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                         SECURITIES EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURUTIES
                              EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                       OR

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

            FOR THE TRANSITION PERIOD FROM TO _______ TO ________
                          COMMISSION FILE NO. 333-3954

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

                              IMC MORTGAGE COMPANY
               (Exact name of issuer as specified in its charter)

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

           Florida                                  59-3350574         
(State or other jurisdiction of                  (I.R.S. Employer      
 incorporation or organization)                 Identification Number) 


       5901 E. Fowler Avenue                        
         Tampa, Florida                               33617   
(Address of principal executive offices)            (Zip Code) 
                                                    

       Registrant's telephone number, including area code: (813) 984-8801

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

           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  26,  1999,  was  $6,072,684.  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 26, 1999, 34,104,590 shares of Common
Stock were outstanding.

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<PAGE>



                                      INDEX

          PART I.
Item 1.   Business.............................................................1
Item 2.   Properties..........................................................26
Item 3.   Legal Proceedings...................................................26
Item 4.   Submission of Matters to a Vote of Security Holders.................26

          PART II.
Item 5.   Market for Registrant's Common Equity and Related 
             Stockholder Matters..............................................27
Item 6.   Selected Financial Data.............................................29
Item 7.   Management's Discussion and Analysis of Financial Condition 
             and Results Of Operations........................................32
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk..........62
Item 8.   Financial Statements and Supplementary Data.........................64
Item 9.   Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosures...........................................103

          PART III.
Item 10.  Directors and Executive Officers of the Registrant.................105
Item 11.  Executive Compensation.............................................108
Item 12.  Security Ownership of Certain Beneficial Owners and Management.....114
Item 13.  Certain Relationships and Related Transactions.....................116

          PART IV.
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K....118
          Signatures.........................................................119


<PAGE>

                                     PART I

Forward Looking Statements

     Certain  statements in this Annual Report on Form 10-K are "forward looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995. You can identify forward looking statements by the use of such words as
"expect",  "estimate",  "intend", "project", budget", "forecast",  "anticipate",
"plan","in the process of" and similar  expressions.  Forward looking statements
include all statements  regarding IMC's expected financial position,  results of
operations,  cash flows, financing plans, business strategies,  budgets, capital
and  other  expenditures,   competitive  positions,   plans  and  objectives  of
management and markets for stock. All forward looking  statements  involve risks
and uncertainties.  In particular, any statements contained herein regarding the
consummation  and benefits of the proposed  transaction  with  Greenwich  Street
Capital Partners II, L.P. and certain related funds (the "Greenwich  Funds"), as
well as expectations  with respect to future sales,  operating  efficiencies and
product  and  product  expansion,  are  subject  to  known  and  unknown  risks,
uncertainties  and  contingencies,  many of which are beyond the control of IMC,
which may cause actual results, performance or achievements to differ materially
from anticipated results, performance or achievements. Factors that might affect
such forward looking statements  include,  among other things,  overall economic
and business conditions,  the demand for IMC's services,  competitive factors in
the industry in which IMC competes, changes in government regulation, continuing
tightening  of credit  availability  to the subprime  mortgage  industry,  early
termination  of  the  amended  and  restated  intercreditor  agreements  or  the
standstill  periods  relating  to certain of IMC's  creditors,  increased  yield
requirements by asset-backed investors,  lack of continued availability of IMC's
credit  facilities,   reduction  in  real  estate  values,  reduced  demand  for
non-conforming loans, changes in underwriting criteria applicable to such loans,
prepayment  speeds,  delinquency  and default  rates of mortgage  loans owned or
serviced by IMC,  rapid  fluctuation  in interest  rates,  risks  related to not
hedging  against loss of value of IMC's mortgage loan  inventory,  changes which
influence the loan securitization and the net interest margin securities (excess
cashflow trust) markets generally,  lower than expected performance of companies
acquired by IMC,  market  forces  affecting  the price of IMC's common stock and
other uncertainties associated with IMC's current financial difficulties and the
proposed transaction with the Greenwich Funds, and other risks identified in IMC
Mortgage Company's Securities and Exchange Commission filings.

Item 1.  Business

     IMC Mortgage  Company  ("IMC" or the  "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 refinance 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 and mortgage loan brokers and on a retail
basis through its direct consumer  lending effort.  As of December 31, 1998, IMC
had in excess of 500  approved  correspondents,  1,500  approved  mortgage  loan
brokers and 80 Company-owned retail branches. IMC has experienced growth in loan
production from total purchases and originations of  approximately  $5.9 billion
for the year ended December 31, 1997 to $6.2 billion for the year ended December
31, 1998. The growth in loan production  from total  purchases and  originations
for the year ended December 31, 1998 resulted  primarily from activities through
the nine months ended September 30, 1998, before

                                      - 1 -


<PAGE>



the volatility in the equity,  debt and asset-backed  capital markets materially
and adversely affected the business of the Company. See "Management's Discussion
and Analysis of Financial  Conditions and Results of Operations"  and "Liquidity
and Capital Resources".  The loan production from purchases and originations for
the three months ended  December 31, 1998 was the lowest loan  production of any
fiscal quarter in 1998. See "Loan Purchases and Originations".  IMC's network of
correspondents accounted for approximately 73.7% and 62.1% of loan production in
1997 and 1998,  respectively.  Through  its  network of  mortgage  brokers,  IMC
generated approximately 13.3% and 22.6% of its loan production in 1997 and 1998,
respectively.  IMC's direct consumer  lending effort  contributed  approximately
13.0% and 15.3% of loan production in 1997 and 1998, respectively.

     The Company's  total  revenues  increased  from $238.8 million for the year
ended  December 31, 1997 to $321.2 million for the year ended December 31, 1998,
while net income  decreased  from $47.9 million for the year ended 1997 to a net
loss of $100.5  million for the year ended  December 31,  1998.  Gain on sale of
loans, net, represented $181.0 million, or 75.8% of total revenues, for the year
ended 1997 and $205.9 million,  or 64.1% of total  revenues,  for the year ended
December 31, 1998.  Servicing  income,  net warehouse  interest income and other
revenues  in the  aggregate  increased  from  $57.8  million,  or 24.2% of total
revenues, for the year ended 1997 to $115.3 million, or 35.9% of total revenues,
for the year ended December 31, 1998.

     IMC sold the majority of its loans  through  September 30, 1998 through its
securitization  program and  retained  the right to service  such  loans.  Since
September  30, 1998,  the Company has focused on selling its loans through whole
loan sales to third parties for cash primarily on a servicing released basis due
to  volatility  in  asset-backed  capital  markets and to improve cash flow from
operations.  The whole loan sales may be on a servicing retained basis (in which
IMC  retains  the  right to  service  the loans  after the sale) or a  servicing
released  basis (in which IMC sells the right to service  the loan with the loan
sold). Through December 31, 1998, IMC had completed twenty-three securitizations
totaling $11.4 billion of loans.  The Company earns  servicing fees on the loans
the Company  services  at a rate of 0.50% per year,  which fees are payable on a
monthly basis,  and ancillary fees on the loans it services.  As of December 31,
1997 and 1998, IMC had a servicing portfolio,  including mortgage loans held for
sale, of $7.0 billion and $8.9 billion, respectively.

     IMC  was  formed  in  1993  by a  team  of  executives  experienced  in the
non-conforming  home equity loan industry.  IMC was  originally  structured as a
partnership  (the  "Partnership"),  with  the  limited  partners  consisting  of
originators of  non-conforming  home equity loans (the "Industry  Partners") and
certain members of management. The original Industry Partners included: Approved
Financial Corp.  (formerly American  Industrial Loan Association)  ("Approved");
Champion Mortgage Co. Inc. ("Champion");  Cityscape Corp.;  Equitysafe,  a Rhode
Island general partnership  ("Equitystars");  Investors  Mortgage,  a Washington
limited  partnership  ("Investors  Mortgage");  Mortgage America Inc. ("Mortgage
America");  Residential Money Centers;  First Government  Mortgage and Investors
Corp.;  Investaid  Corp.;  and New Jersey Mortgage and Investment Corp. In 1994,
TMS Mortgage Inc., a wholly-owned subsidiary of The Money Store Inc. ("The Money
Store"),   and  Equity  Mortgage,   a  Maryland  limited  partnership   ("Equity
Mortgage"),   became  Industry  Partners.   Branchview,   Inc.,  a  wholly-owned
subsidiary of Lakeview Savings Bank ("Lakeview"),  became an Industry Partner in
1995.

Recent Developments

Consummation of Stock Purchase by the Greenwich Funds

     The Company,  like several companies in the sub-prime mortgage industry, is
being materially and adversely affected by significant and adverse conditions in
the equity,  debt and  asset-backed  capital  markets.  IMC's  ability to access
equity,  debt and asset-backed  capital markets has become severely  restricted.
These market  conditions  resulted in several  other  companies in the sub-prime
mortgage  industry filing for bankruptcy  protection,  such as Southern  Pacific
Funding (October 1, 1998),  Wilshire  Financial  Services Group,  Inc. (March 3,
1999), MCA Financial Corp.  (February 11,1999),  United Companies (March 2,1999)
and certain subsidiaries of First Plus Financial (March 6, 1999).

                                      - 2 -



<PAGE>



     The Company's $95 million  revolving credit facility with BankBoston,  N.A.
matured in mid-October 1998 and BankBoston was unwilling to extend the facility.
In addition,  beginning in September 1998, the Company's residual lenders, which
had advanced  approximately  $276 million to the Company  collateralized  by its
interest-only  and residual  certificates,  proposed to reduce their exposure by
making cash margin calls.  Certain of the Company's  warehouse  lenders  holding
more than $2 billion in mortgage  loans also  threatened to make margin calls on
their credit lines during  September and October 1998.  During this period,  the
Company's  traditional  strategy  of  minimizing  the  risks  of  interest  rate
fluctuations   through  a  program  of  short  selling  United  States  Treasury
securities  subjected the Company to margin calls of approximately $47.5 million
in cash as a "flight to quality"  following the devaluation of the Russian ruble
and  concerns  over  economic  conditions  in  the  emerging  markets  generally
disrupted the Company's anticipated hedging strategy.

     As a consequence,  in October 1998, the Company, faced with the prospect of
a forced  liquidation  of its  assets or  bankruptcy  and the  absence  of other
alternative  sources of capital,  entered into a $33 million  standby  revolving
credit  facility with Greenwich  Street Capital  Partners II, L.P.  ("GSCP") and
certain of the other  Greenwich  Funds.  The facility  provided IMC with interim
financing  for a period of 90 days,  which  enabled  the  Company to continue to
operate  while it sought a  substantial  source of capital  which  would  either
invest funds in the Company or acquire the Company.  In return for providing the
facility,  the  Greenwich  Funds  received  a $3.3  million  commitment  fee and
non-voting Class C exchangeable  preferred stock  representing the equivalent of
40% of the common  equity of the  Company.  The Class C  exchangeable  preferred
stock is exchangeable  after March 31, 1999 for Class D preferred  stock,  which
has voting rights  equivalent  to 40% of the voting power of the Company.  Under
the loan  facility,  the Greenwich  Funds may exchange the loans for  additional
shares of Class C  exchangeable  preferred  stock or shares of Class D preferred
stock in an  amount  up to the  equivalent  of 50% of the  common  equity of the
Company (in addition to the preferred stock received for providing the facility)
(the "Exchange  Option").  In addition,  upon certain  changes in control of the
Company,  the Greenwich  Funds could elect either to (i) receive  payment of the
facility,  plus  accrued  interest  and a take-out  premium of up to 200% of the
average  principal amount of the loans outstanding or (ii) exercise the Exchange
Option.  The Company and the  Greenwich  Funds also entered  into  intercreditor
agreements with the Company's  significant creditors requiring such creditors to
"standstill" for up to 90 days.

     On February 19, 1999, the Company entered into a merger  agreement with the
Greenwich  Funds.  On March 31, 1999,  the merger  agreement was  terminated and
recast as an acquisition agreement with the Greenwich Funds on substantially the
same economic terms.  The Company's  entrance into the merger  agreement and the
acquisition  agreement was unanimously approved by the Board of Directors of the
Company,  acting on the unanimous  recommendation  of a special committee of the
Board  consisting  solely of  disinterested  directors.  Under  the  acquisition
agreement,  the Company  agreed to issue  common  stock to the  Greenwich  Funds
representing  approximately 93.5% of the outstanding common stock following such
issuance.  In return for such common stock issuance,  the Greenwich Funds agreed
to  surrender  their  Class C  exchangeable  preferred  stock and amend the loan
agreement (i) to provide for an additional $35 million of working  capital loans
to the Company,  (ii) to forego the Exchange Option, (iii) to reduce the takeout
premium  payable in certain  events  from 200% of the average  principal  amount
outstanding  from October  1998 to the  prepayment  date,  to 10% of the average
principal  amount  outstanding  from  the  closing  of  the  acquisition  to the
prepayment  date and (iv) to extend the maturity of the loans  thereunder  until
the third anniversary of the acquisition.  The Company also entered into amended
intercreditor  agreements  with certain of its  creditors in February 1999 which
provide  an  additional  standstill  period  through  the  consummation  of  the
acquisition by the Greenwich  Funds and for 12 months  thereafter,  provided the
acquisition  occurs within five months,  and subject to earlier  termination  in
certain events as provided in the intercreditor  agreements.  The closing of the
acquisition  by the  Greenwich  Funds  is  subject  to a number  of  conditions,
including  obtaining  the  approval of the  shareholders  of the Company for the
transaction.

     The Company is in the process of preparing to call a special meeting of its
shareholders  to  authorize  the issuance of 93.5% of the common stock of IMC to
the Greenwich  Funds.  The Board of Directors has approved the stock purchase by
the Greenwich Funds and will request  shareholders to vote in favor of the stock
purchase to

                                      - 3 -



<PAGE>



allow the Company to attempt to continue to operate,  repay its  creditors in an
orderly manner, regain access to capital markets and preserve some value for its
shareholders.

Business Strategy

Improvement of Cash Flow from Operations

     The Company has typically  operated on negative cash flows from  operations
since  inception.  The Company,  prior to September  30, 1998,  had been able to
access the capital markets and borrowings to support operations. Since September
30,  1998,  the Company has had only  limited  access to  asset-backed  and debt
markets,  both of which were on terms that were not as  favorable to the Company
as the terms previously available. The Company is attempting to improve the cash
flow required to fund operations and reduce its dependence on capital markets by
selling loans to institutional  investors instead of securitizing,  and reducing
the cost of its  operations.  To reduce the costs of its operation,  the Company
has reduced the number of  employees  and is in the process of  identifying  and
reducing non-essential  expenditures.  There can be no assurance the Company can
achieve a  reduction  of cash flow used in  operations  or that its  attempt  to
reduce non-essential expenditures will be successful.

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 and  maintain  its
commitment to high standards in its underwriting and loan servicing. The Company
is committed to applying consistent  underwriting procedures and criteria and to
training and retaining experienced underwriting staff.

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.  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 typically retains the right to service the loans that it securitizes and may
retain or release  the right to service  the loans it sells  through  whole loan
sales.

Loan Purchases and Originations

     As of December 31, 1998,  IMC  purchased  and  originated  loans through in
excess of 500  approved  correspondents,  1,500  approved  brokers and 80 retail
branch offices.


                                      - 4 -



<PAGE>


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

<TABLE>
<CAPTION>
                                                                                        Year Ended
                                                                                        December 31,
                                                                  ------------------------------------------------------------
                                                                    1994        1995        1996          1997          1998
                                                                  --------    --------    --------      --------      --------
                                                                                        (Dollars in thousands)
<S>                                                               <C>         <C>         <C>           <C>           <C>     
Correspondent:
         Principal balance (in millions) ......................    $233        $544      $1,582        $4,342        $3,839
         Average principal balance per loan (in thousands) ....      66          62          66            73            67
         Weighted average loan-to-value ratio (1)(2) ..........   69.2%       70.6%       72.8%         75.6%         76.9%
         Weighted average interest rate .......................   11.2%       12.1%       11.5%         11.0%         10.7%
Broker:
         Principal balance (in millions) ......................     $49         $67        $121          $782        $1,393
         Average principal balance per loan (in thousands) ....      56          47          54            71            72
         Weighted average loan-to-value ratio (1)(2) ..........   71.8%       72.6%       73.4%         76.9%         78.9%
         Weighted average interest rate .......................   12.0%       12.0%       11.5%         10.7%         10.3%
Direct consumer loan originations:
         Principal balance (in millions) ......................      $1         $11         $67          $769          $945
         Average principal balance per loan (in thousands) ....      88          49          58            68            71
         Weighted average loan-to-value ratio (1)(2) ..........   80.0%       72.6%       72.5%         71.9%         74.5%
         Weighted average interest rate .......................   11.3%       11.7%       10.7%         10.7%          9.6%
Total loan purchases and originations:
         Principal balance (in millions) ......................    $283        $622      $1,770        $5,893        $6,177
         Average principal balance per loan (in thousands) ....      64          60          65            71            69
         Weighted average loan-to-value ratio (1)(2)(3) .......   69.7%       70.9%       72.9%         75.3%         77.0%
         Weighted average interest rate .......................   11.4%       12.1%       11.5%         10.9%         10.4%
</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.

(2)  The weighted  average  loan-to-value  ratio has increased due to increasing
     competition in the  non-conforming  home equity loan market and an increase
     since  1995 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 creditworthy borrowers and therefore typically carry
     less  credit  risk and  involve  higher  loan-to-value  ratios  than  other
     categories of non-conforming loans.

(3)  Includes loans with loan-to-value ratios between 80% and 100% in the amount
     of approximately $173 million,  or 28%, $700 million, or 40%, $2.8 billion,
     or 48%, and $3.4 billion, or 55%, of total purchases and originations , for
     the years ended December 31, 1995, 1996, 1997 and 1998,  respectively.  The
     increase in loan  purchases  and  originations  with  loan-to-value  ratios
     between  80% and 100%  since 1995  primarily  related  to the  increase  in
     purchases and originations of "A" Risk loans as a percentage of total loans
     purchased and originated.


                                      - 5 -


<PAGE>



     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
                                                              1997                1997                   1997                 1997  
                                                            --------            --------             -------------       -----------
<S>                                                          <C>                  <C>                   <C>                  <C>    
Correspondent:                                                                                                                      
  Principal balance (in millions) ......................      $631                $1,096                $1,440               $1,175 
  Average principal balance                                                                                                         
     per loan (in thousands) ...........................        69                    73                    77                   70 
  Weighted average loan-to-                                                                                                         
     value ratio(1)(2) .................................     74.2%                 74.9%                 72.3%                76.1% 
  Weighted average interest rate .......................     11.3%                 11.0%                 10.8%                11.0% 
Broker:                                                                                                                             
  Principal balance (in millions) ......................       $53                  $105                  $270                 $354 
  Average principal balance                                                                                                         
     per loan (in thousands) ...........................        69                    72                    67                   74 
  Weighted average loan-to-                                                                                                         
     value(1)(2) .......................................     73.9%                 75.0%                 77.4%                77.5% 
  Weighted average interest rate .......................     10.6%                 10.6%                 11.0%                10.6% 
Direct consumer loan originations:                                                                                                  
  Principal balance (in millions) ......................      $135                  $191                  $198                 $245 
  Average principal balance per                                                                                                     
     loan (in thousands) ...............................        66                    67                    64                   73 
  Weighted average loan-to-value                                                                                                    
     ratio(1)(2) .......................................     69.8%                 71.0%                 72.3%                73.5% 
  Weighted average interest rate .......................     10.8%                 10.9%                 10.8%                10.3% 
Total loan purchases and originations:                                                                                              
  Principal balance (in millions) ......................      $819                $1,392                $1,908               $1,774 
  Average principal balance                                                                                                         
     per loan (in thousands) ...........................        69                    72                    74                   71 
  Weighted average loan-to-                                                                                                         
     value ratio(1)(2)(3) ..............................     73.5%                 74.4%                 76.0%                76.0% 
  Weighted average interest                                                                                                         
     rate ..............................................     11.2%                 10.9%                 10.8%                10.8% 

<CAPTION>                                                  
                                                                                     Three Months Ended
                                                          --------------------------------------------------------------------------
                                                           March 30,           June 30,             September 30,       December 31,
                                                             1998                1998                   1998                 1998   
                                                          ---------            --------             -------------       ------------
<S>                                                        <C>                   <C>                   <C>                  <C>     
Correspondent:                                                                                                                      
  Principal balance (in millions) ......................    $1,161                $1,309                $1,248                $121  
  Average principal balance                                                                                                         
     per loan (in thousands) ...........................        67                    68                    67                  65  
  Weighted average loan-to-                                                                                                         
     value ratio(1)(2) .................................     76.6%                 76.9%                 77.0%               76.7%  
  Weighted average interest rate .......................     10.9%                 10.7%                 10.6%               10.5%  
Broker:                                                                                                                             
  Principal balance (in millions) ......................      $315                  $376                  $403                $299  
  Average principal balance                                                                                                         
     per loan (in thousands) ...........................        75                    78                    72                  75  
  Weighted average loan-to-                                                                                                         
     value(1)(2) .......................................     77.2%                 78.0%                 80.0%               79.6%  
  Weighted average interest rate .......................     10.3%                 10.3%                 10.4%               10.2%  
Direct consumer loan originations:                                                                                                  
  Principal balance (in millions) ......................      $221                  $251                  $262                $211  
  Average principal balance per                                                                                                     
     loan (in thousands) ...............................        81                    77                    72                  75  
  Weighted average loan-to-value                                                                                                    
     ratio(1)(2) .......................................     72.7%                 72.6%                 76.7%               76.8%  
  Weighted average interest rate .......................      9.8%                  9.8%                  9.6%                9.2%  
Total loan purchases and originations:                                                                                              
  Principal balance (in millions) ......................    $1,697                $1,936                $1,913                $631  
  Average principal balance                                                                                                         
     per loan (in thousands) ...........................        69                    71                    69                  72  
  Weighted average loan-to-                                                                                                         
     value ratio(1)(2)(3) ..............................     76.2%                 76.6%                 77.6%               78.1%  
  Weighted average interest                                                                                                         
     rate ..............................................     10.6%                 10.5%                 10.5%                9.9%  
</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  apppraised  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
     thefirst and second  mortgages  and dividing by the lesser of the purchaser
     price or the appraised value of the mortgaged property at origination.

(2)  The weighted  average  loan-to-value  ratio has increased due to increasing
     competition in the  non-conforming  home equity loan market and an increase
     since  1995 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 creditworthy borrowers and therefore typically carry
     less  credit  risk and  involve  higher  loan-to-value  ratios  than  other
     categories of non-conforming loans.

(3)  Includes loans with loan-to-value ratios between 80% and 100% in the amount
     of approximately $173 million,  or 28%, $700 million, or 40%, $2.8 billion,
     or 48%, and $3.4 billion,  or 55% of total purchases and  originations  for
     the years ended December 31,1995,  1996, 1997 and 1998,  respectively.  The
     increase in loan  purchases  and  originations  with  loan-to-value  ratios
     between  80% and 100% since 1995 is  primarily  related to the  increase in
     purchases and originations of "A" Risk loans as a percentage of total loans
     purchased and originated.


                                      - 6 -

<PAGE>


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

<TABLE>
<CAPTION>
                                                                                            Year Ended
                                                                                            December 31,
                                                                 ------------------------------------------------------------------
                                                                  1994           1995           1996           1997           1998
                                                                 ------         ------         ------         ------         ------
<S>                                                                <C>            <C>            <C>            <C>            <C>  
First mortgages:
  Percentage of total purchases and originations ........          82.4%          77.0%          90.3%          92.1%          92.8%
  Weighted average interest rate ........................          11.3           12.1           11.4           10.8           10.3
  Weighted average loan-to-value ratio(1) ...............          69.8           70.7           72.6           75.2           76.7
Second mortgages:
  Percentage of total purchases and originations ........          17.6%          23.0%           9.7%           7.9%           7.2%
  Weighted average interest rate ........................          11.7           12.4           12.2           12.4           11.9
  Weighted average loan-to-value ratio(1) ...............          68.8           71.7           75.6           78.5           81.6
</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  largest  percentage  of  IMC's  loan  volume  through
September 30, 1998 was purchased  through  correspondents.  For the  three-month
period  ending  December  31, 1998 loan  volume  purchased  from  correspondents
decreased  significantly  due to the lack of  liquidity  available  to IMC.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and "Liquidity and Capital Resources".  For the years ended December
31, 1994,  1995,  1996,  1997 and 1998, IMC purchased loans through its mortgage
correspondent  network totaling  approximately $233 million,  $544 million, $1.6
billion,  $4.3 billion, and $3.8 billion,  respectively.  Total loans originated
through correspondents represented 82.5%, 87.5%, 89.4%, 73.7% and 62.1% of IMC's
total purchases and  originations  for the years ended December 31, 1994,  1995,
1996,  1997  and  1998,   respectively.   The  Industry   Partners   contributed
approximately $116 million,  or 41.0%, $148 million,  or 23.9%, $338 million, or
19.1%, $400 million,  or 6.8%, and approximately $252 million, or 4.1%, of IMC's
total loan  purchases and  originations  for the years ended  December 31, 1994,
1995, 1996, 1997 and 1998, respectively.

     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  correspondent's  lending  operations,  its  licensing or
registration  and  the  performance  of its  previously  originated  loans.  The
investigation   typically  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 maintains  sufficient  equity to fund its loan
operations. IMC periodically reviews and updates the information it has relating
to each approved correspondent to ensure 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  preapproves the loan, the
correspondent lends to the borrower pursuant to certain

                                      - 7 -



<PAGE>



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.  At the time of purchase,  IMC generally
pays the  correspondent  a  premium,  representing  a value in excess of the par
value of the loans  (par  value  representing  the  unpaid  balance  of the loan
amount). 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.  As of December  31, 1997 and
1998,   premium  rebates  due  to  IMC  were  $4.1  million  and  $4.3  million,
respectively.

     Brokers.  For the years ended December 31, 1994, 1995, 1996, 1997 and 1998,
IMC  originated  approximately  $49 million,  $67 million,  $121  million,  $782
million and $1.4 billion,  respectively,  of loans through broker  transactions.
Total loans  purchased and originated  through broker  transactions  represented
17.3%,  10.7%,  6.8%,  13.3%  and 22.6% of the total  loans  IMC  purchased  and
originated for the years ended  December 31, 1994,  1995,  1996,  1997 and 1998,
respectively. 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, 1994,  1995, 1996,
1997 and 1998,  IMC  originated  approximately  $1  million,  $11  million,  $67
million,  $769  million  and $945  million of loans,  respectively.  Total loans
originated  directly to borrowers through its retail branch offices  represented
less than 1%,  1.8%,  3.8%,  13.0% and 15.3% of the  total  loans  purchased  or
originated for the years ended  December 31, 1994,  1995,  1996,  1997 and 1998,
respectively.  As of December 31, 1998, IMC had in excess of 80 retail  offices.
IMC uses the branch office network for marketing to and meeting with  individual
borrowers, local brokers and referral sources such as accountants, attorneys and
financial planners.

     Because  borrowers  may submit  loan  applications  to several  prospective
lenders  simultaneously,  IMC  attempts  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  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
all 50 states,  the District of Columbia and Puerto  Rico,  it has  historically
concentrated its business in the Mid-Atlantic  States.  While this concentration
has declined,  New York contributed 11.7%, 12.4%, 14.0%, 12.6% and 8.8% of IMC's
total loan  purchase  and  origination  volume for the years ended  December 31,
1994, 1995, 1996, 1997 and 1998, respectively.


                                      - 8 -



<PAGE>



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

<TABLE>
<CAPTION>
                                                                                      Year Ended
                                                                                      December 31,
                                                     ------------------------------------------------------------------------------
                                                      1994              1995              1996              1997              1998
                                                     ------            ------            ------            ------            ------
<S>                                                    <C>               <C>               <C>               <C>                <C> 
States:
     New York ............................             11.7%             12.4%             14.0%             12.6%              8.8%
     Michigan ............................              7.3               8.8               7.8               7.1               8.2
     Florida .............................              4.2               6.2               6.7               7.3               7.6
     California ..........................              0.0               0.3               3.0               7.4               6.3
     Illinois ............................              2.0               3.0               4.3               5.9               6.0
     Ohio ................................              4.9               4.7               4.3               4.9               6.0
     Pennsylvania ........................              5.3               4.3               3.8               5.1               5.3
     New Jersey ..........................              6.6               9.9               7.6               4.5               3.9
     Maryland ............................             18.6              12.8               7.3               5.2               3.1
     All other states ....................             39.4              37.6              41.2              40.0              44.8
</TABLE>

Loan Underwriting

     IMC's  origination  volume has  typically  been  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.

     IMC  maintains a staff of  experienced  underwriters  strategically  placed
across the country.  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 after 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 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

                                      - 9 -



<PAGE>



in blocks,  if an appraiser  that is not approved by IMC performed an appraisal,
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  and intent 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
set forth below:


                                     - 10 -



<PAGE>


<TABLE>
<CAPTION>
     
                                                  Loan Classification Criteria
                         
                               "A" Risk                 "B" Risk                       "C" Risk                     "D" Risk        
                               --------                 --------                       --------                     --------        
<S>                       <C>                     <C>                          <C>                           <C> 
General repayment ......  Has repaid              Has generally repaid         May have                      May have               
                          installment or          installment or               experienced                   experienced            
                          revolving debt          revolving credit             significant past credit       significant past credit
                                                                               problems                      problems               
                                                                                                             

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

Non-mortgage credit.....  Minor derogatory        Some prior defaults          Significant prior             Significant prior    
                          items allowed with a    allowed but major            delinquencies may             defaults may have    
                          letter of explanation;  credit or installment        have occurred, but if         occurred, but most   
                          no open collection      debt paid as agreed          major credit or               demonstrate an       
                          accounts or charge-     may offset some              installment debt in           ability to maintain  
                          offs, judgments or      delinquency; open            recent periods have           regularity in payment
                          liens                   charge-offs,                 been paid as agreed,          of credit            
                                                  judgements or liens          may offset some               
                                                  are permitted on a           significant prior    
                                                  case-by-case basis           delinquency          
                                                                               obligations in the   
                                                                               past                 
                                                                               
Bankruptcy filings......  Discharged more         Discharged more              Discharged more               Discharged prior to   
                          than two years prior    than two years prior         than one year prior           closing               
                          to closing and credit   to closing and credit        to closing and credit         
                          reestablished           reestablished                reestablished         

Debt service-to-
income ratio............  Generally 50% of        Generally 50% of             Generally 50% of              Generally 50% of 
                          less                    less                         less                          less             
                                                                                                             


Maximum loan-to-value 
ratio:         

Owner-occupied..........  Up to 100% for a        Generally 80% (or            Generally 75% (or             Generally 65% (or 70% 
                          one- to two-family      85%*) for a one- to          80% for first liens*)         for first liens*) for 
                          residence; 75% for a    two-family residence;        for a one- to two-family      a one- to two-family  
                          condominium and for     70% for                      residence; 60% for a          residence; 60% for a 
                          a three-to four-family  condominium and for          three- to four-family         three- to four-family 
                          residence               a three- to four-            residence or condominium      residence or          
                                                  family residence                                           condominium           

Non-owner-occupied......  Generally 70% for a     Generally 70% for a          Generally 70% for a           N/A
                          one- to four-family     one- to two-family           one- to two-family  
                          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

                                     - 11 -



<PAGE>



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.

     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 .............     $  156      55.0%      10.6%    $  276      44.4%      11.4%    $  883      49.9%      10.9% 
B Risk .............         74      26.3       11.6        177      28.5       12.0        443      25.0       11.5  
C Risk .............         38      13.5       13.0        126      20.2       13.0        338      19.1       12.3  
D Risk .............         15       5.2       14.4         43       6.9       14.4        106       6.0       13.6  
                         ------    ------                ------    ------                ------    ------             
               Total     $  283     100.0%      11.4     $  622     100.0%      12.1     $1,770     100.0%      11.5  
                         ======    ======                ======    ======                ======    ======             

<CAPTION>
                                                Year Ended December 31,
                             -------------------------------------------------------------
                                          1997                            1998            
                             -----------------------------   -----------------------------
                                                  Weighted                        Weighted
Borrower                               % of       Average               % of       Average
Classification                Total    Total      Coupon     Total      Total      Coupon
--------------               ------    -----      -------    ------    ------     --------
<S>                          <C>         <C>        <C>      <C>        <C>        <C> 
A Risk .............         $3,156      53.6%      10.4%    $3,405      55.1%      9.9%
B Risk .............          1,377      23.4       10.9      1,487      24.1%     10.6%
C Risk .............          1,092      18.5       11.7      1,079      17.5%     11.3%
D Risk .............            268       4.5       13.1        206       3.3%     12.6%
                             ------    ------                ------    ------
               Total         $5,893     100.0%      10.9%    $6,177     100.0%     10.4%
                             ======    ======                ======    ======
</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 an increase  since 1995 in the  percentage of the Company's  loans in
the "A" Risk category. Loans with loan-to-value ratios in excess of 80% amounted
to approximately $173 million,  or 28%, $700 million,  or 40%, $2.8 billion,  or
48%, and $3.4  billion,  or 55%, of total  purchases and  originations,  for the
years ended December 31, 1995, 1996, 1997 and 1998,  respectively.  The increase
in loan purchases and  originations  with  loan-to-value  ratios between 80% and
100%  since  1995  is  primarily  related  to  the  increase  in  purchases  and
originations  of "A" Risk loans as a  percentage  of total loans  purchased  and
originated.

Loan Sales

     Typically,  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
typically  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,  and attempt to diversify its exposure
to the  potential  volatility  of the  capital  markets.  Due to  volatility  in
asset-backed  capital  markets,  since  September  30, 1998,  IMC has focused on
selling its loans  through whole loan sales to third parties for cash to improve
cash flow from  operations.  For the years ended December 31, 1994,  1995, 1996,
1997 and 1998, IMC sold approximately $262 million,  $459 million, $1.1 billion,
$5.0 billion and $6.7 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>
                                                                     Year Ended December 31,
                           --------------------------------------------------------------------------------------------------------
                                  1994                 1995                  1996                  1997                  1998
                           ----------------      ----------------      ----------------      ----------------      ----------------
                                      % of                  % of                   % of                  % of                 % of
                            Total     Total      Total      Total       Total     Total       Total     Total      Total      Total
                           ------     -----      ------     -----      ------     -----      ------     -----      ------     -----
                                                                 (Dollars in millions)

<S>                        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>  
Securitizations ......     $   82      31.2%     $  388      84.7%     $  935      87.9%     $4,858      97.1%     $5,117      77.0%
Whole loan sales .....        180      68.8          71      15.3         129      12.1         145       2.9       1,530      23.0
                           ------     -----      ------     -----      ------     -----      ------     -----      ------     -----

  Total loan sales ...     $  262     100.0%     $  459     100.0%     $1,064     100.0%     $5,003     100.0%     $6,647     100.0%
                           ======     =====      ======     =====      ======     =====      ======     =====      ======     =====
</TABLE>

     Securitizations.   Through   December  31,  1998,  the  Company   completed
twenty-three  securitizations  totaling approximately $11.4 billion.  During the
year ended  December 31, 1998,  IMC sold $5.1 billion of its loan volume through
securitizations.  The majority of loans sold through  securitizations during the
year ended  December 31, 1998 were sold during the first nine months of the year
prior to the  significant  volatility  in the  asset-backed  and  other  capital
markets.  See "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations" and "Liquidity and Capital Resources." IMC sells its loan
inventory through  securitization  when management  believes that employing this
strategy will create greater long-term  economic benefit to IMC stockholders and
it has access to liquidity to support the securitization process. IMC intends to
continue  to  conduct  loan  sales  through  securitizations,  either in private
placements or in public  offerings,  when market  conditions and availability of
financing  permit such loan sales on favorable terms. See "Liquidity and Capital
Resources." When IMC securitizes  loans, it typically sells a portfolio of loans
to a "real estate mortgage  investment  conduit" (a "REMIC") or owner trust that
issues classes of certificates representing undivided ownership interests in the
income  stream to the trust.  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 a
securitization  trust,  the Company  collects and remits  principal and interest
payments to the  appropriate  trust,  which in turn passes  through  payments to
certificate  owners.  IMC typically retains the servicing rights and an interest
in the interest-only and residual classes of certificates of the trust.

     The purchasers of trust  certificates  receive a credit-enhanced  security.
Credit  enhancement is generally achieved by subordination of a subsidiary class
of bonds to senior classes or an insurance policy issued by a monoline insurance
company.   As  a  result,   each  offering  of  the  senior  REMIC  pass-through
certificates  has  received  ratings of AAA from  Standard & Poor's and Aaa from
Moody's  Investors  Service.  In  addition,  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 sale of loans to the trust, 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  interest-only  and  residual
class    certificate.    If    payment    defaults    exceed   the   amount   of
over-collateralization,  the insurance  policy  maintained by the trust will pay
any further losses experienced by certificate holders of the senior interests in
the trust or a subordinate class will bear the loss.

     Whole Loan  Sales.  Whole loan sales as a percent of total  sales  declined
from 68.8% for the year ended December 31, 1994 to 15.3%, 12.1% and 2.9% for the
years ended December 31, 1995, 1996 and 1997,  respectively,  but increased as a
percent of total sales to 23.0% for the year ended December 31, 1998.  Beginning
in the fourth quarter of 1998, IMC began selling more loans on a whole loan sale
basis to attempt to partially offset its inability during this time to favorably
access the capital markets. See "Management's Discussion and Analysis

                                     - 13 -



<PAGE>



of Financial  Conditions and Results of  Operations"  and "Liquidity and Capital
Resources." 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 attempts to maximize
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
prices.

     IMC  typically  sells its loans 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.

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
retained the servicing rights to approximately $401 million,  $963 million, $4.9
billion and $4.5 billion,  or 87.3%, 90.5%, 97.1% and 68.0% of the loans it sold
in 1995, 1996, 1997 and 1998, respectively.

     As of December 31, 1998, IMC was servicing loans  representing an aggregate
of approximately  $8.9 billion.  Revenues generated from loan servicing amounted
to 7.8%,  8.5%,  7.2% and 14.1% of IMC's  total  revenues  for the  years  ended
December 31, 1995 and 1996 and 1997 and 1998, respectively.  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 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 first or second
mortgage loans.

     Collection procedures commence upon identification of a past due account by
IMC's  automated  servicing  system.  If the first  payment  due is  delinquent,
generally a collector will telephone to remind the borrower of the payment. Five
days after any payment is due, generally a written notice of delinquency is sent
to the  borrower.  Eleven days after  payment is due,  generally  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.

     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
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.


                                     - 14 -



<PAGE>



     Notwithstanding the above,  charge-offs occur. 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 counsels who are required to provide  monthly reports on each
loan file.


                                     - 15 -



<PAGE>



     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             1997             1998
                                                   -----------   -----------    -----------      -----------      -----------
<S>                                                <C>           <C>            <C>              <C>              <C>        
Servicing portfolio (in thousands) ...........     $    92,003   $   535,798    $ 2,148,068      $ 6,956,905      $ 8,887,163
Delinquency percentages(1):
               30-59 days ....................            0.72%         2.54%          3.01%            2.35%            4.15%
               60-89 days ....................            0.15          0.59           1.01             1.21             1.25
               90+ days ......................            0.00          0.30           1.28             1.84             1.15
                                                   -----------   -----------    -----------      -----------      -----------

               Total delinquency .............            0.87%         3.43%          5.30%            5.40%            6.55%
                                                   -----------   -----------    -----------      -----------      -----------

Default percentages(2):
               Foreclosure ...................            0.00%         0.75%          0.94%            1.42%            4.84%
               Bankruptcy ....................            0.12          0.25           0.53             0.73             2.30
                                                   -----------   -----------    -----------      -----------      -----------

               Total default .................            0.12%         1.00%          1.47%            2.15%            7.14%
                                                   -----------   -----------    -----------      -----------      -----------

Total delinquency and default ................            0.99%         4.43%          6.77%            7.55%           13.69%
                                                   ===========   ===========    ===========      ===========      ===========
</TABLE>


(1)  Represents the  percentages  of account  balances  contractually  past due,
     exclusive of 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.


                                     - 16 -



<PAGE>



     The following table provides certain  delinquency and default experience as
a percentage  of  outstanding  principal  balance for the eight  quarters  ended
December 31,  1998,  if  applicable,  for each of the  Company's  securitization
trusts completed through December 31, 1998, prior to any potential recoveries:

       Delinquency and Defaults for the Company's Securitizations(1)(2)(3)
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                  1994-1                 1995-1                 1995-2                  1995-3     
                                            -----------------      -----------------      -----------------       -----------------
<S>                                         <C>          <C>       <C>          <C>       <C>          <C>        <C>          <C>  
As of March 31, 1997:
Delinquency:
30-59 days ...........................      $1,394       3.10%     $1,576       2.89%     $2,666       3.82%      $4,157       4.23%
60-89 days ...........................         205       0.46         353       0.65         868       1.24          770       0.78
90 days and over .....................         776       1.73         425       0.78       1,136       1.63        1,305       1.33
                                            ------      -----      ------     ------      ------      -----       ------      -----
   Total .............................      $2,375       5.29%     $2,354       4.32%     $4,670       6.69%      $6,232       6.34%
                                            ======      =====      ======     ======      ======      =====       ======      =====
Total defaults .......................      $2,422       5.38%     $2,710       4.98%     $3,942       5.64%      $3,711       3.78%
                                            ======      =====      ======     ======      ======      =====       ======      =====

As of June 30, 1997:
Delinquency:
30-59 days ...........................      $  817       1.99%     $2,545       5.21%     $2,126       3.35%      $2,365       2.63%
60-89 days ...........................         148       0.36         104       0.21         835       1.32          632       0.70
90 days and over .....................           5       0.01         221       0.45         419       0.66          167       0.19
                                            ------      -----      ------     ------      ------      -----       ------      -----
      Total ..........................      $  970       2.36%     $2,870       5.87%     $3,380       5.33%      $3,164       3.52%
                                            ======      =====      ======     ======      ======      =====       ======      =====
Total defaults .......................      $2,900       7.08%     $3,041       6.23%     $4,789       7.55%      $4,202       4.67%
                                            ======      =====      ======     ======      ======      =====       ======      =====

As of September 30, 1997:
Delinquency:
30-59 days ...........................      $  867       2.32%     $  925       2.03%     $1,926       3.32%      $2,804       3.50%
60-89 days ...........................         293       0.79         642       1.40       1,375       2.37          633       0.79
90 days and over .....................         211       0.57          72       0.16       1,314       2.26          712       0.89
                                            ------      -----      ------     ------      ------      -----       ------      -----
      Total ..........................      $1,371       3.68%      1,639       3.59%     $4,615       7.95%      $4,149       5.18%
                                            ======      =====      ======     ======      ======      =====       ======      =====
Total defaults .......................      $3,239       8.68%     $3,512       7.69%     $4,378       7.54%      $4,938       6.17%
                                            ======      =====      ======     ======      ======      =====       ======      =====

As of December 31, 1997:
Delinquency:
30-59 days ...........................      $  661       1.89%     $1,358       3.26%     $1,223       2.33%      $  953       1.28%
60-89 days ...........................         294       0.84         523       1.26         837       1.59        1,556       2.10
90 days and over .....................       1,114       3.19       1,043       2.51       2,723       5.19        1,774       2.39
                                            ------      -----      ------     ------      ------      -----       ------      -----
      Total ..........................      $2,069       5.92%     $2,924       7.03%     $4,783       9.11%      $4,283       5.77%
                                            ======      =====      ======     ======      ======      =====       ======      =====
Total defaults .......................      $2,831       8.11%     $2,469       5.94%     $4,316       8.22%      $4,428       5.96%
                                            ======      =====      ======     ======      ======      =====       ======      =====

As of March 31, 1998:
Delinquency:
30-59 days ...........................      $1,087       3.46%     $1,146       2.99%     $1,086       2.26%      $1,329       1.94%
60-89 days ...........................         190       0.60         727       1.89         410       0.85%         932       1.36
90+days ..............................         567       1.81       1,161       3.02       1,518       3.16        1,423       2.08
                                            ------      -----      ------     ------      ------      -----       ------      -----
      Total ..........................      $1,844       5.87%     $3,034       7.90%     $3,014       6.27%      $3,684       5.37%
                                            ======      =====      ======     ======      ======      =====       ======      =====
Total defaults .......................      $2,242       7.14%     $2,365       6.16%     $5,194      10.80%      $4,507       6.57%
                                            ======      =====      ======     ======      ======      =====       ======      =====
</TABLE>


                                     - 17 -



<PAGE>


<TABLE>
<CAPTION>
                                                1994-1                 1995-1                 1995-2                  1995-3     
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of June 30, 1998:
Delinquency:
30-59 days .........................      $ 1,060      3.75%          757      2.16%      $ 1,452      3.35%      $ 1,410      2.26%
60-89 days .........................          367      1.30           521      1.48           926      2.14           527      0.85
90+ days ...........................          480      1.70           774      2.21         1,603      3.70           932      1.50
                                          -------      ----       -------     -----       -------      ----       -------      ----
      Total ........................      $ 1,907      6.75%      $ 2,052      5.85%      $ 3,981      9.19%      $ 2,869      4.61%
                                          =======      ====       =======     =====       =======      ====       =======      ====
Total defaults .....................      $ 1,992      7.05%      $ 2,178      6.21%      $ 4,559      10.52%     $ 4,724      7.59%
                                          =======      ====       =======     =====       =======      ====       =======      ====

As of September 30, 1998:
Delinquency:
30-59 days .........................      $   639      2.46%      $ 1,095      3.45%      $ 1,077      2.75%      $ 1,234      2.17%
60-89 days .........................          179      0.69           339      1.07           350      0.89           571      1.00
90+ days ...........................          308      1.19           637      2.00%          697      1.78%          935      1.64%
                                          -------      ----       -------     -----       -------      ----       -------      ----
      Total ........................      $ 1,126      4.34%      $ 2,071      6.52%      $ 2,124      5.42%      $ 2,740      4.81%
                                          =======      ====       =======     =====       =======      ====       =======      ====
Total defaults .....................      $ 2,169      8.37%      $ 2,794      8.79%      $ 4,585      11.70%     $ 4,780      8.40%
                                          =======      ====       =======     =====       =======      ====       =======      ====

As of December 31, 1998:
Delinquency:
30-59 days .........................      $ 1,644      6.69%      $ 1,809      6.27%      $   978      2.78%      $ 2,011      3.81%
60-89 days .........................          144      0.59           278      0.96           327      0.93           575      1.09
90+ days ...........................          432      1.76           572      1.98           917      2.60           983      1.86
                                          -------      ----       -------     -----       -------      ----       -------      ----
Total ..............................      $ 2,220      9.04%      $ 2,659      9.21%      $ 2,222      6.31%      $ 3,569      6.76%
                                          =======      ====       =======     =====       =======      ====       =======      ====
Total defaults .....................      $ 2,048      8.34       $ 3,086     10.69%      $ 4,540      12.89%     $ 4,809      9.10%
                                          =======      ====       =======     =====       =======      ====       =======      ====

<CAPTION>
                                                1996-1                 1996-2                 1996-3                  1996-4     
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of March 31, 1997:
Delinquency:
30-59 days .........................      $ 4,089      3.27%      $ 8,329      5.35%      $ 4,742      2.20%      $ 8,189      2.92%
60-89 days .........................        1,424      1.14         1,656      1.06         1,727      0.80         2,355      0.84
90 days and over ...................        2,111      1.69         1,074      0.69         4,186      1.95         4,471      1.59
                                          -------      ----       -------     -----       -------      ----       -------      ----
      Total ........................      $ 7,624      6.10%      $11,059      7.10%      $10,655      4.95%      $15,015      5.35%
                                          =======      ====       =======     =====       =======      ====       =======      ====
  Total defaults ...................      $ 4,973      3.97%      $ 6,164      3.96%      $ 6,304      2.43%      $ 5,573      1.98%
                                          =======      ====       =======     =====       =======      ====       =======      ====


As of June 30, 1997:
Delinquency:
30-59 days .........................      $ 3,721      3.25%      $ 5,952      4.19%      $ 6,644      3.41%      $ 8,009      3.11%
60-89 days .........................        1,206      1.05         1,700      1.20         2,757      1.42         3,029      1.18
90 days and over ...................          430      0.38           154      0.11           334      0.17         1,676      0.65
                                          -------      ----       -------     -----       -------      ----       -------      ----
      Total ........................      $ 5,357      4.68%      $ 7,806      5.50%      $ 9,735      5.00%      $12,714      4.94%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $ 6,549      5.72%      $ 8,104      5.71%      $10,997      5.65%      $10,117      3.93%
                                          =======      ====       =======      ====       =======      ====       =======      ====

As of September 30, 1997:
Delinquency:
30-59 days .........................      $ 2,630      2.50%      $ 4,184      3.19%      $ 3,538      1.99%      $ 8,275      3.58%
60-89 days .........................          911      0.87         1,242      0.95         1,590      0.90         3,436      1.49
90 days and over ...................        1,794      1.71         1,163      0.89           934      0.53         3,714      1.60
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $ 5,335      5.08%      $ 6,589      5.03%      $ 6,062      3.42%      $15,425      6.67%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $ 7,649      7.29%      $ 8,534      6.51%      $13,091      7.38%      $12,662      5.47%
                                          =======      ====       =======      ====       =======      ====       =======      ====

As of December 31, 1997:
Delinquency:
30-59 days .........................      $ 1,658      1.72%        3,794      3.20%      $ 3,887      2.39%      $ 5,686      2.69%
60-89 days .........................        1,445      1.50         2,135      1.80         2,224      1.36         2,420      1.14
90 days and over ...................        2,788      2.90         2,267      1.91         3,680      2.26         4,263      2.02
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $ 5,891      6.12%      $ 8,196      6.91%      $ 9,791      6.01%      $12,369      5.85%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $ 7,279      7.57%      $ 8,660      7.30%      $ 9,605      5.90%      $14,014      6.63%
                                          =======      ====       =======      ====       =======      ====       =======      ====
</TABLE>


                                     - 18 -


<PAGE>

<TABLE>
<CAPTION>
                                                1996-1                 1996-2                 1996-3                  1996-4     
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of March 31, 1998:
Delinquency:
30-59 days .........................      $ 1,871      2.14%      $ 2,471      2.27%      $ 3,350      2.21%      $ 4,131      2.13%
60-89 days .........................        1,135      1.30         1,902      1.74         1,606      1.06         3,227      1.66
90+ days ...........................        1,862      2.13         3,067      2.81         3,025      2.00         5,085      2.62
                                          -------      ----       -------      ----       -------      ----       -------     -----
      Total ........................      $ 4,868      5.56%      $ 7,440      6.82%      $ 7,981      5.27%      $12,443      6.42%
                                          =======      ====       =======      ====       =======      ====       =======     =====
Total defaults .....................      $ 6,719      7.67%      $ 7,832      7.18%      $ 9,624      6.36%      $12,856      6.63%
                                          =======      ====       =======      ====       =======      ====       =======     =====

As of June 30, 1998:
Delinquency:
30-59 days .........................      $ 2,182      2.74%      $ 2,544      2.56%      $ 3,643      2.66%        4,451      2.55%
60-89 days .........................          638      0.80         1,259      1.27         1,623      1.18         2,442      1.40
90+ days ...........................        1,913      2.40         2,303      2.32         5,596      4.08         4,823      2.76
                                          -------      ----       -------      ----       -------      ----       -------     -----
      Total ........................      $ 4,733      5.94%      $ 6,106      6.14%      $10,862      7.93%      $11,716      6.72%
                                          =======      ====       =======      ====       =======      ====       =======     =====
Total defaults .....................      $ 6,510      8.17%      $ 7,635      7.68%      $ 6,434      4.70%      $14,544      8.34%
                                          =======      ====       =======      ====       =======      ====       =======     =====

As of September 30, 1998:
Delinquency:
30-59 days .........................      $ 2,099      2.86%      $ 3,894      4.33%      $ 2,679      2.16%      $ 4,942      3.14%
60-89 days .........................        1,216      1.66         1,134      1.26         1,276      1.03         2,342      1.49
90+ days ...........................        1,802      2.46         1,632      1.81         1,584      1.27         2,984      1.90
                                          -------      ----       -------      ----       -------      ----       -------     -----
      Total ........................      $ 5,117      6.98%      $ 6,660      7.40%      $ 5,539      4.46%      $10,268      6.53%
                                          =======      ====       =======      ====       =======      ====       =======     =====
Total defaults .....................      $ 6,999      9.54%      $ 7,901      8.78%      $10,052      8.09%      $16,363      9.47%
                                          =======      ====       =======      ====       =======      ====       =======     =====

As of December 31, 1998:
Delinquency:
30-59 days .........................      $ 3,595      5.38%      $ 3,293      3.95%      $ 2,916      2.56%      $ 9,728      6.77%
60-89 days .........................          758      1.13         1,453      1.74         1,513      1.33         2,056      1.43
90+days ............................          703      1.05           951      1.14         2,135      1.87         2,436      1.70
                                          -------      ----       -------      ----       -------      ----       -------     -----
      Total ........................      $ 5,056      7.57%      $ 5,697      6.84%      $ 6,564      5.75%      $14,220      9.90%
                                          =======      ====       =======      ====       =======      ====       =======     =====
Total defaults .....................      $ 7,912      11.84%     $ 9,322      11.19%     $ 9,340      8.19%      $15,769     10.97%
                                          =======      ====       =======      ====       =======      ====       =======     =====

<CAPTION>
                                                1997-1                 1997-2                   1997-3                 1997-4       
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of March 31, 1997:
Delinquency:
30-59 days .........................      $ 9,414      3.01%      $10,561      2.67%
60-89 days .........................        3,594      1.15         4,641      1.17
90 days and over ...................        5,217      1.67           843      0.21
                                          -------      ----       -------      ----
   Total ...........................      $18,225      5.83%      $16,045      4.05%
                                          =======      ====       =======      ====
Total defaults .....................      $ 1,170      0.37%      $   369      0.09%
                                          =======      ====       =======      ====

As of June 30, 1997:
Delinquency:
30-59 days .........................      $10,117      3.45%      $ 9,817      2.62%      $29,002      3.67%
60-89 days .........................        2,463      0.84         2,863      0.76         6,201      0.78
90 days and over ...................        5,631      1.92         3,971      1.06           927      0.12
                                          -------      ----       -------      ----       -------      ----
      Total ........................      $18,211      6.21%      $16,651      4.44%      $36,130      4.57%
                                          =======      ====       =======      ====       =======      ====
Total defaults .....................      $ 4,533      1.55       $ 4,248      1.13%      $   241      0.03%
                                          =======      ====       =======      ====       =======      ====

As of September 30, 1997:
Delinquency:
30-59 days .........................      $ 7,452      2.78%      $ 9,753      2.81%      $22,580      2.98%      $12,446      2.22%
60-89 days .........................        2,507      0.94         3,420      0.98         7,906      1.04         5,525      0.99
90 days and over ...................        7,163      2.68         5,925      1.71        14,067      1.85         4,627      0.83
                                          -------      ----       -------      ----       -------      ----       -------     -----
      Total ........................      $17,122      6.40%      $19,098      5.50%      $44,553      5.87%      $22,598      4.04%
                                          =======      ====       =======      ====       =======      ====       =======     =====
Total defaults .....................      $ 8,796      3.29%      $10,848      3.13%      $ 7,040      0.93%      $   798      0.14%
                                          =======      ====       =======      ====       =======      ====       =======     =====
</TABLE>


                                     - 19 -



<PAGE>

<TABLE>
<CAPTION>
                                                1997-1                 1997-2                   1997-3                 1997-4       
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of December 31, 1997:
Delinquency:
30-59 days .........................      $ 6,182      2.56%      $ 9,823      3.13%      $18,556      2.58%      $ 8,691      1.63%
60-89 days .........................        2,918      1.21         4,646      1.48         9,243      1.29         5,398      1.02
90 days and over ...................        5,369      2.22         5,067      1.61        21,463      2.99        10,659      2.00
                                          -------      ----       -------     -----       -------     -----       -------      ----
      Total ........................      $14,462      5.99%      $19,536      6.22%      $49,262      6.86%      $24,748      4.65%
                                          =======      ====       =======     =====       =======     =====       =======      ====
Total defaults .....................      $13,589      5.63%      $16,574      5.28%      $16,467      2.32%      $ 4,765      0.90%
                                          =======      ====       =======     =====       =======     =====       =======      ====

As of March 31, 1998:
Delinquency:
30-59 days .........................      $ 5,082      2.36%      $ 6,455      2.26%      $16,418      2.46%      $10,057      2.04%
60-89 days .........................        3,147      1.46         3,046      1.07         9,904      1.49         6,282      1.27
90 days and over ...................        5,482      2.55         7,382      2.59        18,208      2.73         7,097      1.44
                                          -------      ----       -------     -----       -------     -----       -------      ----
      Total ........................      $13,711      6.38%      $16,883      5.92%      $44,530      6.68%      $23,436      4.75%
                                          =======      ====       =======     =====       =======     =====       =======      ====
Total defaults .....................      $13,938      6.48%      $16,247      5.70%      $27,276      4.09%      $13,346      2.71%
                                          =======      ====       =======     =====       =======     =====       =======      ====

As of June 30, 1998:
Delinquency:
30-59 days .........................      $ 7,154      3.72%      $ 7,196      2.82%      $12,192      2.01%      $ 8,607      1.95%
60-89 days .........................        1,664      0.87         4,280      1.68         6,172      1.02         2,866      0.65
90 days and over ...................        4,282      2.23         5,760      2.26        12,916      2.13         3,778      0.86
                                          -------      ----       -------     -----       -------     -----       -------      ----
      Total ........................      $13,100      6.82%      $17,236      6.76%      $31,280      5.17%      $15,251      3.46%
                                          =======      ====       =======     =====       =======     =====       =======      ====
Total defaults .....................      $14,319      7.46%      $19,844      7.79%      $38,627      6.38%      $21,135      4.79%
                                          =======      ====       =======     =====       =======     =====       =======      ====

As of September 30, 1998:
Delinquency:
30-59 days .........................      $ 6,642      3.85%      $ 9,213      3.98%      $17,851      3.23%      $15,362      3.92%
60-89 days .........................        1,514      0.88         2,469      1.07         6,684      1.21         3,007      0.77
90 days and over ...................        2,725      1.58         3,061      1.32         9,373      1.69         2,305      0.59
                                          -------      ----       -------     -----       -------     -----       -------      ----
      Total ........................      $10,881      6.31%      $14,743      6.37%      $33,908      6.13%      $20,674      5.28%
                                          =======      ====       =======     =====       =======     =====       =======      ====
Total defaults .....................      $16,363      9.47%      $24,404     10.54%      $45,138      8.16%      $24,105      6.15%
                                          =======      ====       =======     =====       =======     =====       =======      ====

As of December 31, 1998:
Delinquency:
30-59 days .........................      $10,131      6.48%      $10,026      4.70%      $29,033      5.74%      $15,832      4.47%
60-89 days .........................        2,447      1.57         3,520      1.65         7,743      1.53         4,663      1.32
90 days and over ...................        3,051      1.95         4,043      1.89         7,258      1.43         3,037      0.86
                                          -------      ----       -------     -----       -------     -----       -------      ----
      Total ........................      $15,629      10.00%     $17,589      8.24%      $44,034      8.70%      $23,532      6.64%
                                          =======      ====       =======     =====       =======     =====       =======      ====
Total defaults .....................      $15,815      10.12%     $24,495     11.48%      $53,514     10.58%      $25,218      7.12%
                                          =======      ====       =======     =====       =======     =====       =======      ====

<CAPTION>
                                               1997-5                   1997-6                  1997-7                 1997-8      
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of September 30, 1997:
Delinquency:
30-59 days .........................      $34,046      3.52%
60-89 days .........................        5,176      0.53
90 days and over ...................          764      0.08
                                          -------      ----
      Total ........................      $39,986      4.13%
                                          =======      ====
Total defaults .....................      $   150      0.16%
                                          =======      ====

As of December 31, 1997:
Delinquency:
30-59 days .........................      $17,978      1.92%      $17,015      2.50%      $30,032      4.00%      $ 7,904      2.59%
60-89 days .........................       11,256      1.20        10,046      1.48        12,353      1.64         2,975      0.98
90 days and over ...................       23,104      2.47        15,325      2.25         5,266      0.70           794      0.26
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $52,338      5.59%      $42,386      6.23%      $47,651      6.34%      $11,673      3.83%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $ 3,254      0.35%      $ 3,659      0.54%      $     0         0%      $     0         0%
                                          =======      ====       =======      ====       =======      ====       =======      ====
</TABLE>


                                     - 20 -


<PAGE>

<TABLE>
<CAPTION>
                                               1997-5                   1997-6                  1997-7                  1997-8   
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of March 31, 1998:
Delinquency:
30-59 days .........................      $14,416      1.61%      $14,155      2.18%      $11,048      1.49%      $ 3,647      1.24%
60-89 days .........................        9,541      1.07         5,824      0.90         6,713      0.91         2,795      0.95
90 days and over ...................       12,144      1.36        11,600      1.79        18,006      2.43         4,400      1.49
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $36,101      4.04%      $31,579      4.87%      $35,767      4.84%      $10,842      3.68%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $24,842      2.78%      $17,358      2.68%      $ 5,085      0.69%      $ 2,096      0.71%
                                          =======      ====       =======      ====       =======      ====       =======      ====

As of June 30, 1998:
Delinquency:
30-59 days .........................      $17,801      2.14%      $12,423      2.07%      $13,752      1.95%      $ 5,262      1.89%
60-89 days .........................       10,478      1.26         6,705      1.12         6,842      0.97         2,474      0.89
90 days and over ...................       10,140      1.22         7,043      1.17        10,158      1.44         2,233      0.80
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $38,419      4.62%      $26,171      4.36%      $30,752      4.36%      $ 9,969      3.58%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $37,962      4.57%      $27,957      4.66%      $22,228      3.15%      $ 6,613      2.37%
                                          =======      ====       =======      ====       =======      ====       =======      ====

As of September 30, 1998:
Delinquency:
30-59 days .........................      $24,358      3.23%       20,991      3.99%      $17,497      2.69%      $ 7,296      2.87%
60-89 days .........................        7,345      0.97         6,032      1.15         5,159      0.79         1,950      0.77
90 days and over ...................        6,139      0.81         3,654      0.69         4,300      0.66         1,442      0.57
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $37,842      5.01%      $30,677      5.83%      $26,956      4.14%       10,688      4.21%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $49,919      6.61%      $35,475      6.74%      $35,269      5.42%       10,917      4.29%
                                          =======      ====       =======      ====       =======      ====       =======      ====

As of December 31, 1998:
Delinquency:
30-59 days .........................      $34,998      5.10%      $20,975      4.47%      $24,574      4.15%      $ 7,731      3.40%
60-89 days .........................       10,605      1.54         7,314      1.56         7,034      1.19         3,178      1.40
90 days and over ...................       11,019      1.60         3,676      0.78         7,768      1.31         2,508      1.10
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $56,622      8.24%      $31,965      6.82%      $39,376      6.66%      $13,417      5.89%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $51,917      7.56%      $42,484      9.06%      $38,454      6.50%      $11,996      5.27%
                                          =======      ====       =======      ====       =======      ====       =======      ====


<CAPTION>
                                                1998-1                  1998-2                  1998-3                  1998-4
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of March 31, 1998:
Delinquency:
30-59 days .........................      $23,065      2.63%      $17,703      3.54%
60-89 days .........................        8,098      0.92         7,163      1.43
90 days and over ...................          803      0.09             0      0.00
                                          -------      ----       -------      ----
      Total ........................      $31,966      3.65%      $24,866      4.97%
                                          =======      ====       =======      ====
Total defaults .....................      $   144      0.02%      $    47      0.01%
                                          =======      ====       =======      ====


As of June 30, 1998:
Delinquency:
30-59 days .........................      $12,677      1.33%      $ 7,395      1.13%      $22,454      2.63%      $15,258      3.10%
60-89 days .........................        7,145      0.75         5,497      0.84         7,319      0.86         4,762      0.97
90 days and over ...................        7,790      0.81         6,930      1.06           932      0.11         1,789      0.36
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $27,612      2.89%      $19,822      3.03%      $30,705      3.60%      $21,809      4.43%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $ 9,116      0.95%      $ 7,810      1.19%      $   157      0.02%      $   829      0.02%
                                          =======      ====       =======      ====       =======      ====       =======      ====

As of September 30, 1998:
Delinquency:
30-59 days .........................      $22,049      2.42%      $19,202      3.21%      $19,725      2.07%      $13,815      2.43%
60-89 days .........................        8,284      0.91         6,581      1.10%        7,358      0.77%        6,160      1.08
90 days and over ...................        4,586      0.50         3,795      0.64%        3,667      0.39%        2,761      0.48
                                          -------      ----       -------      ----       -------      ----       -------      ----
      Total ........................      $34,919      3.83%      $29,578      4.95%      $30,750      3.23%      $22,736      3.99%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $23,585      2.59%      $20,586      3.45%      $15,765      1.66%      $11,743      2.06%
                                          =======      ====       =======      ====       =======      ====       =======      ====
</TABLE>


                                     - 21 -

<PAGE>

<TABLE>
<CAPTION>
                                                1998-1                  1998-2                  1998-3                  1998-4
                                          -----------------       -----------------       -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>        <C>          <C>        <C>          <C>  
As of December 31, 1998:
Delinquency:
30-59 days .........................      $34,541      4.10%      $28,357      5.24%      $35,041      3.89%      $15,830      2.98%
60-89 days .........................       10,248      1.22         8,408      1.55         9,236      1.02         6,244      1.17
90 days and over ...................        6,994      0.83         2,204      0.41         3,666      0.41         2,277      0.43
                                                       ----       -------      ----       -------      ----       -------      ----
      Total ........................      $51,783      6.15%      $38,969      7.20%      $47,943      5.32%      $24,351      4.58%
                                          =======      ====       =======      ====       =======      ====       =======      ====
Total defaults .....................      $32,722      3.89%      $31,148      5.76%      $27,815      3.09%      $24,197      4.55%
                                          =======      ====       =======      ====       =======      ====       =======      ====

<CAPTION>
                                                1998-5                 1998-6            
                                          -----------------       -----------------
<S>                                       <C>          <C>        <C>          <C>
As of September 30, 1998:
Delinquency:
30-59 days .........................      $10,787      2.19%      $20,095      2.88%
60-89 days .........................        3,915      0.79         4,167      0.60
90 days and over ...................          477      0.10           174      0.02
                                          -------      ----       -------      ----
      Total ........................      $15,179      3.08%      $24,436      3.50%
                                          =======      ====       =======      ====
Total defaults .....................      $   500      0.10%      $  ,212      0.03%
                                          =======      ====       =======      ====

As of December 31,1998:
Delinquency:
30-59 days .........................      $17,227      3.63%      $25,606      3.81%
60-89 days .........................        5,841      1.23         7,869      1.17
90 days and over ...................        1,254      0.26         2,266      0.34
                                          -------      ----       -------      ----
      Total ........................      $24,322      5.12%      $35,741      5.32%
                                          =======      ====       =======      ====
Totals defaults ....................      $ 7,973      1.68%      $11,637      1.73%
                                          =======      ====       =======      ====
</TABLE>

(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,
     1996-4,  1997-1,  1997-2,  1997-3,  1997-4, 1997-5, 1997-6, 1997-7, 1997-8,
     1998-1,1998-2,  1998-3, 1998-4, 1998-5 and 1998-6 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%, 18.3%, 18.0%,  20.4%, 24.2%,  21.92%,  29.08%,  29.56%,
     29.55%, 30.38%, 27.3%, 24.4%, 31.2%, 26.5%, 32.1% and 28.8%,  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, 1996, 1997 and 1998.

<TABLE>
<CAPTION>
                                                                                         Year ended
                                                                                         December 31,
                                                         --------------------------------------------------------------------------
                                                            1994            1995            1996            1997            1998 
                                                         ----------      ----------      ----------      ----------      ----------
                                                                                  (Dollars in thousands)
<S>                                                      <C>             <C>             <C>             <C>             <C>       
Average amount outstanding(1) ......................     $   52,709      $  294,252      $1,207,172      $4,315,238      $9,073,680
Losses(2) ..........................................             --             279           1,580           6,274          22,272
Annualized losses as a percentage of average
   amount outstanding ..............................          0.00%           0.09%           0.13%           0.15%           0.27%
</TABLE>

(1)  Average amount  outstanding  during the period is the arithmetic average of
     the  principal  balances of home equity loans  outstanding  serviced by the
     Company 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.



                                     - 22 -



<PAGE>



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
typically  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.  As of December 31, 1998, IMC marketed its direct
consumer  lending  services  through more than 80 branch  offices.  IMC's direct
consumer  loan strategy  involves:  (i)  targeting  cities where the  population
density and economic  indicators  are  favorable  for home equity  lending,  the
foreclosure rate is within reasonable ranges and the non-conforming  loan market
has been undeserved;  (ii) testing the target market prior to the  establishment
of a branch 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 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 had  actively  pursued a strategy of acquiring  originators  of
non-conforming home equity loans. IMC's acquisition strategy focused 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 Banc
("CoreWest"), Equity Mortgage,  and American Mortgage Reduction Inc.  ("American
Reduction").  In July 1997, IMC acquired National Lending Center Inc. ("National
Lending   Center")  and  Central  Money  Mortgage  Co.,  Inc.   ("Central  Money
Mortgage").  In October and November  1997,  IMC acquired  Residential  Mortgage
Corporation and Alternative Capital Group, Inc.  ("Alternative  Capital Group").
Equitystars,  Mortgage America and Equity Mortgage were Industry Partners. There
were no acquisitions of originators of  non-conforming  home equity loans during
1998. As a result of the volatility of the capital markets and severely  reduced
or  unavailable  liquidity,  IMC is not likely to  acquire  any  originators  of
non-conforming  home equity  loans for the  foreseeable  future.  The Company is
currently  focusing on  reducing  the cost of loan  originations  of each of the
companies  it  has  acquired.  To  reduce  costs,  the  Company  closed  certain
non-productive  retail and broker  offices and reduced the number of  employees.
The Company is in the process of identifying and reducing  non-essential  costs.
The Company  anticipates that certain  additional retail and broker offices will
be closed and entire operations of some of the acquired companies may be sold or
shut down. There can be no assurance the Company can achieve a reduction of cash
flow used in operations or that its attempt to reduce non-essential expenditures
will be successful.

     Each of the foregoing acquisitions made in 1996 and 1997 has been accounted
for under the purchase  method of accounting and the results of operations  have
been included with those of the Company from the dates of acquisition.  The fair
value of the acquired  Companies'  assets  approximated the liabilities  assumed
and, accordingly,  the majority of the initial purchase prices has been recorded
as goodwill which is being  amortized on a straight line basis for periods of up
to thirty (30) years. The initial purchase price for all of the assets of

                                     - 23 -


<PAGE>



Equitystars was 239,666 shares of common stock. The aggregate purchase price for
the eight  acquisitions  completed in 1997 included gross cash of  approximately
$20.9 million,  approximately 5.0 million shares of common stock,  $13.2 million
of notes payable to former owners of the acquired  companies and assumption of a
stock option plan which  resulted in the issuance of options to acquire  334,596
shares  of the  Company's  common  stock.  The  aggregate  fair  value of assets
acquired was approximately  $71.2 million and liabilities  assumed  approximated
$70.4 million.  The Company  recorded  goodwill of  approximately  $87.0 million
related  to  these  acquisitions.  Most  of the  acquisitions  include  earn-out
arrangements  that provide for additional  consideration if the acquired company
achieves certain performance targets after the acquisition.  Additional purchase
price of  approximately  $5.6  million and $1.6 million was recorded as goodwill
during the years ended December 31, 1997 and 1998, respectively,  related to the
contingent payment terms of the acquisitions.  Any such contingent payments will
result  in an  increase  in the  amount of  recorded  goodwill  related  to such
acquisition.

Strategic Alliances

     In order to increase the Company's volume and diversify its sources of loan
originations,  the Company  had  entered  into three  strategic  alliances  with
selected  mortgage  lenders,  pursuant  to which the  Company  provided  working
capital not  exceeding  $800,000,  provided  warehouse  financing  and  received
commitments to purchase qualifying loans. In return, the Company received a more
predictable flow of loans and, in some cases, an option or obligation to acquire
an equity interest in the related strategic participant.

International Operations

     In April 1996,  the Company  together  with two partners  formed  Preferred
Mortgages,  a United Kingdom 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.
Preferred  Mortgages  lends to  borrowers in the United  Kingdom  with  impaired
credit profiles similar to the Company's domestic customers.  As of December 31,
1998,  Preferred  Mortgages  had a $78.9  million  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.

     In June 1997, the Company's  wholly-owned  subsidiary IMC Mortgage Company,
Canada Ltd. ("IMC Canada") began operations in the Canadian  Province of Ontario
to serve the non-conforming home equity market in the Toronto marketplace.

     Based on market conditions and limited access to liquidity,  the Company is
evaluating its  international  operations,  in the United Kingdom and Canada and
presently  anticipates  the sale of IMC's joint  venture  interest in  Preferred
Mortgages  and  either  the sale or closing  of IMC  Canada.  See  "Management's
Discussion and Analysis of Financial  Conditions and Results of Operations"  and
"Liquidity and Capital Resources".

Competition

     As a purchaser and  originator of mortgage  loans the proceeds of which are
used for a variety of purposes,  including to consolidate debt,  refinance 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.  Some of the  Company's
competitors  may,  in  some  locations,  also  include  the  Industry  Partners.
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

                                     - 24 -



<PAGE>



pay higher premiums for loans it purchases,  increases the likelihood of 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  remained  constant  at 5.3% for the years ended
December  31, 1997 and 1998;  however,  during the fourth  quarter of 1998,  the
Company to a large  extent  curtailed  its  purchases  from  correspondents  and
significantly  reduced the premiums paid to correspondents as a percent of loans
from  correspondents.  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 to 10.9% for the year ended
December  31,  1997 and to 10.4%  for the year  ended  December  31,  1998.  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 to 75.3% for the year ended December
31, 1997 and to 77.0% for the year ended December 31, 1998.

     Competition  takes many forms,  including  convenience in obtaining a loan,
service,  marketing and distribution  channels and interest rates.  Furthermore,
the level of gains currently  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),  ECOA,  the Fair  Credit
Reporting Act of 1994, as amended,  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 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 indemnification 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.


                                     - 25 -


<PAGE>



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 case. 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, 1998,  IMC had a total of 2,585  employees,  539 of whom
worked in its Tampa, Florida headquarters. As of March 15, 1999, IMC had a total
of 2,120 employees,  470 of whom were in its Tampa,  Florida  headquarters.  The
reduction  of  employees  from  December 31, 1998 to March 15, 1999 was a direct
result of adverse market  conditions and the Company's  efforts to deal with its
limited  liquidity.  See  "Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations" and "Liquidity and Capital Resources." None
of  IMC's  employees  is  covered  by a  collective  bargaining  agreement.  IMC
considers its relations with its employees to be satisfactory  under the current
adverse  market  conditions in which the Company  operates.  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.

Item 2. Properties

     The Company's corporate headquarters are located in an approximately 83,000
square  foot  building at 5901 E.  Fowler  Avenue,  Tampa,  Florida  33617.  The
building was purchased in January 1997 for $2.6 million and through December 31,
1998, the Company spent in excess of $3 million to renovate the building.

     At  December  31,  1998,  IMC  maintained  short-term  leases for  regional
full-service  offices and retail branch offices in executive  spaces in a number
of  locations  throughout  the  United  States.  See  also  Note 15 of  Notes to
Consolidated Financial Statements.

Item 3.   Legal Proceedings

     IMC is a party to various  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.

     On December  23,  1998,  the former  shareholders  of CoreWest  sued IMC in
Superior Court of the State of California for the County of Los Angeles claiming
IMC agreed to pay them $23.8 million in  cancellation  of the  contingent  "earn
out" payment, if any, payable by IMC in connection with IMC's purchase of all of
the outstanding shares of CoreWest. The case is in the early stages of pleading;
however, IMC's management believes there is no merit in the plaintiffs' claims.

Item 4.   Submission of Matters to a Vote of Security Holders

     None.

                                     - 26 -



<PAGE>



                                    PART II.

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

     The Company's common stock is traded on the Nasdaq Stock Market  ("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.

                                                               High         Low
                                                               ----         ---
Year Ended December 31, 1997:
              First Quarter ............................      $25.00      $14.38
              Second Quarter ...........................       18.00       11.13
              Third Quarter ............................       18.44       15.38
              Fourth Quarter ...........................       19.31       11.50

Year Ended December 31, 1998:
              First Quarter ............................       13.63        7.50
              Second Quarter ...........................       18.06       10.00
              Third Quarter (1) ........................       13.75        1.97
              Fourth Quarter (1) .......................        2.88        0.25

Year Ending December 31, 1999:
              First Quarter (through March 26) (1) .....        0.56        0.16


(1)  See  "Management's  Discussions  and  Analysis of Financial  Condition  and
     Results of Operations" and "Liquidity and Capital Resources".

                                   ----------

     As of March 18, 1999, there were  approximately  5,900 holders of record of
the Common Stock.

     On January  13,  1999 Nasdaq  notified  the Company  that IMC had failed to
maintain  a  closing  bid price of  greater  than or equal to $1.00 per share in
accordance  with  Marketplace  Rule 4450 and that IMC's  stock would be delisted
from the Nasdaq  Stock  Market if its stock price does not trade above $1.00 per
share for a period of at least 10  consecutive  trading  days  before  April 13,
1999.  IMC does not believe that the common stock will trade above $1.00 for the
requisite  period.  As a result,  IMC  believes  that its  common  stock will be
delisted from the Nasdaq Stock Market on April 13, 1999.

     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.

Unregistered Sales of Securities

     On October 15, 1998,  the Company issued  23,760.758  shares of its Class C
exchangeable preferred stock in conjunction with a $33 million standby revolving
credit  facility  provided  by  certain  of the  Greenwich  Funds.  The  Class C
exchangeable preferred stock has a par value of $0.01 per share, participates in
dividends declared on

                                     - 27 -



<PAGE>



the common stock,  at a rate per share of Class C exchangeable  preferred  stock
equal  to  1,000  times  the  dividend  per  share  of  common  stock  and has a
liquidation  value  equal to the  greater  of $10 per share and any  liquidating
distribution  payable in respect  of 1,000  shares of common  stock per share of
Class C exchangeable  preferred stock. The Class C exchangeable  preferred stock
is exchangeable for an equivalent number of shares of Class D preferred stock in
certain  events and represents the equivalent of 40% of the common equity of the
Company.  The Class C exchangeable  preferred  stock is subject to redemption at
the option of the holder, under certain circumstances, upon a change of control.

     On July 14, 1998, the Company sold to Travelers Casualty and Surety Company
and certain of the  Greenwich  Funds  500,000  shares of its Class A  redeemable
preferred  stock,  the net proceeds of which  approximated  $49.1  million.  The
Series A redeemable  preferred stock has a par value of $0.01 per share, pays no
dividends and has a liquidation  value of $100 per share. The Class A redeemable
preferred  stock was  convertible  into common  stock at $10.44 per share and is
redeemable  by the Company  over a three year period  commencing  July 2008.  On
October 15, 1998, the Class A redeemable  preferred  stock was amended to, among
other things, eliminate the conversion feature.

     The shares of Class C exchangeable  preferred stock and the shares of Class
A  redeemable  preferred  stock  were  issued  to  fewer  than 10  institutional
investors in transactions  not involving a public offering within the meaning of
Section 4(2) of the Securities Act of 1933, as amended.


                                     - 28 -



<PAGE>



Item 6.  Selected Financial Data

     The  historical  Statement of  Operations  and Balance Sheet data set forth
below as of and for the fiscal years ended December 31, 1994,  1995,  1996, 1997
and 1998 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 "Liquidity and Capital Resources" and the Consolidated Financial
Statements and Notes thereto (dollars in thousands, except share data).

<TABLE>
<CAPTION>
                                                                                              Year Ended
                                                                                             December 31,
                                                                 ------------------------------------------------------------------
                                                                    1994          1995          1996          1997         1998
                                                                 ----------    ----------    ----------    ----------    ----------
<S>                                                                 <C>          <C>           <C>         <C>             <C>     
Statement of Operation Data:
  Revenues
       Gain on sales of loans (1)(2)                                 $8,583       $20,681       $46,230      $180,963      $205,924
       Additional securization transacton expense (3)                  (560)       (5,547)       (4,158)           --            --
                                                                 ----------    ----------    ----------    ----------    ----------
          Gain on sale of loans, net                                  8,023        15,134        42,072       180,963       205,924
                                                                 ----------    ----------    ----------    ----------    ----------
       Warehouse interest income                                      2,510         7,885        37,463       123,432       147,937
       Warehouse interest expense                                    (1,611)       (6,007)      (24,535)      (98,720)     (118,345)
                                                                 ----------    ----------    ----------    ----------    ----------
          Net warehouse interest income                                 899         1,878        12,928        24,712        29,592
                                                                 ----------    ----------    ----------    ----------    ----------
       Servicing fees                                                    99         1,543         5,562        17,072        45,382
       Other                                                          1,073         1,118         5,092        16,012        40,311
                                                                 ----------    ----------    ----------    ----------    ----------
           Total servicing fees and other                             1,172         2,661        10,654        33,084        85,693
                                                                 ----------    ----------    ----------    ----------    ----------
                     Total revenues                                  10,094        19,673        65,654       238,759       321,209
                                                                 ----------    ----------    ----------    ----------    ----------

   Expenses
       Compensation and benefits                                      3,348         5,139        16,007        82,051       124,234
       Selling, general and administrative expenses (2)               2,000         3,478        15,652        64,999       130,547
       Other                                                             14           298         2,321        14,280        28,434
       Hedge loss (4)                                                    --            --            --            --        22,351
       Market valuation adjustment (5)                                   --            --            --            --        84,638
       Interest expense - Greenwich Funds (6)                            --            --            --            --        30,795
       Sharing of proportionate value of equity (7)                   1,689         4,204         2,555            --            --
                                                                 ==========    ==========    ==========    ==========    ==========
           Total Expense                                              7,051        13,119        36,535       161,330       420,999
                                                                 ==========    ==========    ==========    ==========    ==========
Pre-tax income (loss) before income taxes                             3,043         6,554        29,119        77,429       (99,790)
Pro forma provision for income taxes (8)(9)(10)                       1,187         2,522        11,190        29,500           679
                                                                 ==========    ==========    ==========    ==========    ==========
Pro forma net income (loss)(2)(9)(10)                                $1,856        $4,032       $17,929       $47,929     $(100,469)
                                                                 ==========    ==========    ==========    ==========    ==========

Pro forma basic net income (loss) per common share (10)(11)           $0.15         $0.34         $1.12         $1.76        $(3.21)
Pro forma diluted net income (loss) per common shares (10)(11)        $0.15         $0.34         $0.92         $1.54        $(3.21)
Pro forma basic average common shares outstanding (10)(11)       12,000,000    12,000,000    15,981,521    27,299,827    31,745,575
Pro forma diluted average common shares outstanding (10)(11)     12,000,000    12,000,000    19,539,963    31,147,944    31,745,575

Balance Sheet Data:
       Mortgage loans held for sale                                 $28,996      $193,003      $914,587    $1,673,144      $946,446
       Interest-only and residual certificates                        3,404        14,073        86,247       223,306       468,841
       Borrowings under warehouse finance facilities                 27,732       189,819       895,132     1,732,609       984,571
</TABLE>


                                     - 29 -



<PAGE>


<TABLE>
<S>                                                                <C>              <C>         <C>          <C>        <C>      
       Term debt and notes payable                                     --            11,121        47,430      130,480     432,737
       Redeemable preferred stock                                      --                --            --           --      37,333
       Shareholders' equity                                         5,856             5,609        89,337      254,064     210,610
       Total assets                                                36,642           354,551     1,707,348    2,945,932   1,683,639
Operating Data (dollars in millions):                                                          
       Loans purchased or originated                                 $283              $622        $1,770       $5,893      $6,177
       Loans sold through securitization                               82               388           935        4,858       5,117
       Whole loan sales                                               180                71           129          145       1,530
       Serviced loan portfolio (period end)                            92               536         2,148        6,957       8,887
Delinquency Data:                                                                              
       Total delinquencies as a percentage of loans serviced         0.87%             3.43%         5.30%        5.40%       6.55%
        (period end)(12)(13)                                                                   
       Defaults as a percentage of loans serviced                    0.12              1.00          1.47         2.15        7.14
        (period end)(13)(14)                                                                   
       Net annualized losses as a percentages of average              0.0              0.09          0.13         0.15        0.27
       loans serviced for period (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 7.  -"Management's  Discussion  and  Analysis  of
     Financial   Condition  and  Results  of  Operations  --  Transactions  with
     ContiFinancial - Additional Securitization Transaction Expense."

(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 losses incurred from selling short U.S. Treasury  Securities.  The
     Company  historically sold U.S. Treasury  Securities short to hedge against
     interest rate  movements  affecting  mortgages  held for sale. In 1998, the
     Company  paid  approximately  $47.5  million  due  to  devaluation  of  the
     Company's hedge position,  which was not offset by an equivalent  increased
     gain on sale of loans at the time of  securitization.  Of the approximately
     $47.5 million hedge  devaluation,  approximately  $25 million was closed at
     the time the Company  priced two  securitizations  and was  reflected as an
     offset to gain on sale and  approximately  $22 million was charged to hedge
     loss.  See  Item 7  "Management's  Discussion  and  Analysis  of  Financial
     Condition  and Results of Operations - Discussion of Events During the Year
     Ended December 31, 1998," "-Results of Operations - Year Ended December 31,
     1998 Compared to the Year Ended December 31, 1997" and - "Risk  Management"
     and Note 5 of Notes to Consolidated Financial Statements.

(5)  Reflects a decrease in the  estimated  fair value of the interest  only and
     residual certificates resulting from revised loss curve assumptions used to
     approximate the timing of losses over the life of the securitized loans and
     a revised  discount  rate used to present  value the  projected  cash flows
     retained by the Company. See Item 7.-"Management's  Discussion and Analysis
     of  Financial  Condition  and Results of  Operations  - Certain  Accounting
     Considerations" and Note 10 of Notes to Consolidated Financial Statements.

(6)  Reflects interest expense related to a $33 million standby revolving credit
     facility with Greenwich Funds. Interest expense recognized includes accrued
     interest at 10%,  amortization  of a $3.3 million  commitment  fee, and the
     value  attributable  to the preferred  stock issued and the preferred stock
     issuable to Greenwich  Funds under the terms of the agreement.  See Notes 3
     and 4 of Notes to the Consolidated Financial Statements.

(7)  Reflects expenses recorded in connection with the value sharing arrangement
     with  ContiFinancial  (the "Conti VSA") which 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

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<PAGE>



     -- Transactions  with  ContiFinancial - Sharing of  Proportionate  Value of
     Equity" and Note 5 of Notes to Consolidated Financial Statements.

(8)  Prior to its initial  public  offering in June 1996, IMC was organized as a
     partnership.  That  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 of Notes to Consolidated Financial
     Statements 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's  income became subject to income
     taxes at the corporate level as of June 24, 1996, the effective date of the
     exchange described in Note 1 of Notes to Consolidated Financial Statements.

(9)  Pro forma data reflects a provision for income taxes to indicate what these
     taxes  would  have been had the  exchange  described  in Note 1 of Notes to
     Consolidated Financial Statements occurred in prior years.

(10) Amounts are actual for the years ended December 31, 1997 and 1998.

(11) Pro forma per share data reflects the weighted average number of common and
     dilutive  common  share  equivalents  outstanding  during the period  after
     giving  effect  to the  recapitalization  described  in Note 1 of  Notes to
     Consolidated Financial Statements.

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

(13) Total delinquencies,  defaults and net annualized losses as a percentage of
     average loans  serviced have each trended  upward,  in part, as a result of
     the aging of the Company's loan portfolios.

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

                                     - 31 -



<PAGE>



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

The following  management's  discussion and analysis of the Company's  financial
condition and results of operations contain  forward-looking  statements,  which
involve  risks and  uncertainties.  The  Company's  actual  results could differ
materially  from those  anticipated  in these  forward-looking  statements  as a
result of certain  factors  discussed  in the first  paragraph on page 1 of this
Annual  Report  on  Form  10-K.  The  following  discussion  should  be  read in
conjunction  with the Consolidated  Financial  Statements of the Company and the
Notes thereto.

General

The Company is a specialized  consumer  finance  company  engaged in purchasing,
originating,  servicing and selling home equity loans secured primarily by first
liens on  on-to-four  family  residential  properties.  The  Company  focuses on
lending to individuals  whose borrowings 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 refinance  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.

In 1996, the Company acquired  Mortgage Central Corp., a non-conforming  lender,
which did business under the name  "Equitystars".  In 1997, the Company acquired
eight non-conforming  mortgage lenders:  Mortgage America, Inc., Equity Mortgage
Co., Inc., Corewest Banc,  American Mortgage  Reduction,  Inc., National Lending
Center,   Inc.,   Central  Money  Mortgage  Co.,  Inc.,   Residential   Mortgage
Corporation,   and   Alternative   Capital  Group,   Inc.   (collectively,   the
"Acquisitions"). These acquisitions were accounted for using the purchase method
of accounting  and the results of operations  have been included in those of the
Company from the dates of acquisition.

Discussion of Events During the Year Ended December 31, 1998

     As  a  result  of  increased  loan  purchases  and   originations  and  its
securitization program, IMC has typically operated with negative cash flows from
operations.  IMC has obtained cash for its  operations  through a combination of
access to the  equity  capital  markets  (sales of common  stock),  asset-backed
capital markets and borrowings. The borrowings have taken three principal forms:
(i) warehouse  loans secured by IMC's inventory of mortgage loans held for sale,
(ii) loans against  interest-only and residual certificates retained by IMC as a
result of its securitizations of mortgage loans and (iii) working capital loans.

     In  September  1998,  financial  difficulties  primarily in Russia and Asia
formed the catalyst for material  volatility in capital  markets  resulting,  in
part, from a build-up of concern over economic conditions  generally in emerging
markets.  Those  concerns  in turn gave rise to a general  de-leveraging  in the
capital  markets  and a "flight to quality"  causing a  reduction  in demand for
asset-backed  securities  and an increase in demand for United  States  Treasury
securities.  These  factors,  among others,  resulted in upheaval in the capital
markets,  severely  restricting  IMC's  ability to access  capital  through  its
traditional sources.

     Moreover,  several other  factors,  primarily  related to volatility in the
equity, debt and asset-backed capital markets, contributed to a liquidity crisis
for IMC since September 1998.

     o    First,  IMC's $95 million revolving credit facilities with BankBoston,
          N.A.  matured  in  mid-  October  1998.  While  IMC was  working  with
          BankBoston to renew and increase the credit

                                     - 32 -


<PAGE>


          facilities,   it  became  apparent  to  IMC  in  late  September  that
          BankBoston would not renew the credit  facilities,  causing the entire
          amount  outstanding under the facilities to become due in mid-October.
          The   BankBoston   facility   was  secured  by  a  pledge  of  certain
          interest-only and residual  certificates,  the common stock of most of
          IMC's  subsidiaries,  IMC's servicing rights and  substantially all of
          IMC's other assets.

     o    Second, IMC's lenders,  which had advanced  approximately $276 million
          at Sepember  30, 1998 to IMC  collaterized  by its  interest-only  and
          residual  certificates,  proposed to reduce  their  exposure by making
          cash margin calls on IMC.

     o    Third,  IMC's  lenders  which had advanced more than $2 billion to IMC
          collaterized  by mortgage loans also made or threatened to make margin
          calls on those warehouse lines to reduce their exposure to IMC.

     o    Fourth,  at the same time,  IMC's  traditional  strategy of minimizing
          risks of interest rate fluctuations through a hedging program of short
          selling United States  Treasury  Securities  required that IMC satisfy
          margin calls of approximately  $47.5 million in cash. This occurred at
          a time when IMC lacked the ability to recover that cash through  sales
          of its  inventory  of whole  loans,  since  the same  upheaval  in the
          capital markets had made sales of loans either as whole-loan  sales or
          through  securitizations  at a price  sufficient to generate  positive
          cash flow virtually impossible for IMC.

     IMC's Board of Directors  held a series of meetings  during  September 1998
and determined  that IMC needed to locate a substantial  source of capital which
would  either  invest  funds in IMC or acquire  IMC in order to provide  IMC the
liquidity  necessary  to deal with its  immediate  capital  requirements  and to
continue  to operate.  In  September  1998 a special  committee  of  independent
directors  of IMC's  Board of  Directors  was formed to advise the full Board of
Directors  of IMC with respect to any change in control  transactions  regarding
IMC. The special committee engaged J.P. Morgan Securities, Inc. (J.P. Morgan) as
its financial advisor and retained legal counsel.  On October 6, 1998, IMC hired
Donaldson,  Lufkin &  Jenrette  Securities  Corporation  (DLJ) as its  financial
advisor to assist it in locating such capital sources.

     During late  September and early October  1998,  IMC continued  discussions
with  BankBoston to extend the maturity of the BankBoston loan facility and with
IMC's  interest-only  and  residual  lenders  and  warehouse  lenders  to obtain
additional credit. As a result of these discussions,  it became clear that these
lenders  would  forbear from  exercising  their  rights  under their  respective
facilities  only if IMC could  obtain  cash to  maintain  operations  during the
proposed  standstill period.  Under the pressures  associated with the impending
maturity of the BankBoston loans and repeated  demands from IMC's  interest-only
and residual  lenders and warehouse  lenders to reduce their  exposure to IMC or
face margin  calls,  which IMC would likely not be able to satisfy,  IMC entered
into negotiations with certain of the Greenwich Funds.  Certain of the Greenwich
Funds and a related entity, Travelers Casualty and Surety Company ("Travelers"),
had  previously  purchased  $50 million of IMC Class A  preferred  stock in July
1998,  which was  convertible  into IMC common stock.  The  Greenwich  Funds had
conducted a substantial  due diligence  investigation  of IMC in connection with
the July 1998 investment.  Despite IMC's and DLJ's efforts to procure additional
financing  sources or financing  alternatives  for IMC, the Greenwich Funds were
the only  parties  willing to extend  funds to IMC to enable it to  continue  to
operate.

     As a result  of these  negotiations  with the  Greenwich  Funds  and  IMC's
lenders,  on October 15,  1998,  IMC entered into a loan  agreement  dated as of
October 12, 1998 with some of the  Greenwich  Funds  under which  agreement  IMC
could borrow up to $33 million for a period of up to 90 days. The loan agreement
provided IMC

                                     - 33 -



<PAGE>



with interim  financing which enabled IMC to continue to operate while it sought
a  substantial  source of capital  which  would  either  invest  funds in IMC or
acquire  IMC.  The facility was  guaranteed  by IMC and IMC's  subsidiaries  and
collateralized  by  subordinated  liens on  substantially  all of IMC's  and its
subsidiaries' assets and a pledge of the common stock of IMC's subsidiaries. The
facility  bore  interest at 10% per year and  matured in 90 days.  In return for
providing the facility,  certain of the Greenwich  Funds received a $3.3 million
commitment  fee  and  non-voting  IMC  Class  C  exchangeable   preferred  stock
representing  the  equivalent  of 40% of the common  equity of IMC.  The Class C
exchangeable  preferred stock is  exchangeable  after March 31, 1999 for Class D
preferred stock,  which has voting rights  equivalent to 40% of the voting power
of the Company.  Under the loan facility,  the Greenwich  Funds may exchange the
loans for additional  shares of Class C exchangeable  preferred stock or Class D
preferred stock in an amount of up to the equivalent of 50% of the common equity
of IMC (in addition to the Class C exchangeable preferred stock representing the
equivalent  of 40% of the  common  equity  of IMC  received  for  providing  the
facility).  In addition,  upon certain  changes in control of IMC, the Greenwich
Funds could elect either to (i) receive repayment of the facility,  plus accrued
interest and a take-out premium of up to 200% of the average principal amount of
the loan outstanding or (ii) exercise the Exchange Option.  The Greenwich Funds'
willingness to provide the interim  financing was contingent on IMC  negotiating
intercreditor  agreements  with its  significant  creditors to standstill for an
interim period.  In connection with the Greenwich Funds loan agreement,  the IMC
Class A preferred  stock was amended to eliminate  its right to convert into IMC
common stock.

     At the same time as IMC entered into the loan agreement with certain of the
Greenwich  Funds,  IMC  entered  into  intercreditor  agreements  with its three
largest  mortgage  warehouse  lenders.  These three lenders  together held total
available warehouse financing facilities with IMC of approximately $3.25 billion
collateralized   by  mortgage  loans  owned  by  IMC  and  held  for  sale.  The
intercreditor  agreements  provided that, subject to certain  conditions,  these
lenders would "stand still" and take no action,  including issuing margin calls,
with respect to their loan  facilities for 45 days. The standstill  period would
extend for an  additional  45 days or until the second  week of January  1999 if
within  the first  45-day  time  period IMC  entered  into a letter of intent to
effect a change in control of IMC with a third party.  BankBoston entered into a
similar intercreditor agreement at about the same time on similar terms. Without
the forbearance  provided by the intercreditor  agreements,  IMC's lenders could
have foreclosed upon their collateral or forced IMC into bankruptcy.  IMC agreed
to pay $1  million  to  each  of the  lenders  that  executed  an  intercreditor
agreement,  agreed to provide several of the lenders  preferred rights as to any
future IMC securitizations and agreed to issue to one of the lenders warrants to
purchase 2.5% of the common stock at an exercise price of $1.72 per share.

     Throughout  October and November 1998 DLJ contacted more than 70 parties on
behalf of IMC,  and obtained  confidentiality  agreements  from and  distributed
information to more than twenty  parties,  of which four parties  engaged in due
diligence investigations of IMC at its Tampa headquarters.

     In late  October  1998,  IMC  received a draft of a letter of intent from a
private  equity group  relating to a proposed  acquisition of certain assets and
liabilities of IMC. The IMC Board of Directors determined that the terms of such
proposed  transaction were  unsatisfactory and were insufficient to maintain the
intercreditor  agreements in place.  The private equity group withdrew the draft
letter of intent and never made a formal offer to IMC.

     During October and November 1998,  IMC had direct  substantive  discussions
with Commercial  Credit, an affiliate of Travelers,  with respect to a potential
acquisition of IMC by Commercial Credit.  During this period,  Commercial Credit
conducted an extensive  due  diligence  investigation  of IMC. As the end of the
initial 45-day  standstill  period  approached (that is, November 27, 1998), IMC
believed  that  Commercial  Credit  would  offer  a  letter  of  intent  for the
acquisition of IMC.  However,  on November 25, 1998,  Commercial Credit informed
IMC that it would not offer a letter of intent at that time.


                                     - 34 -



<PAGE>



     IMC's Board of Directors  met on November 25,  November 26 and November 27,
1998 to review IMC's  situation.  Those  meetings  were attended not only by the
directors but also by, among others,  representatives of DLJ and representatives
of J.P. Morgan. The IMC Board of Directors  determined that, among other things,
IMC might have to seek protection under the United States  Bankruptcy Code if it
did not by the  deadline of November 27, 1998 enter into a letter of intent that
met the requirements to maintain the intercreditor agreements in effect.

     On the morning of November 27, 1998, a private equity group specializing in
investments  in distressed  companies  proposed a transaction to IMC in which it
would acquire IMC.  However,  the group rescinded its proposed offer to IMC that
same day.

     Despite  the  efforts  of IMC and  DLJ,  at the end of the  initial  45-day
standstill  period, no potential  acquiror had emerged that was willing to enter
into a letter of intent to effect a change of control in IMC. At that time,  the
Greenwich  Funds  indicated  that they  would  enter  into a letter of intent to
invest  additional  capital  in  IMC  and  contemplated   arranging  for  credit
facilities  to permit  IMC to  refinance  its  existing  bank  loans and  credit
facilities,  if required.  The Greenwich  Funds  proposed a transaction in which
they would obtain newly issued  common stock equal to  approximately  95% of the
outstanding  equity  interests of IMC on a fully  diluted  basis,  leaving IMC's
existing common  shareholders  with 5% of the outstanding  equity of IMC and the
possibility of existing common  shareholders  receiving  warrants for additional
common equity on terms to be negotiated.

     As no other  investor  had come  forward  which was willing to enter into a
letter  of  intent  with  IMC  that  would  satisfy  the   requirements  of  the
intercreditor  agreements,  the IMC Board of Directors,  based in part on advice
and analyses provided by DLJ and J.P. Morgan,  believed that the proposal by the
Greenwich Funds was superior to any other alternative available to IMC. Based on
the  recommendation  of the special  committee  of  independent  directors,  and
approved by the IMC Board of Directors,  the IMC Board of Directors directed IMC
to enter into the letter of intent with the Greenwich Funds at that time so long
as the Greenwich Funds would agree that IMC could continue its marketing efforts
to seek a transaction  more favorable to IMC's  shareholders  and creditors than
that  proposed  by the  Greenwich  Funds.  The  Greenwich  Funds  accepted  that
condition  and the  Greenwich  Funds  and IMC  executed  a letter  of  intent on
November 27, 1998. Entering into the letter of intent at that time satisfied the
conditions of the intercreditor agreements, and the standstill period with IMC's
warehouse lenders and BankBoston was extended to mid-January 1999.

     After IMC  entered  into the letter of intent with the  Greenwich  Funds on
November  27,  1998,   DLJ  continued  its  efforts  to  locate  an  alternative
transaction  that would be more  favorable to IMC's  shareholders  and creditors
than the transaction  outlined in the letter of intent with the Greenwich Funds.
In an effort to locate a more  favorable  transaction,  DLJ again  contacted the
entities  previously  contacted  by DLJ that were deemed to be suitable and that
had  shown  an  interest.  At the same  time,  IMC,  the  special  committee  of
independent  directors and its Board of  Directors,  in  consultation  with J.P.
Morgan and DLJ,  continued  to  analyze  other  alternatives  to  effecting  the
transaction  proposed by the Greenwich Funds including,  among other things, the
possibilities  of selling  IMC's assets or divisions and of  liquidating  IMC in
both  bankruptcy and  non-bankruptcy  scenarios.  From the time IMC's  liquidity
crisis was  identified  in  September  1998 through the date IMC entered into an
agreement  with the Greenwich  Funds,  IMC's Board of Directors met more than 15
times to consider those issues.

     In the final stages of  negotiations,  the Greenwich Funds agreed to reduce
the  percentage  of the  total  outstanding  equity  interest  in IMC  that  the
Greenwich Funds would receive as a result of the  transaction  from 95% to about
93.5% in exchange for the elimination of any right of IMC common shareholders to
receive warrants to acquire additional equity in IMC following the completion of
the transaction.


                                     - 35 -



<PAGE>



     At the same time that IMC was  negotiating  an agreement with the Greenwich
Funds,  IMC and the Greenwich Funds were also  negotiating  amended and restated
intercreditor agreements with IMC's three largest mortgage warehouse lenders and
with BankBoston.  Negotiations  between IMC and the Greenwich Funds were delayed
while the Greenwich Funds went through extensive negotiations with IMC's largest
mortgage  warehouse  lenders and  BankBoston  concerning the terms on which they
would be willing to continue the intercreditor  agreements following the signing
of an agreement for a change of control.

     During the same  period,  IMC took all steps  necessary to prepare a filing
for protection under Chapter 11 of the United States  Bankruptcy Code, which the
special  committee  of  independent  directors  and the IMC  Board of  Directors
believed would be required if the Greenwich Funds did not reach  resolution with
IMC's  creditors  and IMC did not enter  into a  definitive  agreement  with the
Greenwich  Funds. On February 11, 1999, the Greenwich Funds and IMC entered into
an  amendment  to the loan  agreement  with the  Greenwich  Funds  which made an
additional  $5  million  available  to IMC for  working  capital  purposes.  The
Greenwich  Funds  and  BankBoston  did not agree on terms  satisfactory  to both
parties for a continuation of the interceditor agreement with BankBoston, and on
February 18, 1999, the Greenwich Funds purchased,  at a discount,  $87.5 million
of secured indebtedness then owed by IMC to BankBoston.

     On February 18, 1999,  IMC entered into amended and restated  intercreditor
agreements  with its  three  largest  mortgage  warehouse  lenders  and with the
Greenwich Funds relating to the revolving  credit  facility,  the loan agreement
with the Greenwich  Funds and the amendment to the loan  agreement.  Under these
agreements,  as amended, the lenders agreed to keep their respective  facilities
in place  through  the  acquisition  and for twelve  months  thereafter,  if the
acquisition by the Greenwich Funds is consummated within five months, subject to
earlier   termination  in  certain  events  as  provided  in  the  intercreditor
agreements.  If  the  proposed  transaction  with  the  Greenwich  Funds  is not
consummated  within such  five-month  period,  after that period,  those lenders
would no longer be subject  to the  requirements  of the  amended  and  restated
intercreditor  agreements  and would be free to exercise  remedies,  if desired,
under their respective loan agreements.

     On February 16, 17 and 18, 1999,  IMC's  special  committee of  independent
directors  and IMC's Board of  Directors  held  meetings in which they  reviewed
alternatives to the Greenwich Funds proposed  transaction with IMC's management,
DLJ and J.P. Morgan. As a result of that review,  and after receiving a fairness
opinion  from J.P.  Morgan,  the  special  committee  of  independent  directors
determined  that entering into a definitive  agreement with the Greenwich  Funds
was the best  alternative  available  to IMC from the  viewpoint  of both  IMC's
shareholders and creditors and that no other  alternative was available that was
more  likely to  provide  some  value for IMC's  shareholders,  and to result in
payment in full to IMC's  creditors over time, and recommended to IMC's Board of
Directors that it approve the proposed  transaction with the Greenwich Funds. As
a result of the special committee's recommendation and discussions with DLJ, and
after receiving a fairness opinion from DLJ, IMC's Board of Directors determined
that entering into a definitive  agreement with the Greenwich Funds was the best
alternative  available to IMC from the viewpoint of both IMC's  shareholders and
creditors and that no other  alternative  was available  that was more likely to
provide some value for IMC's  shareholders,  and to result in payment in full to
IMC's creditors over time. The Board of Directors then approved a merger between
IMC and a subsidiary  wholly owned by the Greenwich Funds and adopted the merger
agreement and  recommended  that the merger  agreement be submitted to a vote of
IMC's  shareholders.  IMC entered into the merger  agreement  with the Greenwich
Funds on February 19, 1999. The merger agreement was terminated and recast as an
acquisition  agreement on March 31, 1999. The Acquisition Agreement provides for
the issuance to the Greenwich  Funds of the same  percentage of shares of common
stock directly and not pursuant to the merger  transaction  contemplated  by the
merger  agreement and  otherwise on economic  terms that are  substantially  the
same.


                                     - 36 -


<PAGE>



     Also,  on  February  19,  1999,  IMC entered  into an amended and  restated
consulting and fee agreement with an affiliate of the Greenwich  Funds.  In July
1998,  in  connection  with the initial  investment  by certain of the Greenwich
Funds in $40  million of Class A  preferred  stock of IMC,  IMC  entered  into a
consulting  and fee  agreement  with such  affiliate,  under which the affiliate
would provide financial and managerial  advisory  consulting  services in return
for an annual fee of $400,000 per year. Under the amended consulting  agreement,
the Greenwich  Funds  affiliate will be entitled to receive an additional fee of
$125,000 for the period ending July 14, 1999 and $700,000 per year thereafter.

     IMC also entered into a consulting  agreement with  Commercial  Credit,  an
affiliate of Travelers. Under this agreement,  Commercial Credit provides advice
and recommendations to the management and Board of Directors of IMC with respect
to  various  aspects  of  IMC's  business,  including  business  plans  and loan
underwriting  criteria.  Under  the  consulting  agreement,   Commercial  Credit
receives fees equal to 150% of its actual costs of providing such services.

Certain Accounting Considerations

Interest-only and Residual Certificates

The Company  purchases  and  originates  loans for the  purpose of sale  through
securitizations  and  whole  loan  sales  to  institutional   investors.   In  a
securitization  transaction,  the Company  sells a pool of  mortgages to a 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  interest-only   certificates.   The  Company
typically  retains  the rights to  service  the pool of  mortgages  owned by the
trust. 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, and
(iv) servicing fees. The Company's right to receive this excess cash flow stream
begins after the  satisfaction  of certain  over-collateralization  requirements
that  are  used  to  provide  credit   enhancement  that  is  specific  to  each
securitization transaction.

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  securitized
mortgage pools under expected loss and  prepayment  assumptions  discounted at a
market yield.  The weighted average rate used to discount the cash flows was 16%
at  December  31,  1998  based on the risks  associated  with  each  securitized
mortgage pool. The rates used to discount the cash flows  increased from a range
of 11% to 14.5% prior to October 1, 1998 to 16% after  September  30, 1998 based
on the adverse  market  conditions  and  volatility  in  asset-backed  and other
capital markets. See Note 17 of Notes to Consolidated Financial Statements.  The
Company  utilizes  prepayment and loss curves,  which the Company  believes will
approximate  the  timing  of  prepayments  and  losses  over  the  life  of  the
securitized  loans.  Prepayments on fixed rate loans  securitized by the Company
are expected to gradually increase from a constant prepayment rate ("CPR") of 4%
to 28% in the first year of the loan and remain at 28%  thereafter.  The Company
currently  expects  prepayments on adjustable  rate loans to increase  gradually
from a CPR of 4% to  35% in the  first  year  of  the  loan  and  remain  at 35%
thereafter.  The CPR measures the annualized  percentage of mortgage loans which
will be prepaid during a given period.  The CPR represents the annual prepayment
rate  over  the  year,  expressed  as  a  percentage  of  the  principal  amount
outstanding  at the beginning of the period,  without giving effect to regularly
scheduled  amortization  payments.  In 1998, the Company  revised its loss curve
assumption  used to  approximate  the  timing  of  losses  over  the life of the
securitized  loans.  The  Company  expects  losses from  defaults  to  gradually
increase from zero in the first six months of the loan to 175 basis points after
36 months.  Prior to October 1998, the loss curve assumption gradually increased
from zero in the first six months of

                                     - 37 -



<PAGE>



the loan to 100  basis  points  after 36  months.  The  revised  loss  curve and
discount rate assumptions  resulted in a decrease in the estimated fair value of
the Company's  interest-only  and residual  certificates of approximately  $32.3
million and $52.3 million,  respectively,  which  comprise the market  valuation
adjustment of $84.6 million for the year ended December 31, 1998.

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 and was adopted by the Company 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  gain on sales of loans 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 per share, respectively.

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  has  been  applied
prospectively.  SFAS 125  requires  the  Company to  allocate  the total cost of
mortgage  loans  sold  among  the  mortgage  loans  sold  (servicing  released),
interest-only  and residual  certificates  and  servicing  rights based on their
relative fair values.  The Company is required to assess the  interest-only  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   interest-only   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 application of the provisions of
SFAS 125 did not cause  earnings to differ  materially  from the results,  which
would have been reported under SFAS 122.

Gain on Sale of Loans, Net

Gain on sale of loans,  net,  which arises  primarily from  securitizations  and
loans sold to third  parties,  includes all related  revenues and direct  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
warehouse finance facilities,  which bear short-term interest rates. Ordinarily,
short-term interest rates are lower than long-term interest

                                     - 38 -



<PAGE>


rates,  and the  Company  earns net  interest  income from this  difference,  or
spread, during the period the mortgage loans are held by the Company.

Servicing Fees

The Company generally  retains servicing rights and recognizes  servicing income
from fees 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.

Other Revenues

Other  revenues  consists  primarily  of  the  recognition  of the  increase  or
accretion of the discounted  value of  interest-only  and residual  certificates
over time and prepayment penalties received from borrowers.

Transactions with ContiFinancial

Additional Securitization Transaction Expense

The Company,  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 the Company and acted as  placement  agent and
underwriter of certain  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  interest-only
and residual interest in such  securitizations.  These transactions  reduced the
Company's gain on sale of loans by  approximately  $5.5 million in 1995 and $4.2
million in 1996.  ContiFinancial  also held a warrant to  purchase  3.0  million
shares of Common Stock (subject to certain adjustments) for a de minimis amount,
of which 3.0 million shares have been issued.

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 $4.2 million and $2.6 million in the
Company's  pre-tax  income  for the  years  ended  December  31,  1995 and 1996,
respectively.  The Conti  VSA was  converted  on March  26,  1996 into an option
entitling  ContiFinancial  on exercise to approximately 18% of the equity of the
Partnership  for  a  de  minimus  amount  (the  "Conti  Option").  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.



                                     - 39 -


<PAGE>


Results of Operations

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997.

Net loss for the year ended December 31, 1998 was $100.5 million  representing a
decrease of $148.4  million or 309.8%  from net income of $47.9  million for the
year ended December 31, 1997.

The decrease in income resulted principally from an $84.6 million mark-to-market
adjustment   in  the  value  of  the   Company's   interest-only   and  residual
certificates,  of which $52.3  million  resulted  from an increase to 16% in the
discount  rate  utilized  and $32.3  million  resulted  from an increase in loss
assumptions.  The Company  revised the loss  assumption  used to approximate the
timing of losses over the life of the  securitized  loans and the discount  rate
used to present  value the  projected  cash flow  retained  by the  Company as a
result of  adverse  market  conditions  and  emerging  trends  in the  Company's
serviced loan  portfolio.  Also  contributing to the decrease in net income were
$30.8  million of interest  expense  associated  with the  transaction  with the
Greenwich  Funds and $22.4 million of hedge losses related to realized losses on
the Company's hedging instruments.  Offsetting the decrease in net income was an
increase  in gain on sale of loans of $24.9  million or 13.8% to $205.9  million
for the year ended  December  31,  1998 from  $181.0  million for the year ended
December 31, 1997 and a $4.9 million or 19.8% increase in net warehouse interest
income to $29.6 million for the year ended  December 31, 1998 from $24.7 million
for the year ended December 31, 1997. Also offsetting the decrease in net income
was a $28.3  million or 165.8%  increase in servicing  fees to $45.4 million for
the year ended  December 31, 1998 from $17.1 million for the year ended December
31,  1997 and a $24.3  million or 151.8%  increase  in other  revenues  to $40.3
million for the year ended  December  31,  1998 from $16.0  million for the year
ended December 31, 1997.

Contributing to the decrease in net income was a $42.2 million or 51.4% increase
in  compensation  and benefits to $124.2 million for the year ended December 31,
1998 from $82.1  million for the year ended  December 31,  1997,  of which $15.0
million related to the  compensation and benefits related to the acquisitions of
National Lending Center and Central Money Mortgage (which occurred in July 1997)
and  Residential  Mortgage  Corporation  and  Alternative  Capital  Group (which
occurred  during  October and November  1997,  respectively)  and the  remainder
related  primarily  to the growth of the Company  through the nine months  ended
September 30, 1998. Also  contributing to the decrease in net income was a $65.5
million or 100.8% increase in selling,  general and  administrative  expenses to
$130.5  million for the year ended  December 31, 1998 from $65.0 million for the
year ended December 31, 1997, of which $6.5 million related to the  acquisitions
of  National  Lending  Center,  Central  Money  Mortgage,  Residential  Mortgage
Corporation and Alternative Capital Group and the remainder related primarily to
the growth of the Company  through the nine months  ended  September  30,  1998.
Contributing  to the  decrease  in net income was also a $14.2  million or 99.1%
increase in other interest  expense to $28.4 million for the year ended December
31, 1998 from $14.3 million for the year ended December 31, 1997.

Net loss before taxes was  increased by a provision for income taxes of $679,000
for the year ended December 31, 1998 compared to a provision for income taxes of
$29.5  million for the year ended  December 31, 1997.  No income tax benefit has
been applied to the net loss for the year ended December 31, 1998 as the Company
determined it cannot be assured that the income tax benefit could be realized in
the future.



                                     - 40 -


<PAGE>


Revenues

The following table sets forth information regarding components of the Company's
revenues for the years ended December 31, 1997 and 1998:

                                                        For the Year
                                                     Ended December 31,
                                                  ------------------------
                                                    1997            1998
                                                  ---------      ---------
                                                       (in thousands)

     Gain on sales of loans                       $180,963       $205,924
     Warehouse interest income                     123,432        147,937
     Warehouse interest expense                    (98,720)      (118,345)
                                                  --------       --------
            Net warehouse interest income           24,712         29,592
                                                  --------       --------
      Servicing fees                                17,072         45,382
      Other                                         16,012         40,311
                                                  --------       --------
             Total revenues                       $238,759       $321,209
                                                  ========       ========
                                                              
Gain on Sales of Loans.  For the year ended December 31, 1998,  gain on sales of
loans  increased  to $205.9  million  from  $181.0  million  for the year  ended
December 31,  1997,  an increase of 13.8%.  The total  volume of loans  produced
increased by $284.0 million or 4.8% to  approximately  $6.2 billion for the year
ended December 31, 1998 compared to a total volume of approximately $5.9 billion
for the year ended  December 31, 1997.  During the year ended December 31, 1998,
as a result of its acquisitions in the year ended December 31, 1997, the Company
increased its loan production from direct lending.  During the fourth quarter of
1998,  the Company  decreased  its  correspondent  lending  activities to better
manage  its cash  flow.  Originations  by the  Company's  correspondent  network
decreased by $503.0 million or 11.6% to approximately  $3.8 billion for the year
ended  December  31,  1998 from  approximately  $4.3  billion for the year ended
December 31, 1997, while production from the Company's broker network and direct
lending  operations  increased by $787.0 million or 50.7% to approximately  $2.3
billion for the year ended December 31, 1998 from approximately $1.6 billion for
the year ended December 31, 1997.

The  Company  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.

During the year ended  December 31, 1998,  the Company  increased  the amount of
loans sold in the whole  loan  market to better  manage its cash flow.  Mortgage
loans sold in the whole loan market increased by  approximately  $1.4 billion to
approximately  $1.5  billion  or 955.2%  for the year ended  December  31,  1998
compared to  approximately  $145  million for the year ended  December 31, 1997.
Mortgage loans delivered to securitization  trusts increased by $259 million, an
increase of 5.3% to $5.1 billion for the year ended  December 31, 1998 from $4.9
billion for the year ended December 31, 1997.

The gain on the sale of loans in a  securitization  represents the present value
of the  difference  (spread)  between (i) interest  earned on the portion of the
loans sold and (ii)  interest  paid to  investors  with  related  costs over the
expected life of the loans, including expected losses,  foreclosure expenses and
a normal  servicing  fee.  The  weighted  average  rates used by the  Company to
compute the present value of the spread ranged from 11% to 14.5% during 1997 and
the nine months ended  September 30, 1998 and was 16% for the fourth  quarter of
1998. The spread is adjusted for estimated  prepayments and losses.  The Company
utilizes assumed prepayment and loss curves, which the

                                     - 41 -



<PAGE>



Company  believes will approximate the timing of prepayments and losses over the
life of the  securitized  loans.  During  the  year  ended  December  31,  1998,
prepayment  assumptions used to calculate the gain on sales of securitized loans
reflect the Company's  expectations  that  prepayments  on fixed rate loans will
gradually  increase from a constant  prepayment rate ("CPR") of 4% to 28% in the
first  year of the loan and remain at 28%  thereafter  and that  prepayments  on
adjustable  rate loans will  gradually  increase  from a CPR of 4% to 35% in the
first year of the loan and remain at 35% thereafter. During the first six months
of the year ended  December  31,  1997,  the maximum CPR used to compute gain on
sales  of  fixed  and  adjustable  rate  securitized  loans  was  27%  and  30%,
respectively. The CPR measures the annualized percentage of mortgage loans which
prepay during a given period. The CPR represents the annual prepayment rate over
the year,  expressed as a percentage  of the  principal  balance of the mortgage
loan  outstanding  at the  beginning  of the period,  without  giving  effect to
regularly  scheduled  amortization  payments.  During  the  three  months  ended
December 31, 1998,  the loss  assumption  used to calculate the gain on sales of
securitized loans reflects the Company's  expectations that losses from defaults
would gradually  increase from zero per year in the first six months of the loan
to 175 basis  points  per year after 36 months.  During  the nine  months  ended
September  30, 1998 and the year ended  December  31,  1997,  the  assumed  loss
assumption  used to calculate gain on sales of securitized  loans  reflected the
Company's  expectation  that losses from defaults would gradually  increase from
zero in the first six  months of the loan to 100 basis  points per year after 36
months. See Note 10 of Notes to Consolidated Financial Statements.

The net gain on sale of  loans as a  percentage  of loans  sold and  securitized
approximated  3.1% for the year ended December 31, 1998 compared to 3.7% for the
year ended  December 31, 1997.  The decrease in gain on sale as a percentage  of
loans sold and  securitized for the year ended December 31, 1998 compared to the
year ended  December  31, 1997 is primarily  the result of  investors  demanding
wider spreads over  treasuries  for newly issued  asset-backed  securities and a
greater  percentage of whole-loan sales in the year ended December 31, 1998. The
weighted  average  spread  over  treasuries  for the  securitization  fixed rate
transactions  the  Company  completed  during the year ended  December  31, 1998
increased   approximately   47  basis   points  or  59%  from  the  fixed   rate
securitization transactions the Company completed during the year ended December
31, 1997. The spread over  treasuries  for the  securitization  transaction  the
Company  completed  in  December  1998 was the most  unfavorable  of the fifteen
securitizations that the Company has completed in the past two years. The impact
on  gain  on  sales  of  loans  of the  widening  of  the  spreads  demanded  by
asset-backed  investors was  particularly  negative for issuers of  asset-backed
securities  which hedged their  exposure to interest rate risk through the short
sale of United States Treasury  Securities.  See Note 5 of Notes to Consolidated
Financial Statements.

The Company has  historically  sold United States Treasury  securities  short to
hedge against  interest  rate  movements  affecting the mortgage  loans held for
sale. Prior to September 1998, when interest rates decreased,  the Company would
experience a devaluation of its hedge position (requiring a cash payment, by the
Company to maintain the hedge),  which would  generally  be largely  offset by a
corresponding  increase  in the  value  of  mortgage  loans  held  for  sale and
therefore  a  higher  gain on  sale  of  loans  at the  time of  securitization.
Conversely,  when interest  rates  increased,  the Company  would  experience an
increase in the valuation in the hedge position (providing a cash payment to the
Company from the hedge  position),  which would generally be largely offset by a
corresponding  decrease in the value of mortgage loans held for sale and a lower
gain at the time of securitization.

In September,  1998,  the Company  believes  that,  primarily due to significant
volatility  in debt,  equity,  and  asset-backed  markets,  investors  increased
investments in United States  Treasury  securities and at the same time demanded
wider spreads over treasuries to acquire newly issued  asset-backed  securities.
The effect of the increased demand for the treasuries  resulted in a devaluation
of the Company's  hedge  position,  requiring  the Company to pay  approximately
$47.5 million.  This devaluation was not offset by an equivalent increase in the
gain on sale of loans at the time of securitization  because investors  demanded
wider  spreads  over  the  treasuries  to  acquire  the  Company's  asset-backed
securities. Of the $47.5 million in hedge devaluation, approximately $25 million
was closed at the

                                     - 42 -


<PAGE>



time the Company  priced two  securitizations  and was reflected as an offset to
gain on sales of loans and approximately $22.4 million was charged to operations
as a hedge loss. At December 31, 1998, the Company had no open hedge positions.

As described  above,  through  September  30, 1998 the Company has used discount
rates ranging from 11% to 14.5% to present value the difference (spread) between
(i) interest  earned on the portion of the loans sold and (ii)  interest paid to
investors  with  related  costs over the expected  life of the loans,  including
expected losses, foreclosure expenses and a normal servicing fee. As a result of
market  volatility in the  asset-backed  markets and the widening of the spreads
recently demanded by asset-backed investors to acquire newly issued asset-backed
securities,  the  discount  rates  utilized by the Company to present  value the
spread  described  above were  increased  to 16% in the fourth  quarter of 1998,
resulting  in a mark to  market  adjustment  of $52.3  million.  A change in the
discount rate of 16% used to present value the spread described above of plus or
minus 1%, 3% or 5% would  result in a  corresponding  change in the value of the
interest only and residual  certificates  at December 31, 1998 of  approximately
2.0%, 6.0% and 9.5%, respectively.

Net Warehouse  Interest Income.  Net warehouse interest income increased by $4.9
million or 19.8% to $29.6  million  for the year ended  December  31,  1998 from
$24.7  million  for the year  ended  December  31,  1997.  The  increase  in net
warehouse  interest  income was primarily due to a decrease in the cost of funds
and an increase in the average  balance of mortgages  held for sale. The average
cost of warehouse funds decreased during 1998 by approximately 6% primarily as a
result  of a  reduction  in the  spread  over  LIBOR  charged  by the  Company's
warehouse  lenders  and a decline  in the  average  LIBOR  during the year ended
December 31, 1998 compared to the average  LIBOR during the year ended  December
31, 1997.

Servicing  Fees.  Servicing  fees  increased to $45.4 million for the year ended
December 31, 1998 from $17.1  million for the year ended  December 31, 1997,  an
increase of 165.8%.  Servicing  fees for the year ended  December  31, 1998 were
positively  affected by an increase in mortgage  loans  serviced  over the prior
period.  The Company increased its average  servicing  portfolio by $4.8 billion
and $1.9 billion,  or 223.9% and 27.7%, during the years ended December 31, 1997
and 1998, respectively.

Other.  Other  revenues  increased to $40.3 million or 151.8% for the year ended
December  31,  1998 from $16.0  million  for the year ended  December  31,  1997
primarily as a result of increased  accretion  income  attributable to increased
investment in interest-only and residual  certificates and increased  prepayment
penalties from borrowers who prepay the outstanding balance of their mortgage.



                                     - 43 -



<PAGE>



Expenses

The following table sets forth information regarding components of the Company's
expenses for the year ended December 31, 1997 and 1998:

                                                          For the Year
                                                        Ended December 31,  
                                                    -----------------------
                                                      1997           1998
                                                    --------       --------
                                                        (in thousands)

     Compensation and benefits                      $ 82,051       $124,234
     Selling, general and administrative              64,999        130,547
     Other interest expense                           14,280         28,434
     Hedge loss                                           --         22,351
     Market valuation adjustment                          --         84,638
     Interest expense - Greenwich Funds                   --         30,795
                                                    --------       --------

     Total expenses                                 $161,330       $420,999
                                                    ========       ========

Compensation and benefits  increased by $42.2 million or 51.4% to $124.2 million
for the year  ended  December  31,  1998 from $82.1  million  for the year ended
December  31,  1997,  principally  due to an increase in the number of employees
related to the Company's  increased mortgage loan servicing  portfolio and $15.0
million of compensation  and benefits  relating to the  acquisitions of National
Lending  Center and Central  Money  Mortgage  (which  occurred in July 1997) and
Residential  Mortgage  Corporation and Alternative Capital Group (which occurred
in October and November 1997,  respectively).  The increase in compensation  and
benefits was partially offset by a decrease in executive bonuses of $3.2 million
during the year ended December 31, 1998 payable under employment  agreements and
stock award plans which provide  executive  bonuses based on increases in annual
net earnings per share.

Selling,  general and  administrative  expenses  increased  by $65.5  million or
100.8% to $130.5 million for the year ended December 31, 1998 from $65.0 million
for the year ended December 31, 1997 principally due to an increase in servicing
costs as a result of an increase  in mortgage  loan  servicing  portfolio,  $6.5
million relating to the  acquisitions of National Lending Center,  Central Money
Mortgage,  Residential  Mortgage  Corporation and Alternative  Capital Group, an
increase in the  provision  for loan losses of $12.5  million and an increase in
amortization  expense related to capitalized  mortgage servicing rights of $12.6
million.

Other expense  increased by $14.2 million or 99.1% to $28.4 million for the year
ended  December 31, 1998 from $14.3 million for the year ended December 31, 1997
principally as a result of increased  interest expense due to increased interest
only and residual borrowings.

Hedge  losses,  which  represent  the  realized  loss on the  Company's  hedging
instruments for the year ended December 31, 1998, increased to $22.4 million for
the year ended  December 31, 1998 from $0 for the year ended  December 31, 1997.
The Company has historically  hedged the interest rate risk on loan purchases by
selling short United States Treasury  Securities which match the duration of the
fixed rate  mortgage  loans held for sale and  borrowing  the  securities  under
agreements to resell.  In October 1998,  the Company  closed its short  treasury
positions,  and is not  currently  hedging  its  mortgage  loans  held for sale.
Approximately $25 million of the realized loss in these

                                     - 44 -


<PAGE>


hedge  transactions in September 1998 was recognized upon  securitization  as an
adjustment to the carrying value of the hedged mortgage loans and is included in
the net gain on sale for the year ended  December 31, 1998.  Realized  losses in
these  instruments of $22.4 million related to hedge positions which were closed
in September and October 1998 unrelated to a securitization transaction and were
recognized as a hedge loss. Prior to September, 1998, unrealized losses on hedge
instruments were deferred and recognized upon securitization as an adjustment to
the carrying value of the hedged mortgage loans.

Market valuation adjustment, which represents the realized loss on the Company's
interest-only  and residual  certificates  for the year ended December 31, 1998,
increased to $84.6 million for the year ended  December 31, 1998 from $0 for the
year ended December 31, 1997.

In 1998, the Company  revised the loss assumption used to approximate the timing
of losses over the life of the  securitized  loans and the discount rate used to
present value the projected  cash flow retained by the Company.  Previously  the
Company  expected  losses from  defaults to gradually  increase from zero in the
first six months of securitization  to 100 basis points after 36 months.  During
the fourth  quarter of 1998,  as a result of adverse  market  conditions  in the
non-conforming  mortgage industry and emerging trends in the Company's  serviced
loan  portfolio,  the Company  revised its loss curve so that expected  defaults
gradually  increase from zero in the first six months of  securitization  to 175
basis points after 36 months. The Company believes the adverse market conditions
affecting  the   non-conforming   mortgage  industry  may  limit  the  Company's
borrowers' ability to refinance existing  delinquent  mortgage loans serviced by
IMC with other  non-conforming  mortgage  lenders that market their  products to
borrowers  that  are  less  credit-worthy  and may  increase  the  frequency  of
defaults. Previously, the Company discounted the present value of projected cash
flows  retained  by the  Company at discount  rates  ranging  from 11% to 14.5%.
During the fourth quarter of 1998, as a result of adverse market conditions, the
Company  adjusted to 16% the discount  rate used to present  value the projected
cash  flow  retained  by  the  Company  (see  Notes  3,  5 and  17 of  Notes  to
Consolidated  Financial  Statements).  The revised loss curve and discount  rate
assumptions  resulted  in  a  decrease  in  the  estimated  fair  value  of  the
interest-only and residual certificates of approximately $32.3 million and $52.3
million, respectively,  which comprises the market valuation adjustment of $84.6
million for the year ended December 31, 1998.

Interest  expense -  Greenwich  Funds  represents  costs  associated  with a $33
million  standby  revolving  credit  facility  dated as of October  12, 1998 and
entered  into by Greenwich  Funds and the Company on October 15, 1998.  Interest
expense  related to the transaction  with the Greenwich  Funds includes  accrued
interest at 10%,  amortization of a $3.3 million commitment fee, amortization of
the value  attributable to the Class C exchangeable  preferred stock issued, and
amortization  of  the  value  assigned  to  the  beneficial  conversion  feature
associated  with the Exchange  Option in favor of the Greenwich  Funds under the
terms of the standby  revolving  credit  facility (See Notes 3 and 4 of Notes to
Consolidated Financial Statements).

Income Taxes.  The  provision  for income taxes for the year ended  December 31,
1998 was approximately  $679,000 or 0%, which differed from the federal tax rate
35% primarily due to state income taxes, the  non-deductibility for tax purposes
of a portion  of  interest  expense -  Greenwich  Funds,  amortization  expenses
related to  goodwill  and a full  valuation  allowance  established  against the
deferred tax asset (see Note 12 of Notes to Consolidated Financial Statements).



                                     - 45 -



<PAGE>


Year Ended December 31,1997 Compared to Year Ended December 31, 1996

Net income for the year ended  December 31, 1997 was $47.9 million  representing
an  increase  of $30.0  million  or 167.3%  over pro  forma net  income of $17.9
million for the year ended December 31, 1996. 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 net income  resulted  principally  from increases in net gain on
sale of loans of $138.9  million or 330.1% to $181.0  million for the year ended
December 31, 1997 from $42.1 million for the year ended December 31, 1996.  Also
contributing  to the  increase  in net  income  was an  $11.8  million  or 91.1%
increase in net  warehouse  interest  income to $24.7 million for the year ended
December  31, 1997 from $12.9  million for the year ended  December  31, 1996, a
$11.5 million or 206.9% increase in servicing fees to $17.1 million for the year
ended  December 31, 1997 from $5.6 million for the year ended  December 31, 1996
and an $10.9 million or 214.5%  increase in other  revenues to $16.0 million for
the year ended  December 31, 1997 from  $5.1million  for the year ended December
31, 1996.

The  increase  in  income  was  partially  offset by a $66.0  million  or 412.6%
increase  in  compensation  and  benefits  to $82.1  million  for the year ended
December 31, 1997 from $16.0  million for the year ended  December 31, 1996,  of
which $48.9  million  consisted of  compensation  and  benefits  relating to the
acquisitions of Mortgage America, CoreWest, Equity Mortgage, American Reduction,
National   Lending  Center,   Central  Money  Mortgage,   Residential   Mortgage
Corporation and Alternative Capital Group (collectively, the "Acquisitions") and
the remainder  related  primarily to the growth of the Company.  The increase in
income  was also  partially  offset by a $49.3  million  or 315.3%  increase  in
selling, general and administrative expenses to $65.0 million for the year ended
December 31, 1997 from $15.7  million for the year ended  December 31, 1996,  of
which increase $27.9 million  consisted of expenses relating to the Acquisitions
for the year ended December 31, 1997 and the remainder  related primarily to the
growth of the  Company.  The  increase in income was  further  offset by a $12.0
million or 515.1%  increase in other  interest  expense to $14.3 million for the
year ended  December 31, 1997 from $2.3 million for the year ended  December 31,
1996.  Finally,  income  for the year  ended  December  31,  1997 was  favorably
affected by a $2.6  million or 100%  decrease  in the  sharing of  proportionate
value of equity representing the Conti VSA to $0 for the year ended December 31,
1997 from $2.6 million for the year ended December 31, 1996.

Income before taxes was reduced by a provision for income taxes of $29.5 million
for the year ended  December  31,  1997  compared to a pro forma  provision  for
income taxes of $11.2 million for the year ended December 31, 1996, representing
an effective  tax rate of  approximately  38.1% for the year ended  December 31,
1997.  The  provisions  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.


                                     - 46 -



<PAGE>


Revenues

The following table sets forth information regarding components of the Company's
revenues for the year ended December 31, 1996 and 1997:

                                                             For the Year
                                                          Ended December 31, 
                                                       ------------------------
                                                         1996           1997
                                                       ---------      ---------
                                                            (in thousands)
Revenues:
     Gain on sales of loans                            $  46,230      $ 180,963
     Additional securitization transaction expense        (4,158)            --
                                                       ---------      ---------
             Gain on sale of loans, net                   42,072        180,963
                                                       ---------      ---------
     Warehouse interest income                            37,463        123,432
     Warehouse interest expense                          (24,535)       (98,720)
                                                                      ---------
             Net warehouse interest income                12,928         24,712
                                                       ---------      ---------
     Servicing fees                                        5,562         17,072
             Other                                         5,092         16,012
                                                       ---------      ---------
              Total revenues                           $  65,654      $ 238,759
                                                       =========      =========

Gain on Sale of Loans, Net.

For the year ended December 31, 1997,  gain on sale of loans increased to $181.0
million from $46.2 million for the year ended  December 31, 1996, an increase of
291.4%,  reflecting  increased loan production and  securitizations for the year
ended December 31, 1997. Additional  securitization  expense decreased to $0 for
the year ended  December 31, 1997 from $4.2 million for the year ended  December
31, 1996.  For the year ended  December 31,  1997,  gain on sale of loans,  net,
increased to $181.0  million from $42.1 million for the year ended  December 31,
1996,  an  increase  of  330.1%,   reflecting   increased  loan  production  and
securitizations in the year ended December 31, 1997.

The total volume of loans  produced  increased by 232.9% to  approximately  $5.9
billion for the year ended  December  31, 1997  compared  with a total volume of
$1.8 billion for the year ended December 31, 1996. Originations by the Company's
correspondent  network  increased  174.5%  to $4.3  billion  for the year  ended
December 31, 1997 from $1.6 billion for the year ended December 31, 1996,  while
production  from the  Company's  broker  network and direct  lending  operations
increased to $1.6 billion or 725% for the year ended December 31, 1997 from $188
million for the year ended December 31, 1996. Production volume increased during
the 1997 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 Acquisitions,  which accounted for approximately  $1.2
billion in residential  mortgage loans originated during the year ended December
31, 1997.

The gain on sale as a percentage of loans sold and securitized decreased to 3.7%
for the year ended  December 31, 1997 from 4.4% for the year ended  December 31,
1996.  The  decrease in the gain on sale  percentage  was  primarily  due to the
increase in  securitization  of adjustable rate mortgage loans,  higher premiums
paid  on  loan  production  and  higher  prepayment  speed  assumptions  used to
calculate the gain on sale of securitized  loans.  In 1996,  less than 2% of the
$935 million  mortgage  loans  securitized by the Company were  adjustable  rate
mortgages.  In 1997,  approximately  $1.7  billion  or 34% of the  $4.9  billion
mortgage loans  securitized by the Company were adjustable  rate mortgages.  The
prepayment  curve  utilized  by the  Company  to  recognize  the gain on sale of
securitized fixed

                                     - 47 -


<PAGE>



rate loans  reaches a maximum  CPR of 28% as compared  to the  prepayment  curve
utilized to recognize the gain on sale of adjustable rate loans, which reaches a
maximum CPR of 35%. The higher prepayment  assumption for adjustable rate loans,
which is based on historical  adjustable rate loan prepayment patterns,  results
in the  recognition of a lower gain on sale for  adjustable  rate loans than for
fixed rate loans.  The average premium paid for loan production was 5.0% for the
year ended  December 31, 1996  compared to 5.3% for the year ended  December 31,
1997.  The maximum CPR assumed for fixed mortgage  loans  securitized  increased
from 26% for the year ended  December 31, 1996 to 28% (35% for  adjustable  rate
mortgage  loans) for the year ended  December 31, 1997. The decrease in the gain
on  sale  percentage  was  partially  offset  by  an  increase  in  retail  loan
production.   Upfront  points  and  origination  fees  related  to  retail  loan
production  are  recognized as gain on sale at the time the loan is sold.  Total
retail  production  increased from  approximately $67 million for the year ended
December 31, 1996 to approximately  $769 million for the year ended December 31,
1997.

Net Warehouse Interest Income

Net  warehouse  interest  income  increased to $24.7  million for the year ended
December 31, 1997 from $12.9  million for the year ended  December 31, 1996,  an
increase of 91.1%.  The increase in the year ended  December 31, 1997  reflected
higher  interest  income  resulting   primarily  from  increased  mortgage  loan
production  and mortgage  loans held for sale in inventory for longer periods of
time, partially offset by interest expense associated with warehouse facilities.
The mortgage loans held for sale increased to $1.7 billion at December 31, 1997,
an increase of 82.9%, from $914.6 million at December 31, 1996.

The  increase  in net  warehouse  interest  income  was  partially  offset by an
increase in the  securitization  of adjustable  rate mortgage  loans. In a fixed
rate  mortgage  loan  securitization  transaction,   the  Company  receives  the
pass-through rate of interest on the loans conveyed to the securitization  trust
for the period between the cut-off date  (generally the first day of the month a
securitization  transaction  occurs) and the closing date of the  securitization
transaction  (typically  during the third week of the month).  The cut-off  date
represents  the  date  when  interest  on  the  mortgage  loans  accrues  to the
securitization  trust rather than the Company.  The pass-through  rate, which is
less than the weighted average  interest rate on the mortgage loans,  represents
the  interest  rate  to  be  received  by  investors  who  purchase  passthrough
certificates  in the  securitization  trust on the  closing  date.  The  Company
continues to incur interest expense on its warehouse financings related to loans
conveyed to the trust until the closing date,  at which time the warehouse  line
is repaid.  In an  adjustable  rate mortgage  loan  securitization,  the Company
receives no interest on mortgage loans conveyed to the securitization  trust for
the period between the cut-off date and the closing date of the  securitization.
For the year ended December 31, 1997, the Company  incurred  warehouse  interest
expense of approximately  $6.9 million related to the period between the cut-off
date and the closing date of adjustable rate mortgage loan  securitizations  for
which no  corresponding  interest  income was  recognized.  The  Company  had an
insignificant  amount of warehouse  interest  expense related to adjustable rate
mortgage loans securitized in 1996.

Servicing Fees

Servicing  fees  increased to $17.1 million for the year ended December 31, 1997
from $5.6 million for the year ended  December 31, 1996,  an increase of 206.9%.
Servicing fees for the year ended December 31, 1997 were positively  affected by
an  increase in  mortgage  loans  serviced  over the prior  period.  The Company
increased its  servicing  portfolio by $4.9 billion or 233.3% to $7.0 billion as
of December 31, 1997 from $2.1 billion as of December 31, 1996.


                                     - 48 -


<PAGE>


Other

Other  revenues,  consisting  principally of the  recognition of the increase or
accretion  of the  discounted  value of interest on  interest-only  and residual
certificates, over time, and prepayment penalties, increased to $16.0 million or
214.5% for the year ended  December 31, 1997 from $5.1 million in the year ended
December 31, 1996 as a result of increased  securitization volume and investment
in interest-only and residual certificates.

Expenses

The following table sets forth information regarding components of the Company's
expenses for the year ended December 31, 1996 and 1997:

                                                           For the Year
                                                        Ended December 31,
                                                      ---------------------
                                                        1996         1997
                                                      --------     --------
                                                         (in thousands)

     Compensation and benefits                        $ 16,007     $ 82,051
     Selling, general and administrative expenses       15,652       64,999
     Other interest expense                              2,321       14,280
     Sharing of proportioante value of equity            2,555            0
                                                      --------     --------
                    Total expenses                    $ 36,535     $161,330
                                                      ========     ========


Compensation and benefits  increased by $66.0 million or 412.6% to $82.1 million
for the year  ended  December  31,  1997 from $16.0  million  for the year ended
December  31,  1996,  principally  due to an increase in the number of employees
related to the Company's  increased  mortgage loan  production,  including $48.9
million of compensation and benefits relating to the Acquisitions,  additions of
personnel to service the Company's  increased  loan servicing  portfolio,  and a
$2.4 million increase in executive incentive  compensation from $2.6 million for
the year ended December 31, 1996 to $5.0 million for the year ended December 31,
1997. The Company's  compensation  and benefits  should  increase if the Company
expands;  however,  the  amount of  executive  bonuses  is  directly  related to
increases in the Company's earnings per share.

Selling,  general and  administrative  expenses  increased  by $49.3  million or
315.3% to $65.0 million for the year ended  December 31, 1997 from $15.7 million
for the year ended December 31, 1996.  Excluding  $27.9 million of  compensation
and benefits relating to the  Acquisitions,  the increase was principally due to
an increase in  underwriting,  originating and servicing costs as a result of an
increase in the volume of mortgage loan production,  an increase in amortization
expense  related to  capitalized  servicing  rights of $4.7  million and a $10.4
million increase in the provision for loan losses.

Other interest expense increased by $12.0 million or 515.3% to $14.3 million for
the year ended  December 31, 1997 from $2.3 million for the year ended  December
31, 1996 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 $0 for the year ended  December 31, 1997 from
$2.6 million for the year ended December 31, 1996.  The Company's  obligation to
make payments under the Conti VSA terminated in March 1996.


                                     - 49 -


<PAGE>


Pro Forma Income Taxes

The  effective  income  tax  rate  for the  year  ended  December  31,  1997 was
approximately  38.1%,  which differed from the federal tax rate of 35% primarily
due to state income  taxes.  The increase in the  provision  for income taxes of
$18.3  million or 163.6% to $29.5  million for the year ended  December 31, 1997
from the pro forma  provision  for income  taxes of $11.2  million  for the year
ended December 31, 1996 was proportionate to the increase in pre-tax income. The
provision for income taxes prior to June 24, 1996 is a pro forma amount  because
prior to that date the  Company  operated as a  partnership  and did not pay any
income taxes.

Financial Condition

December 31, 1998 Compared to December 31, 1997

Prior to October 1998, the Company  hedged,  in part, its interest rate exposure
on fixed-rate  mortgage  loans held for sale through the use of securities  sold
but not yet  purchased  and  securities  purchased  under  agreements to resell.
Securities purchased under agreements to resell decreased $772.6 million or 100%
from $772.6  million at December 31, 1997 to $0 million at December 31, 1998 and
securities  sold but not yet purchased  decreased  $775.3 million or 100.0% from
$775.3  million at December  31, 1997 to $0 million at December  31,  1998.  The
Company stopped hedging its new loan production during the third quarter of 1998
and in October 1998 the Company closed its short  treasury  positions and is not
currently hedging its mortgage loans held for sale.

Mortgage  loans  held for sale at  December  31,  1998 were  $946.4  million,  a
decrease of $726.7  million or 43.4% from  mortgage  loans held for sale of $1.7
billion at December  31, 1997.  Included in mortgages  held for sale at December
31,  1998  and  December  31,  1997  were  $84.6  million  and  $53.9   million,
respectively,  of mortgage loans which were not eligible for  securitization due
to delinquency and other factors (loans under review).  The amount by which cost
exceeds  market  value on loans  under  review 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. The valuation  allowances at December 31,
1998 and December 31, 1997 were $24.0 million and $11.5 million, respectively.

Accounts  receivable  increased  $23.3  million or 109.2% from $21.3  million at
December 31, 1997 to $44.7  million at December 31,  1998,  primarily  due to an
increase in  servicing  advances of $21.5  million.  The  increase in  servicing
advances was due to an overall  dollar  increase in  delinquencies  from 1997 to
1998 as the Company's servicing portfolio increases and matures. As the servicer
for the  securitization  trusts,  the  Company is  required  to advance  certain
principal,   interest  and  escrow  amounts  to  the  securitization  trust  for
delinquent mortgagors and to pay expenses related to foreclosure activities. The
Company then collects the amounts from the  mortgagors or from the proceeds from
liquidation  of  foreclosed  properties.  The Company  expects the total  dollar
amount of delinquencies to increase in future periods as the servicing portfolio
increases and securitization pools continue to mature.

Interest-only  and  residual  certificates  at  December  31,  1998 were  $468.8
million, representing an increase of $245.5 million or 110.0% from interest-only
and residual  certificates  of $223.3  million at December  31,  1997.  Mortgage
servicing rights increased $17.4 million or 49.9% from $35.0 million at December
31,  1997 to $52.4  million at  December  31,  1998.  The  increase  in mortgage
servicing  rights  consists  of  capitalization  of $35.9  million of  servicing
rights,  offset by amortization of $18.5 million. The increases in interest-only
and residual  certificates and mortgage servicing rights resulted primarily from
the  securitization  of $5.1  billion in  mortgage  loans in seven  transactions
during the year ended  December 31,  1998.  The  increase in  interest-only  and
residual  certificates  was  offset by a market  valuation  adjustment  of $84.6
million resulting from the Company's  revision of the loss curve assumption used
to approximate the timing of losses over the life of the  securitized  loans and
an increase in the

                                     - 50 -


<PAGE>



discount  rate used to present  value the  projected  cash flow  retained by the
Company. See Note 10 of Notes to Consolidated Financial Statements.

Warehouse  financings due from  correspondents  decreased $23.1 million or 89.2%
from $25.9 million at December 31, 1997 to $2.8 million at December 31, 1998 due
to  a  decrease  in  committed  warehouse  financing  the  Company  provided  to
correspondents as a result of the Company's severely reduced liquidity.

Goodwill decreased $2.3 million from $92.0 million at December 31, 1997 to $89.6
million at  December  31, 1998 due to  amortization  of $4.0  million  partially
offset by  contingent  earnout  payments of $1.6  million  primarily  related to
Mortgage Central Corp. and National Lending Center.  Goodwill is being amortized
on a  straight-line  basis over periods from five to thirty  years.  The Company
reviews the potential impairment of goodwill on a non-discounted cash flow basis
to assess recoverability. The Company determined that there was no impairment of
goodwill at December 31, 1998 based on the projected  cash flows of the acquired
companies.  However,  potential  impairment  in future  periods  may result from
several  factors,  including the proposed  transaction with the Greenwich Funds,
the  discontinuation  of operations or sale of certain  acquired  companies,  or
other factors  including  turmoil in the financial markets in which the acquired
companies and the Company operate.

Borrowings under warehouse financing facilities at December 31, 1998 were $984.6
million,  a  decrease  of  $748.0  million  or 43.2%  from  warehouse  financing
facilities  of $1.7 billion at December 31, 1997.  This decrease was a result of
decreased  mortgage  loans held for sale,  caused by IMC's  significant  lenders
imposing  restrictions on the availability of fundings to IMC. See " - Liquidity
and Capital Resources" and Note 3 of Notes to Consolidated Financial Statements.

Term  debt  and  notes  payable  at  December  31,  1998  was  $432.7   million,
representing  an increase  of $302.3  million or 231.7% from term debt and notes
payable of $130.5  million at December 31, 1997.  This  increase was primarily a
result of financing the increase in interest-only and residual certificates,  an
increase of $87.5 million in outstanding  borrowings under the Company's working
capital  line of credit,  and $27.6  million  outstanding  under the $33 million
credit facility  provided by the Greenwich Funds, net of a $3.0 million discount
related to the issuance of Class C preferred stock.

Accounts payable and accrued  liabilities  decreased $16.4 million or 51.7% from
$31.7  million at December  31,  1997 to $15.3  million at  December  31,  1998,
primarily  due to  payment  of  accrued  contingent  stock  payments  related to
acquisitions and a $3.2 million decrease in accrued incentive compensation.

The  Company's  net  deferred  tax asset of $33.6  million  was offset by a full
valuation allowance and after the offset, represents a decrease of $10.9 million
from a deferred  tax  liability  of $10.9  million  at  December  31,  1997 to a
deferred tax asset, after valuation  allowance,  of $0 at December 31, 1998. The
decrease is primarily due to temporary  differences in the recognition of market
valuation  adjustments,  income  related  to  the  Company's  interest-only  and
residual  certificates for income tax purposes and a full valuation allowance on
the deferred tax asset.

Redeemable  preferred  stock,  consisting of Class A ($19.0 million) and Class C
($18.3  million),  was $37.3  million at  December  31,  1998  compared to $0 at
December  31,  1997.  In July  1998,  the  Company  sold $50  million of Class A
redeemable preferred stock to certain of the Greenwich Funds and Travelers.  The
Class A redeemable  preferred stock was convertible into  non-registered  common
stock at $10.44  per  share.  As  described  in Note 4 of Notes to  Consolidated
Financial Statements, the conversion feature was eliminated in October 1998. The
elimination  of the  conversion  feature  resulted  in a discount to the Class A
redeemable preferred stock of approximately $32 million,

                                     - 51 -


<PAGE>



which was charged to paid in capital and is being  accreted to  preferred  stock
until the mandatory redemption dates beginning in 2008.

In October 1998,  the Company issued  23,760.758  shares of Class C exchangeable
preferred  stock to certain of the  Greenwich  Funds in  conjunction  with a $33
million credit facility  provided by certain of the Greenwich Funds as described
in Note 4 of Notes to Consolidated Financial Statements. The preferred stock was
recorded at $18.3  million  based on an  allocation of the proceeds from the $33
million credit facility.

Stockholders'  equity as of December 31, 1998 was $210.6 million,  a decrease of
$43.5 million over stockholders'  equity of $254.1 million at December 31, 1997.
Stockholders equity primarily increased for the year ended December 31, 1998 for
common stock issued under  earn-out  arrangements  of $7.1 million,  issuance of
debt with beneficial  conversion feature of $18.2 million and elimination of the
conversion  feature  on the  Class A  preferred  stock  of  $32.4  million,  and
decreased as a result of a net loss of $100.5 million.

December 31, 1997 Compared to December 31, 1996

The Company hedged,  in part, its interest rate exposure on fixed-rate  mortgage
loans held for sale through the use of securities sold but not yet purchased and
securities  purchased  under  agreements to resell.  Securities  purchased under
agreements to resell  increased  $113.1  million or 17.1% from $659.5 million at
December 31, 1996 to $772.6 million at December 31, 1997 and securities sold but
not yet  purchased  increased  $114.3  million or 17.3% from  $661.1  million at
December 31, 1996 to $775.3  million at December  31, 1997 due  primarily to the
increase in  fixed-rate  mortgage  loans held for sale at  December  31, 1997 as
compared to December 31, 1996.

Mortgage   loans  held  for  sale  at  December  31,  1997  were  $1.7  billion,
representing an increase of $758.6 million or 82.9% over mortgage loans held for
sale of $914.6  million at December 31, 1996.  This increase was a result of the
Company's  strategy at the time to increase its net warehouse interest income by
increasing  its balance of  mortgage  loans held for sale.  The  increase in the
volume of loan originations,  allowing the Company to increase its net warehouse
interest  income,  was a result of increased loans purchases and originations as
the Company expanded into new states,  loan  originations  from the Acquisitions
since their effective dates and increased  purchasing and origination efforts in
states in which the Company had an existing market presence.

Accounts  receivable  increased  $18.6  million or 669.1%  from $2.8  million at
December  31, 1996 to $21.3  million at December  31, 1997  primarily  due to an
increase in servicing advances of $8.0 million,  receivables from securitization
transactions  of $4.2  million,  and $2.6 million  related to the  Acquisitions.
Receivables  from   securitization   transactions   reflect   short-term  timing
differences  in  receiving  amounts  due from  the  securitization  trusts.  The
increase in servicing advances was due to an increase in advances by the Company
on loans it services due to an overall  dollar  increase in  delinquencies  from
1996 to 1997 as the Company's  servicing portfolio increases and matures. As the
servicer  for the  securitization  trusts,  the  Company is  required to advance
certain principal,  interest and escrow amounts to the securitization trusts for
delinquent  mortgagors.  The Company then collects the past due amounts from the
mortgagors or from the proceeds from liquidation of foreclosed  properties.  The
Company expects the overall dollar amount of delinquencies to increase in future
periods as the servicing portfolio  increases and securitization  pools continue
to mature.

Interest-only  and  residual  certificates  at  December  31,  1997 were  $223.3
million, representing an increase of $137.1 million or 158.9% over interest-only
and residual  certificates  of $86.2 million at December 31, 1996. This increase
was a result of the Company completing eight  securitizations  during the twelve
months ended  December 31, 1997 for an aggregate of $4.9  billion.  The increase
was  offset by the sale on a  non-recourse  basis of certain  interest-only  and
residual  certificates  that had a net book value of $267 million.  The sale was
effected through a securitization

                                     - 52 -


<PAGE>



(the  "Excess   Cashflow   Securitization")   by  which  the  Company   received
approximately  $228 million of net cash proceeds,  or  approximately  85% of the
estimated net book value, and retained a subordinated  residual  certificate for
the  remaining  balance.  The Company  used the net proceeds to retire or reduce
certain term debt.  Mortgage  servicing rights increased $28.3 million or 427.9%
from $6.6 million at December 31, 1996 to $35.0 million at December 31, 1997 due
to the  increase  in the  Company's  securitization  volume  for the year  ended
December 31, 1997  compared to December 31, 1996.  The increase  consists of the
capitalization  of $34.3 million of servicing  rights offset by  amortization of
$5.9 million.

Warehouse  financings due from correspondents  increased $20.9 million or 413.6%
from $5.0 million at December 31, 1996 to $25.9 million at December 31, 1997 due
to a $27.5  million  increase  in  committed  warehouse  financing  provided  to
correspondents as a result the addition of new correspondents and an increase in
the utilization of such lines by the correspondents.

Property,  furniture,  fixtures and equipment  increased $13.2 million or 787.5%
from $1.7  million at December  31, 1996 to $14.9  million at December  31, 1997
primarily  due to $5.1 million  related to the purchase  and  renovation  of the
Company's  corporate  headquarters  building  and $5.4  million  related  to the
Acquisitions.

Goodwill increased $90.1 million from $1.8 million at December 31, 1996 to $92.0
million at December 31, 1997 due to the  recording of $87.0  million of costs in
excess of fair value of net assets acquired in acquisition transactions and $5.8
related to contingent payment accruals related to acquisitions. The increase was
offset  by  amortization  of $2.7  million.  Goodwill  is being  amortized  on a
straight-line basis over periods from five to thirty years.

Borrowings under warehouse  financing  facilities at December 31, 1997 were $1.7
billion,  representing  an  increase of $837.5  million or 93.6% over  warehouse
financing facilities of $895.1 million at December 31, 1996. This increase was a
result of  increased  mortgage  loans  held for sale and higher  utilization  of
warehouse  financing  facilities  which fund a portion of the  premiums  paid on
loans purchased.

Term debt at December 31, 1997 was $112.3  million,  representing an increase of
$64.9  million or 136.8% over term debt of $47.4  million at December  31, 1996.
This increase was primarily a result of financing the increase in  interest-only
and residual certificates.

Notes  payable  increased  $18.2  million  from $0 at December 31, 1996 to $18.2
million  at  December  31,  1997 due to $13.2  million in notes  payable  issued
related to an  acquisition  and a $5.0 million  mortgage  note payable  obtained
subsequent  to  the  purchase  and   renovation   of  the  Company's   corporate
headquarters building.

Accounts payable and accrued liabilities  increased $23.9 million or 307.7% from
$7.8  million at  December  31,  1996 to $31.7  million  at  December  31,  1997
primarily due to accrual of contingent stock payments related to acquisitions of
$5.8 million,  accruals for  securitization  obligations of $5.9 million, a $2.4
million increase in incentive  compensation accruals and $6.1 million related to
the  Acquisitions.  Accruals for  securitization  obligations  represent  timing
differences on amounts due to the securitization trusts.

The  Company's  net deferred tax  liability  increased  $13.7 million from a net
deferred  tax asset of $2.7  million at December  31, 1996 to a net deferred tax
liability of $10.9 million at December 31, 1997 primarily due to the structuring
of certain securitization transactions to allow debt treatment for tax purposes.

Stockholder's equity as of December 31, 1997 was $254.1 million, representing an
increase of $164.7 million over stockholders equity of $89.3 million at December
31,  1996.  This  increase was  primarily a result of proceeds of  approximately
$58.0  million  from  the sale of  5,040,000  shares  of  common  stock  (net of
underwriting discount and

                                     - 53 -

<PAGE>


expenses  associated  with the  offering),  common stock  issued in  acquisition
transactions and net income for the year ended December 31, 1997.

Liquidity and Capital Resources

During  1998,  the  Company  used 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 and term debt
facilities to meet its working  capital needs.  The Company's cash  requirements
during 1998 included the funding of loan purchases and originations,  payment of
interest   costs,   funding   of    over-collateralization    requirements   for
securitizations,  maintaining  hedge positions (prior to October 1998),  meeting
margin calls, operating expenses, income taxes and capital expenditures.

The Company has an ongoing  need for  substantial  amounts of capital.  Adequate
credit facilities and other sources of funding are essential to the continuation
of the Company's  ability to purchase and originate loans. The Company typically
has operated,  and expects to continue to operate,  on a negative operating cash
flow basis.  During the year ended December 31, 1998, the Company  received cash
flows from operating  activities of $390.3 million, an increase of $1.3 billion,
or 144.4%, from cash flows used in operating activities of $878.4 million during
the year ended December 31, 1997.  During the year ended December 31, 1998, cash
flows  used by the  Company in  financing  activities  were  $391.0  million,  a
decrease  of $1.3  billion or 142.7%  from cash flows  received  from  financing
activities of $916.4  billion  during the year ended December 31, 1997. The cash
flows  received  from  operating  activities  related  primarily  to the sale of
mortgage loans held for sale and cash flows used in financing activities related
primarily to the repayment of warehouse finance facilities borrowings.

Significant  cash  outflows  are incurred  upon the closing of a  securitization
transaction;  however, the Company does not receive a significant portion of the
cash representing the gain until later periods when the related loans are repaid
or otherwise  collected.  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.

During the year ended December 31, 1998, debt,  equity and asset-backed  markets
were  extremely  volatile,  effectively  denying the Company  access to publicly
traded debt and equity markets to fund cash needs. Additionally, the spread over
treasury  securities  demanded by investors to acquire newly issued asset-backed
securities  widened,  resulting in less  profitable  gain on sales of loans sold
through  securitization.  The Company has  responded by reducing the premium the
Company pays to  correspondents  and brokers to acquire loans, but the reduction
of  premiums  in the  future  may not  offset  the  wider  spreads  demanded  by
investors.  Investors may not continue to invest in  asset-backed  securities at
all.

As a result of these adverse market  conditions,  among other things, in October
1998 the Company entered into intercreditor  arrangements with Paine Webber Real
Estate  Securities,  Inc. (Paine Webber),  Bear Stearns Home Equity Trust 1996-1
(Bear Stearns) and Aspen Funding Corp. and German American Capital  Corporation,
subsidiaries   of  Deutsche   Bank  of  North  America   Holding   Corp.   (DMG)
(collectively,  the  "Significant  Lenders"),  which held  $3.25  billion of the
Company's  available  warehouse lines and $294.2 of the Company's  interest-only
and residual  financing at December 31,  1998.  The  intercreditor  arrangements
provided  for the  Significant  Lenders  to  "standstill"  and keep  outstanding
balances under their facilities in place, subject to certain conditions,  for up
to 90 days (which expired  mid-January 1999) in order for the Company to explore
its financial alternatives.  The intercreditor agreements also provided, subject
to  certain  conditions,  that the  lenders  would not issue  any  margin  calls
requesting  additional  collateral  be delivered  to the lenders.  See Note 3 of
Notes to Consolidated Financial Statements.


                                     - 54 -


<PAGE>


In mid-January 1999, the original intercreditor agreements expired;  however, on
February 19, 1999,  concurrent with the execution of the  Acquisition  Agreement
described in Note 17 of Notes to Consolidated Financial Statements,  the Company
entered into amended and restated intercreditor  agreements with the Significant
Lenders.   Under  the  amended  and  restated  intercreditor   agreements,   the
Significant Lenders agreed to keep their respective  facilities in place through
the closing under the  Acquisition  Agreement if the closing  occurs within five
months and for twelve  months  thereafter,  subject  to earlier  termination  in
certain  events.  If the  acquisition  is not  consummated  within a five  month
period,  after that period,  those lenders would not be required to refrain from
exercising  remedies.  The intercreditor  agreements require the Company to make
various amortization  payments on the underlying debt before, upon and after the
closing of the acquisition.  Failure to make the required  payments would permit
the   Significant   Lenders  to  terminate  the  standstill   period  under  the
intercreditor agreements and to exercise remedies. The Company anticipates using
the  proceeds  of the  additional  loans to be made  under the  Greenwich  Funds
facility upon closing of the acquisition to fund certain of these payments.

None of the three Significant  Lenders has formally reduced the amount available
under its  facilities,  but each has  informally  indicated  its desire that the
Company keep the average  amount  outstanding on the warehouse  facilities  well
below the  amount  available.  There can be no  assurance  that the  Significant
Lenders will  continue to fund the Company under their  uncommitted  facilities.
See Notes 3 and 17 of Notes to Consolidated Financial Statements.

At December 31, 1998, the Company had a $1.25 billion uncommitted  warehouse and
residual  financing  facility with Paine Webber.  This warehouse  facility bears
interest  at  rates   ranging  from  LIBOR  plus  0.65%  to  LIBOR  plus  0.90%.
Approximately  $110 million was outstanding under this warehouse  facility as of
December 31, 1998. The Company has informally requested that Paine Webber permit
funding of an additional  $200 million under its warehouse  facilities,  but has
not yet been notified if the request has been approved.

At December 31, 1998, the Company also had a $1.0 billion uncommitted  warehouse
facility with Bear Stearns.  This facility  bears  interest at LIBOR plus 0.75%.
Approximately $496.0 million was outstanding under this facility at December 31,
1998. Bear Stearns has requested that the Company maintain  outstanding  amounts
under this warehouse facility at no more than $500 million.

At December 31, 1998, the Company had a $1.0 billion  credit  facility with DMG,
which includes a $100 million credit facility  collateralized  by  interest-only
and residual  certificates.  Approximately  $369.0 million was outstanding under
this  warehouse and residual  financing  facility at December 31, 1998.  DMG has
indicated to the Company that  additional  fundings will be on an "as requested"
basis. To induce DMG to enter the  intercreditor  agreement in October 1998, the
Company consented to convert DMG's committed  warehouse and residual facility to
an  uncommitted  facility.  See  Note  3  of  Notes  to  Consolidated  Financial
Statements.

Additionally,  at December 31, 1998,  the Company had other  warehouse  lines of
credit which totaled  approximately  $154.0 million.  Interest rates ranged from
LIBOR plus 0.65% to LIBOR plus 1.50% and all borrowings mature within one year.

Outstanding  borrowings under the Company's warehouse  financing  facilities are
collateralized  by mortgage  loans held for sale,  warehouse  financing due from
correspondents and servicing rights on approximately  $250.0 million of mortgage
loans. Upon the sale of these loans and the repayment of warehouse financing due
from correspondents, the borrowings under these lines are repaid.

The  Company  is  attempting  to enter  into  arrangements  to obtain  warehouse
facilities from lenders that are not currently  providing warehouse financing to
IMC, but has not yet been successful.


                                     - 55 -


<PAGE>


As a result of the DMG warehouse  facility becoming  uncommitted and the adverse
market conditions  currently being experienced by the Company and other mortgage
companies  in the  industry,  the  Company's  ability to  continue to operate is
almost  entirely  dependent upon the Significant  Lenders  discretion to provide
warehouse  funding to the Company.  The Significant  Lenders may not approve the
Company's warehouse funding requests.

At December 31, 1998, the Company had borrowed $153.0 million under its residual
financing  credit  facility  with  Paine  Webber.  Outstanding  borrowings  bear
interest at LIBOR plus 2.0% and are  collateralized by the Company's interest in
certain interest-only and residual certificates.

Bear,  Stearns & Co. Inc. and its affiliates,  Bear,  Stearns  Mortgage  Capital
Corporation and Bear, Stearns International Limited,  provide the Company with a
residual  financing  credit  facility which is  collateralized  by the Company's
interest in certain  interest-only  and residual  certificates.  At December 31,
1998,  $98.0 million was  outstanding  under this credit  facility,  which bears
interest at 1.75% per annum in excess of LIBOR.

At  December  31,  1998,   outstanding   interest-only  and  residual  financing
borrowings  under the Company's  credit  facility  with DMG were $43.2  million.
Outstanding  borrowings bear interest at LIBOR plus 2% and are collateralized by
the Company's interest in certain interest-only and residual certificates.

At December 31, 1998,  the Company had  borrowed  $2.2 million  under a residual
financing  credit facility which matured in August 1998,  bears interest at 2.0%
per annum in excess of LIBOR and is collateralized by the Company's  interest in
certain  interest-only  and  residual  certificates.  The  Company is  currently
discussing  an  extension  of this  facility,  but there can be no  assurance an
extension will be obtained.

At December  31, 1998 the Company  also has  outstanding  $6.2  million  under a
credit  facility with an affiliate of a  shareholder  of the Company which bears
interest at 10% per annum.  That  credit  facility  provides  for  repayment  of
principal and interest  over 36 months and,  based on certain  circumstances,  a
partial prepayment of principal may be required on July 31, 1999.

BankBoston  provided the Company with a revolving  credit facility which matured
in October 1998,  bore interest at LIBOR plus 2.75% and provided for  borrowings
up to $50 million to be used to finance interest-only and residual certificates,
or for  acquisitions or bridge  financing.  BankBoston with  participation  from
another  financial  institution  also  provided  the company  with a $45 million
working capital facility, which bore interest at LIBOR plus 2.75% and matured in
October 1998. The Company was unable to repay these credit  facilities when they
matured  and in  October  1998,  the  Company  entered  into a  forbearance  and
intercreditor agreement with BankBoston with respect to these credit facilities.
At  December  31,  1998,  $87.5  million  was  outstanding  under  these  credit
facilities.  The forbearance and intercreditor  agreement provided that the bank
would take no collection  action,  subject to certain  conditions,  for up to 90
days (which expired in mid-January 1999) in order for the Company to explore its
financial alternatives.

In mid-January 1999, the forbearance and intercreditor agreement with BankBoston
expired.  On February 19, 1999, the Greenwich  Funds  purchased,  at a discount,
from  BankBoston  its  interest in the credit  facilities  and  entered  into an
amended  intercreditor  agreement relating to these facilities with the Company.
Under the amended  intercreditor  agreement,  the Greenwich Funds agreed to keep
these facilities in place for a period of twelve months after the acquisition of
IMC common stock  described in the  Acquisition  Agreement is consummated if the
consummation  occurs within a five month period,  subject to earlier termination
in certain events provided in the amended intercreditor agreement.


                                     - 56 -


<PAGE>


The Company's  current  warehouse lines generally are subject to one-year terms.
The Company's  current  creditors may not renew their  facilities as they expire
and the Company may not be able to obtain additional credit lines.

On July 14,  1998,  Travelers  Casualty  and Surety  Company  and certain of the
Greenwich  Funds  (together,  the  "Purchasers")  purchased  $50  million of the
Company's Class A preferred  stock.  The Class A preferred stock was convertible
into  common  stock at $10.44 per share.  The Class A  preferred  stock bears no
dividend and is redeemable by the Company over a three-year period commencing in
July 2008. As part of the preferred stock purchase agreement, the Company agreed
to use its best efforts to cause two persons  designated by the Purchasers to be
elected to the Company's board of directors. The Purchasers were also granted an
option to purchase,  within the next three years,  an additional  $30 million of
Series B  redeemable  preferred  stock at par.  The Class B preferred  stock was
convertible into common stock at $22.50 per share. In October 1998, the terms of
the $50 million  Class A preferred  stock and the terms of the Class B preferred
stock were amended to eliminate the right to convert into common stock. See Note
4 of Notes to Condensed Consolidated Financial Statements.

On October 15, 1998 the Company  reached an agreement for a $33 million  standby
revolving  credit facility with certain of the Greenwich Funds. The facility was
available  to provide  working  capital for a period of up to 90 days,  or until
mid- January 1999. The terms of the standby  revolving credit facility  resulted
in  substantial  dilution of existing  common  stockholders'  equity  equal to a
minimum of 40%, up to a maximum of 90%, on a diluted basis,  depending on (among
other things)  when,  or whether,  a change of control  transaction  occurs.  In
mid-January 1999, the $33 million standby revolving credit facility matured.  On
February 16, 1999,  the  Greenwich  Funds  provided an  additional $5 million of
loans under the  facility.  On February 19, 1999,  the Company and the Greenwich
Funds entered into an amended and restated intercreditor agreement,  whereby the
Greenwich  Funds agreed to keep the  facility in place for a period  through the
closing  under the  Acquisition  Agreement if the closing  occurs  within a five
month period and for twelve months thereafter, subject to earlier termination in
certain events as provided in the amended and restated intercreditor agreement.

On February  19, 1999,  the Company  entered  into a merger  agreement  with the
Greenwich  Funds which was terminated and recast as an acquisition  agreement on
March 31,  1999.  Under the  Acquisition  Agreement,  the  Greenwich  Funds will
receive  newly  issued  common  stock  of the  Company  equal  to  93.5%  of the
outstanding  common  stock  after such  issuance,  leaving the  existing  common
shareholders  of the  Company  with 6.5% of the  common  stock  outstanding.  No
payment will be made to the Company's common  shareholders in this  transaction.
Upon the  closing,  certain of the  Greenwich  Funds will  surrender  all of the
outstanding Class C exchangeable preferred stock for cancellation and enter into
an amendment and restatement of their existing loan agreement with IMC, pursuant
to which the  Greenwich  Funds  will make  available  to IMC an  additional  $35
million in working capital loans.

The  acquisition  by the Greenwich  Funds is subject to a number of  conditions,
including approval by the Company's shareholders. There can be no assurance that
the acquisition will be consummated.  If the Acquisition Agreement is terminated
or the acquisition is not consummated within five months from the signing of the
amended and restated intercreditor  agreements,  the standstills would expire or
could be terminated and the Significant Lenders could exercise remedies. In such
an event, the Company most likely would be unable to continue its business.

The Company has substantial capital requirements and it anticipates that it will
need to arrange for additional  external cash resources  through either the sale
or securitization of interest-only and residual  certificates,  increased credit
facilities  and the  sale or  placement  of  debt,  preferred  stock  or  equity
securities if the acquisition under the Acquisition Agreement with the Greenwich
Funds  is not  consummated.  Also,  there  can  be no  assurance  that  existing
warehouse and  interest-only and residual  certificate  lenders will continue to
fund the Company  under  their  uncommitted  facilities,  that  existing  credit
facilities can be increased, extended or refinanced, that the Company will

                                     - 57 -


<PAGE>


be able to arrange for the sale or  securitization of interest-only and residual
certificates in the future on terms the Company would consider favorable,  if at
all,  that the  Company  will be able to sell  debt,  preferred  stock or equity
securities at any given time or on terms the Company would  consider  favorable,
or at all, or that funds  generated from  operations will be sufficient to repay
the  Company's  existing  debt  obligations  or meet its  operating  and capital
requirements.  To the extent that the Company is not  successful in  increasing,
maintaining or replacing existing credit facilities,  in selling or securitizing
interest-only and residual  certificates or in selling debt,  preferred stock or
other equity securities, the Company would not be able to hold a large volume of
loans  pending  securitization  or whole loan sale and  therefore  would have to
curtail its loan  production  activities to attempt to sustain  operations.  The
Company may not be successful in sustaining operations.

Certain Accounting Considerations

The Company sells loans through  securitizations and retains a residual interest
in the loans and, on occasion,  also retains an interest-only  certificate.  The
interest-only  and residual  certificates are recorded at fair value and changes
in fair value are  recorded  in the results of  operations  in the period of the
change in value.  The Company  determines  fair value 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,  and
insurance  fee when  applicable  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 Company uses 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.

If actual  prepayment speed or credit losses of a loan portfolio  materially and
adversely vary from the Company's  original  assumptions  over time, the Company
would be  required  to  adjust  the  value  of the  interest-only  and  residual
certificates,  and such adjustment  could have a material  adverse effect on the
Company's financial condition and results of operations. Higher than anticipated
rates of loan  prepayments  or credit losses over a  substantial  period of time
would  require  the Company to  write-down  the value of the  interest-only  and
residual certificates,  adversely affecting earnings.  There can be no assurance
that the Company's  assumptions  as to prepayment  speeds and credit losses will
prove to be accurate. To the Company's knowledge,  there is a limited market for
the sale of interest-only  and residual classes of certificates and these assets
may not be sold for the value reflected on the Company's balance sheet.

Risk Management

The Company purchases and originates  mortgage loans and then sells them through
securitizations  and whole  loan  sales.  At the time of  securitization  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 paid to investors  (which typically is priced based on the
United States Treasury security with a maturity corresponding to the anticipated
life of the loans). Historically,  when 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,  in quarters  ended prior to October 1998,  the
Company  hedged a portion  of the value of the loans  through  the short sale of
United States Treasury  securities.  Prior to hedging,  the Company performed an
analysis of its loans taking into account,  among other things,  interest  rates
and  maturities to determine the amount,  type,  duration and proportion of each
United States Treasury security to sell short so that

                                     - 58 -

<PAGE>


the risk to the value of the loans  would be  effectively  hedged.  The  Company
executed the sale of the United States Treasury securities with large, reputable
securities  firms  and used the  proceeds  received  to  acquire  United  States
Treasury   securities  under  repurchase   agreements.   These  securities  were
designated as hedges in the Company's records and were closed out when the loans
were sold.

Historically,  when  the  value  of  the  hedges  decreased,  generally  largely
offsetting an increase in the value of the loans,  the Company,  upon settlement
with  its  counterparty,  would  pay the  hedge  loss in cash  and  realize  the
generally  corresponding  increase  in the  value  of the  loans  as part of its
interest-only and residual certificates.  Conversely, if the value of the hedges
increased,  generally  largely  offsetting a decrease in the value of the loans,
the Company, upon settlement with its counterparty, would receive the hedge gain
in cash and realize  the  generally  corresponding  decrease in the value of the
loans through a reduction in the value of the related interest-only and residual
certificates.

The Company  believes that its hedging  activities  using United States Treasury
securities  were  substantially  similar  in  purpose,  scope and  execution  to
customary hedging activities using United States Treasury  securities engaged in
by several of its competitors.

In September  1998,  the Company  believes  that,  primarily due to  significant
volatility in debt, equity and asset-backed  markets,  investors  demanded wider
spreads  over  United  States  Treasury   securities  to  acquire  newly  issued
asset-backed  securities.  The  effect of the  increased  demand  for the United
States  Treasury  Securities  resulted in a devaluation  of the Company's  hedge
position,  requiring the Company to pay approximately  $47.5 million through the
time the hedge positions were closed in October 1998.  This  devaluation was not
offset  by an  equivalent  increase  in the gain on sale of loans at the time of
securitization  because investors  demanded wider spreads over the United States
Treasury  securities to acquire the Company's  asset-backed  securities.  Of the
$47.5 million in hedge  devaluation,  approximately  $25.3 million was closed at
the time the Company priced two  securitizations  and was reflected as an offset
to gain on sale and  approximately  $22.4 million was charged to operations as a
hedge loss. In September  1998,  the Company  stopped  hedging its interest rate
risk on loan  purchases  and in October 1998 the Company  closed all of its open
hedge  positions.   See  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations - Liquidity and Capital  Resources" and Note
5 of Notes to  Consolidated  Financial  Statements.  At  December  31,  1998 the
Company had no open hedge positions.

The Company uses a discount rate of 16% to present value the difference (spread)
between (i) interest  earned on the portion of the loans sold and (ii)  interest
paid to  investors  with  related  costs  over the  expected  life of the loans,
including  expected  losses,  foreclosure  expenses and a normal  servicing fee.
Based on market  volatility in the asset-backed  markets and the widening of the
spreads  recently  demanded by  asset-backed  investors to acquire  newly issued
asset-backed securities,  there can be no assurance that discount rates utilized
by the Company to present  value the spread  described  above will not change in
the future,  particularly if the spreads  demanded by asset-backed  investors to
acquire newly issued asset-backed  securities continues to increase. An increase
in the discount rates used to present value the spread  described  above of plus
or minus 1%, 3% or 5% would result in a  corresponding  decrease in the value of
the   interest-only   and  residual   certificates   at  December  31,  1998  of
approximately 2.0%, 6.0% and 9.5%, respectively.

Inflation

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


                                     - 59 -

<PAGE>


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 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  interest-only  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  interest-only  and residual
certificates which could have a material adverse effect on the Company's results
of operations and financial condition.  Conversely, lower than anticipated rates
of loan  prepayments  or lower  losses  could allow the Company to increase  the
value of interest-only and residual  certificates,  which could have a favorable
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  securitization  trusts  are  priced  on the basis of
intermediate term rates. The Company's  decision to cease its hedging activities
(See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Management")  could result in substantial  losses in the value
of the Company's  mortgage loans held for sale without an offsetting gain on the
Company's hedging transaction.

Recent Accounting Pronouncements

In October 1998, the FASB issued Statement of Financial Accounting Standards No.
134,   "Accounting   for   Mortgage-Backed   Securities   Retained   after   the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise"
("SFAS 134").  SFAS 134 amends Statement of Financial  Accounting  Standards No.
65,  "Accounting for Certain Mortgage Backed Securities" ("SFAS 65"), to require
that  after an  entity  that is  engaged  in  mortgage  banking  activities  has
securitized  mortgage  loans  that are  held  for  sale,  it must  classify  the
resulting retained mortgage-backed  securities or other retained interests based
on its ability and intent to sell or hold those investments. However, a mortgage
banking  enterprise  must  classify  as  trading  any  retained  mortgage-backed
securities that it commits to sell before or during the securitization  process.
Previously,  SFAS 65  required  that after an entity that is engaged in mortgage
banking  activities  has  securitized  a mortgage loan that is held for sale, it
must  classify  the  resulting  retained  mortgage-backed  securities  or  other
retained interests as trading, regardless of the entity's intent to sell or hold
the securities or retained interest.  SFAS 134 is effective for the first fiscal
quarter  beginning  after  December 15, 1998.  On the date SFAS 134 is initially
applied,  an enterprise may  reclassify  from  "trading"  those  mortgage-backed
securities and other beneficial  interests that were retained after the mortgage
loans were securitized.

The actual effect the adoption of SFAS 134 will have on the Company's  financial
statements will depend on various factors, including the amount of interest-only
and residual  certificates and the Company's  ability and intent to sell or hold
those  investments.  Accordingly,  the Company can not  determine at the present
time the impact the  application  of the provisions of SFAS 134 will have on its
statement of operations or balance sheet.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial   Accounting  Standards  No.  133  ("SFAS  133")  "Accounting  for
Derivative Instruments and Hedging Activities". SFAS 133 is

                                     - 60 -


<PAGE>


effective  for fiscal  quarters of fiscal  years  beginning  after June 15, 1999
(January  1,  2000 for the  Company).  SFAS  133  requires  that all  derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current  earnings or other
comprehensive  income,  depending on whether a derivative was designated as part
of a hedge  transaction  and,  if it is,  the  type of  hedge  transaction.  For
fair-value  hedge  transactions  in which the Company hedges changes in the fair
value of an asset,  liability or firm  commitment,  changes in the fair value of
the derivative  instrument  will generally be offset in the income  statement by
changes in the hedged item's fair value. The ineffective  portion of hedges will
be recognized in current-period earnings.

The  actual  effect  implementation  of SFAS  133  will  have  on the  Company's
financial  statements will depend on various factors determined at the period of
adoption,  including  whether the Company is hedging its interest rate risk loan
purchases, the type of financial instrument used to hedge the Company's interest
rate  risk on  loan  purchases,  whether  such  instruments  qualify  for  hedge
accounting treatment, the effectiveness of the hedging instrument, the amount of
mortgage loans held for sale which the Company intends to hedge and the level of
interest rates.  Accordingly,  the Company can not determine at the present time
the impact  adoption of SFAS 133 will have on its  statements  of  operations or
balance sheets.

In 1998, the Company adopted SFAS No. 130 "Reporting  Comprehensive  Income" and
SFAS  No.  131  "Disclosures   About  Segments  of  an  Enterprise  and  Related
Information." These statements  establish standards for reporting and display of
comprehensive  income  and  disclosure  requirements  related to  segments.  The
application of the provisions of these  statements did not have an impact on the
Company's financial position or results of operations.

Year 2000

The year 2000 (Y2K)  problem is the result of computer  programs  being  written
using two digits rather than four to define the applicable  year.  Thus the year
1998  is  represented  by  the  number  "98"  in  many  software   applications.
Consequently,  on January 1, 2000,  the year will  revert to "00" in  accordance
with many non-Y2K compliant applications. To systems that are non-Y2K compliant,
the time will seem to have reverted  back 100 years.  So, when  computing  basic
lengths  of  time,   the   Company's   computer   programs,   certain   building
infrastructure  components  (including,   elevators,  alarm  systems,  telephone
networks,  sprinkler  systems and security  access  systems) and many additional
time-sensitive  software  that are non-Y2K  compliant may recognize a date using
"00" as the year 1900. This could result in system  failures or  miscalculations
which could cause personal  injury,  property  damage,  disruption of operations
and/or delays in payments from borrowers,  any or all of which could  materially
adversely  effect the  Company's  business,  financial  condition  or results of
operations.

During 1998 the Company  implemented an internal Y2K compliance task force.  The
goal of the task force is to minimize the disruptions to the Company's business,
which could  result from the Y2K  problem,  and to minimize  other  liabilities,
which the Company might incur in connection with the Y2K problem. The task force
consists of existing  employees of the Company and an outside  consultant  hired
specifically to address the Company's internal Y2K issues.

The Company has conducted a company-wide  assessment of its computer systems and
operations  infrastructure,  and is  currently  testing its systems to determine
their Y2K compliance.  The Company  presently  believes those  business-critical
computer systems which are not presently  Y2K-compliant will have been replaced,
upgraded or modified prior to 2000.

During 1998,  the Company  initiated  communications  with third  parties  whose
computer systems'  functionality could impact the Company.  These communications
will facilitate coordination of Y2K solutions and will permit the

                                     - 61 -


<PAGE>


Company  to  determine  the extent to which the  Company  may be  vulnerable  to
failures of the third  parties to address their own Y2K issues.  However,  as to
the systems of the third parties that are linked to the Company, there can be no
guarantee  that  such  systems  that are not now Y2K  compliant  will be  timely
converted to Y2K compliance.

The costs of the  Company's  Y2K  compliance  efforts are being funded with cash
flows  from  operations.   In  total,   these  costs  are  not  expected  to  be
substantially  different from the normal,  recurring costs that are incurred for
systems  development,  implementation and maintenance.  As a result, these costs
are not expected to have a material  adverse  effect on the Company's  financial
position,  results of operations or cash flows. The Company anticipates that Y2K
expenses through December 31, 1999 will be less than $1.0 million.

The Company has currently identified two material potential risks related to its
Y2K issues.  The first risk is that the Company's  primary  lenders,  depository
institutions  and collateral  custodians do not become Y2K compliant before year
end 1999,  which could materially  impact the Company's  ability to access funds
and  collateral  necessary to operate its  businesses.  The Company is currently
assessing the risks related to these and other Y2K risks,  and has received some
assurances that the computer systems of its lenders, depository institutions and
collateral custodians, many of whom are among the largest financial institutions
in the country, will be Y2K compliant by year end 1999.

The  second  risk is that the  external  servicing  system on which the  Company
relies to service  mortgage loans does not become Y2K compliant  before year-end
1999.  Failure on the part of the servicing system could  materially  impact the
Company's  servicing  operations.  As of February 5, 1999, the Company  received
confirmation that the servicing system had achieved Y2K compliance.

The Company is developing  contingency plans for all non-Y2K compliant  internal
systems.  Contingency plans include identifying alternative processing platforms
and alternative sources for services and businesses provided by critical non-Y2K
compliant financial depository institutions,  vendors and collateral custodians.
However,  there  can be no  assurance  that the  Company's  lenders,  depository
institutions,  custodians  and vendors  will  resolve  their own Y2K  compliance
issues in a timely  manner.  The failure by these other  parties to resolve such
issues could have a significant effect on the Company's operations and financial
condition.

The  foregoing  assessment  of the impact of the Y2K  problem on the  Company is
based on  management's  best  estimates  at the  present  time and could  change
substantially.  The  assessment is based upon numerous  assumptions as to future
events. There can be no guarantee that these estimates will prove accurate,  and
actual  results  could differ from those  estimated if these  assumptions  prove
inaccurate.   The   disclosure   in  this   Section,   "Year   2000,"   contains
forward-looking statements, which involve risks and uncertainties.  Reference is
made to the first paragraph on page 1 of this Annual Report on Form 10-K.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The primary market risk facing the Company is interest rate risk.  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  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

                                     - 62 -


<PAGE>


the  Company's  loan  servicing  portfolio  by  increasing  the  level  of  loan
prepayments.  Additionally, to the extent servicing rights and interest-only 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  interest-only and residual
certificates which could have a material adverse effect on the Company's results
of operations and financial condition.  Conversely, lower than anticipated rates
of loan  prepayments  or lower  losses  could allow the Company to increase  the
value of interest-only and residual  certificates,  which could have a favorable
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  securitization  trusts  are  priced  on the basis of
intermediate term rates.

As discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk  Management,"  during the third and fourth quarters
of 1998 the Company's  traditional  strategy of minimizing the risks of interest
rate  fluctuations   through  a  program  of  shorting  United  States  Treasury
securities  subjected the Company to margin calls of approximately $47.5 million
as a result of  significant  volatility  in the debt,  equity  and  asset-backed
markets,   which  disrupted  the  Company's  anticipated  hedging  strategy.  In
September  1998, the Company  stopped hedging its interest rate risk on mortgage
loan  purchases and  originations  and in October 1998 the Company closed all of
its open hedge positions.  The Company's  decision to cease its hedging activity
could result in substantial  losses in the value of mortgage loans held for sale
by the  Company  which  are not  offset  by  gains  from the  Company's  hedging
transactions.

The Company performs sensitivity analyses that quantify the net financial impact
of  changes  in  interest  rates  on  its  interest   rate-sensitive   financial
instruments. These analyses are performed for various interest rate scenarios to
capture the expected economic change in market value of interest  rate-sensitive
financial instruments. Various discounted cash flow models are employed to value
these  interest-rate  sensitive financial  instruments.  The primary assumptions
used in the  discounted  cash flow  models  used to value  capitalized  mortgage
servicing  rights and  interest-only  and residual  certificates  are prepayment
rates,  discount rates and credit losses.  The Company  generally makes mortgage
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  tend to be more payment  sensitive  than interest rate  sensitive and
that changes in interest rates affect  prepayment  rates to a lesser extent than
other factors such as competition, loan type and credit quality.

Utilizing  this  sensitivity  analysis,  as of December  31,  1998,  the Company
estimates that an  instantaneous  increase in interest rates of 50 basis points,
or .50%, all else being  constant,  would result in a decrease in the fair value
of its  interest-rate  sensitive  financial  instruments  of  approximately  $13
million.  These  sensitivity  analyses  are  limited  by the fact  that they are
performed at a particular  point in time and do not  incorporate  other  factors
that would impact the value of the Company's  interest-rate  sensitive financial
instruments in such a scenario. Consequently, the preceding estimates should not
be viewed  as  indicative  of the  actual  changes  in the  values  of  interest
rate-sensitive  financial  instruments  that would  occur in a rate  environment
equivalent to the one described in this paragraph.

For  additional  information,  see  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations - Risk Management and - Inflation"
and Note 13 of Notes to Consolidated Financial Statements.



                                     - 63 -


<PAGE>


Item 8.  Financial Statements and Supplementary Data

                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants..........................  65
Report of Independent Accountants...........................................  66
Financial Statements:
    Consolidated Balance Sheets as of December 31, 1997 and 1998............  67
    Consolidated Statements of Operations for the years ended 
      December 31, 1996, 1997 and 1998......................................  68
    Consolidated Statements of Stockholders' Equity for the years 
      ended December 31, 1996, 1997 and 1998................................  69
    Consolidated Statements of Cash Flows for the years ended 
      December 31, 1996, 1997 and 1998......................................  70
    Notes to Consolidated Financial Statements..............................  71



                                     - 64 -


<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Stockholders of
IMC MORTGAGE COMPANY AND SUBSIDIARIES

     We have audited the accompanying consolidated balance sheet of IMC Mortgage
Company and  Subsidiaries as of December 31, 1998, and the related  consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended.  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 audit.

     We conducted  our audit 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 audit provides 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, 1998 and the consolidated results of
their  operations and their  consolidated  cash flows for the year then ended in
conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As discussed in Notes 3 and
17 to the consolidated financial statements,  the Company is being significantly
and adversely affected by market conditions beyond its control and its access to
debt, equity and asset-backed  capital markets is severely limited. As a result,
during the year ended  December  31,  1998 the  Company  sustained a net loss of
approximately  $100.5 million and has an  accumulated  deficit of $41.3 million.
These matters raise substantial doubt about the Company's ability to continue as
a going concern. Management plans in regard to this matter are also described in
Notes 3 and 17. These plans include obtaining common shareholder approval for an
acquisition  transaction with Greenwich Funds and obtaining  additional capital.
The consolidated  financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

                                                       /S/ Grant Thornton L.L.P.

Tampa, Florida
March 31,1999

                                     - 65 -


<PAGE>


REPORT OF INDEPENDENT ACCOUNTANTS


To the Stockholders of
IMC Mortgage Company and Subsidiaries

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
for each of the two years in the period ended December 31, 1997 present  fairly,
in all material  respects,  the financial  position of IMC Mortgage  Company and
Subsidiaries at December 31, 1997, and the results of their operations and their
cash flows for each of the two years in the period ended  December 31, 1997,  in
conformity  with  generally  accepted  accounting  principles.  These  financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits on these  statements  in  accordance  with
generally accepted auditing standards which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audits  provide a reasonable  basis for the opinion  expressed
above. We have not audited the consolidated financial statements of IMC Mortgage
Company and Subsidiaries for any period subsequent to December 31, 1997.


                       /S/ PricewaterhouseCoopers LLP

Tampa, Florida
February 20, 1998

                                     - 66 -



<PAGE>



                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                       December 31,
                                                               ---------------------------
                                                                   1997            1998
                                                               -----------     -----------
<S>                                                            <C>             <C>        
                   ASSETS

Cash and cash equivalents ................................     $    26,750     $    15,454
Securities purchased under agreements to resell ..........         772,586              --
Accrued interest receivable ..............................          29,272          10,695
Accounts receivable ......................................          21,349          44,661
Mortgage loans held for sale, net ........................       1,673,144         946,446
Interest-only and residual certificates ..................         223,306         468,841
Warehouse financing due from correspondents ..............          25,913           2,810
Property, furniture, fixtures and equipment, net .........          14,884          17,119
Mortgage servicing rights ................................          34,954          52,388
Income tax receivable ....................................          18,841          12,914
Goodwill .................................................          91,963          89,621
Other assets .............................................          12,970          22,690
                                                               -----------     -----------
        Total ............................................     $ 2,945,932     $ 1,683,639
                                                               ===========     ===========

        LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Warehouse finance facilities .............................     $ 1,732,609     $   984,571
Term debt ................................................         112,291         415,331
Notes payable ............................................          18,189          17,406
Securities sold but not yet purchased ....................         775,324              --
Accounts payable and accrued liabilities .................          31,665          15,302
Accrued interest payable .................................          10,857           3,086
Deferred tax liability ...................................          10,933              -- 
                                                               -----------     -----------
      Total liabilities ..................................       2,691,868       1,435,696
                                                               -----------     -----------

Commitments and contingencies (Note 15)

Redeemable preferred stock (redeemable at maturity
  at $100 per share and, under certain circumstances,
  upon a change of control) (Note 4) .....................              --          37,333

Stockholders' equity:
Common stock, par value $.01 per share; 50,000,000
   authorized; 30,710,790 and 34,139,790
   shares issued and outstanding .........................             307             341
Additional paid-in capital ...............................         193,178         251,633
Retained earnings (accumulated deficit) ..................          60,579         (41,364)
                                                               -----------     -----------
    Total stockholders' equity ...........................         254,064         210,610
                                                               -----------     -----------
    Total ................................................     $ 2,945,932     $ 1,683,639
                                                               ===========     ===========
</TABLE>

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


                                     - 67 -


<PAGE>



                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                   For the Year Ended December 31,
                                                          ------------------------------------------------
                                                              1996              1997              1998
                                                          ------------      ------------      ------------
<S>                                                            <C>              <C>               <C>     
Revenues:
    Gain on sales of loans ..........................          $46,230          $180,963          $205,924
    Additional securitization transaction
     expense (Note 7) ...............................           (4,158)               --                --
                                                          ------------      ------------      ------------
        Net gain on sale of loans ...................           42,072           180,963           205,924
                                                          ------------      ------------      ------------
    Warehouse interest income .......................           37,463           123,432           147,937
    Warehouse interest expense ......................          (24,535)          (98,720)         (118,345)
                                                          ------------      ------------      ------------
        Net warehouse interest income ...............           12,928            24,712            29,592
                                                          ------------      ------------      ------------
    Servicing fees ..................................            5,562            17,072            45,382
    Other revenues ..................................            5,092            16,012            40,311
                                                          ------------      ------------      ------------
        Total servicing fees and other ..............           10,654            33,084            85,693
                                                          ------------      ------------      ------------
        Total revenues ..............................           65,654           238,759           321,209
                                                          ------------      ------------      ------------
Expenses:
    Compensation and benefits .......................           16,007            82,051           124,234
    Selling, general and administrative expenses ....           15,652            64,999           130,547
    Sharing of proportionate value of equity (Note 7)            2,555                --                --
    Other interest expense ..........................            2,321            14,280            28,434
    Hedge loss (Note 5) .............................               --                --            22,351
    Market valuation adjustment (Note 10) ...........               --                --            84,638
    Interest expense - Greenwich Funds (Note 3) .....               --                --            30,795
                                                          ------------      ------------      ------------
           Total expenses ...........................           36,535           161,330           420,999
                                                          ------------      ------------      ------------
    Income (loss) before income taxes ...............           29,119            77,429           (99,790)
    Provision for income taxes ......................            4,206            29,500               679
                                                          ------------      ------------      ------------
Net income (loss) ...................................          $24,913           $47,929         $(100,469)
                                                          ============      ============      ============


Earnings per share data  (unaudited  pro forma data
  for the year ended  December 31, 1996 giving
  effect to provision for income taxes):
    Net income (loss) ...............................          $17,929           $47,929         $(100,469)
                                                          ============      ============      ============
    Net income (loss) per common share:
        Basic .......................................            $1.12             $1.76            $(3.21)
        Diluted .....................................            $0.92             $1.54            $(3.21)
    Weighted average shares outstanding:
        Basic .......................................       15,981,521        27,299,827        31,745,575
        Diluted .....................................       19,539,963        31,147,944        31,745,575
</TABLE>


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


                                     - 68 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                          Retained
                                                  Common Stock           Additional       Earnings
                                           -------------------------      Paid-In      (Accumulated
                                             Shares         Amount        Capital         Deficit)         Total
                                           ----------     ----------     ----------      ----------      ----------
<S>                                        <C>                 <C>         <C>            <C>             <C>     
Stockholders' equity at
January 1, 1996 ......................      6,000,000            $60         $3,845          $1,704          $5,609
Issuance of options to
  ContiFinancial (Note 7) ............             --             --          8,448              --           8,448
Common stock issued in public
  offering ...........................      3,565,000             36         58,168              --          58,204
Reclassification of partnership
  earnings ...........................             --             --          4,124          (4,124)             --
Conversion of convertible
  preferred stock ....................        119,833              1          2,005              --           2,006
Stock options exercised ..............        150,000              2             (2)             --              --
Net income ...........................             --             --             --          24,913          24,913
Distributions for taxes (Note 2) .....             --             --             --          (9,843)         (9,843)
Two-for-one stock split (Note 1) .....      9,834,833             98            (98)             --              --
                                           ----------     ----------     ----------      ----------      ----------
Stockholders' equity at
  December 31, 1996 ..................     19,669,666            197         76,490          12,650          89,337
Common stock issued in public
  offering ...........................      5,040,000             50         57,977              --          58,027
Common stock issued in
  acquisition transactions ...........      5,043,763             50         51,962              --          52,012
Common stock issued under stock
  option and incentive plans and
  related tax benefits ...............        957,361             10          6,749              --           6,759
Net income ...........................             --             --             --          47,929          47,929
                                           ----------     ----------     ----------      ----------      ----------
Stockholders' equity at
  December 31, 1997 ..................     30,710,790            307        193,178          60,579         254,064
Common stock issued under
  stock option and incentive
  plans and related tax benefits .....         34,121             --            441              --             441
Exercise of stock warrants and
  related tax benefits ...............      2,159,998             22          2,663              --           2,685
Common stock issued under
  contingent earnouts ................      1,234,881             12          7,082              --           7,094
Issuance of debt with beneficial
  conversion feature .................             --             --         14,719              --          14,719
Issuance of stock warrants ...........             --             --          1,128              --           1,128
Elimination of Class A preferred stock
  conversion feature (Note 4) ........             --             --         32,422              --          32,422
Accretion of Class A preferred stock .             --             --             --          (1,474)         (1,474)
Net loss .............................             --             --             --        (100,469)       (100,469)
                                           ----------     ----------     ----------      ----------      ----------
Stockholders equity at
  December 31, 1998 ..................     34,139,790           $341       $251,633        $(41,364)       $210,610
                                           ==========     ==========     ==========      ==========      ==========
</TABLE>

The  accompanying  notes are an  integral  part of this  consolidated  financial
statement.

                                     - 69 -



<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                 For the Year Ended December 31,  
                                                                           ---------------------------------------
                                                                             1996           1997           1998
                                                                           ---------      ---------      ---------
<S>                                                                        <C>            <C>            <C>       
Operating activities:
Net income (loss) ....................................................     $  24,913      $  47,929      $(100,469)
Adjustments to reconcile net income (loss) to net cash provided by
        (used in) operating activities:
               Interest expense - Greenwich Funds ....................            --             --         27,500
               Issuance of stock warrants ............................            --             --          1,128
               Sharing of proportionate value of equity ..............         2,555             --             --
               Depreciation and amortization .........................         1,650         10,144         25,937
               Mortgage servicing rights .............................        (7,862)       (34,252)       (35,911)
               Net loss in joint venture .............................           852          1,813          2,579
               Non-recurring benefit associated with the conversion
                 of Partnership to C Corporation .....................        (3,600)            --             --
               Change in deferred taxes ..............................           879         13,654        (10,933)
Net change in operating assets and liabilities, net of 
          Effects from acquisitions:
               Decrease (increase) in mortgage loans held
                 for sale ............................................      (721,347)      (702,927)       726,698
               Decrease (increase) in securities purchased
                 under agreement to resell and securities
                 sold but not yet purchased ..........................           429          1,167         (2,738)
               Decrease (increase) in accrued interest receivable ....        (6,763)       (20,615)        18,577
               Decrease (increase) in warehouse financing due
                 from correspondents .................................        (4,992)       (25,674)        23,103
               Increase in interest-only and residual certificates ...       (72,174)      (137,060)      (245,535)
               Increase in other assets ..............................        (2,200)        (7,495)        (7,274)
               Increase in accounts receivable .......................        (1,596)       (16,450)       (23,312)
               Decrease (increase) in income tax receivable ..........            --        (15,241)         8,611
               Increase (decrease) in accrued interest payable .......         3,022          6,779         (7,771)
               Increase (decrease) in income tax payable .............         2,543         (2,543)            --
               Increase (decrease) in accrued and other liabilities ..         6,978          2,421         (9,853)
                                                                           ---------      ---------      ---------
               Net cash provided by (used in) operating activities ...      (776,713)      (878,350)       390,337
                                                                           ---------      ---------      ---------
        Investing activities:
               Investment in joint venture ...........................        (2,591)        (1,781)        (4,260)
               Purchase of property, furniture, fixtures and equipment        (1,218)       (12,772)        (5,665)
               Acquisition of businesses, net of cash acquired and
                 including other cash payments associated with
                 the acquisitions ....................................            --        (10,008)            --
               Other .................................................            --             --           (672)
                                                                           ---------      ---------      ---------
               Net cash used in investing activities .................        (3,809)       (24,561)       (10,597)
                                                                           ---------      ---------      ---------
        Financing activities:
               Issuance of common stock ..............................        58,203         59,923             12
               Issuance of preferred stock ...........................            --             --         49,232
               Distributions to partners for taxes ...................       (11,149)            --             --
               Net borrowings (repayments) on warehouse facilities ...       705,313        787,911       (748,038)
               Borrowings - term debt ................................        51,066        401,240        324,473
               Borrowings - notes payable ............................            --          5,000             --
               Repayments of borrowings - term debt ..................       (14,756)      (337,702)       (15,932)
               Repayments of borrowings - notes payable ..............            --             --           (783)
                                                                           ---------      ---------      ---------
               Net cash provided by (used in) financing activities ...       788,677        916,372       (391,036)
                                                                           ---------      ---------      ---------
               Net increase (decrease) in cash and
                 cash equivalents ....................................         8,155         13,461        (11,296)
               Cash and cash equivalents, beginning of period ........         5,134         13,289         26,750
                                                                           ---------      ---------      ---------
               Cash and cash equivalents, end of period ..............     $  13,289      $  26,750      $  15,454
                                                                           =========      =========      =========
</TABLE>


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


                                     - 70 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998

     1.   Organization and Basis of Presentation

     IMC Mortgage  Company and its  wholly-owned  subsidiaries  (the  "Company")
purchase and  originate  mortgage  loans made to borrowers who may not otherwise
qualify for conventional  loans for the purpose of securitization  and sale. The
Company has typically securitized these mortgages into the form of a Real Estate
Mortgage  Investment Conduit ("REMIC") or owner trust. A significant  portion of
the mortgages historically have been sold on a servicing retained basis.

     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 IMC Mortgage Company (the "Parent") in June
1996  when  the  limited  partners  (the  "Partners")  and the  general  partner
exchanged their  partnership  interests for voting common shares (the "exchange"
or  "recapitilization")  of  the  Parent.  The  exchange  was  consummated  on a
historical  cost basis as all entities were under common  control.  Accordingly,
since June 1996, the Parent 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.  On
December 31, 1997, the  Partnership and the general partner were merged into the
Parent. The accompanying  consolidated financial statements include the accounts
of the Parent, the Partnership and their wholly owned subsidiaries, after giving
effect to the exchange as if it had occurred at inception.

     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  $98,000  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.

     As  discussed  in Note 17  "Significant  Events  and Events  Subsequent  to
December  31,  1998",  on February  19,1999,  the Company  entered into a merger
agreement  with  the  Greenwich  Funds  that was  terminated  and  recast  as an
acquisition agreement (the "Acquisition Agreement") on March 31, 1999. Under the
Acquisition  Agreement,  the  Greenwich  Funds will receive  newly issued common
stock equal to 93.5% of the  outstanding  common stock of the Company after such
issuance.  Upon the  consummation  of the proposed  acquisition by the Greenwich
Funds,  the Greenwich Funds will surrender their Class C exchangeable  preferred
stock of the Company for  cancellation  and amend and restate the existing  loan
agreement with the Company  described in Note 3 "Warehouse  Finance  Facilities,
Term Debt and Notes  Payable",  pursuant to which the Greenwich  Funds will make
available to the Company an additional $35 million in working capital loans.

     2.   Summary of Significant Accounting Policies

Principles of Consolidation

     The consolidated  financial  statements  include the accounts of the Parent
and its wholly-owned subsidiaries after elimination of intercompany accounts and
transactions.

Cash and Cash Equivalents

     Cash  and  cash  equivalents  consist  of cash on hand  and on  deposit  at
financial institutions and short term investments with original maturities of 90
days or less when purchased.


                                     - 71 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998

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 primarily into the
form of a REMIC or owner trust that issues classes of certificates  representing
undivided ownership interests in the income stream payable to the Trust. 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  class
certificates issued by the trust, which are credit enhanced,  are sold, with the
subordinated  classes  (or a  portion  thereof)  retained  by the  Company.  The
subordinated classes are in the form of interest-only and residual certificates.
Credit  enhancement is generally achieved by subordination of a subsidiary class
of bonds to senior classes or an insurance policy issued by a monoline insurance
company.  The  documents  governing the  Company's  securitizations  require the
Company  to build  overcollateralization  levels  through  payment to holders of
senior certificates, for a period of time, of distributions otherwise payable to
the Company as the residual interest holder. This  overcollateralization  causes
the  aggregate  principal  amount of the loans in the related pool to exceed the
aggregate  principal  balance of the  outstanding  investor  certificates.  Such
excess amounts serve as additional credit  enhancement for the related trust. To
the extent that borrowers default on the payment of principal or interest on the
loans,  the losses  incurred in the REMIC 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 on certain
REMIC trusts will pay any further  losses  experienced  by holders of the senior
interests in those  related REMIC trusts or a  subordinated  class will bear the
loss.  The Company does not have any recourse  obligations  for credit losses in
the trusts.  During 1996, 1997 and 1998, the Company  securitized  $935 million,
$4.9 billion and $5.1 billion of loans  through four,  eight,  and seven trusts,
respectively. See Note 10 "Interest Only and Residual Certificates."

     On January 1, 1997, the Company adopted the Financial  Accounting Standards
Board ("FASB")  Statement of Financial  Accounting  Standards  ("SFAS") No. 125,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of Liabilities" ("SFAS 125"), which was effective for transfers of the Company's
financial assets made after December 31, 1996. 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 requires the Company to allocate the total cost of mortgage loans sold among
the mortgage loans sold (without servicing  rights),  interest-only and residual
certificates  and  servicing  rights based on their  relative  fair values.  The
adoption of SFAS 125 did not have a material  effect on the Company's  financial
position or results of operations.

     The Company  initially records  interest-only and residual  certificates 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.

     In accordance with the provisions of SFAS No. 115,  "Accounting for Certain
Investments in Debt and Equity  Securities" ("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 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 servicing fee, a trustee fee, an insurance fee
when  applicable and an estimate of annual future credit losses and  prepayments
related to the mortgage loans securitized over the life of the mortgage loans.


                                     - 72 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998

     These cash flows are  projected  over the life of the mortgage  loans using
prepayment,  default and interest rate  assumptions  that the Company  perceives
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 and information on
prepayment  rates,  interest rates,  collateral  value,  economic  forecasts and
historical default and prepayment rates of the portfolio under review.

     Prior to the fourth  quarter of 1998,  the rates used to discount  the cash
flows ranged from 11% to 14.5% based on the perceived risks associated with each
REMIC or owner trust  mortgage  pool.  During the fourth  quarter of 1998,  as a
result of adverse market conditions (see Note 3 "Warehouse  Finance  Facilities,
Term  Debt and Notes  Payable,"  Note 5 "Hedge  Loss"  and Note 17  "Significant
Events and Events  Subsequent to December 31, 1998") the Company adjusted to 16%
the discount rate used to present value the projected cash flows retained by the
Company.  See Note 10  "Interest-Only  and Residual  Certificates."  The Company
utilizes  prepayment and loss curves which the Company believes will approximate
the timing of  prepayments  and losses over the life of the  securitized  loans.
Prepayments  on fixed rate loans  securitized  by the  Company  are  expected to
gradually  increase from a constant  prepayment rate ("CPR") of 4% to 28% in the
first  year of the  loan and  remain  at 28%  thereafter.  The  Company  expects
prepayments on adjustable  rate loans to gradually  increase from a CPR of 4% to
35% in the first year of the loan and remain at 35% thereafter. The CPR measures
the annualized  percentage of mortgage loans which prepay during a given period.
The CPR  represents  the annual  prepayment  rate over the year,  expressed as a
percentage of the  principal  balance of the mortgage  loan  outstanding  at the
beginning  of  the  period,   without  giving  effect  to  regularly   scheduled
amortization payments. Prior to the fourth quarter of 1998, the Company expected
losses from  defaults to increase  from zero in the first six months of the loan
to 100 basis points  after 36 months.  During the fourth  quarter of 1998,  as a
result of emerging  trends in the Company's  serviced loan portfolio and adverse
market  conditions,  the  Company  revised  the loss  curve  assumption  used to
approximate  the  timing of  losses  over the life of the  securitized  loans to
increase from zero in the first six months of the loan to 175 basis points after
36 months. See Note 10 "Interest-Only and Residual Certificates."

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 125,
which was adopted by the Company  effective  January 1, 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 its relative fair
value.  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 income.  Under SFAS 122 and SFAS 125, the Company
capitalized  mortgage  servicing  rights of  approximately  $7.8 million,  $34.3
million and $35.9 million for the years ended December 31, 1996,  1997 and 1998,
respectively, and amortized $1.2 million, $5.9 million and $18.5 million for the
same periods.

     The Company  periodically reviews mortgage servicing rights for impairment.
This review is  performed  on a  disaggregated  basis for the  predominant  risk
characteristic  of the  underlying  loans which the Company  believes to be loan
type (i.e.,  fixed vs.  adjustable rate). The Company does not consider interest
rate to be a predominant risk characteristic.  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  tend to be more  payment  sensitive  than  interest  rate  sensitive.
Impairment is recognized in a valuation allowance for each disaggregated stratum
in the period of impairment. The carrying amount of mortgage servicing rights is
deemed to be a reasonable estimate of their fair value.


                                     - 73 -

<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998

Securities  Purchased  Under  Agreements to  Resell/Securities  Sold But Not Yet
Purchased

     Prior to October  1998,  the Company  hedged the interest rate risk on loan
purchases by selling short United States Treasury  Securities  which matched the
duration  of the  fixed  rate  mortgage  loans  held for sale and  borrowed  the
securities under agreements to resell.

     Securities  sold but not yet purchased  were recorded on a trade date basis
and carried at market value.  The unrealized  gain or loss on these  instruments
was deferred and recognized upon securitization as an adjustment to the carrying
value of the hedged mortgage loans. The cost to carry securities purchased under
agreements to resell was recorded as incurred.

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

     In October 1998, the Company closed all of its open hedge  positions and at
December 31, 1998, there were no open hedge positions. See Note 5 "Hedge Loss."

Mortgage Loans Held for Sale, Net

     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 loan origination fees, certain direct
costs  and  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.  Included in mortgages  held for sale at
December  31, 1997 and 1998 were  approximately  $54  million  and $85  million,
respectively,  of mortgage loans which were not eligible for  securitization due
to delinquency and other factors (loans under review).  The amount by which cost
exceeds  market  value on loans  under  review 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. The valuation  allowances at December 31,
1997 and 1998 were $11.5 million and $24.0 million, respectively.

Revenue Recognition

     Gains on the sale of mortgage loans  represent the  difference  between the
sales price and the net carrying  amount  (which  includes any hedging gains and
losses)  and 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  difference  (spread)  between (i)
interest  earned  on the  portion  of  loans  sold  and  (ii)  interest  paid to
investors,  including  related  costs  over  the  expected  life  of the  loans,
including expected  charge-offs,  foreclosure  expenses and a servicing fee. The
spread is adjusted for estimated prepayments.

     The increase or accretion of the value of the discounted  interest-only and
residual certificates over time is recognized on the interest method as earned.

     Prepayment  penalties  received from  borrowers are recorded in income when
collected  and included in other  revenue in the  Statement of Operations at the
time of early prepayments.  Warehouse interest income on mortgage loans held for
sale is recognized on the accrual method.

     The  Company  has  typically   retained  servicing  rights  and  recognizes
servicing  income from fees 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
outstanding  loan balance being serviced.  Servicing fee income is recognized as
collected.

                                     - 74 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


Property, Furniture, Fixtures and Equipment, Net of Accumulated Depreciation

     Property,  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.

Advertising

     The Company  expenses  the  production  costs of  advertising  as incurred.
Advertising expense was approximately  $499,000,  $9.0 million and $15.3 million
for the years ended December 31, 1996, 1997 and 1998, respectively.

Goodwill

     Goodwill  represents  the  excess  of cost over  fair  value of net  assets
acquired  by  acquisition.  Such  excess of cost over fair  value of net  assets
acquired is being amortized on a  straight-line  basis over periods from five to
thirty years.  Amortization expense approximated  $71,000, $2.7 million and $4.0
million for the years ended  December  31,  1996,  1997 and 1998,  respectively.
Accumulated amortization  approximated $2.8 million and $6.8 million at December
31, 1997 and 1998, respectively.

     Management  periodically  reviews the potential impairment of goodwill on a
non-discounted  cash flow  basis to assess  recoverability.  The cash  flows are
projected  on a pre-tax  basis  over the  estimated  useful  lives  assigned  to
goodwill.  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.

Translation of Foreign Currency

     Assets and  liabilities  of the Company's  Canadian  subsidiary,  which was
incorporated during the year ended December 31, 1997, are translated at year-end
rates of exchange,  and the income  statement is translated at weighted  average
rates of exchange for the year.  For the years ended December 31, 1997 and 1998,
the  financial  position and results of  operations  of the  Company's  Canadian
subsidiary was not material in relation to the financial  position or results of
operations of the Company.

Income Taxes

     Income tax expense is provided  for using the asset and  liability  method,
under which deferred tax assets and  liabilities  are determined  based upon the
temporary  differences  between the financial  statement and income tax bases of
assets and  liabilities,  using enacted tax rates currently in effect.  Deferred
tax  assets  are  reduced  by a  valuation  allowance  when,  in the  opinion of
management,  it is more likely than not that some portion or all of the deferred
tax  assets  will not be  realized.  Deferred  tax assets  and  liabilities  are
adjusted  for the  effects  of  changes  in tax  laws  and  rates on the date of
enactment.


                                     - 75 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998

Stock-Based Compensation

     SFAS No.  123,  "Accounting  for  Stock-Based  Compensation"  ("SFAS  123")
encourages,  but does not  require,  companies to record  compensation  cost for
stock-based  employee  compensation plans at fair value. The Company has elected
to  continue  to  account  for its  stock-based  compensation  plans  using  the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees"  ("APB 25").  Under the provisions of
APB 25,  compensation  cost for stock options is measured as the excess, if any,
of the quoted  market price of the  Company's  common stock at the date of grant
over the amount an employee must pay to acquire the stock.

Consolidated Statement of Cash Flows - Supplemental Disclosures

     The Company  paid $23.8  million,  $106.2  million  and $157.8  million for
interest during the years ended December 31, 1996, 1997 and 1998,  respectively.
Total income taxes paid were  $796,000,  $33.5  million and $4.1 million for the
years ended  December 31, 1996,  1997 and 1998,  respectively.  During the years
ended December 31, 1997 and 1998, the Company recorded a benefit of $3.6 million
and $2.7  million,  respectively,  for the income tax related to the issuance of
common stock under stock option and incentive plans and stock warrants.

Recent Accounting Pronouncements

     In  October  1998,   the  FASB  issued  SFAS  No.  134,   "Accounting   for
Mortgage-Backed  Securities  Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking  Enterprise"  ("SFAS 134").  SFAS 134 amends
Statement of Financial  Accounting  Standards  No. 65,  "Accounting  for Certain
Mortgage-Backed  Securities" ("SFAS 65") to require that after an entity that is
engaged in mortgage banking  activities has securitized  mortgage loans that are
held  for  sale,  it  must  classify  the  resulting  retained   mortgage-backed
securities or other retained  interests  based on its ability and intent to sell
or hold those investments.  However, a mortgage banking enterprise must classify
as  trading  any  retained  mortgage-backed  securities  that it commits to sell
before or during the securitization process.  Previously,  SFAS 65 required that
after an entity that is engaged in mortgage banking activities has securitized a
mortgage loan that is held for sale,  it must  classify the  resulting  retained
mortgage-backed securities or other retained interests as trading, regardless of
the entity's  intent to sell or hold the securities or retained  interest.  SFAS
134 is effective for the first fiscal quarter beginning after December 15, 1998.
On the date SFAS 134 is initially  applied,  an enterprise may  reclassify  from
"trading" those  mortgage-backed  securities and other beneficial interests that
were retained after the mortgage loans were securitized.

     The  actual  effect  the  adoption  of SFAS 134 will have on the  Company's
financial  statements  will depend on various  factors,  including the amount of
interest-only and residual  certificates and the Company's ability and intent to
sell or hold those  investments.  Accordingly,  the Company can not determine at
the present time the impact the  application  of the provisions of SFAS 134 will
have on its statement of operations or balance sheet.

     In June 1998,  the FASB  issued  SFAS No. 133  "Accounting  for  Derivative
Instruments  and Hedging  Activities"  ("SFAS  133").  SFAS 133 is effective for
fiscal  quarters of fiscal years  beginning after June 15, 1999 (January 1, 2000
for the Company).  SFAS 133 requires that all derivative instruments be recorded
on the  balance  sheet  at  their  fair  value.  Changes  in the  fair  value of
derivatives are recorded each period in current earnings or other  comprehensive
income,  depending on whether a  derivative  was  designated  as part of a hedge
transaction and, if it is, the type of hedge  transaction.  For fair-value hedge
transactions  in which the Company hedges changes in the fair value of an asset,
liability  or firm  commitment,  changes  in the fair  value  of the  derivative
instrument  will  generally be offset in the income  statement by changes in the
hedged item's fair value.  The ineffective  portion of hedges will be recognized
in current-period earnings.


                                     - 76 -



<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998

     SFAS 133 precludes designation of a nonderivative financial instrument as a
hedge of an asset or liability. The Company has historically hedged its interest
rate risk on loan purchases by selling short United States  Treasury  Securities
which  match the  duration  of the fixed rate  mortgage  loans held for sale and
borrowing the securities under agreements to resell. Prior to September 30, 1998
the  unrealized  gain or loss  resulting  from the change in fair value of these
instruments  has  been  deferred  and  recognized  upon   securitization  as  an
adjustment to the carrying value of the hedged mortgage loans. SFAS 133 requires
the gain or loss on these nonderivative  financial  instruments to be recognized
in  earnings  in the period of changes  in fair  value  without a  corresponding
adjustment of the carrying  amount of mortgage  loans held for sale.  Management
anticipates that if the Company uses derivative  financial  instruments to hedge
the  Company's  interest  rate  risk on loan  purchases  the  Company  will  use
derivative  financial  instruments  which qualify for hedge accounting under the
provisions of SFAS 133.

     The actual  effect  implementation  of SFAS 133 will have on the  Company's
statements will depend on various factors  determined at the period of adoption,
including  whether  the  Company  is  hedging  its  interest  rate  risk on loan
purchases, the type of financial instrument used to hedge the Company's interest
rate  risk on  loan  purchases,  whether  such  instruments  qualify  for  hedge
accounting treatment, the effectiveness of the hedging instrument, the amount of
mortgage loans held for sale which the Company  intends to hedge,  and the level
of interest  rates.  Accordingly,  the Company can not  determine at the present
time the impact  adoption of SFAS 133 will have on its  statements of operations
or balance sheets.

     Effective  January 1, 1998,  the Company  adopted  SFAS No. 130  "Reporting
Comprehensive  Income"  and  SFAS  No.  131  "Disclosure  About  Segments  of an
Enterprise and Related  Information".  These statements  establish standards for
reporting  and  display  of  comprehensive  income and  disclosure  requirements
related to segments.  The application of the provisions of these  statements did
not have an impact on the Company's financial position or results of operations.

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,  and those
differences could be material.

Reclassifications

     Certain  amounts  in the 1996  and  1997  financial  statements  have  been
reclassified to conform with the 1998 classifications.

Unaudited Pro Forma Data

     The Partnership which is included in the consolidated  financial statements
became a wholly  owned  subsidiary  of the  Parent  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.  Under  the  terms  of the  partnership  agreement,  the
Partnership 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 $9.8 million for the year ended  December 31,
1996.


                                     - 77 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998

     The  Partnership's  income became  subject to income taxes at the corporate
level 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 for the year ended December 31,
1996 to  indicate  what these taxes  would have been had the  exchange  occurred
prior to January 1, 1996.

     The following  unaudited pro forma  information  reflects the Company's net
income for the year ended December 31, 1996 had the Partnership  been subject to
federal and state income taxes for the entire year ended December 31, 1996:

                                                                 (in thousands)
     Income before income taxes ..........................          $29,119
     Pro forma provision for income taxes ................           11,190
                                                                    -------
     Pro forma net income ................................          $17,929
                                                                    =======

     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, 1996.

                                                                 (in thousands)
     Pro forma current:
                   Federal ...............................          $ 8,910
                   State .................................            1,894
                                                                    -------
                                                                     10,804
                                                                    -------
     Pro forma deferred:
                   Federal ...............................              318
                   State .................................               68
                                                                    -------
                                                                        386
                                                                    -------
     Pro forma provision for income taxes ................          $11,190
                                                                    =======

     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 for the entire year
ended December 31, 1996.

                                                               (in thousands)
     Income tax at federal statutory rate ..............          $ 10,192
     State taxes, net of federal benefit ...............             1,310
     Nondeductible expenses ............................                36
     Other, net ........................................              (348)
                                                                  --------
     Pro forma provision for income taxes ..............          $ 11,190
                                                                  ========

Pro Forma Earnings Per Share and Earnings per Share

     In February 1997, the FASB issued SFAS No. 128, "Earnings per Share" ("SFAS
128"), which became effective for the Company for reporting periods ending after
December 15, 1997. Under the provisions of SFAS 128, basic earnings per share is
determined  using  net  income,  adjusted  for  preferred  stock  dividends  and
accretion  of  preferred   stock,   and  divided  by  weighted   average  shares
outstanding. Diluted earnings per share, as defined by SFAS No. 128, is computed
based on the amount of income that would be  available  for each  common  share,
assuming  all dilutive  potential  common  shares were issued.  All prior period
earnings per share data have been restated in accordance  with the provisions of
SFAS 128.


                                     - 78 -

<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


     Due to the recapitalization described in Note 1, earnings per share for the
years ended December 31, 1996 have been computed on a pro forma basis,  assuming
the  recapitalization  occurred at the  beginning  of 1996.  Amounts used in the
determination  of basic and  diluted  earnings  per share are shown in the table
below.

<TABLE>
<CAPTION>
                                                                   (in thousands, except share data)      
                                                           -----------------------------------------------
                                                               1996              1997             1998
                                                           ------------      ------------     ------------
<S>                                                        <C>               <C>              <C>          
Net income (loss) (pro forma net income for 1996) ....     $     17,929      $     47,929     $   (100,469)
Less preferred dividends .............................              (79)               --               --
Less accretion of preferred stock ....................               --                --           (1,474)
                                                           ------------      ------------     ------------
Income (loss) available to common stockholders-basic .           17,850            47,929         (101,943)
Add interest expense attributable to convertible
         debentures and accrued preferred dividends ..               97                --               --
                                                           ------------      ------------     ------------
Income (loss) available to common stockholders-diluted     $     17,947      $     47,929     $   (101,943)
                                                           ============      ============     ============

Weighted average common shares outstanding ...........       15,981,521        27,299,827       31,745,575
Adjustments for dilutive securities:
         Stock warrants ..............................        2,139,344         2,327,178               --
         Stock options ...............................        1,240,553         1,281,995               --
         Contingent shares ...........................            9,827           238,944               --
         Convertible preferred stock .................          115,248                --               --
         Convertible debentures ......................           53,470                --               --
                                                           ------------      ------------     ------------
Diluted common shares ................................       19,539,963        31,147,944       31,745,575
                                                           ============      ============     ============
</TABLE>

     For the year ended December 31, 1998,  there were no adjustments  for stock
warrants, stock options,  contingently issuable shares and convertible preferred
stock in computing the diluted weighted average number of shares  outstanding as
their effect was antidilutive.

                                     - 79 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


3. Warehouse Finance Facilities, Term Debt and Notes Payable

Warehouse Finance Facilities

     In  October  1998,  as  a  result  of  volatility  in  equity,   debt,  and
asset-backed markets, among other things, the Company entered into intercreditor
arrangements  with Paine Webber Real Estate  Securities,  Inc. ("Paine Webber"),
Bear Stearns Home Equity Trust 1996-1 ("Bear Stearns"),  Aspen Funding Corp. and
German  American  Capital  Corporation,  subsidiaries  of Deutsche Bank of North
America  Holding Corp ("DMG")  collectively  (the  "Significant  Lenders").  The
intercreditor  arrangements  provided for the warehouse  lenders to "standstill"
and keep  outstanding  balances  under  their  facilities  in place,  subject to
certain conditions,  for up to 90 days (which expired mid-January 1999) in order
for the  Company  to  explore  its  financial  alternatives.  The  intercreditor
agreements also provided, subject to certain conditions,  that the lenders would
not issue any margin calls requesting  additional collateral be delivered to the
lenders.  To induce DMG to enter the  intercreditor  agreement,  the Company was
required to permit DMG's  committed  warehouse  and  interest-only  and residual
facilities to become uncommitted and issued to DMG warrants exercisable at $1.72
per share to  purchase  2.5% of the  common  stock of the  Company  on a diluted
basis. Issuance of the stock warrants resulted in an increase to paid-in capital
of $1.1 million and a corresponding charge to interest expense included in other
interest expense in the accompanying  Statement of Operations for the year ended
December 31, 1998.

     In mid-January  1999, the intercreditor  agreements  expired;  however,  on
February 19, 1999,  concurrent with the execution of the  Acquisition  Agreement
described in Note 17 "Significant  Events and Events  Subsequent to December 31,
1998",  the Company entered into amended and restated  intercreditor  agreements
with the  Significant  Lenders.  Under the  amended and  restated  intercreditor
agreements,  the Significant Lenders agreed to keep their respective  facilities
in place until the closing of the acquisition  and for twelve months  thereafter
provided that the closing of the acquisition occurs within five months,  subject
to earlier  termination in certain events. If the acquisition is not consummated
within a five-month period, after that period, the Significant Lenders would not
be  subject  to the  requirements  of the  amended  and  restated  intercreditor
agreements.

     The Acquisition  Agreement is subject to a number of conditions,  including
approval  by the  Company's  shareholders.  There can be no  assurance  that the
acquisition  will be  consummated.  If the acquisition by the Greenwich Funds is
not consummated  within five months from the signing of the amended and restated
intercreditor agreements,  the standstill period thereunder would expire and the
Significant Lenders could exercise remedies. In such an event, it is likely that
the Company would be unable to continue its business.

     None of the three  Significant  Lenders  has  formally  reduced  the amount
available  under its  facilities,  but each has informally  indicated its desire
that the Company keep the average amount outstanding on the warehouse facilities
well below the amount available.  There can be no assurance that the Significant
Lenders will  continue to fund the Company under their  uncommitted  facilities.
See Note 17 "Significant Events and Events Subsequent to December 31, 1998". The
Significant Lenders are to receive a fee of $1 million each upon consummation of
the acquisition. The intercreditor agreements also provide for periodic payments
to be made before, upon and after the acquisition.

     At December 31, 1998,  the Company had a $1.25 billion  uncommitted  credit
facility  with  Paine  Webber.  Outstanding  warehouse  borrowings,  which  bear
interest at rates  ranging  from LIBOR (5.1% at December 31, 1998) plus 0.65% to
LIBOR plus  0.90%.  Approximately  $110.0  million  was  outstanding  under this
facility at December 31, 1998. The Company has  informally  requested that Paine
Webber  permit  funding  of an  additional  $200  million  under  its  warehouse
facilities, but has not yet been notified if the request has been approved.

                                     - 80 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


     At December 31, 1998,  the Company had a $1.0  billion  uncommitted  credit
facility with DMG which includes a $100.0 million credit facility collateralized
by interest-only and residual certificates. At December 31, 1998, $369.0 million
was  outstanding  under this facility at December 31, 1998. DMG has indicated to
the Company that additional funding will be on an "as-requested" basis.

     At December 31, 1998, the Company had a $1.0 billion uncommitted  warehouse
facility with Bear Stearns. This facility bears interest at LIBOR plus 0.75%. At
December 31, 1998,  $496.2 million was  outstanding  under this  facility.  Bear
Stearns has requested that the Company maintain  outstanding  amounts under this
warehouse facility at no more than $500 million.

     Additionally,  at December 31, 1998, the Company had other  warehouse lines
of credit which totaled  $154.0  million.  Interest rates ranged from LIBOR plus
0.65% to LIBOR plus 1.50% as of December 31,  1998,  and all  borrowings  mature
within one year.

     Outstanding  borrowings under the Company's warehouse financing  facilities
are collateralized by mortgage loans held for sale, warehouse financing due from
correspondents  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.

     The Company is attempting to enter into  arrangements  to obtain  warehouse
facilities from lenders that are not currently providing warehouse facilities to
IMC, but has not yet been successful.

     As a result of the DMG  warehouse  facility  becoming  uncommitted  and the
adverse market  conditions  currently being experienced by the Company and other
mortgage companies in the industry, the Company's ability to continue to operate
is dependent  upon the  Significant  Lenders'  discretion  to provide  warehouse
funding to the Company.  There can be no assurance the Significant  Lenders will
approve the Company's warehouse funding requests.

Term Debt

     At December  31, 1998,  outstanding  interest-only  and residual  financing
borrowings  were $153.3 million under the Company's  credit  facility with Paine
Webber.  Outstanding  borrowings  bear  interest  at  LIBOR  plus  2.0%  and are
collateralized by the Company's  interest in certain  interest-only and residual
certificates.

     Bear, Stearns & Co. Inc. and its affiliates,  Bear Stearns Mortgage Capital
Corporation and Bear, Stearns International Limited, provide the Company with an
$100 million credit facility which is collateralized  by the Company's  interest
in certain interest-only and residual certificates.  At December 31, 1998, $97.7
million was  outstanding  under this credit  facility,  which bears  interest at
1.75% per annum in excess of LIBOR.

     At December  31, 1998,  outstanding  interest-only  and residual  financing
borrowings  under the Company's  credit  facility  with DMG were $43.2  million.
Outstanding  borrowings bear interest at LIBOR plus 2.0% and are  collateralized
by the Company's interest in certain interest-only and residual certificates.

     The interest-only  and residual  financing  facilities  described above are
subject to the intercreditor  agreements and amended and restated  intercreditor
agreements described under "Warehouse Finance Facilities" above.


                                     - 81 -



<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


     At December  31,  1998,  the Company had  borrowed  $2.2  million  under an
agreement  which  matured in August  1998,  bears  interest at 2.0% per annum in
excess of LIBOR and is  collateralized  by the  Company's  interest  in  certain
interest-only and residual certificates.  The Company is currently discussing an
extension of this  facility,  but there can be no assurance an extension  can be
obtained.

     At December  31,  1998,  the Company  also has  outstanding  a $6.2 million
credit facility with an affiliate of the Company which bears interest at 10% per
annum. The credit facility provides for repayment of principal and interest over
36 months, and based on certain circumstances, a partial prepayment of principal
may be required on July 31, 1999.

     BankBoston  provided the Company  with a revolving  credit  facility  which
matured in October  1998,  bore  interest at LIBOR plus 2.75% and  provided  for
borrowings up to $50.0 million to be used to finance  interest-only and residual
certificates  or for  acquisitions  or bridge  financing.  At December 31, 1998,
$42.5  million was  outstanding  under this credit  facility.  BankBoston,  with
participation  from another financial  institution,  provided the Company with a
$45.0 million working capital facility,  which bore interest at LIBOR plus 2.75%
and matured in October 1998. At December 31, 1998, $45.0 million was outstanding
under this facility.  The Company was unable to repay either of these BankBoston
facilities when they matured.

     In October 1998, the Company entered into a forbearance  and  intercreditor
agreement with BankBoston with respect to its combined $95.0 million facilities.
That agreement provided that the bank would take no collection  action,  subject
to certain conditions,  for up to 90 days (which expired in mid-January 1999) in
order for the Company to explore its financial alternatives.

     In  mid-January,  1999 the  forbearance  and  intercreditor  agreement with
BankBoston  expired.  On February  19,1999 the Greenwich Funds  purchased,  at a
discount,  from  BankBoston its interest in the credit  facilities,  and entered
into an  amended  intercreditor  agreement  with  the  Company  relating  to the
combined $95.0 million facilities.  Under the amended  intercreditor  agreement,
the Greenwich  Funds have agreed to keep its facilities in place for a period of
12 months  thereafter,  if the acquisition  described in Acquisition  Agreement,
discussed  below,  is  consummated  within  five  months,   subject  to  earlier
termination in certain events as provided in the  intercreditor  agreements.  If
the acquisition by the Greenwich  Funds is not  consummated  within a five month
period,  after  that,  the  Greenwich  Funds  would no  longer  be  required  to
standstill.

     On October 15, 1998,  the Company  entered  into an  agreement  for a $33.0
million  standby  revolving  credit facility with certain of the Greenwich Funds
(the "Greenwich Loan Agreement").  The facility was available to provide working
capital  for a period  of up to 90 days.  The  terms of the  facility  result in
substantial  dilution of existing common stockholders' equity equal to a minimum
of 40%, up to a maximum of 90%, on a diluted  basis,  depending  on (among other
thing) when,  or whether the Company  entered into a definitive  agreement for a
transaction which could result in a change of control. In mid-January, 1999, the
$33.0 million standby revolving credit facility  matured.  On February 16, 1999,
the Greenwich Funds made additional loans available  totaling $5.0 million under
the facility.

     The terms of the Greenwich Loan Agreement  resulted in significant  expense
and  stockholder  dilution  during the year ended  December 31,  1998.  Interest
expense of $30.8  million was  recognized  with  respect to the  Greenwich  Loan
Agreement  which  includes  accrued  interest at 10%,  amortization  of the $3.3
million commitment fee and the value attributable to the Class C preferred stock
issued and the additional  preferred  stock  issuable to the Greenwich  Funds in
exchange  for its loan under the terms of the  agreement  as described in Note 4
"Redeemable Preferred Stock."

                                     - 82 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


     On February 19, 1999, the Company entered into a merger  agreement with the
Greenwich  Funds that was terminated  and recast as an acquisition  agreement on
March 31,  1999.  Under the  Acquisition  Agreement,  the  Greenwich  Funds will
receive  newly issued  common stock of the Company  equal to 93.5% of the common
stock outstanding after such issuance,  leaving the existing common shareholders
of the Company  with 6.5% of the common  stock  outstanding.  No payment will be
made  to the  Company's  common  shareholders  in  this  transaction.  Upon  the
consummation  of  the  acquisition,  the  Greenwich  Funds  will  surrender  for
cancellation  their  Class C  exchangeable  preferred  stock and  enter  into an
amendment  and  restatement  of its existing  loan  agreement  with the Company,
pursuant  to which the  Greenwich  Funds will make  available  to the Company an
additional  $35 million in working  capital  loans,  extend the  maturity of the
loans to three years from such  consummation  and forego their right to exchange
their loans for additional preferred stock as described in Note 4.

     The Acquisition  Agreement is subject to a number of conditions,  including
approval  by the  Company's  shareholders.  There can be no  assurance  that the
Acquisition Agreement will be consummated. If the acquisition is not consummated
within five months  from the signing of the amended and  restated  intercreditor
agreements,  the standstill  thereunder would expire and Significant Lenders and
the Greenwich Funds could exercise remedies.

     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.

Notes Payable

     At December 31, 1998,  $4.5 million was  outstanding  under a mortgage note
payable,  which bears interest at 8.16% per annum and expires December 2007. The
note is collateralized by the Company's headquarters building.

     At December 31, 1998, $12.9 million was outstanding  under notes payable to
shareholders  related to an  acquisition  completed  in 1997.  These  notes bore
interest at prime  (7.75% at December  31, 1998) plus 2.0% and mature on July 1,
1999.

     Note  payable  maturities  for the next five  years are as  follows:  $13.4
million in 1999;  $500,000  in 2000;  $500,000 in 2001;  $500,000  in 2002;  and
$500,000 in 2003.


                                     - 83 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


4.   Preferred Stock:

     Preferred stock consisted of the following at December 31, 1998:

                                                                  (in thousands)
Redeemable preferred stock, Class A,
    par value $.01 per share; liquidation
    value $100 per share; 500,000 shares
    authorized; 500,000 shares issued and
    outstanding ...............................................        19,052
Redeemable preferred stock, Class B,
    par value $.01 per share; liquidation
    value $100 per share; 300 shares
    authorized; no shares issued and
    outstanding ...............................................            --
Exchangeable preferred stock, Class C,
    par value $.01 per share; liquidation
    value $10 per share, 800,000
    shares authorized, 23,760.758
    shares issued and outstanding .............................        18,281
Preferred stock, Class D,
    par value $.01 per share; liquidation
    value $10 per share; 800,000 shares
    authorized; no shares issued or outstanding ...............            --
                                                                      -------
           Total preferred stock ..............................       $37,333
                                                                      =======

     There was no preferred stock issued or outstanding at December 31, 1997.

     On July 14,1998,  Travelers  Casualty and Surety Company and certain of the
Greenwich  Funds  (together,  the  "Purchasers")  purchased $50.0 million of the
Company's  Class A redeemable  preferred stock (500,000 shares at $100 per share
liquidation  value).  The  Class A  redeemable  preferred  stock  was  initially
convertible  into  non-registered  common stock at $10.44 per common share.  The
Class A redeemable  preferred  stock bears no dividend and is  redeemable by the
Company over a three-year period commencing in July 2008. The Class A redeemable
preferred stock, under certain  conditions,  which includes a change of control,
may be tendered to the Company at the option of the holder for redemption  prior
to scheduled maturity at a premium of 10%.

     The Purchasers were also granted an option to purchase an additional  $30.0
million of Class B redeemable preferred stock at par (300,000 shares at $100 per
share liquidation value) with a conversion price into common stock of $22.50. At
December  31,  1998,  this  option  had not been  exercised.  The  option may be
exercised until July 2001.

     In conjunction  with the Greenwich  Loan Agreement  entered into on October
15, 1998  (see  Note 3  "Warehouse  Finance  Facilities,  Term Debt  and   Notes
Payable"),  the terms of the Class A redeemable  preferred  stock issued on July
14, 1998 and the terms of the Class B  preferred  stock were  amended to,  among
other things, eliminate the conversion feature into common stock.

     The  elimination  of the  conversion  feature  of the  Class  A  redeemable
preferred  stock resulted in an increase to additional  paid-in capital of $32.4
million representing the discount associated with the Class A redeemable

                                     - 84 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


preferred stock. In subsequent periods,  the Class A redeemable  preferred stock
will be accreted to the redemption amount of $50 million. The amount of periodic
accretion will be charged against retained  earnings.  Accretion  related to the
Class A redeemable preferred shares was $1.5 million for the year ended December
31,  1998.  The Company  used a 10%  discount  rate to estimate the value of the
Class A preferred stock.

     On October 15, 1998,  the Company issued  23,760.758  shares of its Class C
exchangeable  preferred  stock in conjunction  with the Greenwich Loan Agreement
described  in Note  3,  "Warehouse  Finance  Facilities,  Term  Debt  and  Notes
Payable." The Class C exchangeable  preferred stock has a par value of $0.01 per
share,  participates in any dividends paid in the common stock on the basis of a
dividend  per share equal to 1,000 times the  dividend  paid on the common stock
and has a  liquidation  value  equal to the  greater  of $10 per share and 1,000
times the liquidating distribution otherwise payable on a share of common stock.
The Class C exchangeable preferred stock is exchangeable into an equal number of
shares  of  Class D  preferred  stock  in  certain  events  and  represents  the
equivalent of 40% of the common equity of the Company.  The Class C exchangeable
preferred  stock is subject to  redemption  at the option of the  holder,  under
certain circumstances, upon a change of control.

     The carrying value of the Class C exchangeable preferred stock was based on
an allocation of the proceeds from the Greenwich Loan Agreement,  which resulted
in a discount on the term debt  associated  with the Greenwich Loan Agreement of
$18.3 million.  As of December 31, 1998, $15.2 million of this discount has been
amortized to interest  expense and is included in "Interest  expense - Greenwich
Funds" in the accompanying Consolidated Statements of Operations.  The remaining
discount  of $3.1  million  will be  amortized  to  interest  expense  over  the
remaining term of the Greenwich Loan  Agreement,  which expired in January 1999.
See Note 3 "Warehouse Finance Facilities, Term Debt and Notes Payable."

     Under the terms of the Greenwich  Loan  Agreement,  after the end of the 90
day commitment period, if no definitive agreement which would result in a change
of control  has been  entered  into,  the loans  outstanding  thereunder  may be
exchanged, at the holder's election, for Class C exchangeable preferred stock or
Class D preferred stock representing the equivalent of 50% of the diluted equity
of the Company.  The Company valued this beneficial  conversion feature based on
the market  capitalization of the Company at the effective date of the Greenwich
Loan Agreement. The value assigned to the beneficial conversion feature of $14.7
million,  which  resulted  in a discount  on the term debt  associated  with the
Greenwich  Loan  Agreement,  and is being  amortized  to expense over the 90-day
commitment  period of the  Greenwich  Loan  Agreement.  As of December 31, 1998,
$12.3  million of this  discount has been  amortized to interest  expense and is
included  in  "Interest   Expense  -  Greenwich   Funds"  in  the   accompanying
Consolidated Statements of Operations. The remaining amount of $2.4 million will
be amortized to interest  expense over the remaining  term of the Greenwich Loan
Agreement which matured in January 1999.

5.   Hedge Loss:

     The Company has historically  sold United States Treasury  securities short
to hedge against  interest rate movements  affecting the mortgage loans held for
sale. Prior to September 1998, when interest rates decreased,  the Company would
experience a devaluation of its hedge position  (requiring a cash payment by the
Company to maintain the hedge),  which would  generally  be largely  offset by a
corresponding  increase  in the  value  of  mortgage  loans  held  for  sale and
therefore  a  higher  gain on  sale  of  loans  at the  time of  securitization.
Conversely,  when interest  rates  increased,  the Company  would  experience an
increase in the valuation in the hedge position (providing a cash payment to the
Company from the hedge  position),  which would generally be largely offset by a
corresponding  decrease in the value of mortgage loans held for sale and a lower
gain at the time of securitization.


                                     - 85 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


     In September, 1998, the Company believes that, primarily due to significant
volatility  in  debt,  equity  and  asset-backed  markets,  investors  increased
investments in United States  Treasury  securities and at the same time demanded
wider spreads over treasuries to acquire newly issued  asset-backed  securities.
The effect of the increased demand for the treasuries  resulted in a devaluation
of the Company's hedge position,  resulting in the Company paying  approximately
$47.5 million,  which was not offset by an equivalent  increased gain on sale of
loans at the time of securitization as the investors demanded wider spreads over
the treasuries to acquire the Company's  asset-backed  securities.  Of the $47.5
million in hedge devaluation, approximately $25.1 million was closed at the time
the Company priced two securitizations and was reflected as an offset to gain on
sale and approximately  $22.4 million was charged to hedge loss in the Statement
of Operations. At December 31, 1998, the Company had no open hedge positions.

6.   Business Combinations

For the Year Ended December 31, 1996

     On January 1, 1996, the Company  acquired 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 price ($2.0 million) for
certain  assets  of  MCC  was  paid  by  delivery  to MCC of  Series  A  voting,
convertible  preferred stock of the Company,  with contingency payments 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 $2.0 million 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 $2.0 million over the
fair values of the assets  acquired of  approximately  $333,000 and  liabilities
assumed   $57,000  was  recorded  as   goodwill.   Additional   purchase   price
consideration of approximately $480,000 has been recorded as goodwill related to
the contingent payment terms of the acquisition through December 31, 1997.

The operating results of MCC have been included in the Consolidated Statement of
Operations from the date of acquisition on January 1, 1996.

For the Year Ended December 31, 1997

     Effective  January  1,  1997,  the  Company  acquired  all of the assets of
Mortgage  America,  Inc., a  non-conforming  mortgage  lender based in Bay City,
Michigan and Equity  Mortgage  Co., a  non-conforming  mortgage  lender based in
Baltimore, Maryland, and all of the outstanding common stock of Corewest Banc, a
non-conforming  mortgage  lender  based in Los  Angeles,  California.  Effective
February 1, 1997,  the Company  acquired all of the assets of American  Mortgage
Reduction,  Inc.,  a  non-conforming  mortgage  lender  based in  Owings  Mills,
Maryland.  Effective July 1, 1997, the Company  acquired all of the  outstanding
common stock of National Lending Center, Inc., a non-conforming  mortgage lender
based in  Deerfield  Beach,  Florida,  and  substantially  all of the  assets of
Central Money  Mortgage Co.,  Inc., a  non-conforming  mortgage  lender based in
Baltimore,   Maryland.   Effective   October  1,  1997,  the  Company   acquired
substantially  all  of  the  assets  of  Residential  Mortgage  Corporation,   a
non-conforming  mortgage  lender  based in  Cranston,  Rhode  Island.  Effective
November

                                     - 86 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


1, 1997,  the Company  acquired  substantially  all of the assets of Alternative
Capital Group, Inc., a non-conforming lender based in Dallas, Texas.

     All acquisitions were accounted for using the purchase method of accounting
and the results of  operations  have been  included in those of the Company from
the dates of the acquisition.  The fair value of the acquired  companies' assets
approximated  the  liabilities  assumed  and,  accordingly,  the majority of the
initial  purchase  prices has been recorded as goodwill which is being amortized
on a  straight-line  basis for  periods  from five to 30  years.  The  aggregate
purchase price for the eight  acquisitions  completed in 1997 included 5,043,763
shares of common stock,  gross cash paid of approximately  $21.0 million,  $12.9
million  of notes  payable  to  former  owners  of the  acquired  companies  and
assumption  of a stock option plan which  resulted in the issuance of options to
acquire 334,596 share of the Company's common stock. The aggregate fair value of
assets  acquired  in these  acquisitions  was  approximately  $71.2  million and
liabilities assumed approximated $70.4 million. The Company recorded goodwill of
approximately  $87.0  million  related  to  these  acquisitions.   Most  of  the
acquisitions   include  earn-out   arrangements   that  provide  for  additional
consideration if the acquired company achieves certain performance targets after
the acquisition.  Additional  purchase price of  approximately  $5.6 million and
$1.6 million was recorded as goodwill  during the years ended  December 31, 1997
and  1998,  respectively,  related  to  the  contingent  payment  terms  of  the
acquisitions.  Any such  contingent  payments  will result in an increase in the
amount of recorded goodwill related to such acquisition.

     The  Company   reviewed  the   potential   impairment   of  goodwill  on  a
non-discounted cash flow basis to assess recoverability.  The Company determined
that there was no  impairment  of  goodwill  at  December  31, 1998 based on the
projected cash flows of the acquired companies. However, potential impairment in
future periods may result from several  factors,  including the  consummation of
the proposed  transaction  with the  Greenwich  Funds,  the  discontinuation  of
operations or sale of certain  acquired  companies,  or other factors  including
turmoil in the financial markets in which the acquired companies and the Company
operate. See Note 3 "Warehouse Finance Facilities, Term Debt and Notes Payable",
Note 5 "Hedge Loss" and Note 17  "Significant  Events and Events  Subsequent  to
December 31, 1998."

     The  pro  forma  results  of  operations   listed  below  reflect  purchase
accounting adjustments assuming the acquisitions occurred on January 1, 1997.

                                                                   1997
                                                                -----------
                                                                (unaudited)

                                                               (in thousands)

     Revenues ......................................            $   273,659
     Net Income ....................................                 56,370
     Basic earnings per share ......................                   1.96
     Diluted earnings per share ....................                   1.73

     The pro forma results of operations are not necessarily  indicative of what
the  actual   consolidated   results  of  operations  would  have  been  if  the
acquisitions had been effective at the beginning of 1997.


                                     - 87 -



<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


7.   Strategic Alliance

     The Company,  prior to 1997, 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 expertise
and  assistance  in loan  securitization.  In  1996,  the  securitizations  were
structured  so  that  ContiFinancial  received,  in  exchange  for  cash of $8.6
million,  interest-only and residual certificates with estimated values of $13.4
million.  In  addition,  ContiFinancial  paid  $654,000 in  expenses  related to
securitizations  in 1996.  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  amounted to $4.2
million in 1996, and has been recorded as additional securitization  transaction
expense.

     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.
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 $1.7
million 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  $5.9
million  (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  accrued 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 the year
ended December 31, 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 contained customary anti-dilution provisions.  ContiFinancial
had 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 $8.4  million  based on an
independent appraisal of the option. The Company recorded

                                     - 88 -

<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


expense of $2.6 million 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.  As of
December  31,  1998 Conti  Financial  had  exercised  the warrant for the entire
3,000,000 shares.

8.   Other Assets

     Other assets consist of the following:

                                                       (in thousands)
                                                      1997            1998
                                                    -------         -------

     Prepaid expenses .....................         $ 3,106         $10,319
     Real estate owned ....................           1,805           6,088
     Investment in joint venture ..........           1,707           3,388
     Hedge deposits .......................           4,356              --
     Notes receivable .....................           1,003             950
     Other ................................             993           1,945
                                                    -------         -------
                                                    $12,970         $22,690
                                                    =======         =======

     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 $1.0 million and a
note receivable from the joint venture for $1.0 million.

     Additionally,  at December 31, 1997 and December 31, 1998,  the Company had
loaned to the joint  venture $1.8 million and $4.3  million,  respectively.  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 is
included in other assets.

9.   Servicing Portfolio

     The total servicing portfolio of loans was approximately $2.1 billion, $7.0
billion and $8.9 billion at December 31, 1996, 1997 and 1998, respectively.



                                     - 89 -



<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


10.  Interest-Only and Residual Certificates

     Activity  in  interest-only  and  residual  certificates  consisted  of the
following:

                                                    For the year ended
                                                        December 31,     
                                                --------------------------
                                                   1997             1998
                                                ---------        ---------
                                                      (in thousands)
     Balance, beginning of year .........       $  86,247        $ 223,306
     Additions ..........................         384,971          365,353
     Cash receipts ......................        (247,912)         (35,180)
     Market valuation adjustment ........              --          (84,638)
                                                ---------        ---------
     Balance, end of year ...............       $ 223,306        $ 468,841
                                                =========        =========


     In 1998, the Company revised the loss curve  assumption used to approximate
the timing of losses  over the life of the  securitized  loans and the  discount
rate used to present  value the  projected  cash flows  retained by the Company.
Previously,  the Company  expected losses from defaults to increase from zero in
the first six months of the loan to 100 basis points after 36 months. During the
fourth quarter of 1998, as a result of emerging trends in the Company's serviced
loan  portfolio and adverse  market  conditions  (see Note 3 "Warehouse  Finance
Facilities,  Term  Debt,  and Notes  Payable,"  Note 5 "Hedge  Loss" and Note 17
"Significant  Events and Other Events  Subsequent  to December 31,  1998"),  the
Company revised its loss curve so that expected defaults gradually increase from
zero in the first six  months of the loan to 175 basis  points  after 36 months.
The Company believes the adverse market conditions  affecting the non-conforming
mortgage  industry  may limit the  Company's  borrowers'  ability  to  refinance
existing  delinquent  loans serviced by IMC with other  non-conforming  mortgage
lenders that market  their  products to  borrowers  that are less  creditworthy,
which IMC  believes may increase  the  frequency  of defaults.  Previously,  the
Company  discounted  the present value of projected  cash flows  retained by the
Company at discount  rates ranging from 11% to 14.5%.  During the fourth quarter
of 1998, as a result of adverse market  conditions,  the Company adjusted to 16%
the discount rate used to present value the projected  cash flow retained by the
Company.  The revised  loss curve and  discount  rate  assumption  resulted in a
decrease  to  the  estimated  fair  value  of  the  interest-only  and  residual
certificates of approximately $32.3 million and $52.3 million, respectively. The
total decrease in fair value of the interest-only  and residual  certificates of
$84.6 million is reflected as a market valuation  adjustment in the accompanying
Consolidated Statement of Operations for the year ended December 31, 1998.

     Cash  receipts  in 1997  include  gross  receipts of  approximately  $232.4
million from the sale, on a  non-recourse  basis of  interest-only  and residual
certificates.  The sale was  effected  through  a  securitization  (the  "Excess
Cashflow  Securitization")  in which the Company sold interest-only and residual
certificates  that had an  estimated  net book  value  of  approximately  $266.6
million  and  received  net  cash  proceeds  equal to  approximately  85% of the
estimated net book value and a subordinated residual certificate for the balance
of the estimated net book value.  The Company did not recognize any gain or loss
as a  result  of the  Excess  Cashflow  Securitization,  although  costs  of the
transaction of approximately $4.9 million were expensed as incurred. The Company
used the net proceeds to retire or reduce certain term debt.


                                     - 90 -



<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


11.  Property, Furniture, Fixtures and Equipment

     Property, furniture, fixtures and equipment consists of the following:

                                                         December 31,       
                                                  ------------------------
                                                    1997            1998
                                                  --------        --------
                                                       (in thousands)

     Building .............................       $  5,113        $  5,113
     Computer systems .....................          4,430           6,991
     Office equipment .....................          3,603           4,395
     Furniture ............................          3,465           5,350
     Leasehold improvements ...............            512             732
     Other ................................            335             648
                                                  --------        --------
             Total ........................         17,458          23,229
     Less accumulated depreciation ........         (2,574)         (6,110)
                                                  --------        --------
     Property, furniture, fixtures and
        equipment, net ....................       $ 14,884        $ 17,119
                                                  ========        ========

     Depreciation  expense was  $317,000,  $1.5 million and $3.5 million for the
years ended December 31, 1996, 1997 and 1998, respectively.


                                     - 91 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


12.  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>
                                                                        (in thousands)
     Current income tax expense:                                1996          1997         1998 
                                                              --------      --------     --------
<S>                                                           <C>           <C>          <C>     
                   Federal ..............................     $  5,713      $ 13,070     $  9,578
                   State ................................        1,214         2,776        2,034
                                                              --------      --------     --------
                                                                 6,927        15,846       11,612
                                                              --------      --------     --------
     Deferred income tax expense (benefit):
                   Federal ..............................          725        11,262       (9,018)
                   State ................................          154         2,392       (1,915)
                                                              --------      --------     --------
                                                                   879        13,654      (10,933)
                                                              --------      --------     --------
     Non-recurring benefit associated with the conversion
        of Partnership to C Corporation .................       (3,600)           --           --
                                                              --------      --------     --------
     Total provision for income taxes ...................     $  4,206      $ 29,500     $    679
                                                              ========      ========     ========

The income tax  benefits  related to the  exercise of certain  warrants  reduces
taxes  currently  payable and is credited to  additional  paid in capital.  Such
income tax benefit for 1998 was approximately $2.7 million.

</TABLE>


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

<TABLE>
<CAPTION>
                                                                          (in thousands)
                                                                 1996          1997          1998
                                                               --------      --------      --------
<S>                                                            <C>           <C>           <C>      
     Income tax (benefit) at federal statutory rate ......     $ 10,192      $ 27,100      $(34,927)
     State income tax (benefit), net of federal benefit ..        1,310         3,484        (4,490)
     Interest expense - Greenwich Funds ..................           --            --         4,845
     Non-recurring benefit associated with the conversion
        of the Partnership to a C Corporation ............       (3,600)           --            --
     Goodwill amortization ...............................           --           817         1,345
     Other, net ..........................................         (312)       (1,901)          281
     Valuation allowance .................................           --            --        33,625
     Effect of applying statutory federal and state income
        tax rates to partnership income ..................       (3,384)           --            --
                                                               --------      --------      --------
                   Total provision for income taxes ......     $  4,206      $ 29,500      $    679
                                                               ========      ========      ========
</TABLE>


                                     - 92 -

<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


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>
                                                                     (in thousands)
                                                                   1997          1998
                                                                 --------      --------
<S>                                                              <C>           <C>     
     Deferred tax assets:
         Stock warrants .....................................    $  2,403      $     --
         Allowance for loan losses ..........................       5,095        10,334
         Interest-only and residual certificates ............       3,722        69,323
         Joint venture ......................................       1,037         2,068
         Mortgage servicing rights ..........................         866         8,159
         Other ..............................................       3,634         4,346
     Deferred tax liabilities:                       
         Interest-only and residual certificates ............     (27,110)      (59,611)
         Other ..............................................        (580)         (994)
                                                                 --------      --------
         Net deferred tax asset (liability) before             
           valuation allowance ..............................     (10,933)       33,625
         Valuation allowance ................................         --        (33,625)
                                                                 --------      --------
         Net deferred tax asset (liability) .................    $(10,933)     $     --
                                                                 ========      ========
</TABLE>

     The asset and liability method of accounting for income taxes requires that
a valuation  allowance be recorded against tax assets which are not likely to be
realized.  Specifically,  due to the  timing  of the  expected  reversal  of the
Company's  temporary  differences,  realization  is  dependent  upon the Company
achieving  sufficient  future  earnings to achieve the tax benefits.  Due to the
uncertain nature of their ultimate realization based upon past performance,  the
Company has  established  a full  valuation  allowance  against the deferred tax
assets  and  is  recognizing   the  deferred  tax  asset  only  as  reassessment
demonstrates that the assets are realizable.  Realization is entirely  dependent
upon  future  earnings in specific  tax  jurisdictions.  While the need for this
valuation  allowance is subject to periodic review, if the allowance is reduced,
the tax  benefits  from these  deferred  tax assets  will be  recorded in future
operations as a reduction of the Company's income tax provision.

13.  Financial Instruments and Off Balance Sheet Activities

Financial Instruments

     The  Company  regularly  securitizes  and  sells  fixed and  variable  rate
mortgage  loans.  Prior to  October  1998,  as part of its  interest  rate  risk
management  strategy,  the  Company  hedged  its fixed rate  interest  rate risk
related to its mortgage loans held for sale by utilizing  United States Treasury
securities.  The Company  classified these transactions as hedges. The gains and
losses derived from these financial securities were deferred and included in the
carrying  amounts of the mortgage loans held for sale and ultimately  recognized
in income  when the related  mortgage  loans were sold.  Deferred  losses on the
United States Treasury  Securities  used to hedge the  anticipated  transactions
amounted to approximately $2.7 million at December 31, 1997. The Company did not
hedge its fixed rate interest rate risk related to mortgage  loans held for sale
at December 31, 1998. See Note 5 "Hedge Loss".


                                     - 93 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


Market Risk

     The  Company is  subject to market  risk from  interest-only  and  residual
certificates  and was subject to market  risk from short sales of United  States
Treasury  securities prior to October 1998, in that changes in market conditions
can and could 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 and cash
     equivalents 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.

          Securities  purchased  under  agreements to resell and securities sold
     but not yet purchased: The carrying amounts approximate fair value as these
     amounts are short-term in nature and bear market rates of interest.

          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  $1.7  billion  and  $970.0  million  at
     December 31, 1997 and 1998, respectively.

          Warehouse financing due from correspondents:  The carrying amounts are
     considered  to  approximate  fair  value as the  amounts  are short term in
     nature and bear market rates of interest.

          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 the Company
     believes 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.


                                     - 94 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


          Warehouse  finance  facilities,  term  debt  and  notes  payable:  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 and notes payable bear market rates of interest and approximates  fair
     value.

Credit Risk

     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, 1997 and 1998, the Company had  outstanding  commitments
to extend  credit at fixed  rates to  purchase  loans in the  amounts  of $515.0
million and $101.0  million,  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.

     Financial   instruments,   which   potentially   subject   the  Company  to
concentrations of credit risk, consist  principally of cash and cash equivalents
and mortgages held for sale.  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, 1996,  1997 and
1998 a large  amount 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, of which $25.9 million and $2.8 million were  outstanding at December 31,
1997 and  1998,  respectively.  Interest  income  on these  warehouse  financing
facilities  were  $191,000,  $1.5  million and $1.2  million for the years ended
December 31, 1996, 1997 and 1998,  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.

14.  Employee Benefit Plans

Defined Contribution Plans

     The Company adopted a defined  contribution  plan (401(k)) for all eligible
employees  during  August 1995.  Additionally,  the Company  assumed many 401(k)
plans of acquired subsidiaries and merged these plans into the

                                     - 95 -



<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


Company's  plan.  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  $277,000,  $960,000  and $1.9 million for the years ended
December 31, 1996, 1997 and 1998, respectively.

     The Company's subsidiary,  National Lending Center, Inc. ("National Lending
Center"),  sponsors  a 401(k)  plan for  eligible  employees.  National  Lending
Center's  policy  is to  match  25% of the  first 6% of  employees'  contributed
amounts.  Contributions  to the plan included in the  accompanying  consolidated
statement  of  operations  for the years ended  December  31, 1997 and 1998 were
approximately $24,000 and $89,000, respectively.

Stock Award Plans

     Effective   October  1997,  the  Company  adopted  the  Executive   Officer
Unregistered Stock Plan (the "Executive Officer Plan") and the  Vice-Presidents'
Unregistered Stock Plan (the "Vice Presidents' Plan") which provide compensation
for certain  officers of the Company in the form of  unregistered  shares of the
Company's common stock.

     Under the Executive  Officer  Plan, if the Company  achieves an increase in
net  earnings  per  share  for two  consecutive  years of 10% or more,  eligible
participants  receive  a  grant  of  fully-vested  unregistered  shares  of  the
Company's  common stock at the end of each fiscal year beginning with the fiscal
year ended December 31, 1997. The number of unregistered  shares granted to each
participant equals the officer's base salary divided by the closing price of the
Company's  common stock on the last calendar day of the year.  Each  participant
also receives a cash payment equal to the income tax benefit the Company obtains
from the issuance of the common stock. A total of 104,463 shares of unregistered
stock were granted under the Executive  Officer Plan for the year ended December
31, 1997,  resulting in  compensation  expense of $3.0 million.  No unregistered
shares  were  granted  under the  executive  officer  plan during the year ended
December 31, 1998.

     Under the Vice-Presidents'  Plan, certain  vice-presidents as determined by
the  Compensation  Committee  of the Board of  Directors  may receive a grant of
unregistered shares of the Company's common stock at the end of each fiscal year
beginning  with the year ended  December  31, 1997.  The number of  unregistered
shares   granted   to  each   designated   vice-president   shall   equal   such
vice-president's  base salary at the year end  divided by the closing  price for
the Company's  common stock on the last day of the fiscal year. The unregistered
shares  granted  to each  vice-president  vest  over a three  year  period  with
one-third vesting  immediately,  and an additional one-third vesting on the last
day of each of the next two fiscal years so long as the  vice-president is still
employed by the Company on such date. No unregistered  shares were granted under
the Vice-Presidents' Plan during the years ended December 31, 1997 and 1998.

Stock Option Plans

     On December 11, 1995, the Partnership  adopted the Partnership  Option Plan
pursuant  to which  the  Partnership  was  authorized  to grant to  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 may not exceed 12% of all equity  interests  in the  Company as of the date
the plan was adopted.

                                     - 96 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


     In July 1997, the Company  adopted the IMC Mortgage  Company 1997 Incentive
Plan (the "1997 Incentive  Plan") pursuant to which the Company is authorized to
grant to eligible  employees  options to purchase  shares of common stock of the
Company.  The 1997  Incentive Plan provides that options to acquire a maximum of
250,000  shares may be granted  thereunder  at exercise  prices of not less than
100% of the fair  market  value of the common  stock at the date of each  grant.
Such options expire ten years after the date of grant.  As of December 31, 1998,
127,500 options had been granted under the 1997 Incentive Plan.

     The Company  applies APB 25 and related  interpretations  in accounting for
its  plans.  SFAS 123 was  issued  by the FASB in 1995  and,  if fully  adopted,
changes  the method for  recognition  of cost with  respect to 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.

     A summary of the status of the  Company's  stock options as of December 31,
1996, 1997 and 1998 and the changes during the year is presented below:

<TABLE>
<CAPTION>
                                                           1996                        1997                      1998          
                                                  -----------------------    -----------------------   -------------------------
                                                                 Weighted                   Weighted                   Weighted
                                                                  Average                   Average                     Average
                                                                 Exercise                   Exercise                   Exercise
                                                    Shares        Price        Shares        Price        Shares         Price  
                                                    ------        -----        ------        -----        ------         -----  
<S>                                                <C>           <C>          <C>           <C>          <C>           <C>      
Outstanding at beginning of year .............     1,150,866     $ 2.35       1,511,168     $ 4.18       1,464,661      $ 4.18
Granted ......................................       360,302     $10.00         354,596     $ 4.94         139,932      $ 8.29
Exercised ....................................             0                    401,103     $ 3.77           5,173      $ 2.35
Canceled .....................................             0                          0                     63,032      $11.49
                                                  ---------                  ----------                 ----------     
Outstanding at end of year ...................     1,511,168     $ 4.18       1,464,661     $ 3.59       1,536,388      $ 4.54
                                                  ==========                 ==========                 ==========     
Options exercisable at end of year ...........     1,010,456                  1,258,820                  1,325,075    
                                                  ==========                 ==========                 ==========     
Options available for future grant ...........       534,286                    429,690                    343,092    
                                                  ==========                 ==========                 =========     
Weighted average fair value of options granted                                                                        
    during year ..............................    $     5.75                 $     5.92                 $     6.64    
                                                  ==========                 ==========                 ==========     
</TABLE>                                              

     The fair value of stock  options at date of grant was  estimated  using the
Black-Scholes  option  pricing model  utilizing the following  weighted  average
assumptions:

                                             1996        1997        1998
                                            ------      ------      ------

     Risk-free interest rate ..........      5.7%        5.5%        5.6%
     Expected option life in years ....      4.2         1.3         6.0
     Expected stock price volatility ..     53.2%       54.1%       96.6%
     Expected dividend yield ..........       --          --          --

     The 1996 grants included options to purchase 120,000 shares of common stock
granted to employees at exercise  prices less than the market price of the stock
on the date of grant. The exercise price of the options,

                                     - 97 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


market price of the common stock 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,  $96,000
and $96,000 in the years ended December 31, 1996, 1997 and 1998, respectively.

     The 1996 grants also include  options to purchase  20,000  shares of common
stock, 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, $57,000 and $96,000 has been
recognized in the years ended  December 31, 1996,  1997 and 1998,  respectively,
under the provisions of SFAS 123.

     The Company  assumed  the stock  option  plan of its  acquired  subsidiary,
Mortgage America,  Inc. ("Mortgage America") in accordance with the terms of the
purchase  agreement.  On January 1, 1997, the effective date of the acquisition,
the fully vested  outstanding  options  under the Mortgage  America stock option
plan were  converted to  fully-vested  options to acquire  334,596 shares of the
Company's  common  stock (see Note 6). The  exercise  price of the  options  and
market price of the common stock at the acquisition  date were $4.19 and $16.75,
respectively.

     The following table summarizes  information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
                                                Options Outstanding                Options Exercisable       
                                      ---------------------------------------   --------------------------
                                                        Weighted                  Number
                                          Number        average      Weighted   exercisable at    Weighted
                                      outstanding at   remaining     average      December        average
                                        December 31,  contractual    exercise        31,         exercise
                                           1998          life         price         1998           price    
                                      --------------  -----------   ---------   --------------    -------    
<S>                                     <C>               <C>         <C>        <C>              <C>   
     Range of exercise prices                                                                     
          $2.35 ....................       994,592        7.0         $ 2.35       994,592        $ 2.35
          $4.00 to $8.00 ...........       458,865        7.9         $ 7.08       300,052        $ 6.72
          $12.00 to $20.25                  82,931        8.6         $10.99        30,431        $11.20
                                         ---------                               ---------        
               Total ...............     1,536,388        7.4         $ 4.23     1,325,075        $ 3.54
                                         =========                               =========        
</TABLE>

     Had  compensation  cost for the  Company's  1996,  1997 and 1998 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 the
year ended  December  31, 1996 and net income  (loss) and net income  (loss) per
common share for the years ended  December  31, 1997 and 1998 would  approximate
the pro forma amounts below.

<TABLE>
<CAPTION>
                                                  Year Ended                   Year Ended                      Year Ended
                                               December 31, 1996            December 31, 1997               December 31, 1998    
                                           -------------------------     -------------------------     ---------------------------
                                           As Reported     Pro Forma     As Reported     Pro Forma     As Reported       Pro Forma
                                           -----------     ---------     -----------     ---------     -----------       ---------
                                                                    (in millions except per share data)
<S>                                         <C>            <C>            <C>            <C>            <C>              <C>       
Net income (loss) (pro forma for 1996)      $   17.9       $   17.3       $   47.9       $   47.5       $  (100.5)       $  (100.7)
Basic earnings (loss) per share
   (pro forma for 1996) ..............      $   1.12       $   1.08       $   1.76       $   1.74       $   (3.21)       $   (3.22)
Diluted earnings per share
  (pro forma for 1996) ...............      $   0.92       $   0.88       $   1.54       $   1.52       $   (3.21)       $   (3.22)
</TABLE>


                                     - 98 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


     The  effects  of  applying  SFAS 123 in this pro forma  disclosure  are not
indicative  of  future  amounts  and  additional  awards  in  future  years  are
anticipated.

15.  Commitments and Contingencies

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 of the Company at $9.00 per share were awarded to 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 Partners
that doubled their  commitments,  pro rata, to the extent the Partners  exceeded
that  doubled  commitment  for the  quarter.  The plan was amended and, for each
quarter  beginning with the quarter ended 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 $105,000  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 the
years ended December 31, 1996, 1997 and 1998 amounted to approximately $257,000,
$252,000 and $189,000, respectively.

Operating Leases

     The  Company  leases  office  space  and  various  office  equipment  under
operating lease  agreements.  Rent expense under operating  leases was $753,000,
$4.1  million and $7.9 million in the years ended  December  31, 1996,  1997 and
1998, respectively.

     Future  minimum  lease  payments  under   noncancellable   operating  lease
agreements at December 31, 1998 are as follows:

   Years Ending
   December 31,                                               (in thousands)
   ------------
   1999.......................................                     6,305
   2000.......................................                     4,889
   2001.......................................                     3,896
   2002.......................................                     2,729
                                                                 -------
                                                                 $17,819
                                                                 =======

Employment Agreements

     Certain members of management entered into employment  agreements  expiring
through  2001  which,   among  other  things,   provide  for  aggregate   annual
compensation of  approximately  $1.4 million plus bonuses ranging from 5% to 15%
of base salary in the  relevant  year for each one percent by which the increase
in net  earnings per share 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.

                                     - 99 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


Legal Proceedings

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

     On December 23, 1998,  certain  former  shareholders  of CoreWest  sued the
Company  in  Superior  Court of the State of  California  for the  County of Los
Angeles claiming the Company agreed to pay them $23.8 million in cancellation of
the contingent "earn out" payment,  if any, payable by the Company in connection
with the Company's  purchase of all of the outstanding  shares of CoreWest.  The
case is in the early  stages of  pleading;  however,  the  Company's  management
believes there is no merit in the plaintiffs' claims.

Year 2000

     The Year  2000  issue  relates  to  limitations  in  computer  systems  and
applications that may prevent proper recognition of the Year 2000. The potential
effect of the Year 2000 issue on the Company and its business  partners will not
be  fully  determinable  until  the  Year  2000  and  thereafter.  If Year  2000
modifications are not properly  completed either by the Company or entities with
which the Company  conducts  business,  the  Company's  revenues  and  financial
condition could be adversely impacted.


16.  Quarterly Results of Operations (Unaudited)

                                         (in millions, except per share data)
                                                    Fiscal Quarter 
                                       ----------------------------------------
           1998                         First      Second     Third      Fourth
           ----                        ------      ------     -----      ------

Revenues .........................     $  83.9    $  97.3    $  83.8    $  56.2
Net income (loss) ................     $  15.1    $  16.3    $   2.2    $(134.1)
Basic earnings per share .........     $  0.49    $  0.53    $  0.07    $ (4.00)
Diluted earnings per share .......     $  0.44    $  0.47    $  0.06    $ (4.00)

           1997
           ----

Revenues .......................       $  38.4    $  49.8    $  73.7    $  76.8
Net income .....................       $   8.9    $  10.7    $  13.5    $  14.8
Basic earnings per share .......       $  0.41    $  0.41    $  0.45    $  0.48
Diluted earnings per share .....       $  0.34    $  0.36    $  0.40    $  0.43
                                                                          

                                     - 100 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


17.  Significant Events and Events Subsequent to December 31, 1998:

     The Company, like several companies in the sub-prime mortgage industry, has
been  significantly  and adversely  affected by market  conditions  beyond their
control.  Along with many  companies in the industry,  the  Company's  access to
debt,  equity and asset-backed  markets has become virtually  impossible.  These
market  conditions  have resulted in many  companies in the industry  filing for
bankruptcy  protection,  such as  Southern  Pacific  Funding  (October  1,1998),
Wilshire  Financial  Services  Group,  Inc.  (March  3,1999) MCA Financial  Corp
(February 1,1999),  United Companies (March 2,1999) and certain  subsidiaries of
First Plus Financial (March 6, 1999). As a result of these unprecedented  market
conditions,  the Company has closed certain retail offices, reduced total number
of  employees,  significantly  reduced  all loan sales  through  securitization,
focused  significantly  on loan sales to  institutional  investors and is in the
process of  identifying  and reducing  non-essential  costs of  operations.  The
Company,  based on these  unprecedented  market conditions,  has entered into an
Acquisition  Agreement to provide the Company with a reasonable  opportunity  to
avoid having to file bankruptcy protection like many of its competitors.

     As described in Note 3 "Warehouse Finance  Facilities,  Term Debt and Notes
Payable",  on October 15,  1998,  the Company  entered into the  Greenwich  Loan
Agreement  that  provided  the Company a $33 million  standby  revolving  credit
facility  for a period of up to 90 days.  In  consideration  for  providing  the
facility,  the Greenwich  Funds received Class C  exchangeable  preferred  stock
representing  the  equivalent  of 40% of the  Company's  common equity and under
certain  conditions  the  Greenwich  Funds  could  elect  either to (a)  receive
repayment of the loan facility,  plus accrued  interest at 10% per annum,  and a
take-out premium of up to 200% of the average  principal  amount  outstanding or
(b)  exchange  its  loans  for  additional  preferred  stock,  representing  the
equivalent of an additional 50% of the Company's common equity.

     On February 19, 1999, the Company entered into a merger  agreement with the
Greenwich  Funds which was terminated and recast as an acquisition  agreement on
March 31,  1999.  Under the  Acquisition  Agreement,  the  Greenwich  Funds will
receive  newly  issued  common  stock  of the  Company  equal  to  93.5%  of the
outstanding  common  stock  after such  issuance,  leaving the  existing  common
shareholders  of the  Company  with 6.5% of the  common  stock  outstanding.  No
payment will be made to the Company's common  shareholders in this  transaction.
Upon the  consummation  of the  acquisition,  the Greenwich Funds will surrender
Class  C  exchangeable  preferred  stock  for  cancellation  and  enter  into an
amendment and restatement of the Greenwich Loan Agreement, pursuant to which the
Greenwich  Funds will make available to the Company an additional $35 million in
working capital loans. See Note 3, "Warehouse Finance Facilities,  Term Debt and
Notes Payable."

     The  Acquisition  Agreement is subject to a number of conditions  including
approval  by  the  Company's  shareholders.  There  is no  assurance  that  this
transaction will be consummated.

     The Company is in the process of preparing to call a special meeting of its
shareholders to authorize the issuance of common stock to the Greenwich Funds.

     On February 19, 1999, the Greenwich Funds  purchased,  at a discount,  from
BankBoston its interests in the revolving credit facilities.

     Simultaneously  with the  execution  of the merger  agreement,  the Company
entered into amended and restated intercreditor  agreements with its three major
warehouse  lenders and with the Greenwich Funds relating to the revolving credit
bank  facility  and the  Greenwich  Loan  Agreement,  as  amended.  Under  those
agreements,  the lenders  agreed to keep their  respective  facilities  in place
through the closing of the acquisition and for twelve months

                                     - 101 -


<PAGE>


                      IMC MORTGAGE COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1996, 1997 and 1998


     thereafter if acquisition by the Greenwich Funds is consummated within five
months,  subject to earlier  termination  in certain  events as  provided in the
intercreditor  agreements.  If the acquisition is not consummated  within a five
month  period,  after that period,  those lenders would no longer be required to
stand still and could exercise remedies. In such an event, it is likely that the
Company would be unable to continue its business.  The financial statements have
been  prepared  assuming  the  Company  will  continue as a going  concern,  the
shareholders will approve the acquisition by the Greenwich Funds of 93.5% of the
common stock to be outstanding and the  intercreditor  agreements will remain in
effect  for a period of up to  seventeen  months.  In the event the  Acquisition
Agreement  is  terminated  or the  acquisition  is not  consummated  within five
months,  the lenders  subject to the  requirements  of the amended and  restated
intercredior  agreements  would no longer be required to refrain from exercising
remedies.  The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.



                                     - 102 -



<PAGE>



Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

     Change in Certifying Accountants

     On February 16, 1999, IMC appointed  Grant Thornton LLP ("Grant  Thornton")
the independent accounting firm to audit the financial statements of IMC for the
year ended December 31, 1998 and dismissed  PricewaterhouseCoopers  LLP ("PWC").
The decision to dismiss PWC was  approved by the Audit  Committee of IMC's Board
of Directors on February 16, 1999.

     IMC's  decision  was made after  discussions  with and in  accordance  with
directions  from  the  SEC.  The SEC  announced  on  January  14,1999  that  the
Securities  and  Exchange  Commission  ("SEC") had  brought and settled  charges
against PWC for  engaging  in improper  professional  conduct by  violating  SEC
independence rules. The SEC issued an Order Instituting  Proceedings and Opinion
and Order  Pursuant to Rule 102(e) of the SEC's Rules of Practice  ("SEC Order")
issued  by  the  SEC  under  the  Securities   Exchange  Act  of  1934  (Release
40945/January  14, 1999 and  Accounting  and  Auditing  Enforcement  Release No.
10981/January 14, 1999 Administration Proceedings File No. 2-9809).

     Specifically,  the  SEC  Order  details  activities  by a  PWC  Senior  Tax
Associate with  securities of a company  identified in the SEC Order as "Company
A". Based on  communications  with the SEC and PWC, IMC believes  that it is the
company  identified  in the SEC Order as "Company  A". The SEC Order states that
the PWC Senior Tax Associate performed preliminary work involved in transferring
certain engagements for Company A from PWC's Jacksonville, Florida office to its
Tampa  Office.  The SEC Order also states that the PWC Senior Tax  Associate did
not own Company A  securities  while he  performed  services  for  "Company  A."
However,  his ownership of Company A securities  occurred during the period that
PWC was designated as Company A's independent public accountant.

     PWC has stated to IMC that they  believe  this  violation  had no effect on
either the quality or integrity of any audit or the  reliability  of any opinion
rendered  in  connection  with its audit  engagement  with IMC.  IMC also firmly
believes in the quality and  integrity of its  financial  statements as of their
respective dates and in the reliability of PWC's audit opinions.

     The SEC has  acknowledged  that IMC had no  knowledge  or reason to know of
PWC's lack of compliance with the SEC's independence  standards.  The conduct of
PWC  is  not  consistent  with  the  standards  regarding  compliance  with  SEC
regulations that IMC expects and demands from its independent public accountant.

     Before IMC became aware of the  violations of the  independence  standards,
IMC was  satisfied  with its  relationship  with PWC and,  in the absence of the
violations described in the SEC Order, would not have elected to replace PWC.

     PWC's reports on IMC's consolidated  financial statements for 1997 and 1996
did not  contain  an adverse  opinion  or  disclaimer  of  opinion,  and was not
qualified or modified as to uncertainty,  audit scope or accounting  principles.
During  IMC's two most  recent  fiscal  years and the period from the end of its
most recent fiscal year through  February 16, 1999,  there were no disagreements
with  PWC on  any  matter  of  accounting  principles  or  practices,  financial
statement  disclosure or auditing  scope or procedure,  which if not resolved to
PWC's satisfaction would have caused PWC to make reference to the subject matter
of the  disagreement in connection with its reports.  In addition,  during IMC's
two most  recent  fiscal  years and the period  from the end of its most  recent
fiscal year through February 16, 1999, there have been no reportable  events, as
such term is defined in Item  304(a) of  Regulation  S-K  promulgated  under the
Securities Act.

     During IMC's two most recent fiscal years and the subsequent interim period
preceding the engagement of Grant Thornton, neither IMC nor anyone on its behalf
consulted Grant Thornton regarding (i.) the application of accounting principles
to specific  completed or proposed  transactions,  or the type of audit  opinion
that might be

                                     - 103 -


<PAGE>



rendered  on IMC's  financial  statements,  which  consultation  resulted in the
providing  of a written  report or oral advice  concerning  the same to IMC that
Grant Thornton concluded was an important factor considered by IMC in reaching a
decision as to the accounting,  auditing or financial  reporting issue; or (ii.)
any matter  that was either the  subject of a  disagreement  (as defined in Rule
304(a)(1)(iv.)  of  Regulation  S-K or a  reportable  event (as  defined in Rule
304(a)(1)(v.) of Regulation S-K.



                                     - 104 -



<PAGE>



                                    PART III.

Item 10.  Directors and Executive Officers of the Registrant

     The  executive  officers of the Company and their ages and  positions as of
the date of this Annual Report on Form 10-K are set forth below:

<TABLE>
<CAPTION>
Name (Age)                                      Position and Business Experience
----------                                      --------------------------------
<S>                                <C>
George Nicholas (56)               Chief Executive Officer, Chairman of the Board, and
                                   Assistant Secretary, Member of the Compensation and
                                   Executive Committees
Thomas G. Middleton (52)           President and Chief Operating Officer, Member of the
                                   Compensation and Executive Committees
Stuart D. Marvin (39)              Chief Financial Officer
Joseph P. Goryeb (68)              Director, Member of the Audit and Option Commitees
Mitchell W. Legler (57)            Director, Member of the Compensation and Audit Committees
Mark W. Lorimer (40)               Director, Member of the Compensation and Audit Committees
</TABLE>

George Nicholas has served as Chief Executive  Officer and Chairman of the Board
of IMC since the  formation  of the  Company in December  1995 and as  Assistant
Secretary of the Company 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.  The Company became the successor of the  Partnership in June 1996. Mr.
Nicholas'  experience in the lending  business spans 34 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 the
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 in connection with the
formation of the Partnership.

Thomas G.  Middleon  has served as Director and  President of the Company  since
December 1995 and as Assistant  Secretary of the Company  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 28
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 STG
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 has served as Chief Financial Officer since August 1, 1996. Mr.
Marvin is a certified  public  accountant and prior to joining the Company was a
partner in the  Jacksonville,  Ft.  Lauderdale,  and Miami,  Florida  offices of
Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP).

Joseph P. Goryeb has served as a director of the Company  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 the Company since April 1996. Mr.
Legler is the sole stockholder of Mitchell W. Legler,  P.A. and has been general
counsel to the Company 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

                                     - 105 -


<PAGE>


was a partner of Foley & Lardner,  prior to which he was a partner of Commander,
Legler,  Werber, Dawes, Sadler & Howell, P.A., attorneys at law in Jacksonville,
Florida.'

Mark W. Lorimer has served as the Executive Vice  President and Chief  Operating
Officer  of  Auto-By-Tel  Corporation,  a leading  international  online  buying
service for automotive purchasing,  financing and insurance, since May 1997. Mr.
Lorimer served as Vice President and General Counsel of Auto-By-Tel  Corporation
from December 1996 until May 1997. Prior to joining Auto-By-Tel Corporation, Mr.
Lorimer was a partner of and, from March 1989 to January 1996,  was an associate
with, the law firm of Dewey Ballantine.

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 ten persons. Currently there are five directors. The term
of office of the  directors in each of the three  classes  expires at the annual
meeting of stockholders in 1999 through 2001, respectively. Messrs. Nicholas and
Middleton  serve until their term ends at the Annual Meeting of  Stockholders to
be held in 1999.  Mr. Legler serves until his term ends at the Annual Meeting of
Stockholders to be held in the year 2000. Messrs. Goryeb and Lorimer serve until
their term ends at the Annual  Meeting of  Stockholders  to be held in 2001.  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 and Meetings of the Board of Directors

     The Board of Directors of the Company held 18 meetings in 1998. During such
year, each Director  attended more than 75% of the meetings held by the Board of
Directors  and the  committees  on  which  he  served.  The  Company's  Board of
Directors  also acts from time to time by unanimous  written  consent in lieu of
meetings.

     The Company has an Audit  Committee,  a Compensation  Committee,  an Option
Committee, an Executive Committee and a 1997 Incentive Plan Committee.

     Audit  Committee.  During  1998 the Audit  Committee  consisted  of Messrs.
Goryeb, Legler and Lorimer. 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 independence 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.  The Audit  Committee held meetings on June 2 and December
22, 1998.

     Compensation  Committee.  The  Compensation  Committee  consists of Messrs.
Nicholas,  Middleton  and Legler.  The  Compensation  Committee  determines  the
compensation of the Company's executive officers. The Compensation Committee met
once during 1998 on February 9, 1998.

     Option Committee.  During 1998 the Option Committee consisted of Mr. Goryeb
and Mr. Wykle, a director who did not stand for reelection at the Company annual
meeting in June, 1998. The Option Committee has the

                                     - 106 -


<PAGE>


authority to administer  the  Company's  stock option plans and to grant options
thereunder. The Option Committee did not meet during 1998.

     Executive Committee.  The Executive Committee consists of Messrs. Nicholas,
Middleton,  and any one other member of the Board of  Directors.  The  Executive
Committee did not meet during 1998.

     1997 Incentive Plan Committee.  The 1997 Incentive Plan Committee  consists
of Messrs.  Nicholas and  Middleton  and has the  authority to grant  options to
eligible  employees  under  the IMC  Mortgage  1997  Incentive  Plan.  The  1997
Incentive Plan Committee did not meet during 1998.

     Other Committees.  The Board of Directors may establish other committees as
deemed necessary or appropriate from time to time.

     The Company does not have a nominating committee. The functions customarily
performed by a nominating committee are performed by the Board of Directors as a
whole.  Any  stockholder who wishes to make a nomination at an annual or special
meeting  for the  election  of  directors  must  do so in  compliance  with  the
applicable  procedures  set forth in the  Company's  Bylaws.  The  Company  will
furnish  Bylaw  provisions  upon  written  request  to  Laurie  Williams  at the
Company's  principal  executive  offices at 5901 E.  Fowler  Avenue,  Tampa,  FL
33617-2362.

Director Compensation

     Directors  who are not  employees  of the Company  received  stock  options
pursuant to the Directors'  Stock Option Plan (the "Directors'  Plan").  Messrs.
Goryeb and Legler each received  ten-year  options to purchase  12,932 shares of
Common Stock  pursuant to the  Directors'  Plan at $2.35 per share.  Mr. Lorimar
received  ten-year options to purchase 12,932 shares of Common Stock pursuant to
the Directors' Plan at $10.00 per share. The Company pays non-employee directors
$5,000  per  quarter.   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 receives  compensation
for services rendered as a director.

Compensation Committee Interlocks and Insider Participation

     The  Compensation  Committee of the Board of Directors  consists of Messrs.
Nicholas,  Middleton  and Legler.  Messrs.  Nicholas and Middleton are Executive
Officers of the Company (see "Executive  Compensation").  Mr. Legler is the sole
stockholder in Mitchell W. Legler, P.A., which is retained by the Company as its
general counsel. 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.



                                     - 107 -


<PAGE>



Item 11. Executive Compensation

Summary  Compensation Table. The following table sets forth compensation earned,
whether paid or deferred,  by the Company's  Chief  Executive  Officer and other
executive  officers whose  compensation  exceeded $100,000 during the year ended
December 31, 1998 for all services  rendered in all  capacities  as employees of
the Company during the years ended December 31, 1996, 1997 and 1998. Information
is provided for each fiscal  period  during which such persons were  employed by
the Company.

<TABLE>
<CAPTION>
                                                                                                               Long Term
                                                        Annual Compensation                                Compensation Awards
                                    -------------------------------------------------------------     ------------------------------
                                                                                      Other           Securities        Issuance
                                                                                      Annual          Underlying           of
Name and Principal Position         Year         Salary              Bonus        Compensation(1)     Options(2)      Securities(3)
---------------------------         ----       ----------          ----------     ---------------     ----------      -------------
<S>                                 <C>        <C>                 <C>              <C>               <C>                  <C>
George Nicholas, Chairman           1998       $  574,750          $       --       $   21,676             --                  --
of the Board, Chief                 1997          522,500           1,567,500          373,344             --              13,003
Executive Officer ............      1996          475,000           1,425,000            6,500             --                  --

Thomas G. Middleton,                1998          459,800                  --           21,676             --                  --
President, Chief Operating          1997          418,000           1,254,000          300,575             --              10,331
Officer ......................      1996          380,000           1,140,000            9,500             --                  --

                                    1998          330,000                  --           21,676             --                  --
Stuart D. Marvin, Chief             1997          256,250             300,000          227,638             --               2,513
Financial Officer (4) ........      1996          111,677              93,750               --         96,000                  --
</TABLE>

----------
(1)  Consists of payments made in cash to Executive Officers for the tax benefit
     realized  by the Company as a result of the  issuance of common  stock as a
     part of their annual compensation,  payments for automobile  allowances and
     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)  Options for Mr. Nicholas and Mr. Middleton are fully vested. Mr. Marvin was
     granted  120,000  options on August 1, 1996 to purchase  120,000  shares of
     common  stock at $8.00 per share.  These  options vest over five years at a
     rate of 1 2/3 % per month.  Mr. Marvin exercised 24,000 of these options in
     1997. See "Aggregate Option Exercises and Year-End Option Values".

(3)  Issued to executive officers as part of annual compensation.  Amounts shown
     are net of shares  withheld  by  Company at the  request  of the  Executive
     Officer to pay federal income taxes.  Shares  withheld were 30,997,  24,869
     and 22,751 for Messrs. Nicholas, Middleton and Marvin, respectively.

(4)  Compensation  from  commencement of employment on August 1, 1996;  includes
     reimbursement of $17,927 for relocation costs to Tampa, Florida.

     Stock Options and Stock  Appreciation  Rights Grants. No stock options were
granted to any  executive  officer or director  of the  Company  during the year
ended December 31, 1998 except that Mr. Lorimer was granted  options to purchase
12,  932  shares  of common  stock at a price of $10 per share  when he became a
director in June 1998.  No stock  appreciation  rights have ever been granted to
any executive officers.


                                     - 108 -


<PAGE>



Aggregate Option Exercises and Year-End Option Values.  The following table sets
forth  information  concerning the value of unexercised  options held by each of
the executive  officers at December 31, 1998. No stock options were exercised by
any executive officers during the year ended December 31, 1998.

                                                                  Value of
                                  Number of securities       Unexercised In-the-
                                 underlying unexercised       Money Options at
                                 options at Fiscal Year       Fiscal Year End/
                                  End/ Un-exercisable &       Un-exercisable &
                                     Exercisable(1)           Exercisable (1)
                                     --------------           ---------------
         Name
         ----
George Nicholas                        475,732                     $0
Thomas G. Middelton                    282,866                      0
Stuart D. Marvin                        96,000                      0


(1)  Based on the closing price of $0.28 per share of the Common Stock on Nasdaq
     on December 31, 1998,  the last trading day of the  Company's  fiscal year.
     All options held by Mr. Nicholas and Mr. Middleton are fully vested and are
     exercisable at $2.35 per share.  Mr. Marvin was granted  120,000 options on
     August  1, 1996 to  purchase  120,000  shares of common  stock at $8.00 per
     share.  These  options vest over five years at a rate of 1 2/3 % per month,
     of which he exercised 24,000 during 1997.

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").  In addition to the Employment  Agreements described
below,  in September of 1997, the Board of Directors  established  the Executive
Officer Unregistered Share Plan. See "Compensation  Committee Report - Executive
Officer Unregistered Share Plan" for a description of this plan.

     Mr.  Nicholas'  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 $574,750 for the year of 1998,  plus an increase each  subsequent year
equal to the greater of (i) the change in the cost of living in Tampa,  Florida,
and (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 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.  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,  and  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

                                     - 109 -


<PAGE>



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,  and (ii) an amount  equal to 150% of the  highest  annualized  total
compensation  (including  bonus) 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,  except that Mr.  Middleton's  annual salary for the year
1998 is $459,800, plus increases as provided therein.

     Mr.  Marvin's  Employment  Agreement,  as amended on October 3, 1997 and on
April 1, 1998,  commenced on August 1, 1996 and extends until December 31, 2001.
Mr. Marvin's employment agreement contains terms that are substantially the same
as those of Mr. Nicholas'  employment  agreement,  except that Mr. Marvin's base
salary for 1998 was  $330,000,  plus  increases as provided,  and except that in
determining any deferred  compensation payable to Mr. Marvin, Mr. Marvin's bonus
for 1997 is deemed to be three times his 1997 base  salary of $300,000  that was
in effect at the end of 1997.

COMPENSATION COMMITTEE REPORT

     The  Compensation  Committee of the Board of Directors  has  furnished  the
following  report on executive  compensation for inclusion in this Annual Report
on Form 10-K:

     Compensation  Philosophy.  Base salaries and bonus for  executive  officers
shown on the  summary  compensation  table  set  forth  above  under  "Executive
Compensation"  were established by employment  agreements that were entered into
prior to the  Company's  initial  public  offering in June of 1996 and  continue
through 2001, except in the case of Stuart Marvin, the Company's Chief Financial
Officer,  whose  employment  agreement  was  executed  in August of 1996 when he
joined the  Company,  and  amended  on  October  3, 1997 and April 1, 1998,  and
extends until December 31, 2001. The employment agreements are described in more
detail  above and the  Compensation  Committee  believes  that those  agreements
established  base  salaries,  which are  reasonable  when compared the Company's
industry  peers.  The employment  agreements  provide for bonuses that can be as
much as three times base salary.

     As the bonuses for the Company's  executive  officers are a direct function
of increases in earnings per share, the Compensation Committee believes that the
compensation plan and employment agreements for the Company's executive officers
are in  line  with  the  Company's  dual  goals  of  rewarding  performance  and
establishing compensation arrangements which align the interests of officers and
other key  employees  with those of the Company's  shareholders.  As the Company
suffered a material  decrease in earnings per share in 1998 compared to 1997, no
bonus was paid to any executive officer with respect to 1998.


                                     - 110 -


<PAGE>



Long Term Compensation Incentive Plans.

     Employee Stock Option Plan and IMC Mortgage  Company 1997  Incentive  Plan.
The Company has an Employee Stock Option Plan and the IMC Mortgage  Company 1997
Incentive  Plan ("The  Option  Plans").  The  purpose of The Option  Plans is to
provide  long-term  incentive to the Company's key employees.  The  Compensation
Committee  believes that The Option Plans are a principal vehicle for motivating
management and employees to work toward long-term growth and shareholder  value.
During 1998,  127,000  options were awarded under The IMC Mortgage  Company 1997
Incentive Plan.

     The Option  Plans  reflect the  Company's  philosophy  that  officers'  and
employees' incentive compensation should reflect the same long-term interests as
those of the Company's  shareholders.  To encourage  continued  service with the
Company,  the  options  granted  under The Option  Plans  typically  vest over a
five-year  period of employment  with the Company.  Additional  increases in the
value of the Common Stock, which benefit all shareholders,  will thus serve as a
primary incentive to officers and key employees.

     Executive Officer Unregistered Share Plan. On October 3, 1997, the Board of
Directors  adopted the  Executive  Officer  Unregistered  Share Plan pursuant to
which each of the Company's Chief Executive Officer, Chief Operating Officer and
Chief  Financial  Officer  could  receive  an  annual  bonus  payable  solely in
unregistered  shares of the  Company's  Common Stock if the Company  achieved at
least a ten  percent  (10%)  growth  in net  income  per share for the year then
ending over the net income per share for the prior  fiscal  year.  In each case,
the bonus would equal the  officer's  base salary then in effect.  The number of
unregistered  shares issued to each Executive  Officer is calculated by dividing
the base salary for each Executive Officer by the closing price of the Company's
shares  on NASDAQ  at the end of the year as to which  the  bonus  relates.  The
Company  will  "gross-up"  each  bonus for  taxes  saved by the  Company  on the
issuance of the shares and taxes may be paid by withholding of shares.  The plan
also allows Executive  Officers to surrender shares or options for shares of the
Company's  Common Stock owned by them to satisfy income tax obligations  arising
from any compensation received from the Company for the calendar year. No shares
were awarded pursuant to this plan for 1998.

     Vice-President  Unregistered  Share Plan. On October 3, 1997,  the Board of
Directors adopted the  Vice-President  Unregistered Share Plan pursuant to which
certain of the Company's  officers  could receive an annual bonus payable solely
in unregistered shares of the Company's Common Stock. The number of unregistered
shares is  calculated by dividing the base salary of the employee by the closing
price of the  Company's  shares  on  NASDAQ  at the end of the year to which the
bonus  relates.  The  unregistered  shares  granted  vest over a period of three
years, with one-third vesting  immediately and one-third vesting on the last day
of each of the next two fiscal years so long as the officer is still employed by
the Company on such date. The Company will "gross-up" each bonus for taxes saved
by  the  Company  on the  issuance  of the  shares  and  taxes  may be  paid  by
withholding of shares. No shares were awarded pursuant to this Plan for 1998.

     CEO Compensation.  George Nicholas,  Chairman and Chief Executive  Officer,
received  an option  grant from the  Company's  predecessor,  Industry  Mortgage
Company,  L.P., a Delaware  limited  partnership (the  "Partnership"),  and that
grant  was  approved  by  all  partners  of  the   Partnership.   Mr.  Nicholas'
compensation  is pursuant to his employment  agreement  commencing on January 1,
1996. Mr. Nicholas is a member of the  Compensation  Committee.  See "Employment
Agreements" and "Compensation Philosophy".

                                               IMC MORTGAGE COMPANY COMPENSATION
                                               COMMITTEE:

                                               Mitchell W. Legler, Secretary
                                               George Nicholas
                                               Thomas G.  Middleton

                                     - 111 -



<PAGE>


Stock Performance Graph

The following graph depicts the cumulative  total return on the Company's Common
Stock compared to the  cumulative  total return for The Nasdaq  Composite  Index
("Nasdaq Composite") and the Nasdaq Other Financial Index, a peer group selected
by the Company on an industry and  line-of-business  basis,  commencing June 25,
1996 and ending  December 31, 1998.  The graph  assumes an investment of $100 on
June 25, 1996, when the Company's stock was first traded in a public market.






                                     - 112 -



<PAGE>



                                [GRAPH OMITTED]



                                     - 113 -



<PAGE>



Item 12. Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth information, as of March 1, 1999, concerning
the common stock of the Company  beneficially  owned (i) by each director of the
Company,  (ii) by the  Company's  executive  officers,  (iii)  by all  executive
officers and  directors as a group,  and (iv) by each  shareholder  known by the
Company to be the beneficial  owner of more than five percent of the outstanding
common stock.  Unless  otherwise  indicated in the  footnotes to the table,  the
beneficial  owners named have, to the knowledge of the Company,  sole voting and
dispositive  power  with  respect  to  shares  beneficially  owned,  subject  to
community property laws where applicable.

Name and Address of Beneficial Owner              Shares            Percent (1)
                                                  ------            -----------

Neal Henschel (2)                                2,382,581             6.53%
700 W. Hillsboro Boulevard
Building 1, Suite 204
Deerfield Beach , Fl 33441

ContiTrade Services Corporation (3)              2,174,998             6.00%
277 Park Avenue
New York, NY 10172

George Nicholas (4)                              1,489,645             4.19%
5901 E. Fowler Avenue
Tampa, FL 33617


Joseph P. Goryeb (5)                               534,692             1.54%
Waterview Corporate Centre
20 Waterview Boulevard
Parsippany, NJ 07054-1267

Thomas G. Middleton (6)                            472,471             1.37%
5901 E. Fowler Avenue
Tampa, FL 33617

Mitchell W. Legler (7) (8)                         108,734                *
300A Wharfside Way
Jacksonville, FL 32202

Stuart D. Marvin (9)                                45,386                *
5901 E. Fowler Avenue
Tampa, FL 33617

Mark W. Lorimer (7)                                 12,932                *
18872 McArthur Blvd 
Irvine, CA 92612

All directors and executive officers             2,673,423             7.66%
as a group (4) (5) (6) (7) (8) (9)

----------
*    Represents less than one percent (1%)


                                     - 114 -



<PAGE>



(1)  Based on the number of shares of the Company's Common Stock  outstanding as
     of March 1, 1999.

(2)  Excludes 265,349 shares owned by Mr. Henschel's adult child.

(3)  Source of  ownership  information:  SEC Form 13 G filed as an  amendment on
     February 11, 1999.  Ownership  reported includes 2,159,998 shares of common
     stock owned by ContiTrade Services Corporation, an affiliate of Continental
     Grain Company,  which represent shared voting and disposition  powers.  The
     13-G filing includes 15,000 shares owned by Paul J. Fribourg, President and
     Chairman of  Continental  Grain Company.  Mr.  Fribourg has sole voting and
     disposition  power over  15,000  shares and shared  voting and  disposition
     power over the 2,159,998 shares issuable upon exercise of the warrants.

(4)  Includes  475,732  shares of Common  Stock  issuable  upon the  exercise of
     options.

(5)  Excludes  504,119  shares  of  Common  Stock  owned by Mr.  Goryeb's  adult
     children.

(6)  Includes  282,866  shares of Common  Stock  issuable  upon the  exercise of
     options.

(7)  Includes  12,932  shares of Common  Stock  issuable  upon the  exercise  of
     options.

(8)  Includes  62,026 shares of Common Stock  issuable upon exercise of options,
     27,776 shares held by Mr.  Legler  jointly with his spouse and 6,000 shares
     held in his IRA.

(9)  Includes 44,136 shares of Common Stock issuable upon the exercise of vested
     options.

                                     - 115 -


<PAGE>



Item 13. Certain Relationships and Related Transactions

     Since its  inception,  IMC has had  business  relationships  and engaged in
certain  transactions with affiliated  companies and parties as described below.
See also  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations -- Discussion of Events During the Year Ended December 31,
1998." It is the policy of IMC to engage in  transactions  with related  parties
only on terms that,  in the opinion of IMC,  are no less  favorable  to IMC than
could be obtained from unrelated parties and each of the transactions  described
below conforms to that policy.

IMC Associates. IMC Associates,  Inc. leases skybox suites in various arenas for
professional sporting events. IMC purchases tickets for sporting events from IMC
Associates  for an  aggregate  amount  equal  to the  annual  lease  cost of the
skyboxes.  IMC Associates is owned by George Nicholas, the Chairman of the Board
and Chief Executive Officer of IMC.

General Counsel.  IMC has an arrangement with Mitchell W. Legler, P.A., which is
solely owned by Mr.  Legler who serves as IMC's general  counsel.  Mr. Legler is
also a member of IMC's Board of Directors  and was paid $20,000  during 1998 for
services  rendered in his capacity as a Board member.  IMC paid Mr. Legler's law
firm  $345,000  during 1998 for Mr.  Legler's  services as general  counsel.  In
addition,  Mitchell W.  Legler,  P.A. is entitled to 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 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.

     The contingency  fees are capped at $750,000 in cash on a running  two-year
average. Any contingency fees earned in excess of the cash cap are to be paid in
unregistered shares of the IMC's common stock,  subject to a cap on unregistered
shares paid on a running  two-year  average of $550,000 in value of such shares.
During 1997 IMC completed  eight  acquisitions  and during 1998 IMC completed no
acquisitions.  As a result of the  acquisitions  in 1997, Mr.  Legler's law firm
received  approximately  $433,000 in cash contingency fees in 1998. No shares of
unregistered common stock of IMC were issued to Mr. Legler in 1998 in connection
with acquisitions completed during 1997.

Lakeview  Savings  Bank.  In January 1996 IMC entered into a loan  facility with
Lakeview  Savings Bank, an affiliate of  Branchview,  Inc.,  one of the original
partners in Industry Mortgage Company,  L.P. The Lakeview credit facility had an
original principal balance of $7 million and was scheduled to mature on July 31,
1999 bearing interest at 10% per annum. On October 28, 1998, the credit facility
was modified to provide for repayment in 36 consecutive  equal  installments.  A
mandatory prepayment under the credit facility is scheduled for July 31, 1999 in
such amount,  if any, as is necessary so that the outstanding  principal balance
due at the close of business on that date will not exceed the then legal lending
rate of Lakeview Savings Bank at that date. At December 31, 1998, $6,231,550 was
outstanding under this credit facility.

Mortgage  America.  Effective January 1, 1997, IMC acquired all of the assets of
Mortgage America, one of the Industry Partners. Thomas LaPorte and Mary Reid are
husband and wife and were the primary  owners of Mortgage  America  prior to the
acquisition. The purchase price for all of the assets of Mortgage America was an
initial payment of 1,790,000 share of IMC common stock and assumption of a stock
option plan which could result in the issuance of an additional  334,596  shares
of IMC  common  stock and a  contingent  payment of up to  2,770,000  additional
shares of IMC  common  stock at the end of three  years  based on the growth and
profitability  of Mortgage  America  during that  period.  As a condition of the
acquisition  agreement,  Tom  LaPorte and Jon  LaPorte,  his adult  child,  have
employment agreements,  as amended, with IMC ending on December 31, 2001 and May
30, 2006, respectively. The employment agreements include a non-compete clause.

                                     - 116 -


<PAGE>



     Thomas LaPorte is President of Mortgage America. Since January 1, 1997, the
effective  date of  IMC's  acquisition  of  Mortgage  America,  IMC  has  leased
administrative  and  executive  offices  from MA Real  Estate  and  Investments,
L.L.C.,  which is owned by Mr. LaPorte,,  under  non-cancelable  leases expiring
December  31, 2006 and from  LaPorte,  Inc.,  a company  owned by Mr.  LaPorte's
brother.  Combined  annual  rent  payments  to these  two  entities  in 1998 was
$273,700, in addition to total leasehold improvements made by IMC of $96,675.

     From June 1997 until October 14, 1998,  Mortgage America leased a corporate
jet from Tomahawk Aviation,  L.L.C., which is owned by Mr. LaPorte.  Total lease
payments from January 1, 1998 through  October 14, 1998,  the date the lease was
terminated, were $442,000.

Industry  Partners'  Incentive  Plan.  To  encourage  the  Industry  Partners to
continue  to sell  more  mortgage  loans  than  required  under  their  original
commitments,  IMC created an incentive plan for Industry Partners in March 1996.
Under that plan,  Industry Partners that doubled their loan sale commitments per
quarter  are  eligible  to receive on a pro rata basis  fully paid shares of IMC
common  stock  equal to $105,000  divided by the market  price of the IMC common
stock at the end of that quarter.  The fully paid shares of IMC common stock are
issued pro rata among those Industry  Partners that doubled their commitments to
the extent the Industry Partner exceeded its doubled  commitment  amount for the
quarter.  A total of 71,124  shares were  earned  under the plan for the year of
1998. IMC expects to discontinue this plan.




                                     - 117 -


<PAGE>



                                    PART IV.

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  conditions  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.

     (b)  Reports filed on Form 8-K.

          On March 3, 1999,  the Company  filed a Current  Report on Form 8-K to
          report  that the Company had  entered  into an  Agreement  and Plan of
          Merger with Greenwich Funds.

          On February 23, 1999,  the Company filed a Current  Report on Form 8-K
          to report that the Company had appointed  Grant Thornton L.L.P. as the
          independent  accounting firm to audit the financial  statements of the
          Company  for  the  year  ended   December   31,  1998  and   dismissed
          PricewaterhouseCoopers L.L.P.

          On February 26, 1999,  the Company filed a Current Report on Form 8-KA
          with  respect to the Current  Report on Form 8-K filed on February 23,
          1999.

          On November 27, 1998,  the Company filed a Current  Report on Form 8-K
          to report that the Company had entered  into a  non-binding  letter of
          intent with  Greenwich  Street Capital  Partners II, L.P.  ("Greenwich
          Street") on November  27,1998  whereby  Greenwich  Street would invest
          sufficient  additional  equity in the  Company  and arrange for credit
          facilities  to permit the Company to repay in full its  existing  bank
          loans and credit  facilities,  and Greenwich Street would obtain newly
          issued stock equal to 95% of the total outstanding  equity interest of
          the Company on a diluted basis,  leaving existing common  shareholders
          with 5% of the outstanding equity.

          On October 21, 1998, the Company filed a Current Report on Form 8-K to
          report that an agreement for a $33 million  standby  revolving  credit
          facility to provide working capital for a period up to 90 days.

     (c)  Exhibits. 

          See (a) (3) above.

     (d)  Financial statement schedule.

          See (a) (2) above.



                                     - 118 -


<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 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, 1999.

          Signature                                   Title
          ---------                                   -----

    /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 Officer)
      (Stuart D. Marvin)                                  



 /s/ MITCHELL W. LEGLER           Director
-------------------------------
      (Mitchell W. Legler)


/s/ THOMAS G. MIDDLETON           Director
-------------------------------
      (Thomas G. Middleton)





                                     - 119 -


<PAGE>


                                  EXHIBIT INDEX

     Unless otherwise  indicated,  all Exhibits are incorporated by reference to
the same exhibit to the  Company's  Registration  Statement of Form S-1 declared
effective  by  the   Securities   and  Exchange   Commission   on  June  25,1996
(Registration No. 333-3954).

2.1   -   Pre-IPO  Agreement  between the Partnership,  the General Partners and
          each Limited Partner.

3.1   -   Articles of Incorporation of the Company, as amended,  incorporated by
          reference  to the  Company's  Quarterly  Report  on Form  10-Q for the
          quarter ended September 30, 1998.

3.2   -   Bylaws of the Company, as amended.

3.3   -   Amended  and   Restated   Articles  of   Amendment   Designating   the
          Preferences,  Rights and Limitations of Class A Preferred Stock, Class
          B Preferred  Stock,  Class C Exchangeable  Preferred Stock and Class D
          Preferred  Stock of the  Company,  incorporated  by  reference  to the
          Registrant's Current Report on Form 8-K dated October 15, 1998.

4.1   -   Specimen of Certificate for Common Stock.

4.2   -   Indenture  Agreement  between the Partnership and ContiTrade  Services
          Corporation.

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.

4.7   -   Form of Stock  Purchase  Warrant  issued  to German  American  Capital
          Corporation, incorporated by reference to the Company's Current Report
          on Form 8-K dated October 15, 1998.

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.

                                     - 120 -



<PAGE>



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.

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.

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 Company and
          Stuart D. Marvin, incorporated by reference to the Company's Quarterly
          Report on Form 10-Q for the quarter ended September 30, 1996.

10.35 -   Asset  Purchase  Agreement  and  Plan of  Reorganization  between  the
          Company,  Mortgage  America,  Inc.  and the  shareholders  of Mortgage
          America,  Inc.,  incorporated  by reference to the same exhibit to the
          Company's   Registration  Statement  on  Form  S-1  (Registration  No.
          33-21823) filed by the Company with the Commission.

10.36 -   First   Amendment  to  the  Asset  Purchase   Agreement  and  Plan  of
          Reorganization  between the Company,  Mortgage  America,  Inc. and the
          shareholders of Mortgage America,  Inc.,  incorporated by reference to
          the same exhibit to the Company's  Registration  Statement on From S-1
          (Registration No. 33-21823) filed by the Company with the Commission.

10.37 -   Form of  Registration  Rights  Agreement  between  the Company and the
          Shareholders of Mortgage America,  Inc.,  incorporated by reference to
          the same exhibit to the Company's  Registration  Statement on Form S-1
          (Registration No. 33-21823) filed by the Company with the Commission.

10.38 -   Agreement  and  Plan  of  Reorganization   between  the  Company,  CWB
          Acquisitions,  Inc.,  CoreWest Banc and the  shareholders  of CoreWest
          Banc,  incorporated  by reference to the same exhibit to the Company's
          Registration  Statement on Form S-1  (Registration No. 33-21823) filed
          by the Company with the Commission.

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10.39 -   Registration Rights Agreement between the Company and the shareholders
          of CoreWest  Banc.,  incorporated  by reference to the same exhibit to
          the Company's  Registration  Statement on Form S-1  (Registration  No.
          33-21823) filed by the Company with the Commission.

10.40 -   Form of Amended and Restated Loan Agreement  between the Company,  the
          Partnership,  IMC  Corporation  of America  and Nomura  Asset  Capital
          Corporation,  incorporated  by  reference  to the same  exhibit to the
          Company's   Registration  Statement  on  Form  S-1  (Registration  No.
          33-21823) filed by the Company with the Commission.

10.41 -   Form of Custodial Agreement between the Company, the Partnership,  IMC
          Corporation of America,  Nomura Asset Capital  Corporation and LaSalle
          National  Bank,  incorporated  by reference to the same exhibit to the
          Company's   Registration  Statement  on  Form  S-1  (Registration  No.
          33-21823) filed by the Company with the Commission.

10.42 -   Form of Loan and Security Agreement among the Company, the Partnership
          and The First  National Bank of Boston,  incorporated  by reference to
          the same exhibit to the Company's  Registration  Statement on Form S-1
          (Registration No. 33-21823) filed by the Company with the Commission.

10.43 -   Form  of  Asset  Purchase  Agreement  between  the  Company,  American
          Mortgage  Reduction,  Inc., and the Shareholders of American  Mortgage
          Reduction, Inc., incorporated by reference to the same exhibit tot the
          Company's   Registration  Statement  on  Form  S-1  (Registration  No.
          33-21823) filed by the Company with the Commission.

10.44 -   Form of Asset  Purchase  Agreement  between  the  Company  and  Equity
          Mortgage Co., Inc.,  incorporated  by reference to the same exhibit to
          the Company's  Registration  Statement on Form S-1  (Registration  No.
          33-21823) filed by the Company with the Commission.

10.45 -   Employment  Agreement  dated as of January 1, 1997 between the Company
          and Mark J.  Greenberg,  incorporated by reference to the same exhibit
          to the Company's  Registration  Statement on Form S-1 (Registration No
          33-21823) filed by the Company with the Commission.

10.46 -   Form  of  Warehouse   Security   Agreement  among  the  Company,   the
          Partnership and GE Capital Mortgage  Services,  Inc.,  incorporated by
          reference to the same exhibit to the Company's  Registration Statement
          on Form S-1  (Registration No. 33-21823) filed by the Company with the
          Commission.

10.47 -   Form of Warehouse Credit Agreement among the Company,  the Partnership
          and GE Capital Mortgage Services,  Inc.,  incorporated by reference to
          the same exhibit to the Company's  Registration  Statement on Form S-1
          (Registration No. 33-21823) filed by the Company with the Commission.

10.48 -   Loan and Security  Agreement  among the Company,  IMC  Corporation  of
          America,  the  Partnership,  IMC Investment  Corp.,  CoreWest Banc and
          Paine Webber Real Estate Securities Inc., incorporated by reference to
          the same exhibit to the Company's  Registration  Statement on Form S-1
          (Registration No 33-21823) filed by the Company with the Commission.

10.49 -   IMC Mortgage Company 1997 Incentive Plan, incorporated by reference to
          the Company's Proxy Statement dated June 12, 1997.

10.50 -   IMC  Mortgage  Company  Executive  Officer  Unregistered  Stock  Plan,
          incorporated  by reference to the Company's  Annual Report on Form 10K
          for the year ended December 31, 1997.

10.51 -   IMC  Mortgage   Company  Vice  President   Unregistered   Stock  Plan,
          incorporated  by reference to the Company's  Annual Report on Form 10K
          for the year ended December 31, 1997.

10.52 -   First  Amendment to Employment  Agreement dated August 1, 1996 between
          the Company and Stuart D.  Marvin,  incorporated  by  reference to the
          Company's  Annual Report on Form 10-K for the year ended  December 31,
          1997.

10.53 -   First  Amendment  and  Restatement  of  Contingency  Fee  Compensation
          Arrangement  between the Company and Mitchell W. Legler,  incorporated
          by reference to the  Company's  Quarterly  Report on Form 10-Q for the
          quarter ended June 30, 1998.

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10.54 -   Second Amendment to Employment  Agreement dated August 1, 1996 between
          the Company and Stuart D.  Marvin,  incorporated  by  reference to the
          Company's  Quarterly  Report  on  Form  10-Q  for  the  quarter  ended
          June 30, 1998.

10.55 -   Preferred  Stock  Purchase  and Option  Agreement  dated July 14, 1998
          between the Company and Greenwich  Street  Capital  Partners II, L.P.,
          GSCP Offshore Fund, L.P.,  Greenwich Fund, L.P. and Travelers Casualty
          and  Surety  Company,  incorporated  by  reference  to  the  Company's
          Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.

10.56 -   Letter Agreement dated October 15, 1998 between  BankBoston,  N.A. and
          the Company  regarding a Line of Credit,  incorporated by reference to
          the Company's Current Report on Form 8-K dated October 15, 1998.

10.57 -   Forbearance and  Intercreditor  Agreement dated as of October 12, 1998
          among the Company, BankBoston, N.A., Greenwich Street Capital Partners
          II  L.P.,   Greenwich  Fund,  L.P.  and  GSCP  Offshore  Fund,   L.P.,
          incorporated by reference to the Company's  Current Report on Form 8-K
          dated October 15, 1998.

10.58 -   Intercreditor  Agreement  dated  as of  October  12,  1998  among  the
          Company,  Bear Stearns Home Equity Trust,  Bear Stearns  International
          Limited,   Greenwich  Street,  L.P.  and  GSCP  Offshore  Fund,  L.P.,
          incorporated by reference to the Company's  Current Report on Form 8-K
          dated October 15, 1998.

10.59 -   Intercreditor  Agreement  dated  as of  October  12,  1998  among  the
          Company,  Paine Webber Real Estate Securities,  Inc., Greenwich Street
          Capital  Partners II L.P.,  Greenwich  Street,  L.P. and GSCP Offshore
          Fund, L.P.,  incorporated by reference to the Company's Current Report
          on Form 8-K dated October 15, 1998.

10.60 -   Intercreditor  Agreement  dates  as of  October  12,  1998  among  the
          Company,  German American  Capital  Corporation,  Aspen Funding Corp.,
          Greenwich Street Capital Partners II L.P.,  Greenwich Street, L.P. and
          GSCP Offshore Fund,  L.P.,  incorporated by reference to the Company's
          Current Report on Form 8-K dated October 15, 1998.

10.61 -   Loan  Agreement  dated as of  October  12,  1998  among  the  Company,
          Greenwich Street Capital Partners IIL.P.  Greenwich  Street,  L.P. and
          GSCP Offshore Fund,  L.P.,  incorporated by reference to the Company's
          Current Report on Form 8-K dated October 15, 1998.

10.62 -   Borrower  Security  Agreement  dated as of October  12, 1998 among the
          Company,  Greenwich Street Capital Partners II L.P., Greenwich Street,
          L.P.  and GSCP  Offshore  Fund,  L.P.  and  Greenwich  Street  Capital
          Partners II L.P., as collateral agent incorporated by reference to the
          Company's Current Report on Form 8-K dated October 15, 1998.

10.63 -   Registration  Rights  Agreement  among the Company,  Greenwich  Street
          Capital  Partners II L.P.,  Greenwich  Street,  L.P. and GSCP Offshore
          Fund, L.P.,  incorporated by reference to the Company's Current Report
          on Form 8-K dated October 15, 1998.

10.64 -   Letter of intent dated November 27, 1998 between the Company and GSCP,
          Inc.,  incorporated  by reference to the same exhibit to the Company's
          current report on Form 8-K dated November 27, 1998.

10.65 -   Agreement  and Plan of  Merger  as of  February  19,  1999  among  the
          Company,  Greenwich  Street  Capital  Partners  II L.P.  and IMC  1999
          Acquisition Co., Inc. incorporated by reference to the same exhibit to
          the Company's Current Report on Form 8-K dated February 19, 1999.

10.66 -   Amendment  No. 1 dated as of February  11, 1999 to the Loan  Agreement
          dated as of October  12,  1998  among the  Company,  Greenwich  Street
          Capital  Partners II L.P.,  Greenwich  Fund,  L.P.  and GSCP  Offshore
          Funds,  L.P.  incorporated  by  reference  to the same  exhibit to the
          Company's Current Report on Form 8-K dated February 19, 1999.

10.67 -   Amendment No 1 dated as of February 11, 1999 to the Borrower  Security
          Agreement  dated as of October 12, 1998 among the  Company,  Greenwich
          Street  Capital  Partners  II  L.P.,  Greenwich  Fund,  L.P.  and GSCP
          Offshore Fund, L.P. and Greenwich  Street Capital Partners II L.P., as
          collateral agent, incorporated by reference to the same exhibit to the
          Company's Current Report on Form 8-K dated February 19, 1999.


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10.68 -   Amended and Restated Intercreditor  Agreement dated as of February 17,
          1999 among the Company,  Bear Stearns Home Equity Trust,  Bear Stearns
          International  Limited,  Greenwich  Street  Capital  Partners II L.P.,
          Greenwich  Fund,  L.P. and GSCP Offshore Fund,  L.P.,  incorporated by
          reference to the same exhibit to the Company's  Current Report on Form
          8-K dated February 19, 1999.

10.69 -   Amended and Restated Intercreditor  Agreement dated as of February 17,
          1999 among the  Company,  Paine Webber Real Estate  Securities,  Inc.,
          Greenwich  Street Capital  Partners II L.P.,  Greenwich Fund, L.P. and
          GSCP  Offshore  Fund,  L.P.,  incorporated  by  reference  to the same
          exhibit to the Company's Current Report on Form 8-K dated February 19,
          1999.

10.70 -   Amended and Restated Intercreditor  Agreement dated as of February 17,
          1999 among the Company,  German American  Capital  Corporation,  Aspen
          Funding Corp.,  Greenwich Street Capital  Partners II L.P.,  Greenwich
          Fund, L.P. and GSCP Offshore Fund, L.P.,  incorporated by reference to
          the same  exhibit to the  Company's  Current  Report on Form 8-K dated
          February 19, 1999.

10.71 -   Amended and Restated Forbearance and Intercreditor  Agreement dated as
          of  February  17, 1999 among the  Company,  Greenwich  Street  Capital
          Partners II L.P.,  Greenwich Fund, L.P. and GSCP Offshore Fund,  L.P.,
          incorporated by reference to the same exhibit to the Company's Current
          Report on Form 8-K dated February 19, 1999.

10.72 -   Acquisition Agreement dated as of February 19, 1999 among the Company,
          Greenwich Street Capital  Partners II L.P.,  Greenwich Fund L.P., GSCP
          Offshore Funds L.P.,  Greenwich  Street  Employees  Fund, L.P. and TRV
          Executive Fund, L.P.*

10.73 -   Commitment  Letter re: Amended and Restated Loan Agreement dated March
          31, 1999 among the Company, Greenwich Street Capital Partners II L.P.,
          Greenwich  Fund  L.P.,  GSCP  Offshore  Fund  L.P.,  Greenwich  Street
          Employees Fund, L.P. and TRV Executive Fund, L.P.*

11.1  -   Statement  re  computation  of  earnings  per share (See Note 2 of the
          Notes to the Consolidated Financial Statements).

16.1  -   Letter dated April, 1996 from Deloitte & Touche, LLP to the Company.

16.2  -   Letter from  PricewaterhouseCoopers LLP to the Securities and Exchange
          Commission  dated  February  25,  1999,  incorporated  by reference to
          Exhibit  16.1 to the  Company's  Current  Report on Form  8-K/A  dated
          February 16, 1999.

21.1  -   Subsidiaries of the Company.*

27.1  -   Financial Data Schedule.*

99.1  -   Third Amended and Restated Agreement of Limited Partnership.

----------


       Confidential treatment granted with respect to certain provisions.

       * Filed as an exhibit hereto.

                                     - 124 -