption of a stock option plan which could result
in issuance of  an additional 334,596  shares of Common  Stock and a  contingent
payment of up to 2,770,000 additional shares of Common Stock at the end of three
years  based on  the growth  and profitability  of Mortgage  America during that
period.

EQUITY MORTGAGE

     Effective January  1,  1997, IMC  acquired  all  of the  assets  of  Equity
Mortgage,  one  of  the  Industry  Partners.  IMC  purchased  $12.5  million  of
residential mortgage loans from Equity Mortgage during 1996. The purchase  price
for  Equity Mortgage was a cash payment of $150,000 in excess of its net assets.
In connection  with  the acquisition,  the  Company  entered into  a  four  year
employment  agreement  with  the  former  owner  of  Equity  Mortgage,  Mr. Mark
Greenberg, pursuant to which the Company is obligated to pay Mr. Greenberg  1.5%
of  the  principal  amount  of non-conforming  loans  originated  by  the Equity
Mortgage division of the Company during such four years, up to a maximum  amount
that does not exceed the net income of the division.

INVESTORS MORTGAGE

     Investors  Mortgage sold loans in the  aggregate amount of $12.1 million to
IMC during 1996. Investors Mortgage has agreed to sell $12.0 million in loans to
the Company in 1997.

APPROVED FINANCIAL CORP.

     Approved, formerly American Industrial Loan Association, sold loans in  the
aggregate amount of $100.1 million to IMC during 1996 and has agreed to sell $24
million  in loans to IMC in 1997. Mr.  Wykle, a member of the Board of Directors
of IMC, is Chairman  and Chief Executive Officer  of Approved. In January  1996,
IMC  and Approved entered into a  warehouse financing facility pursuant to which
IMC  committed  to  lend  Approved  $8.0  million  secured  by  mortgage  loans.
Borrowings  under the facility bear interest at  a rate of LIBOR plus 1.75%, and
Approved paid IMC $137,189 in interest payments during 1996.

                                       72

<PAGE>
                                   PART III.

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

     (a) Documents filed as part of this Report.

          (1) Financial Statements

          See Item 8.

          'Financial Statements and Supplementary Data'

          (2) Financial Statement Schedules

          No  Financial statement schedules are  included because of the absence
     of the conditons under which they  are required or because the  information
     is included in the financial statements or notes thereto.

          (3) Exhibits

          The exhibits are listed on the Exhibit Index attached hereto.

                                       73


<PAGE>
                                   SIGNATURES

     Pursuant  to the requirements  of the Securities Exchange  Act of 1934, the
Registrant has duly caused this Annual Report  on Form 10-K to be signed on  its
behalf by the undersigned, thereunto duly authorized.

                                          IMC MORTGAGE COMPANY

                                          By       /S/ THOMAS G. MIDDLETON
                                              ..................................

                                                    THOMAS G. MIDDLETON,
                                                         PRESIDENT

     Pursuant  to the requirements of the  Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed by the following persons on behalf of
the registrant and in the capacities indicated on March 31 , 1997.

<TABLE>
<CAPTION>
                SIGNATURE                                      TITLE
------------------------------------------  --------------------------------------------

<S>                                         <C>
           /S/ GEORGE NICHOLAS              Chairman of the Board and Chief Executive
 .........................................    Officer (Principal Executive Officer)
            (GEORGE NICHOLAS)

           /S/ STUART D. MARVIN             Chief Financial Officer (Principal
 .........................................    Accounting Officer and Principal Financial
            (STUART D. MARVIN)                Officer)

           /S/ JOSEPH P. GORYEB             Director
 .........................................
            (JOSEPH P. GORYEB)

          /S/ MITCHELL W. LEGLER            Director
 .........................................
           (MITCHELL W. LEGLER)

         /S/ THOMAS G. MIDDLETON            Director
 .........................................
          (THOMAS G. MIDDLETON)

            /S/ ALLEN D. WYKLE              Director
 .........................................
             (ALLEN D. WYKLE)
</TABLE>

                                       74


<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<S>     <C>
2.1     -- Pre-IPO Agreement between the Partnership, the General Partners and each Limited Partner.*
3.1     -- Articles of Incorporation of the Registrant, as amended.*
3.2     -- Bylaws of the Registrant, as amended.*
4.1     -- Specimen of Certificate for Common Stock.*
4.2     -- Indenture Agreement between the Partnership and Rotch Property Group Limited.*
4.3     -- Substitution Agreement between the Partnership and ContiTrade Services Corporation.*
4.4     -- Incentive Plan of the Company and related assumption agreements.*
4.5     -- Outside Directors' Option Plan of the Company and related assumption agreements.*
4.6     -- Form of Common Stock Warrant issued to ContiTrade Services Corporation.*
10.1    -- Employment Agreement dated January 1, 1996 between the Partnership and George Nicholas, as amended.*
10.2    -- Employment Agreement dated January 1, 1996 between the Partnership and Thomas G. Middleton, as amended.*
10.3    -- Employment Agreement dated January 1, 1996 between the Partnership and David MacDonald.*
10.4    -- Lease Agreements between the Partnership and CLW Realty Asset Group Inc.*
10.5    -- Share Subscription  and Shareholders'  Agreement between the  Partnership and  Foxgard  Limited,  Financial
           Security Assurance Holdings, Inc. and Preferred Mortgages Limited.*
10.6    -- Transfer  Agreement  between  the Partnership  and  Curzon Equity  Finance Corporation  Limited,  Preferred
           Mortgages Limited, Rotch Property Group Limited, Foxgard Limited and Financial Security Assurance Holdings,
           Inc.*
10.7    -- Side letter relating  to the Share  Subscription and Shareholders' Agreement  between the  Partnership  and
           Foxgard Limited, Financial Security Assurance Holdings, Inc. and Preferred Mortgage Limited.*
10.8    -- Asset  Purchase Agreement  and Plan  of Reorganization  between  the  Partnership, IMC  Acquisition,  Inc.,
           Mortgage Central Corp. and the shareholders of Mortgage Central Corp.*
10.9    -- Registration Rights Agreement between the Partnership and the shareholders of Mortgage Central Corp.*
10.10   -- Investment Banking Services Agreement between the Partnership and ContiTrade Services Corporation.*
10.11   -- Standby  Facility  Agreement  between  the Partnership and  ContiTrade Services  Corporation and Supplement
           thereto.*
10.12   -- Amended  and  Restated  Loan and  Security  Agreement  between  the  Partnership  and  ContiTrade  Services
           Corporation.*
10.13   -- Secured Note from the Partnership to ContiTrade Services Corporation.*
10.14   -- Amended and Restated Custodial Agreement among  the Partnership, ContiTrade  Services Corporation and  Bank
           of Boston.*
10.15   -- 1995 Agreement between the Partnership and ContiTrade Services Corporation.*
10.16   -- Assignment, Assumption and Consent  Agreement among the Partnership,  ContiTrade, ContiTrade  Services  LLC
           and First National Bank of Boston.*
10.17   -- Master Repurchase Agreement  Governing Purchase and  Sales of Mortgage Loans  between the  Partnership  and
           Nomura Asset Capital Corporation and related Power of Attorney.*
10.18   -- Master Repurchase Agreement between the Partnership and Nomura Securities International, Inc.*
10.19   -- Global Master Repurchase Agreement between the Partnership and Nomura Grand Cayman, Ltd.*
10.20   -- Custodial Agreement among  the Partnership, The  First National Bank  of Boston and  Nomura  Asset  Capital
           Corporation.*
10.21   -- Loan and  Security Agreement  between the Partnership  and First  National Bank of  Boston  and  amendments
           thereto.*
10.22   -- Interim Loan and Security Agreement  between the Partnership and National  Westminster Bank  PLC,  New York
           Branch.*
10.23   -- Custodial  Agreement among  the Partnership,  National Westminster  Bank PLC  and First  National  Bank  of
           Boston.*
10.24   -- Promissory Note between the Partnership and Lakeview Savings Bank.*
10.25   -- Security Agreement Collateralizing Promissory Note between the Partnership and Lakeview Savings Bank.*
10.26   -- Master Repurchase Agreement among the Partnership and Bear Stearns Home Equity Trust 1996-1.*
</TABLE>

                                       75


<PAGE>
<TABLE>
<S>     <C>
10.27   -- Custody Agreement among the Partnership, IMC Corporation of America, Bear Stearns Home Equity  Trust 1996-1
           and Bank of Boston.*
10.28   -- Warehousing  Credit   and  Security  Agreement  among the  Partnership,  IMC  Corporation  of  America  and
           Residential Funding Corporation, as amended.`D'*
10.29   -- Custodial Agreement among the First National Bank  of Boston, the Partnership, IMC Corporation  of  America
           and Residential Funding Corporation.*
10.30   -- Loan  and Security  Agreement between the  Partnership and Approved  Financial Corp., Approved  Residential
           Mortgage, Inc. and Armada Residential Mortgage, LLC.*
10.31   -- Loan and Security Agreement between the Partnership and Mortgage Central Corp.*
10.32   -- Custodial Agreement among the Partnership, Mortgage Central Corp. and the First National Bank of Boston.*
10.33   -- Custodial Agreement  among the  Partnership, American  Industrial Loan  Association,  Approved  Residential
           Mortgage, Inc., Armada Residential Mortgage, LLC and the First National Bank of Boston.*
10.34   -- Employment Agreement dated August 1, 1996 between the Registrant and Stuart D. Marvin.**
10.35   -- Asset Purchase Agreement and Plan of Reorganization between the Registrant, Mortgage America, Inc.  and the
           shareholders of Mortgage America, Inc.***
10.36   --  First  Amendment to  the Asset  Purchase Agreement  and  Plan of  Reorganization between  the  Registrant,
           Mortgage America, Inc. and the shareholders of Mortgage America, Inc.***
10.37   -- Form  of Registration  Rights Agreement between  the Registrant and the  Shareholders of Mortgage  America,
           Inc.***
10.38   -- Agreement  and Plan of Reorganization between the Registrant, CWB Acquisitions, Inc., CoreWest Banc and the
           shareholders of CoreWest Banc.***
10.39   -- Registration Rights Agreement between the Registrant and the shareholders of CoreWest Banc.***
10.40   -- Form  of Amended and Restated  Loan Agreement between the Registrant,  the Partnership, IMC Corporation  of
           America and Nomura Asset Capital Corporation.***
10.41   -- Form  of Custodial Agreement  between the Registrant, the Partnership,  IMC Corporation of America,  Nomura
           Asset Capital Corporation and LaSalle National Bank.***
10.42   -- Form  of Loan and Security Agreement among the  Registrant, the Partnership and The First National Bank  of
           Boston.***
10.43   -- Form  of Asset  Purchase Agreement  between the  Registrant, American  Mortgage Reduction,  Inc.,  and  the
           Shareholders of American Mortgage Reduction, Inc.***
10.44   -- Form of Asset Purchase Agreement between the Registrant and Equity Mortgage Co., Inc.***
10.45   -- Employment Agreement dated as of January 1, 1997 between the Registrant and Mark J. Greenberg.***
10.46   -- Form  of  Warehouse  Security Agreement  among the  Registrant,  the Partnership  and GE  Capital  Mortgage
           Services, Inc.***
10.47   -- Form  of Warehouse Credit Agreement among the Registrant, the Partnership and GE Capital Mortgage Services,
           Inc.***
10.48   -- Loan  and  Security  Agreement among  the  Registrant, IMC  Corporation of  America, the  Partnership,  IMC
           Investment Corp., CoreWest Banc and Paine Webber Real Estate Securities Inc.***
11.1    -- Statement  re  computation  of earnings per  share (See Note 4  of the Notes  to the Consolidated Financial
           Statements).
16.1    -- Letter dated April, 1996 from Deloitte & Touche, LLP to the Registrant.*
21.1    -- Subsidiaries of the Registrant.*
27.1    -- Financial Data Schedule.***
99.1    -- Third Amended and Restated Agreement of Limited Partnership.*
</TABLE>

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

  `D' Confidential treatment granted with respect to certain provisions.

  * Incorporated  by  reference  to  the   same  exhibit  to  the   Registrant's
    Registration  Statement on Form S-1 declared effective by the Securities and
    Exchange Commission on June 25, 1996 (Registration No. 333-3954).

 ** Incorporated by reference to Exhibit  1 to Registrant's Quarterly Report  on
    Form 10-Q for the quarter ended September 30, 1996.

*** Incorporated   by  reference  to  the   same  exhibit  to  the  Registrant's
    Registration Statement on Form S-1 (Registration No. 33-21823) filed by  the
    Company with the Commission.

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                              STATEMENT OF DIFFERENCES
                              ------------------------

The British pound sign shall be expressed as 'L'
The dagger symbol shall be expressed as 'D'