UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549 FORM 10-Q x
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR
  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended:   MARCH 31, 2001 OR o
  TRANSITION REPORT TO SECTION 13 OR 15(d) OF
  THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to
  ______  Commission File Number: 001-13637 APEX MORTGAGE CAPITAL, INC.(Exact
name of Registrant as specified in its Charter)  Maryland
  95-4650863(State or other jurisdiction of
  incorporation
  or organization)
  (I.R.S. Employer
  Identification Number)865 South Figueroa Street
  Los Angeles, California
  90017(Address of principal executive offices)
  (Zip Code)
 Registrants
telephone number, including area code (213) 244-0440 Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
          Yesx       Noo APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding of
the issuers classes of common stock, as of the last practicable date. Common Stock ($0.01 par value)
  5,753,000 as of May 11, 2001
   APEX MORTGAGE
CAPITAL, INC.FORM 10-Q

INDEX

PART
I.      FINANCIAL INFORMATION

Item 1.      Financial
Statements

Balance Sheets at
March 31, 2001 (unaudited) and December 31, 2000

Statements
of Operations for the three months ended March 31, 2001 and March 31, 2000
(unaudited)

Statement of
Stockholders Equity for the three months ended March 31, 2001 (unaudited)

Statements
of Cash Flows for the three months ended March 31, 2001 and March 31, 2000
(unaudited)

Notes to Financial
Statements (unaudited)

Item 2.      Managements
Discussion and Analysis of Financial Condition and Results of Operations

Item
3.      Quantitative and Qualitative
Disclosures About Market Risk

PART
II.     OTHER INFORMATION

Item 1.      Legal
Proceedings

Item 2.      Changes in Securities

Item 3.      Defaults
Upon Senior Securities

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

Item 5.      Other Information

Item 6.      Exhibits and Reports on Form 8-K

Signatures

PART
1.         FINANCIAL INFORMATION

Item 1.           
Financial Statements

Apex Mortgage Capital,
Inc.

Balance Sheets

March 31, 2001
  December 31, 2000(Unaudited)AssetsCash and cash equivalents
  $4,239,000
  $140,000Fixed income trading securities, at
  fair value (Note 3)
  584,187,000
  -Fixed income securities
  available-for-sale, at fair value (Note 3)
  5,766,000
  600,131,000Equity securities available-for-sale,
  at fair value (Note 3)
  11,328,000
  9,068,000Accrued interest receivable
  3,743,000
  3,734,000Principal payments receivable
  -
  288,000Other assets
  637,000
  712,000$609,900,000
  $614,073,000Liabilities and Stockholders' EquityLiabilitiesReverse repurchase agreements (Note 4)
  $555,747,000
  $545,434,000Payable for unsettled securities
  -
  14,514,000Accrued interest payable
  652,000
  569,000Dividend payable
  2,111,000
  2,073,000Unrealized loss on forward contracts,
  at fair value (Note 10)
  3,132,000
  3,731,000Deferred gain on interest rate swap
  contracts
  -
  2,546,000Accrued expenses and other liabilities
  698,000
  823,000562,340,000
  569,690,000Commitments and contingencies (Notes
  3,4,9, and 10)Stockholders' EquityPreferred stock, par value $0.01 per
  share; 50,000,000 shares authorized; no shares outstandingCommon stock, par value $0.01 per
  share; 100,000,000 shares authorized; 6,700,100 shares outstanding (Notes 6 and
  8)Additional paid-in-capital
  67,000
  67,000Accumulated other comprehensive income
  (loss)
  3,196,000
  (1,079,000)Accumulated dividend distributions in
  excess of net income
  (38,495,000)
  (37,396,000)Treasury stock, at cost (947,100
  shares) (Note 6)
  (10,569,000)
  (10,569,000)47,560,000
  44,383,000$609,900,000
  $614,073,000See accompanying notes to financial
statements

Apex Mortgage Capital,
Inc.

Statements of Operations(Unaudited)

Three Months
  Ended
  March 31, 2001
  Three Months
  Ended
  March 31, 2000Interest Income:Fixed income securities
  $10,978,000
  $12,080,000Cash and cash equivalents
  42,000
  57,00011,020,000
  12,137,000Interest Expense
  7,076,000
  9,688,000Net Interest Income
  3,944,000
  2,449,000Dividend Income
  188,000
  370,000Total Operating Income
  4,132,000
  2,819,000General and Administrative Expenses:Management fee (Note 7)
  88,000
  156,000Incentive fee from operations (Note 7)
  -
  152,000Other
  181,000
  215,000269,000
  523,000Net Operating Income
  3,863,000
  2,296,000Net Loss from Trading Activities
  (2,458,000)
  -Reclassification of Previously Unrealized Gains (Note 2)
  1,742,000
  -Net Income Before Cumulative Effect of Change in Accounting
  Principle
  3,147,000
  2,296,000Cumulative Effect of Change in Accounting Principle
  (2,173,000)
  -Net Income
  $974,000
  $2,296,000Net Income Per Share
  Before Cummulative Effect of Change in Accounting Principle:Basic
  $0.55
  $0.40Diluted
  $0.54
  $0.40Effect of Accounting
  Change Per Share:Basic
  $(0.38)
  $-Diluted
  $(0.37)
  $-Net Income Per Share:Basic
  $0.17
  $0.40Diluted
  $0.17
  $0.40Weighted Average
  Number of Shares Outstanding:Basic
  5,753,000
  5,753,000Diluted
  5,783,000
  5,753,000Dividends Declared Per
  Share
  $0.35
  $0.46See accompanying notes to financial
statements

Apex Mortgage Capital,
Inc.

Statement of
Stockholders' EquityThree
Months Ended March 31, 2001(Unaudited)

Additional
  Paid-in
  Capital
  Acccumulated
  Other
  Comprehensive
  Income (Loss)
  Acccumulated
  Dividend
  Distributions
  in Exesss of
  Net Income
  Comprehensive
  Income / (Loss)
  Treasury
  Stock
  At Cost
  TotalCommon
  StockShares
  AmountBalance, December 31,
  2000
  6,700,100
  $67,000
  $93,360,000
  ($1,079,000)
  ($37,396,000)
  
  ($10,569,000)
  $44,383,000Issuance of stock
  options to non-employees (Note 8)
  
  
  1,000
  
  
  
  
  1,000Net income (loss)
  
  
  
  
  974,000
  $974,000
  
  974,000Other comprehensive
  income:Cumulative efffect of change in
  accounting principle (Note 2)
  
  
  
  2,173,000
  
  2,173,000
  
  2,173,000Reclassification of previously unrealized
  gains
  
  
  
  (1,742,000)
  
  (1,742,000)
  
  (1,742,000)Change in unrealized gain on
  available-for-sale securities
  
  
  
  2,450,000
  
  2,450,000
  
  2,450,000Cumulative effect of change in accounting
  principle - reclassification of deferred gain on terminated swaps
  
  
  
  2,546,000
  
  2,546,000
  
  2,546,000Amortization of deferred gain on
  terminated swaps
  
  
  
  (1,152,000)
  
  (1,152,000)
  
  (1,152,000)Comprehensive income
  (loss)
  
  
  
  
  
  $5,249,000Dividends declared
  
  
  
  
  (2,073,000)
  
  
  (2,073,000)Balance, March 31,
  2001
  6,700,100
  $67,000
  $93,361,000
  $3,196,000
  ($38,495,000)
  
  ($10,569,000)
  $47,560,000

See accompanying notes to financial
statements

Apex Mortgage Capital,
Inc.

Statements of Cash Flows(Unaudited)

For the QuarterEndedMarch
  31, 2001
  For the QuarterEndedMarch
  31, 2000Operating Activities:Net Income
  $974,000
  $2,296,000Adjustments to reconcile net income to
  net cash provided by operating activities:Amortization
  (1,730,000)
  91,000Net (gain) loss on trading
  activities
  2,458,000
  -Cumulative effect of change in
  accounting principle
  2,173,000
  -Reclassification of previously
  unrealized gains
  (1,742,000)
  -Change in assets and liabilities:Trading securities
  (6,336,000)
  -Accrued interest receivable
  (9,000)
  1,657,000Other assets
  75,000
  433,000Accrued interest payable
  83,000
  (3,372,000)Accrued expenses and other liabilities
  (125,000)
  (190,000)Net cash (used in) provided by
  operating activities
  (4,179,000)
  915,000Investing Activities:Payments on closed forward contracts
  -
  (1,119,000)Proceeds from closed forward contracts
  -
  5,465,000Principal payments on fixed income
  securities available-for-sale
  -
  21,846,000Net cash provided by investing
  activities
  -
  26,192,000Financing Activities:Net proceeds from reverse repurchase
  agreements
  10,313,000
  (24,189,000)Dividend distributions
  (2,035,000)
  (2,674,000)Net cash provided by (used in)
  financing activities
  8,278,000
  (26,863,000)Net Increase in Cash and Cash Equivalents
  4,099,000
  244,000Cash and Cash Equivalents at Beginning of Period
  140,000
  2,605,000Cash and Cash Equivalents at End of Period
  $4,239,000
  $2,849,000Supplemental Disclosure of Cash Flow Information:Cash paid for interest
  $8,146,000
  $13,033,000Noncash Investing and Financing Activities:Net unrealized loss on securities
  available-for-sale and forward contracts
  $4,275,000
  $(4,438,000)Principal payments, not yet received
  $288,000
  $0Securities purchased, not yet settled
  $-
  $3,346,000Dividends declared, not yet paid
  $2,111,000
  $2,775,000See accompanying notes to financial
statements

Apex Mortgage Capital, Inc.Notes
to Financial Statements

Note
1 - The
Company

Apex Mortgage Capital, Inc. (the Company) was
incorporated in Maryland on September 15, 1997.  The Company commenced its operations of acquiring and managing a
portfolio of mortgage assets on December 9, 1997, upon receipt of the net
proceeds from the initial public offering of the Companys common stock.  The Company uses its equity capital and
borrowed funds to seek to generate income based on the difference between the
yield on its investments and the cost of its borrowings.  The Company is structured for tax purposes
as a real estate investment trust (REIT) under the Internal Revenue Code of
1986, as amended (the Code).Note
2 -
Summary of Significant Accounting Policies

Cash
and Cash EquivalentsCash and cash equivalents include cash and highly
liquid investments with original maturities of three months or less.  The carrying amount of cash equivalents
approximates their fair value.Fixed Income SecuritiesThe Companys fixed income securities consist
primarily of residential mortgage securities and other fixed income
securities.  All fixed income securities
are recorded at cost on the date the assets are purchased.  Realized gains and losses on sales of the
securities are determined on an average cost basis.  A majority of the Company's fixed income securities are expected
to qualify as real estate assets under the REIT Provisions of the Code.Interest income on the Companys mortgage securities
is accrued based on the actual coupon rate and the outstanding principal
amount.  Premiums and discounts are
amortized into interest income over the lives of the securities using the
effective yield method adjusted for the effects of estimated prepayments.  When securities are deemed to be impaired,
an impairment reserve is recorded.  Such
reserve is accounted for as an adjustment to the cost of the securities and is
accreted into income on the same basis as the original discount.Interest income on the Companys other fixed income
securities is accrued using the effective interest method applied prospectively
based on current market assumptions.Beginning on January 1, 2001, the Company's policy is
to generally classify its fixed income securities that are subject to a hedging
strategy and are generally expected to experience a higher level of turnover as
held-for-trading.  These fixed income
securities are reported at fair value with unrealized gains and losses included
in earnings each reporting period. 
Fixed income securities that are generally not subject to hedging and
are expected to experience a lower level of turnover are classified as
available-for-sale.  These fixed income
securities are reported at fair value with unrealized gains and losses excluded
from earnings and reported in accumulated other comprehensive income.Equity SecuritiesThe Companys equity securities consist primarily of
equity securities issued by other real estate investment trusts.Dividend income on equity securities is recorded on
the declaration date.  Realized gains
and losses on sales of the securities are determined on an average cost
basis.  A majority of the Company's
equity securities are expected to qualify as real estate assets under the REIT
Provisions of the Code.The Companys policy is to generally classify its
equity securities as available-for-sale. 
Equity securities are reported at fair value with unrealized gains and
losses excluded from earnings and reported in accumulated other comprehensive
income.Interest Rate Hedging TransactionsThe Company may enter into interest rate swap and
interest rate cap agreements in order to mitigate the impact of rising interest
rates on the cost of its short-term borrowings.  The Company may also enter into forward contracts to sell U.S.
Treasury notes in order to mitigate the negative impact of rising interest
rates on the fair value of certain fixed income securities.  Prior to December 31, 2000, unrealized gains
and losses on open forwards were shown as assets and liabilities, respectively,
and as accumulated other comprehensive income in the balance sheets.  Realized gains and losses on terminated
forwards were recorded as deferred gains and losses, included in accumulated
other comprehensive income in the balance sheets and were amortized over the
remaining lives of the fixed income securities being hedged as an adjustment to
income in the statements of operations. 
Beginning on January 1, 2001, all realized and unrealized gains and
losses on forward contracts are recognized in net gains and losses from trading
activities in the statement of operations.

Stock Based CompensationThe Company grants stock options to its directors and
officers and to certain directors, officers and employees of its investment
manager and the investment manager itself, as discussed in Note 8.  Options granted to directors of the Company
are accounted for using the intrinsic value method, and generally no
compensation expense is recognized in the statements of operations for such
options.  Other options are accounted
for using the fair value method; such options are measured at their fair value
when they are granted and are recognized as a general and administrative
expense during the periods when the options vest and the related services are
performed.Federal and State Income TaxesThe Company has elected to be taxed as a REIT and
generally is not subject to federal and state taxes on its income to the extent
it distributes annually 95% of its predistribution taxable income to
stockholders and meets certain other asset, income and stock ownership
tests.  As such, no accrual for income
taxes has been included in the financial statements.Net
Income Per ShareBasic net income per share is calculated on the basis
of the weighted average number of common shares outstanding during each
period.  Diluted net income per share
includes the additional dilutive effect of common stock equivalents and
outstanding stock options, and is calculated using the treasury stock method.Stock options that could potentially dilute net income
per share in the future were not included in the computation of diluted net
income per share in 2000 because they would have been antidilutive for the
period presented.Income
RecognitionIncome and expenses are recorded on the accrual basis
of accounting.Credit RiskThe Company has limited its exposure to credit losses
on its portfolio of fixed income securities by purchasing securities that are
either rated AAA by at least one nationally recognized rating agency or are
issued by the Federal Home Loan Mortgage Corporation (FHLMC), Fannie Mae
(formerly known as the Federal National Mortgage Corporation) or the Government
National Mortgage Association (GNMA). 
The payment of principal and interest on the FHLMC, Fannie Mae and GNMA
securities are guaranteed by those respective agencies.  In addition, the Company has the ability to
purchase up to 10% of the portfolio in below investment grade securities.Use
of EstimatesThe preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those
estimates.

Recently Issued Accounting Standards Transition
AdjustmentThe Company adopted SFAS No. 133 and the related
amendments on January 1, 2001.  This
adoption resulted in a transition adjustment that reclassified $2,173,000 of
net losses on unrealized and deferred gains and losses on investment securities
and forward contracts from accumulated other comprehensive income to current
income.  Also, deferred gains on
interest rate swaps previously designated as hedges were reclassified from
other liabilities to accumulated other comprehensive income.In conjunction with the adoption of SFAS No. 133, the
Company reclassified $594,469,000 of its mortgage securities from the
available-for-sale category to the trading category for investments accounted
for under SFAS No. 115.  This change
resulted in the reclassification of $1,742,000 net unrealized gains from accumulated
other comprehensive income to current income, in addition to net unrealized
gains included in the SFAS No. 133 transition adjustment discussed above.Note 3  Fixed
Income and Equity Securities

At March 31, 2001, fixed income and equity securities
consisted of the following:(in thousands)
  Fixed Income
  Trading Securities
  Fixed Income
  Securities
  Available-For-Sale
  Equity
  Securities Avilable-For-SalePrincipal Amount
  $580,095
  $10,400
  $8,690Unamortized Premium (Discount)
  (10,294)
  (3,797)
  -Adjusted Cost
  569,801
  6,603
  8,690Unrealized Gains
  14,388
  -
  2,946Unrealized Losses
  (2)
  (837)
  (308)Fair Value
  $584,187
  $5,766
  $11,328At December 31, 2000, fixed income and equity
securities available-for-sale consisted of the following:(in thousands)
  Adjustable
  Rate Mortgage
  Securities
  Fixed Rate
  Mortgage
  Securities
  Other Fixed
  Income
  Securities
  Equity
  SecuritiesPrincipal Amount
  $39,253
  $557,962
  $10,400
  $8,690Unamortized Premium (Discount)
  978
  (15,529)
  (3,712)
  -Adjusted Cost
  40,231
  542,433
  6,688
  8,690Unrealized Gains
  46
  11,783
  -
  2,946Unrealized Losses
  (24)
  -
  (1,026)
  (308)Fair Value
  $40,253
  $554,216
  $5,662
  $11,328A portion of the other fixed income securities held as
available-for-sale generally have an original maturity of five years subject to
certain acceleration provisions.  The
expected average remaining maturity at March 31, 2001 and December 31, 2000 was
approximately 1.7 and 2.0 years, respectively. 
The remaining portion of this category has a fixed remaining maturity of
approximately 1.3 years as of March 31, 2001.During the quarter ended March 31, 2001 the Company
realized $3,444,000 in gains on the sale of $142,809,000 of fixed income
securities and reported gains of $3,180,000 from the net increase in fair
market value of fixed income securities held for trading.  There were no gains or losses recognized
during the quarter ended March 31, 2000.At March 31, 2001, the Company held equity securities
and senior unsecured notes issued by Dynex Capital, Inc. (Dynex) with fair
market values of $4,000,000 and $3,815,000, respectively.  During the year ended December 31, 1999,
Dynex suspended the payment of dividends on its preferred stock.  Accordingly, the Company is no longer
recognizing dividend income on its equity investments in Dynex.  Dynex is currently paying interest on its
senior notes.  Accordingly, the Company
is recognizing interest income on the senior note investments issued by
Dynex.  If Dynex were to suspend payment
of interest on its senior notes, interest income recognized by the Company
would be negatively impacted.Note
4 -
Reverse Repurchase Agreements

The Company has entered into reverse repurchase
agreements to finance certain of its investments.  These agreements are secured by a portion of the Companys
investments and bear interest rates that have historically moved in close
relationship to LIBOR.At March 31, 2001, the Company had outstanding
$555,747,000 of reverse repurchase agreements with a weighted average current
borrowing rate of 5.07% and a maturity of 1.1 months.  The reverse repurchase agreements were collateralized by
securities with an estimated fair value of $569,141,000.At December 31, 2000, the Company had outstanding
$545,434,000 of reverse repurchase agreements with a weighted average current
borrowing rate of 6.61% and a maturity of 1.1 months.  The reverse repurchase agreements were collateralized by
securities with an estimated fair value of $564,274,000.For the quarter ended March 31, 2001, the average
reverse repurchase agreement balance was $562,610,000 with a weighted average
interest cost of 5.85%.For the year ended December 31, 2000, the average
reverse repurchase agreement balance was $576,190,000 with a weighted average
interest cost of 6.33%.Note 5 - Fair Value
of Financial Instruments

The following table presents the amortized cost and
estimated fair values of the Companys financial instruments.  SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale (dollars in thousands):At March 31,
  2001
  At December
  31, 2000Adjusted
  Cost
  Fair
  Value
  Adjusted
  Cost
  Fair
  ValueTrading securities
  $569,801
  $584,187
  -
  -Mortgage related securities
  available-for-sale
  
  
  $582,664
  $594,469Equity securities
  8,690
  11,328
  8,690
  9,068Other fixed income securities
  6,603
  5,766
  6,688
  5,662Forward contracts
  -
  (3,132)
  -
  (3,731)

Adjusted cost in the table above includes the net
effect of unamortized impairment reserves.The Company bases its fair value estimates for
mortgage related securities, equity securities, other fixed income securities,
interest rate swaps, and forward contracts primarily on third party price
indications provided by dealers who make markets in these financial instruments
when such indications are available. 
However, the fair value reported reflects estimates and may not
necessarily be indicative of the amounts the Company could realize in a current
market exchange.  Cash and cash
equivalents, interest receivable and reverse repurchase agreements are
reflected in the financial statements at their costs, which approximates their
fair value because of the short-term nature of these instruments.Note
6 
Stock Repurchase Program

The Companys Board of Directors has authorized a
program to repurchase shares of the Companys common stock.  At March 31, 2001 and December 31, 2000, the
Company was authorized to repurchase an additional 552,900 shares of the
Companys common stock pursuant to the repurchase program.At March 31, 2001 and December 31, 2000, the Company
held 947,100 shares of treasury stock repurchased in 1998.  During the three months ended March 31, 2001
and year ended December 31, 2000, the Company did not repurchase any treasury
shares.Note
7 -
Transactions with Affiliates

The Company has entered into a Management Agreement
(the Management Agreement), as amended, with TCW Investment Management
Company (the Manager), a wholly owned subsidiary of The TCW Group, Inc.,
under which the Manager will manage its day-to-day operations, subject to the
direction and oversight of the Companys Board of Directors.  The Company will pay the Manager annual base
management compensation, payable monthly in arrears, equal to 3/4 of 1% of the
average net invested capital as further defined in the Management Agreement.The Company recorded expense of $88,000 and $156,000
in base management compensation to the Manager during the quarters ended March
31, 2001 and 2000, respectively.The accrued liability for base management compensation
was $173,000 and $156,000 at March 31, 2001 and 2000, respectively.The Company also pays the Manager, as incentive compensation,
an amount equal to 30% of the Net Income of the Company, before incentive
compensation, in excess of the amount that would produce an annualized return
on equity equal to the ten-year US Treasury rate plus 1% as further defined in
the Management Agreement.The Company recorded expense of $152,000 for incentive
compensation to the Manager for the quarter ended March 31, 2000.  The Company did not record any incentive
compensation to the Manager for the quarter ended March 31, 2001.There was no accrued liability for incentive
compensation at March 31, 2001.  The
accrued liability for incentive compensation was $152,000 at March 31, 2000.The Company may also grant stock options to directors,
officers and key employees of the Company, the Manager, its directors, officers
and key employees (see Note 8).The Management Agreement may be renewed each year at
the discretion of the Companys Board of Directors, unless previously
terminated by the Company or the Manager upon written notice. Except in the
case of a termination or non-renewal by the Company for cause, upon termination
or non-renewal of the Management Agreement by the Company, the Company is
obligated to pay the Manager a termination or non-renewal fee, which may be
significant. The termination or non-renewal fee shall be equal to the fair
market value of the Management Agreement without regard to the Company's
termination right, as determined by an independent appraisal.  Neither the fair market value of the
Management Agreement nor the various factors that an appraiser may find
relevant in its determination of the fair market value can be determined at
this time.  The fair market value of the
Management Agreement will be affected by significant variables, including (i)
the historical management fees paid to the Manager, (ii) any projections of
future management fees to be paid to the Manager determined by the independent
appraiser, (iii) the relative valuations of agreements similar to the
Management Agreement and (iv) other factors, all of which may be unrelated to
the performance of the Manager.  Similar
management agreements have been valued at as much as eight times the historical
annual fees paid under such agreements. 
Any termination or non-renewal fee paid may be materially greater than
eight times historical fees and the Company can provide no assurance at this
time as to the amount of any such fee.The Companys other fixed income investments held as
available-for-sale include securities that are issued by special purpose
companies that invest primarily in mortgage-related assets.  The Manager serves as the investment manager
to these companies and is paid fees in connection with such services.  The Company does not anticipate paying any
management fees directly to the Manager in connection with these investments.Note
8 -
Stock Options

The Company has adopted a stock option plan (the
''Amended and Restated 1997 Stock Option Plan'') that provides for the grant of
both qualified incentive stock options that meet the requirements of Section
422 of the Code, and non-qualified stock options, stock appreciation rights and
dividend equivalent rights.  Stock
options may be granted to directors of the Company (employees), and to the
Manager and the directors, officers and key employees of the Manager
(non-employees).The exercise price for any stock option granted under
the Amended and Restated 1997 Stock Option Plan may not be less than 100% of
the fair market value of the shares of common stock at the time the option is
granted.  Each option must terminate no
more than ten years from the date it is granted.  Subject to anti-dilution provisions for stock splits, stock
dividends and similar events, the Amended and Restated 1997 Stock Option Plan
authorizes the grant of options to purchase an aggregate of 1,000,000 shares of
common stock.The Company recognized stock option expense relating
to the options granted to the non-employees of $1,000 and $24,000 during the
quarters ended March 31, 2001 and 2000, respectively.For stock options outstanding at March 31, 2001, the
range of exercise prices is $6.98 to $15.00 per share and the weighted-average
remaining contractual life is 7.94 years.For the year ended December 31, 2000, options to
purchase 183,000 shares of the Companys common stock were granted to directors
of the Company and options to purchase 125,000 shares were granted to officers
of the Company and officers and key employees of the Manager.  The exercise price of the options granted
during 2000 was $6.98 per share.  None
of the options granted during 2000 include dividend equivalent rights.The fair value of each option granted during 2000 was
estimated to be $0.04 as of the grant date using the Black-Scholes option
pricing model with the following assumptions: dividend yield of 20% per annum;
expected volatility of 30%; risk free interest rate of 5.22% per annum; and an
expected life of 10 years.The options granted during 2000 expire in December
2010 and vest in two equal installments during the month of December in 2001
and 2002.For the year ended December 31, 1998, options to
purchase 112,000 shares of the Companys common stock were granted to directors
of the Company and options to purchase 58,000 shares were granted to officers
of the Company and officers and key employees of the Manager.  The exercise price of the options granted
during 1998 was $10.38 per share.  All
of the options granted during 1998 include dividend equivalent rights that
entitle the option holder to receive a cash payment equal to the dividends
declared on the Companys common stock multiplied by the number of options held
until the options are exercised or expire.The fair value of each option granted during 1998 was
estimated to be $5.32 as of the grant date using the Black-Scholes option
pricing model with the following assumptions: dividend yield of 0% per annum
(to account for the dividend equivalent rights); expected volatility of 30%;
risk free interest rate of 4.57% per annum; and an expected life of 10 years.The options granted during 1998 expire in December
2008 and vested in two equal installments during the month of December in 1999
and 2000.For the year ended December 31, 1997, options to
purchase 210,000 shares of the Companys common stock were granted to directors
of the Company and options to purchase 190,000 shares were granted to officers
of the Company and officers and key employees of the Manager.  The exercise price of the options granted
during 1997 was $15 per share.The fair value of each option granted during 1997 was
estimated to be $1.05 as of the grant date using the Black-Scholes option
pricing model with the following assumptions: dividend yield of 11% per annum;
expected volatility of 30%; risk free interest rate of 5.82% per annum; and an
expected life of 10 years.The options granted during 1997 expire in December
2007 and vest in three equal installments during the month of February in 1999,
2000 and 2001.If the Company had recorded stock option grants to
Company directors at fair value and related compensation expense, the pro forma
effect on the Companys net income and earnings per share would have been as
follows:Quarter
  Ended
  March 31, 2001
  Quarter
  Ended
  March 31, 2000Net income - as reported
  $974,000
  $2,296,000Net income - pro forma
  969,000
  2,254,000Basic earnings per share - as reported
  $0.17
  $0.40Diluted earnings per share - as reported
  $0.17
  $0.40Basic earnings per share - pro forma
  $0.17
  $0.39Diluted earnings per share - pro forma
  $0.17
  $0.39Information regarding stock option activity during the
quarter ended March 31, 2001 is as follows:Shares
  Weighted
  Average Exercise PriceOptions
  Outstanding at January 1, 2001
  878,000
  $11.29Exercised
  -
  -Expired
  -
  -Options
  Outstanding at March 31, 2001
  878,000
  $11.29Note
9 
Contractual Commitments

The Company from time to time may enter into interest
rate swap agreements in order to mitigate the impact of rising interest rates
on the cost of its short-term borrowings. 
There were no interest rate swap agreements open at March 31, 2001 and December
31, 2000.The Company received $249,000 from the swap
counter-parties during the quarter ended March 31, 2000 which is included in
interest expense in the statements of operations.During the year ended December 31, 2000, the Company
terminated all outstanding interest rate swap agreements with a combined
notional amount of $386,213,000 which resulted in a deferred gain of $5,554,000
that is being amortized over the remaining life of the original swap
agreements.  The deferred gain is
included in accumulated other comprehensive income on the balance sheet and the
amortization expense is included in interest expense in the statements of
operations.   During the quarter ended
March 31, 2001, $1,152,000 of the deferred gain was amortized.  Approximately 92% of the deferred gain will
be amortized by June 30, 2001.  The
remaining deferred gain will be fully amortized by May 31, 2002.During
the year ended December 31, 1999, the Company terminated interest rate swap
agreements with a combined notional amount of $255,530,000 which resulted in a
net deferred loss of $66,000 that was amortized over the remaining life of the
original swap agreements. During the quarter ended March 31, 2000, $25,000 of
the net deferred loss was amortized. The remaining net deferred loss was fully
amortized at August 31, 2000.Note 10 -  Forward Contracts

At March 31, 2001, the Company had open forward
contracts to sell U.S. Treasury notes with terms stated below.Current
  Notional Amount
  (000)
  Average
  TerminationDate
  Net
  Unrealized
  Losses
  (000)
  Average
  Maturity of
  Underlying Securities$395,000
  4/30/2001
  ($3,132)
  3.87
  YearsAt December 31, 2000, the Company had open forward
contracts to sell U.S. Treasury notes with terms stated below.Current
  Notional Amount
  (000)
  AverageTerminationDate
  Net
  UnrealizedLosses
  (000)
  Average
  Maturity of
  Underlying Securities$575,000
  1/19/2001
  ($3,731)
  2.99
  YearsDuring the quarter ended March 31, 2001, a transition
adjustment, in connection with the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 133, was recorded to reclassify $2,173,000
from accumulated other comprehensive income to net loss on investment
transactions on the statements of operations. 
This reclassification consists of $8,505,000 net deferred losses on
closed forward contracts, $3,731,000 net unrealized losses on open forward
contracts, and $10,063,000 net unrealized gains on securities hedged by open
forward contracts at December 31, 2000. 
Also, during the quarter ended March 31, 2001, $9,082,000 of net loss
was realized on closed forward contracts and is included in net loss from
trading activities on the statements of operations.Note
11 
Adoption of Shareholder Rights Plan

On
June 30, 1999, the Board of Directors of Apex Mortgage Capital, Inc. (the
Company) declared a dividend distribution of one Right for each outstanding
share of Company Common Stock to stockholders of record at the close of
business on July 30, 1999 (the Record Date). 
Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $0.01 per share (the Preferred Stock), at a Purchase Price of $50,
subject to adjustment.  The description
and terms of the Rights are set forth in a Shareholder Rights Agreement (the
Rights Agreement) between the Company and The Bank of New York, as Rights
Agent.Initially,
the Rights will be attached to all Common Stock certificates representing
shares then outstanding, and no separate Rights Certificates will be
distributed.  Subject to certain
exceptions specified in the Rights Agreement, the Rights will separate from the
Common Stock and a Distribution Date will occur upon the earlier of (i) 10
business days following a public announcement that a person or group of
affiliated or associated persons (an Acquiring Person) has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the Stock Acquisition Date), other than
as a result of repurchases of stock by the Company or certain inadvertent
actions by institutional or certain other stockholders or (ii) 10 business days
(or such later date as the Board shall determine) following the commencement of
a tender offer or exchange offer that would result in a person or group
becoming an Acquiring Person.  Until the
Distribution Date, (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the Record Date
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. 
Pursuant to the Rights Agreement, the Company reserves the right to
require that, prior to the occurrence of a triggering event, upon any exercise
of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock will be issued.The Rights are not exercisable until the Distribution
Date and will expire on July 30, 2009, unless earlier redeemed or exchanged by
the Company.ITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

SAFE
HARBOR/FORWARD LOOKING STATEMENTS

Certain
information contained in this Quarterly Report on Form 10-Q constitutes
forward-looking statements which can be identified by the use of
forward-looking terminology such as may, will, should, expect,
anticipate, estimate, intend, continue, or believes or the negatives
thereof or other variations thereon or comparable terminology.  Discussed below are some important factors
that would cause actual results to differ materially from those in any
forward-looking statements, including changes in interest rates; domestic and
foreign business, market, financial or legal conditions; differences in the
actual allocation of the assets of the Company from those assumed; and the
degree to which assets are hedged and the effectiveness of the hedge, among
others.  In addition, the degree of risk
is increased by the Companys leveraging of its assets.  For additional discussion of factors that
could cause actual results to differ from those contained in such
forward-looking statements, see Principal Risks and Special Considerations,
Item 7 Management's Discussion and Analysis of Financial Conditions and
Results of Operations and Item 7A Quantitative and Qualitative Disclosures
About Market Risk in the Companys annual report on Form 10-K for the year
ended December 31, 1999.  The Company
does not undertake, and specifically disclaims any obligation, to update any forward-looking
statements to reflect occurrences or unanticipated events or circumstances
after the date of such statements.

GENERAL

Apex
Mortgage Capital, Inc.  (the
''Company''), a Maryland corporation, was formed on September 15, 1997,
primarily to acquire United States agency and other highly rated, single-family
real estate adjustable and fixed rate Mortgage Related Assets.  The Company commenced operations on December
9, 1997 following the initial public offering of the Companys Common Stock.  The Company's principal executive offices
are located at 865 South Figueroa Street, Suite 1800, Los Angeles, California
90017, and its telephone number is (213) 244-0440.

The
Company uses its equity capital and borrowed funds to seek to generate income
based on the difference between the yield on its Mortgage Related Assets and
the cost of its borrowings.  The Company
has elected to be taxed as a real estate investment trust (''REIT'') under the
Internal Revenue Code of 1986, as amended (the ''Code'').  The Company will not generally be subject to
federal taxes on its income to the extent that it distributes its net income to
its stockholders and maintains its qualification as a REIT.

The
day-to-day operations of the Company are managed by an external management
company, TCW Investment Management Company (the "Manager"), subject
to the direction and oversight of the Company's Board of Directors.  A majority of the Board of Directors are
unaffiliated with The TCW Group, Inc. 
(''TCW'' and, together with its subsidiaries and Affiliates, the ''TCW
Group'') or the Manager.  The Manager is
a wholly-owned subsidiary of TCW.  The
Manager was established in 1992 and the TCW Group began operations in 1971
through one of its affiliates.  The
Company's investment management team are selected members of the TCW Group's
Mortgage-Backed Securities Group (the ''MBS Group''), all of whom have over
twelve years of experience in raising and managing mortgage capital.  The Company has elected to be externally
managed by the Manager to take advantage of the existing operational systems,
expertise and economies of scale associated with the Manager's current business
operations, among other reasons. The Manager's key officers have experience in
raising and managing mortgage capital, mortgage finance and the purchase and
administration of Mortgage Related Assets.

RECENT
EVENTS

Exchange Listing.Effective
February 8, 2001, the Company was listed on the American Stock Exchange and
began trading its common stock under the symbol AXM.

Recently
Issued Accounting Standards The
Company adopted SFAS No. 133 and the related amendments on January 1,
2001.  This adoption resulted in a
transition adjustment that reclassified $2,173,000 of net losses on unrealized
and deferred gains and losses on investment securities and forward contracts
from accumulated other comprehensive income to current income.  Also, deferred gains on interest rate swaps
previously designated as hedges were reclassified from other liabilities to
accumulated other comprehensive income.

In
conjunction with the adoption of SFAS No. 133, the Company reclassified
$594,469,000 of its mortgage securities from the available-for-sale category to
the trading category for investments accounted for under SFAS No. 115.  This change resulted in the reclassification
of $1,742,000 net unrealized gains from accumulated other comprehensive income
to current income, in addition to net unrealized gains included in the SFAS No.
133 transition adjustment discussed above. This change is also expected to
increase the volatility of net income as both changes in the fair market value
and actual realized gains and losses of the fixed income securities and the
related hedging instruments will now flow through net income each reporting
period.

STRATEGY

To
achieve its business objective and generate dividend yields that provide a
competitive rate of return for its stockholders, the Company's strategy is to:

purchase
primarily single-family fixed and adjustable rate Mortgage Related Assets;

manage
the credit risk of its Mortgage Related Assets through, among other activities
(i) carefully selecting Mortgage Related Assets to be acquired, (ii) complying
with the Company's investment policy, (iii) actively monitoring the ongoing
credit quality and servicing of its Mortgage Related Assets, and (iv)
maintaining appropriate capital levels and allowances for possible credit
losses;

finance
purchases of Mortgage Related Assets with the net proceeds of equity offerings
and, to the extent permitted by the Company's leverage policy, to utilize leverage
to increase potential returns to stockholders through borrowings (primarily
reverse repurchase agreements) with interest rates that will also reflect
changes in short-term market interest rates;

seek
to structure its borrowings in accordance with its interest rate risk
management policy;

utilize
interest rate swaps, forward contracts on U.S. Treasury notes, interest rate
caps and similar financial instruments to mitigate interest rate risks; and

seek
to minimize prepayment risk primarily by structuring a diversified portfolio
with a variety of prepayment characteristics;

purchase
equity and other securities issued by financial entities on an opportunistic
basis.

There
can be no assurance that the Company will be able to generate competitive
earnings and dividends while holding primarily High Quality Mortgage Related
Assets and maintaining a disciplined risk-control profile.

The
Company may attempt to increase the return to stockholders over time by: (i)
raising additional capital in order to increase its ability to invest in
additional Mortgage Related Assets; (ii) lowering its effective borrowing costs
through direct funding with collateralized lenders, in addition to using Wall
Street intermediaries, and investigating the possibility of using
collateralized commercial paper and medium-term note programs; and (iii)
improving the efficiency of its balance sheet structure by issuing
uncollateralized subordinated debt and other forms of capital.

POLICIES

The
Companys current investment policies are set forth in its Annual Report on
form 10-K for the year ended December 31, 2000.

FINANCIAL
CONDITION

Fixed
Income Securities

At
March 31, 2001 and December 31, 2000, the Company held $589,953,000 and
$600,131,000 of Fixed Income Securities, respectively.  The original maturity of a significant
portion of the Fixed Income Securities ranges from fifteen to thirty years; the
actual maturity is subject to change based on the prepayments of the underlying
mortgage loans.

The
following table is a schedule of Fixed Income Securities held as available for
sale listed by security type (dollars in thousands):

March 31,
  2001
  December 31,
  2000Fixed Income
  Securities
  Carrying
  Value
  Percent of
  Total
  Available-for-sale Securities
  Carrying
  Value
  Percent of
  Total
  Available-for-sale SecuritiesMortgage Securities:Adjustable Rate (1)
  -0-
  0.00%
  $40,253
  6.71%Fixed Rate
  -0-
  0.00%
  554,216
  92.35%Other Fixed Income Securities
  $5,766
  100.00%
  5,662
  0.94%Totals
  $5,766
  100.00%
  $600,131
  100.00%





(1)December
31, 2000, the interest rate indices for 97% and 3% of the adjustable rate
mortgage securities were based on the one-year U.S. Treasury rate and the
six-month London Inter-Bank Offered Rate, respectively.The
following table is a schedule of Fixed Income Securities held for trading at
March 31, 2001 listed by security type (dollars in thousands):

March 31,
  2001Fixed Income
  Securities
  Carrying
  Value
  Percent of
  Total
  Securities Held for TradingMortgage Securities:Adjustable Rate
  $38,258
  6.55%Fixed Rate
  545,929
  93.45%Totals
  $584,187
  100.00%The following table shows various
weighted average characteristics of the Fixed Income Securities held as
available-for-sale by the Company at March 31, 2001 (dollars in thousands):

Security
  Type
  Par Amount
  Par as a
  Percent of Category
  Adjusted
  Cost Basis
  Market
  Price
  Current
  Coupon
  Weighted
  Average
  LifeOther Fixed Income Securities
  10,400
  100%
  63.79%
  55.44%
  15.62%
  1.5

The
following table shows various weighted average characteristics of the Fixed
Income Securities held for trading by the Company at March 31, 2001 (dollars in
thousands):

Security
  Type
  Par Amount
  Par as a
  Percent of
  Category
  Adjusted
  Cost Basis
  Market
  Price
  Current
  Coupon
  Weighted
  Average
  Life (1)20 Year Agency Pass-throughs
  $224,926
  38.77%
  97.18%
  100.40%
  6.50%
  4.730 Year Agency Pass-throughs
  192,779
  33.23%
  100.31%
  101.41%
  7.11%
  3.8AAA CMOs
  125,114
  21.57%
  95.77%
  99.60%
  6.78%
  4.1Total Fixed Rate Holdings
  $542,819
  93.57%
  97.97%
  100.57%
  6.78%
  4.3Adjustable Rate Holdings
  37,276
  6.43%
  101.97%
  102.64%
  7.91%
  0.6Category Total
  $580,095
  100.00%
  98.22%
  100.71%
  6.85%
  4.0The
following table shows various weighted average characteristics of the Fixed Income
Securities held as available-for-sale by the Company at December 31, 2000
(dollars in thousands):

Security Type
  Par Amount
  Percent of
  Total Par
  Amount
  Adjusted
  Cost Basis
  Market
  Price
  Current
  Coupon
  Weighted
  Average
  Life (1)15 Year Agency/AAA Pass-throughs
  $145,251
  23.90%
  98.00%
  99.90%
  6.50%
  4.520 Year Agency Pass-throughs
  230,193
  37.90%
  97.00%
  99.30%
  6.50%
  5.630 Year Agency Pass-throughs
  54,759
  9.00%
  99.65%
  101.23%
  7.41%
  5.0AAA CMOs
  127,759
  21.00%
  95.68%
  97.92%
  6.80%
  6.4Total Fixed Rate Holdings
  $557,962
  91.80%
  97.22%
  99.33%
  6.80%
  5.4Other Fixed Income Securities
  10,400
  1.70%
  64.31%
  54.44%
  15.89%
  1.8Adjustable Rate Holdings
  39,253
  6.50%
  102.49%
  102.55%
  8.00%
  0.6Total Portfolio
  $607,615
  100.00%
  96.99%
  98.77%
  6.90%
  5.1(1)The
weighted average life of the fixed rate mortgage securities is based upon
market prepayment expectations as of the dates shown.  The actual weighted average life could be longer or shorter
depending on the actual prepayment rates experienced over the life of the
securities.  The weighted average life
shown for the adjustable rate mortgage assets represents the average time until
the next coupon reset date.  All
averages are shown in years.Equity
Securities

At
March 31, 2001 and December 31, 2000 the Company held $11,328,000 and
$9,068,000 of equity securities held as available-for-sale, respectively.  Equity securities consist primarily of
investment in equities issued by other real estate investment trusts.

At March 31, 2001, equity securities
consisted of the following:

(In thousands)
  Shares Held
  Adjusted
  Cost
  Fair ValueCommon Stock:American Residential Investment Trust,
  Inc.
  109
  $611
  $350Anworth Mortgage Asset Corporation
  222
  994
  1,053Dynex Capital, Inc.
  75
  122
  75Total Common Stock
  
  1,727
  1,478Convertible Preferred Stock:Capstead Mortgage Corporation, Series B
  520
  4,408
  6,110Dynex Capital, Inc., Series A
  53
  420
  591Dynex Capital, Inc., Series B
  150
  1,167
  1,725Dynex Capital, Inc.,  Series C
  108
  968
  1,424Total Convertible Preferred Stock
  
  6,963
  9,850Total Equity Securities
  
  $8,690
  $11,328At December 31, 2000, equity securities
consisted of the following:

(In
  thousands)
  Shares Held
  Adjusted
  Cost
  Fair ValueCommon Stock:American Residential Investment Trust,
  Inc.
  109
  $611
  $238Anworth Mortgage Asset Corporation
  222
  994
  900Dynex Capital, Inc.
  75
  122
  75Total Common Stock
  
  1,727
  1,213Convertible Preferred Stock:Capstead Mortgage Corporation, Series B
  520
  4,408
  5,492Dynex Capital, Inc., Series A
  53
  420
  427Dynex Capital, Inc., Series B
  150
  1,167
  1,088Dynex Capital, Inc.,  Series C
  108
  968
  848Total Convertible Preferred Stock
  
  6,963
  7,855Total Equity Securities
  
  $8,690
  $9,068Hedging Instruments

There
can be no assurance that the Company will enter into hedging activities or
that, if entered into, such activities will have the desired beneficial impact
on the Companys results of operations or financial condition.  Moreover, no hedging activity can completely
insulate the Company from the risks associated with changes in interest rates
and prepayment rates.

Hedging
involves risk and typically involves costs, including transaction costs.  Such costs increase dramatically as the
period covered by the hedging increases and during periods of rising and
volatile interest rates.  The Company
may increase its hedging activity and, thus, increase its hedging costs during
such periods when interest rates are volatile or rising and hedging costs have
increased.  The Company intends
generally to hedge as much of the interest rate risk as the Manager determines
is in the best interest of the shareholders of the Company given the cost of
such hedging transactions and the Companys desire to maintain its status as a
REIT.  The Companys policies do not
contain specific requirements as to the percentages or amount of interest rate
risk that the Manager is required to hedge.

At
March 31, 2001, the Company had open forward contracts to sell U.S. Treasury
notes with terms stated below.

Current
  Notional Amount
  (000)
  Average
  Contract
  Price
  Fair
  value of
  contracts
  (000)
  AverageTerminationDate
  Unrealized
  Gains (Losses)
  (000)$395,000
  101.896
  $405,620
  4/30/2001
  ($3,132)At December
31, 2000, the Company had open forward contracts to sell U.S. Treasury notes
with terms stated below.

CurrentNotional Amount
  (000)
  Average
  Contract
  Price
  Fair
  value of
  contracts(000)
  Average
  TerminationDate
  Unrealized
  Gains (Losses)
  (000)$575,000
  101.099
  $585,048
  1/19/2001
  ($3,731)The
contracts were entered into to mitigate the negative impact of rising interest
rates on certain fixed income securities that generally have a market weighted
average duration approximately equal to the contracts shown above.

Liabilities

The
Company has entered into reverse repurchase agreements to finance certain of
its mortgage-backed securities.  These
agreements are secured by a portion of the Companys mortgage-backed securities
and bear interest rates that have historically moved in close relationship to
LIBOR.

At
March 31, 2001, the Company had outstanding $555,747,000 of reverse repurchase
agreements with a weighted average current borrowing rate of 5.07% and a
maturity of 1.1 months.  The reverse repurchase
agreements were collateralized by securities with an estimated fair value of
$569,141,000.

At
December 31, 2000, the Company had outstanding $545,434,000 of reverse
repurchase agreements with a weighted average current borrowing rate of 6.61%
and a maturity of 1.1 months.  The
reverse repurchase agreements were collateralized by mortgage-backed securities
with an estimated fair value of $564,274,000.

The
Company had $6,593,000 and $24,256,000 of other liabilities at March 31, 2001
and December 31, 2000, respectively, consisting primarily of and accrued
interest payable, unrealized loss on forward contracts and payables for
unsettled securities at March 31, 2001 and deferred gain on interest rate
swaps, accrued interest payable and payables for unsettled securities at
December 31, 2000.  The Company
anticipates settling all other liabilities within one year.

Other Matters

At March 31, 2001, the Company held
equity securities and senior unsecured notes issued by Dynex Capital, Inc.
(Dynex) with fair market values of $4,000,000 and $3,815,000,
respectively.  During the year ended
December 31, 1999, Dynex suspended the payment of dividends on its preferred
stock.  Accordingly, the Company is no
longer recognizing dividend income on its equity investments in Dynex.  Dynex is currently paying interest on its
senior notes.  Accordingly, the Company
is recognizing interest income on the senior note investments issued by Dynex.  If Dynex were to suspend payment of interest
on its senior notes, interest income recognized by the Company would be
negatively impacted.

Results of Operations  for the Three Months Ended March 31, 2001

For
the three months ended March 31, 2001, the Companys net income was $974,000,
or $0.17 per share on a basic and diluted basis, based on a weighted average of
5,753,000 and 5,783,000 shares outstanding, respectively.  That compares to net income of $2,296,000,
or $0.40 per share on both a basic basis and diluted basis, based on a weighted
average of 5,753,000 shares outstanding for the three months ended March 31,
2000.  Net interest income for the three
months ended March 31, 2001 was $3,944,000 consisting of interest income on
fixed income securities and cash balances less interest expense on reverse
repurchase agreements compared to $2,449,000 for the three months ended March
31, 2000.  The Company reported dividend
income of $188,000 from dividends on equity investments for the three months
ended March 31, 2001 compared to $370,000 for the three months ended March 31,
2000.

The
Company incurred operating expenses of $269,000 for the three months ended
March 31, 2001 consisting of management fees, professional, printing, insurance
and other expenses.  For the three
months ended March 31, 2000, the Company incurred operating expenses of
$523,000 consisting of management fees, incentive fees, professional, printing,
insurance and other expenses.

During
the quarter ended March 31, 2001, the Company realized $3,444,000 in gains on
the sale of $142,809,000 of fixed income securities, reported gains of
$3,180,000 from the net increase in fair market value of fixed income
securities held for trading and realized $9,082,000 in losses on closed forward
contracts.  There were no gains or
losses reported from the sale of assets during the quarter ended March 31,
2000.  The Company realized $5,465,000
in deferred gains on closed forward contracts during the quarter ended March
31, 2000 that were either amortized or written off in subsequent quarters during
2000.

During
the quarter ended March 31, 2001, the Company adopted SFAS No. 133 and the
related amendments.  This adoption
resulted in a transition adjustment that reclassified $2,173,000 of net losses
on unrealized and deferred gains and losses on investment securities and
forward contracts from accumulated other comprehensive income to current
income.  Also, deferred gains on
interest rate swaps previously designated as hedges were reclassified from
other liabilities to accumulated other comprehensive income.

Also
during the quarter ended March 31, 2001, the Company reclassified $594,469,000
of its mortgage securities from the available-for-sale category to the trading
category for investments accounted for under SFAS No. 115.  This change resulted in the reclassification
of $1,742,000 net unrealized gains from accumulated other comprehensive income
to current income, in addition to net unrealized gains included in the SFAS No.
133 transition adjustment discussed above.

No
such accounting changes were made during the quarter ended March 31, 2000.

The following table reflects the average
balances for each category of the Companys interest earning assets as well as
the Companys interest bearing liabilities, with the corresponding effective
rate of interest annualized (dollars in thousands):

AVERAGE BALANCE AND RATE TABLE(Dollars in thousands)

For the Quarter EndedMarch 31, 2001
  For the Quarter EndedMarch 31, 2000AverageBalance
  EffectiveRate
  AverageBalance
  EffectiveRateInterest
  Earning Assets:Mortgage Securities
  $577,232
  7.39%
  $709,780
  6.65%Other Fixed Income Assets
  6,699
  18.98%
  7,141
  16.02%Cash and Cash Equivalents
  3,343
  5.03%
  4,671
  4.88%Total Interest Earning Assets
  587,274
  7.51%
  721,592
  6.73%Interest
  Bearing Liabilities:Reverse Repurchase Agreements
  562,610
  5.03%
  6561,955
  5.85%Net
  Interest Earning Assets and Spread
  $24,664
  2.48%
  $59,637
  0.88%

The
effective yield data is computed by dividing the annualized net interest income
or expense including hedging transactions as applicable into the average daily
balance shown.

The
following table reflects the average balances for the Companys equity
securities (dollars in thousands):

AVERAGE
BALANCE AND RATE TABLE(Dollars in thousands)

For the Quarter EndedMarch 31, 2001
  For the Quarter EndedMarch
  31, 2000AverageBalance
  Effective
  Dividend Yield
  AverageBalance
  EffectiveDividend YieldEquity securities
  $13,082
  5.75%
  $19,370
  7.64%Liquidity and Capital Resources

The
Companys primary sources of funds as of March 31, 2001 and December 31, 2000,
consisted of reverse repurchase agreements totaling $555,747,000 and
$545,434,000, respectively.  The Company
expects to continue to borrow funds in the form of reverse repurchase agreements.  At March 31, 2001, the Company had borrowing
arrangements with over twenty different investment banking firms.  Increases in short-term interest rates could
negatively impact the valuation of the Companys mortgage assets which could
limit the Companys borrowing ability or cause its lenders to initiate margin
calls.

The
Company will also rely on the cash flow from operations, primarily monthly
principal and interest payments to be received on the mortgage assets, for
liquidity.

The
Company believes that equity capital, combined with the cash flow from
operations and the utilization of borrowings, will be sufficient to enable the
Company to meet anticipated liquidity requirements.  If the Company's cash resources are at any time insufficient to
satisfy the Company's liquidity requirements, the Company may be required to
liquidate mortgage assets or sell debt or additional equity securities.  If required, the sale of mortgage assets at
prices lower than the carrying value of such assets would result in losses.

The
Company may in the future increase its capital resources by making additional
offerings of equity and debt securities, including classes of preferred stock,
common stock, commercial paper, medium-term notes, CMOs and senior or
subordinated notes.  All debt
securities, other borrowings, and classes of preferred stock will be senior to
the Common Stock in a liquidation of the Company.  The effect of additional equity offerings may be the dilution of
stockholders' equity of the Company or the reduction of the price of shares of
the Common Stock, or both.  The Company
is unable to estimate the amount, timing or nature of additional offerings as
they will depend upon market conditions and other factors.

Inflation

Virtually
all of the Companys assets and liabilities are financial in nature.  As a result, interest rates and other
factors drive the Companys performance far more than does inflation.  Changes in interest rates do not necessarily
correlate with inflation rates or changes in inflation rates.  The Companys financial statements are
prepared in accordance with generally accepted accounting principles and the
Companys dividends are determined by the Companys net income as calculated
for tax purposes; in each case, the Companys activities and balance sheet are
measured with reference to historical cost and or fair market value without
considering inflation.

ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

MARKET RISK

The Companys two
primary components of market risk are interest rate risk and equity price risk
as discussed below.

Interest Rate Risk

Effect on Net Interest Income.The
Company invests in fixed-rate mortgage assets that are expected to be funded
with short-term borrowings.  During
periods of rising interest rates, the borrowing costs associated with funding
such fixed-rate assets are subject to increase while the income earned on such
assets may remain substantially unchanged. 
This would result in a narrowing of the net interest spread between the
related assets and borrowings and may even result in losses. The Company may
enter into derivative transactions seeking to mitigate the negative impact of a
rising interest rate environment. Hedging techniques will be based, in part, on
assumed levels of prepayments of the Company's mortgage assets.  If prepayments are slower or faster than
assumed, the life of the mortgage assets will be longer or shorter which would
reduce the effectiveness of the Company's hedging techniques and may result in
losses on such transactions.  Hedging
techniques involving the use of derivative securities are highly complex and
may produce volatile returns. The hedging activity of the Company will also be
limited by the asset and sources of income requirements applicable to the Company
as a REIT.

Extension Risk.  Fixed-rate assets are generally acquired with a projected
weighted average life based on certain assumptions regarding prepayments.  In general, when a fixed-rate mortgage asset
is acquired with borrowings, the Company may, but is not required to, enter
into an interest rate swap agreement or other hedging instrument that
effectively fixes the Companys borrowing costs for a period close to the
anticipated average life of the related asset. 
This strategy is designed to protect the Company from rising interest
rates because the borrowing costs are fixed for the duration of the asset.  However, if prepayment rates decrease in a
rising interest rate environment, the life of the mortgage asset could extend
beyond the term of the swap agreement or other hedging instrument.  This situation could negatively impact the
Company as borrowing costs would no longer be fixed after the end of the
hedging instrument while the income earned on the asset would remain
fixed.  This situation may also cause
the market value of the Companys mortgage assets to decline with little or no
offsetting gain from the related hedging transactions.  In certain situations, the Company may be
forced to sell assets and incur losses to maintain adequate liquidity.

Prepayment Risk.  Fixed-rate assets in combination with hedging instruments are
also subject to prepayment risk.  In
falling interest rate scenarios, the fixed-rate mortgage assets may prepay
faster such that the average life becomes shorter than its related hedging
instrument.  If this were to happen, the
Company would potentially need to reinvest at rates lower than that of the
related hedging instrument.  This
situation may result in the narrowing of interest rate spreads or may cause
losses.

Forward Contract Risk.  The Company may also enter in forward
contracts to sell U.S. Treasury notes in addition to or instead of interest
rate swap agreements.  These forward
contracts are generally expected to mitigate the impact of rising interest
rates on the fair value of the Company's fixed income securities.  However, if the interest rate spread between
mortgage securities and U.S. Treasury notes were to widen, the fair value of
the Company's portfolio would generally be expected to decline.  In addition, the use of forward contracts to
sell U.S. Treasury notes generally does not directly impact borrowing costs in
the same manner as interest rate swap agreements.  Therefore, the use of such forward contracts could result in net
income volatility during periods of interest rate volatility.

The Company also invests
in adjustable-rate mortgage assets that are typically subject to periodic and
lifetime interest rate caps that limit the amount an adjustable-rate mortgage
asset's interest rate can change during any given period, as well as the
minimum rate payable.  The Company's
borrowings will not be subject to similar restrictions.  Hence, in a period of increasing interest
rates, interest rates on its borrowings could increase without limitation by
caps, while the interest rates on its mortgage assets are generally limited by
caps.  This problem will be magnified to
the extent the Company acquires mortgage assets that are not fully indexed.  Further, some adjustable-rate mortgage
assets may be subject to periodic payment caps that result in some portion of
the interest being deferred and added to the principal outstanding.  This could result in receipt by the Company
of less cash income on its adjustable-rate mortgage assets than is required to
pay interest on the related borrowings. 
These factors could lower the Company's net interest income or cause a
net loss during periods of rising interest rates, which would negatively impact
the Company's financial condition, cash flows and results of operations.

The Company intends to
fund a substantial portion of its acquisitions of adjustable-rate mortgage
assets with borrowings that have interest rates based on indices and repricing
terms similar to, but of somewhat shorter maturities than, the interest rate
indices and repricing terms of the mortgage assets.  Thus, the Company anticipates that in most cases the interest
rate indices and repricing terms of its mortgage assets and its funding sources
will not be identical, thereby creating an interest rate mismatch between
assets and liabilities.  While the
historical spread between relevant short-term interest rate indices has been
relatively stable, there have been periods, especially during the 1979-1982 and
1994 interest rate environments, when the spread between such indices was
volatile.  During periods of changing
interest rates, such interest rate mismatches could negatively impact the
Company's financial condition, cash flows and results of operations.

Prepayment rates
generally increase when prevailing interest rates fall below the interest rates
on existing mortgage assets.  In
addition, prepayment rates generally increase when the difference between
long-term and short-term interest rates declines.  Prepayments of mortgage assets could adversely affect the Company's
results of operations in several ways. 
The Company anticipates that a substantial portion of its
adjustable-rate mortgage assets may bear initial ''teaser'' interest rates that
are lower than their ''fully indexed'' rates (the applicable index plus a
margin).  In the event that such an
adjustable-rate mortgage asset is prepaid prior to or soon after the time of
adjustment to a fully indexed rate, the Company will have held the mortgage
asset while it was less profitable and lost the opportunity to receive interest
at the fully indexed rate over the expected life of the adjustable-rate
mortgage asset.  In addition, the
prepayment of any mortgage asset that had been purchased at a premium by the
Company would result in the immediate write-off of any remaining capitalized
premium amount and consequent reduction of the Company's net interest income by
such amount.  Finally, in the event that
the Company is unable to acquire new mortgage assets to replace the prepaid
mortgage assets, its financial condition, cash flow and results of operations
could be materially adversely affected.

Effect on Fair Value.Another component of interest rate risk is
the effect changes in interest rates will have on the market value of the
Company's assets.This is the risk
that the market value of the Companys assets will increase or decrease at
different rates than that of the Companys liabilities including its hedging
instruments.

The Company primarily
assesses its interest rate risk by estimating the duration of its assets and
the duration of its liabilities including all hedging instruments.  Duration essentially measures the market
price volatility of financial instruments as interest rates change.  The Company generally calculates duration
using various financial models and empirical data.

The
following sensitivity analysis table shows the estimated impact on the fair
value of the Companys interest rate sensitive investments net of its hedging
instruments and reverse repurchase agreement liabilities assuming rates
instantaneously fall one hundred basis points and rise one hundred basis
points.  (Dollars are in thousands
except per share amounts.)

Fair Value for
  Scenario ShownInterest 
  Rates Fall 
  100 Basis 
  Points

  Unchanged

  Interest 
  Rates Rise 
  100 Basis 
  PointsInterest
  Rate Sensitive Instruments

  $34,112

  $31,074

  $19,236Change
  in Fair Value

  $3,038

  -

  ($11,838)Change
  as a Percent of Fair Value

  0.51%

  -

  (2.01%)Change
  as a Percent of Stockholders Equity

  6.39%

  -

  (24.89%)Change
  on a Per Share Basis

  $0.53

  -

  ($2.06)It is important to note
that the impact of changing interest rates on fair value can change
significantly when interest rates change beyond one hundred basis points from
current levels.  Therefore, the
volatility in fair value for the Company could increase significantly when
interest rates change beyond one hundred basis points.  In addition, there are other factors that
impact the fair value of the Companys interest rate sensitive investments and
hedging instruments such as the shape of the yield curve, market expectations
as to future interest rate changes and other market conditions.  Accordingly, there may be differences
between the fair value changes shown above and actual changes in fair value as
interest rates change and those differences may be material.

The Company has
established an interest rate risk management policy that is intended to
mitigate the negative impact of changing interest rates.  The Company generally intends to mitigate
interest rate risk by targeting the difference between the market weighted
average duration on its mortgage related assets funded with secured borrowings
to the market weighted average duration of such borrowings to one year or less,
taking into account all hedging transactions. 
The Company generally does not intend to have any specific duration
target for the portion its mortgage related assets that are not funded by
secured borrowings.

There can be no
assurance that the Company will be able to limit such duration differences and
there may be periods of time when the duration difference will be greater than
one year.

Beginning with the
quarter ended March 31, 2001, the Company reclassified it fixed income
securities that are generally subject to a hedging strategy from the
available-for-sale category to the held-for-trading category of SFAS #115.  This change is expected to increase the
volatility of net income as both changes in the fair market value and actual
realized gains and losses of the fixed income securities and the related
hedging instruments will now flow through net income each reporting period.

Equity Price Risk

Another component of
market risk for the Company is equity price risk.  This is the risk that the market value of the Companys equity
investments will decrease.  The following
table shows the impact on the Companys fair value as the price of its equity
securities change assuming price decreases of 10% and increases of 10%.  Actual price decreases or increases may be
greater or smaller.  (Dollars are in
thousands except per share amounts.)

Fair
  Value for Scenario ShownPrices
  Decrease 10%

  Unchanged

  Prices
  Increase 10%Equity Investments

  $10,195

  $11,328

  $12,461Change in Fair Value

  (1,133)

  -

  1,133Change as a Percent of
  Fair Value

  (10%)

  -

  10%Change as a Percent of
  Stockholders Equity

  (2.4%)

  -

  2.4%Change on a Per Share
  Basis

  (0.20)

  -

  0.20Although there is no
direct link between changes in fair value and changes in earnings in many
cases, a decline in fair value for the Company may translate into decreased earnings
over the remaining life of the investment portfolio.

If the fair market value
of the Companys portfolio were to decline significantly, the Companys overall
liquidity may be impaired which could result in the Company being required to
sell assets at losses.

The Companys analysis of risks is based on management's
experience, estimates, models and assumptions. 
These analyses rely on models of financial information which utilize
estimates of fair value and interest rate sensitivity.  Actual economic conditions or implementation
of investment decisions by the Manager may produce results that differ
significantly from the estimates and assumptions used in the Companys models
and the projected results shown in the above tables and in this report.  These analyses contain certain
"forward-looking statements" and are subject to the Safe Harbor
contained in the Private Securities Litigation Reform Act of 1995.

PART 2.           OTHER INFORMATION

Item 1.  Legal
Proceedings

None.

Item 2.  Changes
in Securities

None.

Item 3.  Defaults
Upon Senior Securities

Not Applicable.

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

None.

Item 5.  Other
Information

None.

Item 6.  Exhibits
and Reports on Form 8-K:

None

The
following exhibits are part of this quarterly report on Form 10-Q and are
numbered in accordance with Item 601 of Regulation S-K.

None.SIGNATURESPursuant to the requirements of Section
13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

Apex
  Mortgage Capital, Inc.(Registrant)Dated:
  May 11, 2001
  /s/
  Philip A. BarachPhilip
  A. BarachPresident
  and Chief Executive Officer 
  (Principal Executive Officer)Dated:
  May 11, 2001
  /s/
  Daniel K. OsborneDaniel
  K. OsborneExecutive
  Vice President 
  Chief Operating Officer and 
  Chief Financial Officer 
  (Principal Accounting Officer)