<PAGE>

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

                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 1934

  / /    FOR THE QUARTERLY PERIOD ENDED:    MARCH 31, 1999

                                                        OR

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

         FOR 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          (I.R.S. Employer
or organization)                                    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.
         Yes    X          No 
              -----            -----

                      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 14, 1999

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

<PAGE>

                           APEX MORTGAGE CAPITAL, INC.
                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
   PART I.     FINANCIAL INFORMATION                                                    PAGE
                                                                                        ----
<S>                                                                                     <C>
      ITEM 1.  FINANCIAL STATEMENTS

                  BALANCE SHEETS AT MARCH 31, 1999 (UNAUDITED) AND DECEMBER 31, 1998     3

                  STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
                  AND MARCH 31, 1998 (UNAUDITED)                                         4

                  STATEMENT OF STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED
                  MARCH 31, 1999 (UNAUDITED)                                             5

                  STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
                  MARCH 31, 1999 AND MARCH 31, 1998 (UNAUDITED)                          6

                  NOTES TO FINANCIAL STATEMENTS (UNAUDITED)                              7

      ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS                         14

      ITEM 2A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            21


   PART II.       OTHER INFORMATION

      ITEM 1.     LEGAL PROCEEDINGS                                                     25

      ITEM 2.     CHANGES IN SECURITIES                                                 25

      ITEM 3.     DEFAULTS UPON SENIOR SECURITIES                                       25

      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                   25

      ITEM 5.     OTHER INFORMATION                                                     25

      ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                      25


      SIGNATURES                                                                        26
</TABLE>

<PAGE>

PART 1.     FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS

                           APEX MORTGAGE CAPITAL, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                        MARCH 31, 1999          DECEMBER 31, 1998
                                                                                   ----------------------      -------------------
ASSETS                                                                                     (Unaudited)
<S>                                                                                <C>                         <C>
         Cash and cash equivalents                                                         $   3,426,000            $  12,679,000
         Fixed income securities available-for-sale, at fair value (Note 3)                  821,117,000              829,712,000
         Equity securities available-for-sale, at fair value (Note 4)                         24,112,000               16,422,000
         Accrued interest receivable                                                           5,890,000                5,151,000
         Principal payments receivable                                                         1,463,000                  937,000
         Receivable for unsettled securities                                                       8,000                        -
         Other assets                                                                            459,000                  577,000
                                                                                   ----------------------      -------------------
                                                                                           $ 856,475,000            $ 865,478,000
                                                                                   ----------------------      -------------------
                                                                                   ----------------------      -------------------


LIABILITIES AND STOCKHOLDERS' EQUITY

     Liabilities

         Reverse repurchase agreements (Note 5)                                            $ 765,018,000            $ 767,908,000
         Payable for unsettled securities                                                        187,000                  838,000
         Accrued interest payable                                                              2,160,000                6,173,000
         Dividend payable                                                                      2,284,000                1,777,000
         Accrued expenses and other liabilities                                                  871,000                  752,000
                                                                                   ----------------------      -------------------
                                                                                             770,520,000              777,448,000
                                                                                   ----------------------      -------------------
                                                                                   ----------------------      -------------------

     Commitments and contingencies (Note 10)

     Stockholders' Equity

         Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized;
              no shares outstanding
         Common Stock, par value $0.01 per share; 100,000,000 shares
              authorized; 6,700,100 shares outstanding (Notes 8 and 9)                            67,000                   67,000
         Additional paid-in-capital                                                           93,052,000               92,978,000
         Accumulated other comprehensive income                                                3,828,000                6,689,000
         Accumulated dividend distributions in excess of net income                             (423,000)              (1,135,000)
         Treasury stock, at cost (947,100 shares) (Note 7)                                   (10,569,000)             (10,569,000)

                                                                                   ----------------------      -------------------
                                                                                              85,955,000               88,030,000
                                                                                   ----------------------      -------------------
                                                                                           $ 856,475,000            $ 865,478,000
                                                                                   ----------------------      -------------------
                                                                                   ----------------------      -------------------
</TABLE>

     See accompanying notes to financial statements

                                       3
<PAGE>

                           APEX MORTGAGE CAPITAL, INC.

                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS                 THREE MONTHS
                                                                     ENDED                        ENDED
                                                                 MARCH 31, 1999               MARCH 31, 1998
                                                             -----------------------      -----------------------
<S>                                                          <C>                          <C>
INTEREST INCOME:
     Fixed Income securities                                           $ 13,848,000                  $ 4,726,000
     Cash and cash equivalents                                               89,000                      181,000
                                                             -----------------------      -----------------------
                                                                         13,937,000                    4,907,000

INTEREST EXPENSE                                                         11,261,000                    4,011,000
                                                             -----------------------      -----------------------
NET INTEREST INCOME                                                       2,676,000                      896,000
                                                             -----------------------      -----------------------

NET GAIN ON SALE OF SECURITIES                                              614,000                            -

DIVIDEND INCOME                                                             711,000                            -

GENERAL AND ADMINISTRATIVE EXPENSES:
     Management fee (Note 8)                                                157,000                      173,000
     Incentive Fee (Note 8)                                                 591,000                            -
     Audit and tax fees                                                      11,000                       11,000
     Insurance expense                                                       67,000                       67,000
     Directors' fees                                                         15,000                       20,000
     Stock Option expense                                                    74,000                       28,000
     Other                                                                  124,000                       33,000
                                                             -----------------------      -----------------------
                                                                          1,039,000                      332,000
                                                             -----------------------      -----------------------

NET INCOME                                                              $ 2,962,000                  $   564,000
                                                             -----------------------      -----------------------
                                                             -----------------------      -----------------------

Net Income Per Share:
     Basic                                                                   $ 0.51                       $ 0.09
                                                             -----------------------      -----------------------
                                                             -----------------------      -----------------------
     Diluted                                                                 $ 0.51                       $ 0.09
                                                             -----------------------      -----------------------
                                                             -----------------------      -----------------------

Weighted Average Number of Shares Outstanding:
     Basic                                                                5,753,000                    6,603,000
                                                             -----------------------      -----------------------
                                                             -----------------------      -----------------------
     Diluted                                                              5,773,000                    6,603,000
                                                             -----------------------      -----------------------
                                                             -----------------------      -----------------------

Dividends Declared Per Share                                                 $ 0.38                       $ 0.25
                                                             -----------------------      -----------------------
                                                             -----------------------      -----------------------
</TABLE>

See accompanying notes to financial statements

                                       4
<PAGE>

                           APEX MORTGAGE CAPITAL, INC.

                        STATEMENT OF STOCKHOLDERS' EQUITY
                        THREE MONTHS ENDED MARCH 31, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             Accumulated
                                                              Acccumulated     Dividend
                                  Common Stock    Additional     Other      Distribution                   Treasury
                              ------------------   Paid-in   Comprehensive  In Excess of  Comprehensive     Stock,
                               Shares    Amount    Capital       Income       Net Income      Income         At Cost      Total
                              --------- -------- ----------- -------------- ------------- -------------- ------------- ------------
<S>                           <C>       <C>      <C>         <C>            <C>           <C>            <C>           <C>
Balance, December 31, 1998    6,700,100  $67,000 $92,978,000    $6,689,000   ($1,135,000)                ($10,569,000) $88,030,000

Repurchases of common stock           -        -           -             -             -              -             -            -

Issuance of stock options
   to non-employees (Note 9)          -        -      74,000             -             -              -             -       74,000

Net income                            -        -           -             -     2,962,000      2,962,000             -    2,962,000

Other comprehensive income:
   Net unrealized gain (loss)
   on investments available-
   for-sale                           -        -           -    (2,861,000)            -     (2,861,000)            -   (2,861,000)


                                                                                          --------------
Comprehensive income                  -        -           -             -                    $ 101,000
                                                                                          --------------
                                                                                          --------------

Dividends declared                    -        -           -             -    (2,250,000)                           -   (2,250,000)

                              --------- -------- ----------- -------------- -------------                ------------- ------------
Balance, March 31, 1999       6,700,100  $67,000 $93,052,000    $3,828,000     ($423,000)                ($10,569,000) $85,955,000
                              --------- -------- ----------- -------------- -------------                ------------- ------------
                              --------- -------- ----------- -------------- -------------                ------------- ------------
</TABLE>




                                       5
<PAGE>

                          APEX MORTGAGE CAPITAL, INC.

                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                          FOR THE QUARTER                   FOR THE QUARTER
                                                                               ENDED                             ENDED
                                                                          MARCH 31, 1999                    MARCH 31, 1998
<S>                                                                    <C>                               <C>
Operating Activities:
     Net Income                                                                  $ 2,962,000                         $ 564,000
     Adjustments to reconcile net income to net cash
         provided by operating activities:
            Amortization                                                             164,000                           971,000
            Net gain on sale of securities                                          (614,000)                                -
            Change in assets and liabilities:
                Accrued interest receivable                                         (739,000)                       (2,813,000)
                Other Assets                                                         118,000                            48,000
                Accrued interest payable                                          (4,013,000)                        1,268,000
                Accrued expenses and other liabilities                               119,000                          (937,000)
                                                                       ----------------------            ----------------------
                Net cash used in operating activities                             (2,003,000)                         (899,000)
                                                                       ----------------------            ----------------------

INVESTING ACTIVITIES:
     Purchase of equity securities                                                (7,005,000)                                -
     Purchase of rate caps                                                                 -                           (80,000)
     Purchase of fixed income securities                                         (92,947,000)                     (559,186,000)
     Proceeds from sales of equity securities                                      1,441,000                                 -
     Proceeds from sales of fixed income securities                               40,406,000                                 -
     Principal payments on fixed income securities                                55,465,000                        55,576,000
                                                                       ----------------------            ----------------------
                Net cash used in investing activities                             (2,640,000)                     (503,690,000)
                                                                       ----------------------            ----------------------

FINANCING ACTIVITIES:
     Net proceeds from reverse repurchase agreements                              (2,890,000)                      509,464,000
     Dividend distributions                                                       (1,720,000)                         (268,000)
     Purchase of treasury stock                                                            -                        (2,535,000)
                                                                       ----------------------            ----------------------
                Net cash used in provided by financing activities                 (4,610,000)                      506,661,000
                                                                       ----------------------            ----------------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                              (9,253,000)                        2,072,000

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                  12,679,000                         3,085,000
                                                                       ----------------------            ----------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       $ 3,426,000                       $ 5,157,000
                                                                       ----------------------            ----------------------
                                                                       ----------------------            ----------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid for interest                                                     $ 15,274,000                       $ 2,735,000
                                                                       ----------------------            ----------------------
                                                                       ----------------------            ----------------------

NONCASH INVESTING AND FINANCING ACTIVITIES:
     Net unrealized gain (loss) on mortgage-backed
         securities available-for-sale                                          $ (2,861,000)                      $ 1,547,000
                                                                       ----------------------            ----------------------
                                                                       ----------------------            ----------------------
     Securities sold, not yet settled                                                $ 8,000                       $         0
                                                                       ----------------------            ----------------------
                                                                       ----------------------            ----------------------
     Principal payments, not yet received                                          $ 526,000                       $ 5,609,000
                                                                       ----------------------            ----------------------
                                                                       ----------------------            ----------------------
     Securities purchased, not yet settled                                         $ 651,000                       $ 1,544,000
                                                                       ----------------------            ----------------------
                                                                       ----------------------            ----------------------
     Dividends declared, not yet paid                                           $ (2,250,000)                      $ 1,626,000
                                                                       ----------------------            ----------------------
                                                                       ----------------------            ----------------------
</TABLE>

See accompanying notes to financial statements

                                       6
<PAGE>

                           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 related 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 fixed income securities 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 EQUIVALENTS

         Cash 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 SECURITIES

         The 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
         a specific identification 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.

         Interest Income on the Company's other fixed income securities is
         accrued using the effective interest method applied prospectively based
         on current market assumptions.

         The Company's policy is to generally classify its fixed income
         securities as available-for-sale. The fixed income securities are
         reported at fair value with unrealized gains and losses excluded from
         earnings and reported in other comprehensive income.

     EQUITY SECURITIES

         The 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 a specific
         identification 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
         other comprehensive income.

     INTEREST RATE HEDGING TRANSACTIONS

         The Company enters 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. Amounts payable or receivable
         from such agreements are accounted for on an accrual basis and
         recognized as a net adjustment to interest expense. Premiums paid for
         cap agreements accounted for as hedges are recorded as other assets and
         amortized over the lives of such agreements as an adjustment to
         interest expense.

                                       7
<PAGE>

     STOCK BASED COMPENSATION

         The 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 9. Options granted
         to directors of the Company are accounted for using the intrinsic
         method, and generally no compensation expense is recognized in the
         statement 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 TAXES

         The 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 SHARE

         Basic 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.

     INCOME RECOGNITION

         Income and expenses are recorded on the accrual basis of accounting.

     CREDIT RISK

         The 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.

     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 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.

     COMPREHENSIVE INCOME

         The Company has adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME.
         This statement establishes standards for reporting and display of
         comprehensive income and its components in a full set of
         general-purpose financial statements. Comprehensive income is defined
         as "the change in equity of a business enterprise during a period from
         transactions and other events and circumstances from non-owner sources.
         It includes all changes in equity during a period except those
         resulting from investments by owners and distributions to owners."

     RECENTLY ISSUED ACCOUNTING STANDARDS

         In the first quarter of 1999, the Company wrote off $64,000 of
         unamortized organizational costs in accordance with the adoption of
         S.O.P. 98-5, "Reporting on the Cost of Start-Up Activities."

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
         133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. The
         Statement establishes accounting and reporting standards requiring that
         every derivative instrument (including certain derivative instruments
         embedded in other contracts) be recorded in the balance sheet as either
         an asset or liability measured at its fair value. The Statement
         requires that changes in the derivative's fair value be recognized
         currently in earnings unless specific hedge accounting criteria are
         met. Special accounting for qualifying hedges allows a derivative's
         gains and losses to offset related results on the hedged item in the
         income statement, and requires that a company must formally document,
         designate, and assess the effectiveness of transactions that receive
         hedge accounting. SFAS No. 133 is effective for fiscal years 

                                       8
<PAGE>

         beginning after June 15, 1999. A company may also implement the 
         Statement as of the beginning of any fiscal quarter after issuance 
         (that is, fiscal quarters beginning June 16, 1998 and thereafter). 
         Statement 133 cannot be applied retroactively. Statement 133 must be 
         applied to (a) derivative instruments and (b) certain derivative 
         instruments embedded in hybrid contracts that were issued, acquired, 
         or substantively modified after December 31, 1998 (and, at the 
         Company's election, before January 1, 1998). The Company will adopt 
         the reporting requirements of SFAS No. 133 by the first quarter of 
         2000. An earlier adoption may be made if circumstances warrant. The 
         Company expects the impact of the adoption of the reporting 
         requirements of SFAS No. 133 to include the recording of the 
         approximate fair value of the Company's interest rate swaps as 
         comprehensive income.

     RECLASSIFICATIONS

         Certain prior year amounts have been reclassified to conform to the 
         current year presentation.

NOTE 3 - FIXED INCOME SECURITIES AND EQUITY SECURITIES

         At March 31, 1999, fixed income securities consisted of the following:

<TABLE>
<CAPTION>
                                                   Adjustable Rate        Fixed Rate        Other Fixed
         (in thousands)                         Mortgage Securities  Mortgage Securities  Income Securities       Total
                                               --------------------- -------------------- ------------------ ------------------
<S>                                             <C>                   <C>                  <C>                <C>
         Principal Amount                               $42,131             $772,907            $5,400            $820,438
         Unamortized Premium (Discount)                     515                1,846            (1,535)                826
                                               --------------------- -------------------- ------------------ ------------------
         Amortized Cost                                  42,646              774,753             3,865             821,264
         Unrealized Gains                                   181                1,723                 0               1,904
         Unrealized Losses                                  (53)              (1,547)             (451)             (2,051)
                                               --------------------- -------------------- ------------------ ------------------
         Fair Value                                     $42,774             $774,929             3,414            $821,117
                                               --------------------- -------------------- ------------------ ------------------
                                               --------------------- -------------------- ------------------ ------------------
</TABLE>

         At December 31, 1998, fixed income securities consisted of the
following:

<TABLE>
<CAPTION>
                                                    Adjustable Rate        Fixed Rate         Other Fixed
         (in thousands)                          Mortgage Securities  Mortgage Securities  Income Securities       Total
                                                --------------------- -------------------- ------------------ ----------------
<S>                                             <C>                   <C>                  <C>                <C>
         Principal Amount                              $61,590              $758,110            $5,400            $825,100
         Unamortized Premium (Discount)                    772                   800            (1,380)                192
                                                --------------------- -------------------- ------------------ ----------------
         Amortized Cost                                 62,362               758,910             4,020             825,292
         Unrealized Gains                                   86                 4,762                 0               4,848
         Unrealized Losses                                (110)                  (15)             (303)               (428)
                                                --------------------- -------------------- ------------------ ----------------
         Fair Value                                    $62,338              $763,657             3,717            $829,712
                                                --------------------- -------------------- ------------------ ----------------
                                                --------------------- -------------------- ------------------ ----------------
</TABLE>

         The contractual final maturity of the mortgage loans supporting the
         mortgage securities is generally between 15 and 30 years at
         origination. Because of prepayments on the underlying mortgage loans,
         the actual weighted-average maturity is expected to be less.

         The other fixed income securities generally have an original maturity
         of five years subject to certain acceleration provisions. The expected
         average remaining maturity at March 31, 1999 and December 31, 1998 were
         approximately 3.8 and 4.0 years, respectively.

         The adjustable rate mortgage securities are typically subject to
         periodic and lifetime caps that limit the amount an adjustable rate
         mortgage security's interest rate can change during any given period
         and over the life of the asset. At March 31, 1999 and December 31,
         1998, the average periodic cap on the adjustable rate mortgage was 2.0%
         per annum and the average lifetime cap was equal to 11.3%.

                                       9
<PAGE>

         During the quarter ended March 31, 1999 the Company realized $194,000
         in gains on the sale of $40,406,000 of mortgage securities which were
         classified as available-for-sale. During the quarter ended March 31,
         1998, there were no sales of mortgage securities.

         At March 31, 1999 and December 31, 1998, equity securities consisted 
         of the following:

<TABLE>
<CAPTION>
         (in thousands)
                                                    March 31, 1999      December 31, 1998
                                                -------------------- ----------------------
<S>                                             <C>                  <C>
          Cost Basis                                        $20,137                $14,154
          Unrealized Gains                                    4,777                  2,268
          Unrealized Losses                                   (802)                    (0)
                                                -------------------- ----------------------
          Fair Value                                        $24,112                $16,422
                                                -------------------- ----------------------
                                                -------------------- ----------------------
</TABLE>

         During the quarter ended March 31, 1999, the Company realized $420,000
         in gains on the sale of $1,441,000 of equity securities that were
         classified as available-for-sale. There were no equity securities sold
         in the first quarter ended March 31, 1998.

NOTE 4 - INTEREST RATE CAP AGREEMENTS

         Interest rate cap agreements include the carrying value of purchased
         interest rate caps, entered into by the Company in order to mitigate
         the impact of rising interest rates on the cost of its short-term
         borrowings. As discussed in Note 10, the Company has entered into
         certain interest rate swap transactions. The execution of these swaps
         eliminated the need for the cap protection previously purchased.
         Accordingly, the interest rate cap agreements no longer qualify for
         hedge accounting and were written down to zero during the year ended
         December 31, 1998 which approximates their fair value.

         The terms of outstanding interest rate cap agreements are as follows:

<TABLE>
<CAPTION>
                                           At March 31, 1999         At December 31, 1998
                                       --------------------------- --------------------------
<S>                                    <C>                         <C>
         Notional Amount                     $900,000,000                $900,000,000
         Average Contract Rate                   10.4%                       10.4%
         Average Final Maturity             January 24, 2002           January 24, 2002
</TABLE>

         Under these agreements, the Company will receive cash payments to the
         extent of the excess of three month London Interbank Offered Rate
         ("LIBOR") over the agreements' contract rate times the notional amount.

NOTE 5 - REVERSE REPURCHASE AGREEMENTS

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

         At March 31, 1999, the Company had outstanding $765,018,000 of reverse
         repurchase agreements with a weighted average current borrowing rate of
         4.96% and a maturity of 1.7 months. The reverse repurchase agreements
         were collateralized by fixed income securities with an estimated fair
         value of $796,251,000.

         At December 31, 1998, the Company had outstanding $767,908,000 of
         reverse repurchase agreements with a weighted average current borrowing
         rate of 5.34% and a maturity of 2.9 months. The reverse repurchase
         agreements were collateralized by fixed income securities with an
         estimated fair value of $800,260,000.

         For the quarter ended March 31, 1999, the average reverse repurchase
         agreement balance was $786,472,000 with a weighted average interest
         cost of 5.09%. The maximum reverse repurchase agreement balance
         outstanding during the quarter ended March 31, 1999 was $812,019,000.

                                       10
<PAGE>

         For the quarter ended March 31, 1998, the average reverse repurchase
         agreement balance was $287,088,000 with a weighted average interest
         cost of 5.59%. The maximum reverse repurchase agreement balance
         outstanding during the quarter ended March 31, 1998 was $597,282,000.


NOTE 6 - 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):

<TABLE>
<CAPTION>
                                                    At March 31, 1999                    At December 31, 1998

                                                   Amortized                             Amortized
                                                        Cost   Fair Value                     Cost      Fair Value
                                          ------------------- ------------     -------------------- ---------------
<S>                                       <C>                 <C>              <C>                  <C>
        Mortgage related securities                 $817,399     $817,703                 $821,272        $825,995
        Equity securities                             20,137       24,112                   14,154          16,422
        Other fixed income securities                  3,865        3,414                    4,020           3,717
        Interest rate swaps                                -      (5,633)                        -          (9,994)
</TABLE>

         The Company bases its fair value estimates for fixed income securities,
         equity securities and interest rate swaps 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 7 - 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, 1999 and December
         31, 1998, the Company was authorized to repurchase 552,900 shares of
         the Company's common stock pursuant to the repurchase program.

         At March 31, 1999 and December 31, 1998, the Company held 947,100
         shares of treasury stock. During the quarter ended March 31, 1999, the
         Company did not repurchase any treasury shares, however, for the
         quarter ended March 31, 1998, the Company repurchased 197,700 shares
         which are held at cost in the financial statements herein.


NOTE 8 - TRANSACTIONS WITH AFFILIATES

         The Company has entered into a Management Agreement (the "Management
         Agreement") 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 paid the Manager $157,000 and $173,000 in base management
         compensation during the quarter ended March 31, 1999 and March 31,
         1998, 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.

                                       11
<PAGE>

         The Company accrued $591,000 for incentive compensation to the Manager
         for the quarter ended March 31, 1999. The Company did not accrue any
         incentive compensation to the Manager for the quarter ended March 31,
         1998.

         The Company may also grant stock options to directors, officers and key
         employees of the Company, the Manager, its directors, officers and key
         employees.

         The Company's other fixed income securities include securities that are
         issued by special purpose companies that invest primarily in
         mortgage-related assets. An affiliate of 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 any affiliate of the Manager in connection
         with these investments.

NOTE 9 - 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, officers and key employees of the Company, the Manager, its
         directors, officers and key 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 1,000,000 shares of common stock.

         The Company recognized compensation expenses of $74,000 and $28,000
         during the quarter ended March 31, 1999 and March 31, 1998,
         respectively.

         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:

<TABLE>
<CAPTION>
                                                                            Quarter Ended            Quarter Ended
                                                                           March 31, 1999           March 31, 1998
                                                                       ------------------------ ------------------------
<S>                                                                    <C>                      <C>
        Net income - as reported                                             $2,962,000                  $564,000
        Net income - pro forma                                                2,837,000                   533,000

        Basic and diluted earnings per share - as reported                        $0.51                     $0.09
        Basic and diluted earnings per share - pro forma                          $0.49                     $0.08
</TABLE>

         Information regarding stock option activity during the quarter ended 
         March 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                                                                               Weighted Average
                                                                                 Shares         Exercise Price
                                                                            ------------------ ------------------
<S>                                                                         <C>                <C>
        Options Granted Prior to December 31, 1998                               570,000            $13.62
        Exercised                                                                   -                  -
        Expired                                                                     -                  -
                                                                            ------------------ ------------------
        Options Outstanding at March 31, 1999                                    570,000             $13.62
                                                                            ------------------ ------------------
                                                                            ------------------ ------------------
</TABLE>

NOTE 10 - CONTRACTUAL COMMITMENTS

         At March 31, 1999 the Company had entered into interest rate swap
         agreements with the total current notional amount as stated below.
         Under these agreements, the Company receives a floating rate and pays a
         fixed rate.

         (Amounts are in thousands)

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                                              Average
            Current                                       Average                           Termination       Unrealized
     Notional Amount (000)            Type              Fixed Rate       Floating Rate         Date         Gains (Losses)
    ------------------------ ----------------------- ------------------ ----------------- ---------------- -----------------
<S>                          <C>                     <C>                <C>               <C>              <C>
            690,995            Interest Rate Swap         5.850%           1Mo LIBOR          2/16/01              $(5,633)
</TABLE>

         At December 31, 1998 the Company entered into interest rate swap
agreement as follows: (Amounts are in thousands)

<TABLE>
<CAPTION>
                                                                                              Average
            Current                                       Average                           Termination       Unrealized
     Notional Amount (000)            Type              Fixed Rate       Floating Rate         Date         Gains (Losses)
    ------------------------ ----------------------- ------------------ ----------------- ---------------- -----------------
<S>                          <C>                     <C>                <C>               <C>              <C>
            703,590            Interest Rate Swap         5.850%           1Mo LIBOR         2/16//01              $(9,994)
</TABLE>

         The Company paid $1,262,000 to the swap counter-parties during the
         quarter ended March 31, 1999 which is included in interest expense on
         the statement of operations. There were no such payments made during
         the quarter ended March 31, 1998.

         The Company is generally required to deposit collateral with the swap
         agreement counter-parties in an amount at least equal to the amount of
         any unrealized losses. At March 31, 1999 and December 31, 1998, the
         Company had securities with a fair market value of $10,424,000 and
         $17,327,000, respectively, on deposit with its counter-parties. If
         unrealized losses on the interest rate swap agreements were to
         increase, the Company would be required to deposit additional
         collateral.




                                       13
<PAGE>

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, 1998. 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 
securities and other highly rated, single-family real estate adjustable and 
fixed rate mortgage related assets. The Company commenced operations on 
December 9, 1997, upon receipt of the net proceeds from 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 should 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 goal of the Company is to be an efficient investor in mortgage assets. 
The Company generally acquires mortgage assets primarily in the secondary 
mortgage market through the operational experience and market relationships 
of TCW Investment Management Company (the "Manager") and its affiliates.

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 consists of selected 
members of TCW's mortgage-backed securities group, all of whom have over 
eleven 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.

                                       14
<PAGE>

                                    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 adjustable and fixed 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 caps, swaps 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.

     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.





                                       15
<PAGE>

FINANCIAL CONDITION

FIXED INCOME SECURITIES

At March 31, 1999, the Company held $821,117,000 of Fixed Income Securities as
compared to $827,712,000 at December 31, 1998. The following table is a schedule
of Fixed Income Securities held listed by security type (dollars in thousands):

<TABLE>
<CAPTION>
                                                March 31, 1999                    December 31, 1998
                                      ----------------------------------- ----------------------------------
                                               Carrying       Percent of         Carrying        Percent of
   Fixed Income Securities                        Value        Portfolio            Value         Portfolio
   ---------------------------------- ------------------ ---------------- ---------------- -----------------
<S>                                   <C>                <C>              <C>              <C>

   Mortgage Securities:
      Adjustable Rate (1)                       $42,646             5.2%          $62,362              7.6%
      Fixed Rate                                774,753            94.3%          758,910             91.0%
   Other Fixed Income Securities                  3,865             0.5%            4,020              1.4%
                                              ----------         --------       ----------          --------
        Totals                                 $821,264           100.0%         $825,292            100.0%
                                              ----------         --------       ----------          --------
                                              ----------         --------       ----------          --------
</TABLE>

          (1) At March 31, 1999 and December 31, 1998, the interest rate indices
              for 95% and 5% 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 shows various weighted average characteristics of the
Fixed Income Securities held by the Company at March 31, 1999 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                           Percent of                                            Weighted
                                                            Total Par     Amortized     Market      Current      Average
Security Type                                Par Amount      Amount      Cost Basis      Price       Coupon      Life (1)
------------------------------------------ --------------- ------------ -------------- ----------- ----------- -------------
<S>                                        <C>             <C>          <C>            <C>         <C>         <C>
15 Year Agency/AAA Pass-throughs                 $221,295        27.0%        100.41%   100.76%       6.50%        4.1
20 Year Agency Pass-throughs                      247,997        30.2%        100.55%   100.20%       6.50%        6.3
30 Year Agency Pass-throughs                       19,680         2.4%        102.15%   101.80%       7.20%        3.2
AAA CMOs                                          283,935        34.6%         99.70%    99.83%       6.84%        2.7
                                                ----------      -------      --------- ---------     -------      -----
Total Fixed Rate Holdings                        $772,907        94.2%        100.24%   100.27%       6.63%        4.3

Other Fixed Income Securities                       5,400         0.7%         74.96%    70.18%      21.83%        3.8
Adjustable Rate Holdings                           42,132         5.1%        101.22%   101.53%       6.51%        1.0
                                                ----------      -------      --------- ---------     -------      -----

Total Portfolio                                  $820,439       100.0%        100.18%   100.19%       6.70%        4.1
                                                ----------      -------      --------- ---------     -------      -----
                                                ----------      -------      --------- ---------     -------      -----
</TABLE>


                                       16
<PAGE>

     The following table shows various weighted average characteristics of the
mortgage securities held by the Company at December 31, 1998 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                           Percent of                                            Weighted
                                                            Total Par     Amortized    Market      Current       Average
Security Type                                Par Amount      Amount      Cost Basis      Price       Coupon      Life (1)
------------------------------------------ --------------- ------------ -------------- ----------- ----------- -------------
<S>                                        <C>             <C>          <C>            <C>         <C>         <C>

15 Year Agency/AAA Pass-throughs                 $253,581        33.4%        100.42%   101.23%      6.50%         3.7
20 Year Agency Pass-throughs                      209,566        27.6%        100.45%   101.06%      6.50%         6.1
30 Year Agency Pass-throughs                        8,076         1.1%        102.19%   101.99%      7.50%         3.2
AAA CMOs                                          286,887        37.8%         99.52%   100.01%      6.82%         2.7
                                                ----------      -------      --------- ---------     -------      -----
Total Fixed Rate Holdings                        $758,110        91.9%        100.11%   100.73%      6.63%         3.9

Other Fixed Income Securities                       5,400         0.7%         74.43%    72.24%      21.83%        4.0
Adjustable Rate Holdings                           61,590         7.5%        101.25%   101.21%      6.79%         1.0
                                                ----------      -------      --------- ---------     -------      -----

Total Portfolio                                  $825,100       100.0%        100.02%   100.58%      6.74%         3.7
                                                ----------      -------      --------- ---------     -------      -----
                                                ----------      -------      --------- ---------     -------      -----
</TABLE>

          (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, 1999, the Company held $24,112,000 of equity securities 
compared to $16,422,000 at December 31, 1998. Equity securities consist 
primarily of investment in equities issued by other real estate investment 
trusts.

     The Company's investments in other real estate investment trusts consist 
of publicly traded preferred and common stock securities issued by companies 
involved in the mortgage finance industry. The Company generally expects to 
receive dividend income on the majority of these investments.

INTEREST RATE CAP AGREEMENTS

     The Company utilizes interest rate caps, swaps and similar financial 
instruments to mitigate the risk of the cost of its variable-rate liabilities 
exceeding the earnings on its mortgage assets during a period of rising 
interest rates. The Company is currently utilizing both interest rate cap and 
interest rate swap agreements.

     Interest rate cap agreements consisted of LIBOR based agreements as 
follows:

<TABLE>
<CAPTION>
                                  At March 31, 1999         At December 31, 1998
                              --------------------------- --------------------------
<S>                           <C>                         <C>
Notional Amount                      $900,000,000               $900,000,000
Average Contract Rate                   10.4%                       10.4%
Average Final Maturity             January 24, 2002           January 24, 2002
</TABLE>

                                       17
<PAGE>

     Under these agreements, the Company will receive cash payments to the 
extent of the excess of three-month LIBOR over the agreements' contract rate 
times the notional amount. The interest rate cap agreements no longer qualify 
for hedge accounting now that the Company has entered into additional hedging 
transactions as discussed below. Accordingly, the Company now records the cap 
agreements at fair market value, which is zero in the current market 
environment.

     At March 31, 1999, the Company had entered into interest rate swap 
agreements with the total current notional amount as stated below. Under 
these agreements, the Company receives a floating rate and pays a fixed rate.

<TABLE>
<CAPTION>
                                                                                              Average
            Current                                       Average                           Termination       Unrealized
     Notional Amount (000)            Type              Fixed Rate       Floating Rate         Date         Gains (Losses)
    ------------------------ ----------------------- ------------------ ----------------- ---------------- -----------------
<S>                          <C>                     <C>                <C>               <C>              <C>
            690,995            Interest Rate Swap         5.850%           1Mo LIBOR          2/16/01              $(5,633)
</TABLE>

     The weighted average life of the agreements at March 31, 1999 was 1.7 
years.

     At December 31, 1998, the Company had entered into interest rate swap 
agreements with the total current notional amount as stated below.

<TABLE>
<CAPTION>
                                                                                              Average
            Current                                       Average                           Termination       Unrealized
     Notional Amount (000)            Type              Fixed Rate       Floating Rate         Date         Gains (Losses)
    ------------------------ ----------------------- ------------------ ----------------- ---------------- -----------------
<S>                          <C>                     <C>                <C>               <C>              <C>
            703,590            Interest Rate Swap         5.850%           1Mo LIBOR         2/16//01              $(9,994)
</TABLE>

     The weighted average life of the agreements at December 31, 1998 was 1.9 
years.

             The Company is generally required to deposit collateral with the
             swap agreement counter-parties in an amount at least equal to the
             amount of any unrealized losses. At March 31, 1999 the Company had
             securities with a fair market value of $10,424,000 on deposit with
             its counter-parties. If the unrealized losses on the interest rate
             swap agreements were to increase, the Company would be required to
             deposit additional collateral.

     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 which the Manager is required to hedge.

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, 1999, the Company had outstanding $765,018,000 of reverse 
repurchase agreements with a weighted average current borrowing rate of 4.96% 
and a maturity of 1.7 months. The reverse repurchase agreements were 
collateralized by mortgage-backed securities with an estimated fair value of 
$796,251,000.

                                       18
<PAGE>

     At December 31, 1998, the Company had outstanding $767,908,000 of 
reverse repurchase agreements with a weighted average current borrowing rate 
of 5.34% and a maturity of 2.9 months. The reverse repurchase agreements were 
collateralized by mortgage-backed securities with an estimated fair value of 
$800,260,000.

     The Company had $5,502,000 and $9,540,000 of other liabilities at March 
31, 1999 and December 31, 1998, respectively, consisting primarily of accrued 
interest payable and payables for unsettled securities at March 31, 1999 and 
December 31, 1998, respectively. The Company anticipates settling all other 
liabilities within one year by entering into additional reverse repurchase 
agreements.

RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999

     For the quarter ended March 31, 1999, the Company's net income was 
$2,962,000, or $0.51 per share on both a basic and diluted basis, based on a 
weighted average of 5,753,000 and 5,773,000 shares outstanding, respectively. 
That compares to $564,000, or $0.09 per share on both a basic and diluted 
basis, based on a weighted average of 6,603,000 shares outstanding for the 
quarter ending March 31, 1998. Net interest income for the first quarter 1999 
was $2,676,000 consisting of interest income on mortgage assets and cash 
balances less interest expense on reverse repurchase agreements compared to 
$896,000 for the first quarter in 1998. The Company reported dividend income 
of $711,000 from dividends on equity investments at March 31, 1999. No 
dividend interest was reported for the quarter ending March 31, 1998. The 
Company reported gains on investment transactions, net of $614,000 primarily 
from the sale of mortgage securities and equity securities during the quarter 
ending March 31, 1999. There were no sales reported for the quarter ending 
March 31, 1998. The Company incurred operating expenses of $1,039,000 for the 
quarter ending March 31, 1999 consisting of management fees, audit, tax, 
legal, printing, insurance and other expenses compared to $332,000 for the 
quarter ending March 31, 1998.

     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)

<TABLE>
<CAPTION>
                                                    For the Quarter Ended             For the Quarter Ended
                                                        March 31, 1999                    March 31, 1998

                                                  Average         Effective          Average       Effective
                                                  Balance           Rate             Balance          Rate
                                                ------------     ------------      ------------    -----------
<S>                                             <C>              <C>               <C>             <C>
Interest Earning Assets:
     Mortgage Securities                           $826,343            6.64%          $351,633          5.38%
     Other Fixed Income Assets                        4,203           13.48%                 0             0%
     Cash and Cash Equivalents                        6,687            5.32%            13,767          5.26%
                                                ------------     ------------      ------------    -----------
     Total Interest Earning Assets                  837,233            6.66%           365,400          5.37%
                                                ------------     ------------      ------------    -----------

Interest Bearing Liabilities:
     Reverse Repurchase Agreements                  786,472            5.73%           287,087          5.59%

                                                ------------     ------------      ------------    -----------
Net Interest Earning Assets and Spread              $50,761            0.93%           $78,313        (0.22%)
                                                ------------     ------------      ------------    -----------
                                                ------------     ------------      ------------    -----------
</TABLE>

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

                                       19
<PAGE>

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

                                              AVERAGE BALANCE AND RATE TABLE
                                                  (Dollars in thousands)

<TABLE>
<CAPTION>
                                                   For the Quarter Ended             For the Quarter Ended
                                                       March 31, 1999                    March 31, 1998

                                                  Average         Effective          Average       Effective
                                                  Balance           Rate             Balance          Rate
                                                ------------     ------------      ------------    -----------
<S>                                             <C>              <C>               <C>             <C>
     Equity securities                              $16,416           17.32%                 -              -
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of funds as of March 31, 1999 and December 
31, 1998, consisted of reverse repurchase agreements totaling $765,018,000 
and $767,908,000, respectively. The Company expects to continue to borrow 
funds in the form of reverse repurchase agreements. At March 31, 1999 and 
December 31, 1998, the Company had borrowing arrangements with twenty-three 
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.

YEAR 2000 MATTERS

     The year 2000 issue is the result of computer programs using two digits 
rather than four to define the applicable year. Any computer system that the 
Company relies on with time sensitive software may recognize a date entered 
as "00" as the year 1900 rather than the year 2000. This could result in a 
system failure or miscalculations causing disruption of operations, 
including, among other things, a temporary inability to process transactions 
or engage in normal business 

                                       20
<PAGE>

activities. The Company believes that most of its exposure to Year 2000 
issues involves the readiness of external third parties such as, but not 
limited to, loan servicers, security master servicers, security paying agents 
and trustees, its stock transfer agent, its securities custodian, the 
counterparties on its various financing agreements and hedging contracts and 
vendors ("External Service Providers").

     The Company relies on the Manager for its computer services and the 
Manager has been addressing this issue at no cost to the Company. 
Specifically, the Manager's internally developed computer systems have been 
implemented within the past five years. These systems have been developed 
with software tools that utilize a century date format (ccyymmdd). Although 
it has been a standard procedure to use this format for all date fields, the 
Manager is nonetheless in the process of unit testing its internally 
developed applications for numerous date conditions, including: the first and 
last day of the year 2000, the leap year day and the day after, the first day 
of the year 2001, functions with date ranges from 1999 which cross over into 
year 2000, functions which have both "from date" and "to date" in the year 
2000, date arithmetic and validation using standard routines through the year 
2199.

     The Manager has been, and is currently in contact with, each of its 
External Service Providers to evaluate their readiness for the year 2000. The 
Manager has requested each of its External Service Providers to either (i) 
prepare a description of its process for identifying date sensitive areas, 
its approach for implementing changes, its testing methodology, along with 
its timetable for completion, or (ii) certify as to its year 2000 compliance.

     Due to the technical architecture of the Manager's internally developed 
applications, its emphasis on using major providers and its ongoing 
communication with those providers, the Manager anticipates it will be well 
positioned to begin the year 2000. There can be no assurance, however, that 
the Company's External Service Providers will resolve their own Year 2000 
issues in a timely manner, or that any failure by these External Service 
Providers to resolve such issues would not have an adverse effect on the 
Company's operations and financial condition. Each External Service Provider 
is in turn subject to the Year 2000 issues of various third parties with 
which it does business, making the Company's exposure to the noncompliance of 
any External Service Provider difficult to assess. In a worst case scenario, 
a significant portion of the Company's External Service Providers and 
contractual counter-parties could fail to fulfill their respective 
obligations which would significantly impair the Company's ability to meet 
its obligations under its financing and hedging agreements. This would in 
turn cause the Company to liquidate assets at potentially substantial losses 
and possibly render the Company insolvent. The Company believes it is 
devoting the necessary resources to address the Year 2000 issues over which 
it has control. The Company anticipates, although there can be no assurance, 
completing all necessary procedures for Year 2000 compliance by June 30, 
1999. With respect to the Year 2000 issues of External Service Providers, 
over which the Company has no control, the Company's contingency plan is to 
identify replacement vendors, where possible.

ITEM 2A. 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 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.

Two primary risks the Company faces are that of extension risk and prepayment 
risk.

                                       21
<PAGE>

     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 will 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.

     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.

                                       22
<PAGE>

     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.)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                                                  Fair Value for Scenario Shown
                                                              Interest                       Interest
                                                             Rates Fall                     Rates Rise
                                                             100 Basis                       100 Basis
                                                               Points        Unchanged        Points
-------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>            <C>
Interest Rate Sensitive Instruments                             $47,111         $50,466        $40,338

Change in Fair Value                                            ($3,355)              -       ($10,128)
Change as a Percent of Fair Value                                (0.41%)              -         (1.23%)
Change as a Percent of Stockholders' Equity                      (3.90%)              -        (11.78%)
Change on a Per Share Basis                                      ($0.58)              -         ($1.76)
</TABLE>

     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 contract terms of the Company's liabilities exclusive of
             hedging instruments are subject to change as interest rates change.
             In general, the Company utilizes short-term borrowings in the form
             of 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.




                                       23
<PAGE>

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.)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                               Fair Value for Scenario Shown
                                                           Prices                          Prices
                                                        Decrease 10%     Unchanged      Increase 10%
------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>           <C>
Equity Investments                                            $21,701         $24,112         $26,523

Change in Fair Value                                           (2,411)              -           2,411
Change as a Percent of Fair Value                                (10%)              -             10%
Change as a Percent of Stockholders' Equity                     (2.8%)              -            2.8%
Change on a Per Share Basis                                     (0.42)              -            0.42
</TABLE>

     Although 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.




                                       24
<PAGE>

PART 2.  OTHER INFORMATION

Item 1.  Legal Proceedings

            None

Item 2.  Changes in Securities

            Not Applicable

Item 3.  Defaults Upon Senior Securities

            Not Applicable

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

            Not Applicable

Item 5.  Other Information

            None

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

            (a)  Exhibits

                Exhibit #11     Computation of Earnings Per Share
                Exhibit #27     Financial Data Schedule

(b)      Reports on Form 8-K

                None




                                       25
<PAGE>

                                   SIGNATURES

Pursuant to the requirements 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.

Dated:   May 14, 1999

                               By:      /s/ Philip A. Barach
                                        --------------------------------------
                                        Philip A. Barach
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)



                               By:      /s/ Daniel K. Osborne
                                        --------------------------------------
                                        Daniel K. Osborne
                                        Executive Vice President
                                        Chief Operating Officer
                                        Chief Financial Officer
                                        (Principal Accounting Officer)





                                       26