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, 2001

OR

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

FOR THE TRANSITION PERIOD FROM _______________ TO _________________

Commission file number: 1-13563

LASER MORTGAGE MANAGEMENT, INC.(Exact name of registrant as specified in its charter)

|MARYLAND
(State or Other Jurisdiction of Incorporation Or
organization) | 22-3535916
(I.R.S. Employer
Identification No.)
|----------------------------------------------------------------------- | -----------------------------------------------

c\o Mariner Mortgage Management, L.L.C.
65 East 55th Street
New York, NY 10022
(Address of principal executive offices)
(Zip Code)

(212) 758-2024
(Registrant's telephone number, including area code)

Indicate
by check mark whether the registrant (1) has filed all documents and 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 ___

Indicate
the number of shares outstanding of each of the issuer's classes of stock,
as of the last practicable date: 14,038,983 shares of common stock, $0.001 par
value, outstanding as of May 1, 2001.

LASER MORTGAGE MANAGEMENT, INC.

FORM 10-Q

INDEX

|PART I.   FINANCIAL INFORMATION | 1
|------------------------------- | -

| | Item 1. Financial Statements | 1
| | ---------------------------- | -

| | Balance Sheets as of March 31, 2001 (Unaudited) and December 31, 2000 | 1
| | --------------------------------------------------------------------- | -

| | Statements of Operations and Comprehensive Income (Unaudited) for the Three
Months Ended March 31, 2001 and March 31, 2000 | 2
| | -------------------------------------------------------------------------------------------------------------------------- | -

| | Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March
31, 2001 | 3
| | ---------------------------------------------------------------------------------------- | -

| | Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2001
and March 31, 2000 | 4
| | ------------------------------------------------------------------------------------------------- | -

| | Notes to Financial Statements (Unaudited) | 5
| | ----------------------------------------- | -

| | Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations | 13
| | --------------------------------------------------------------------------------------------- | --

| | Item 3. Quantitative and Qualitative Disclosures About Market Risk | 22
| | ------------------------------------------------------------------ | --

|PART II. OTHER INFORMATION | 24
|-------------------------- | --

| | Item 1.  Legal Proceedings | 24
| | -------------------------- | --

| | Item 2.  Changes in Securities and Use of Proceeds | 24
| | -------------------------------------------------- | --

| | Item 3.  Defaults Upon Senior Securities | 24
| | ---------------------------------------- | --

| | Item 4.  Submission of Matters to a Vote of Security Holders | 24
| | ------------------------------------------------------------ | --

| | Item 5.  Other Information | 24
| | -------------------------- | --

| | Item 6.  Exhibits and Reports on Form 8-K | 24
| | ----------------------------------------- | --

`PART I.   FINANCIAL INFORMATION

ITEM 1...FINANCIAL STATEMENTS

LASER Mortgage Management, Inc.                                                   AS OF
BALANCE SHEETS                                                MARCH 31, 2001          DECEMBER 31, 2000
                                                                (UNAUDITED)
ASSETS

Cash and cash equivalents.............................     $         46,966,943       $       3,542,209
Investment in securities at fair value................              123,047,578             315,560,905
Investment in mortgage loans at amortized cost........                2,413,404               2,699,838
Interest rate agreement...............................                       --                 380,000
Interest and principal paydowns receivable............                3,616,227               4,328,489
Prepaid expenses......................................                1,280,262               1,416,792
                                                           --------------------       -----------------
         Total assets.................................     $        177,324,414       $     327,928,233
                                                           ====================       =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Repurchase agreements...............................     $        113,757,581       $     239,877,000
  Payable for securities acquired                                            --              23,321,844
  Accrued interest payable............................                  146,492                 560,130
  Accounts payable and accrued expenses...............                  771,594                 729,703
  Payable to manager..................................                1,219,285                      --
                                                           --------------------       -----------------
         Total liabilities............................              115,894,952             264,488,677
                                                           --------------------       -----------------

Stockholders' Equity:
  Common stock: par value $0.001 per share;
    100,000,000 shares authorized, 20,118,749
      shares issued...................................                   20,119                  20,119
  Additional paid-in capital..........................              283,012,967             283,012,967
  Accumulated other comprehensive loss................               (3,586,376)             (3,673,678)
  Accumulated distributions and losses................             (185,168,817)           (183,071,421)
  Treasury stock at cost (6,079,766 shares)                         (32,848,431)            (32,848,431)
                                                           --------------------       ------------------
         Total stockholders' equity...................               61,429,462              63,439,556
                                                           --------------------       ------------------

Total liabilities and stockholders' equity                 $        177,324,414       $     327,928,233
                                                           ====================       ==================

                                       See notes to financial statements.`

`LASER Mortgage Management, Inc.


                                                                              FOR THE THREE MONTHS ENDED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)        MARCH 31, 2001          MARCH 31, 2000

Interest income:
   Securities and mortgage loans..............................        $     5,099,426       $     1,884,320
   Cash and cash equivalents..................................                208,588               504,801
                                                                      ---------------       ---------------
       Total interest income..................................              5,308,014             2,389,121
                                                                      ---------------       ---------------

Interest expense:
   Repurchase agreements......................................              3,204,167               579,879
                                                                      ---------------       ---------------

Net interest income...........................................              2,103,847             1,809,242

Net realized loss on sale of securities.......................             (2,293,685)           (2,404,857)

Net loss on interest rate agreement...........................               (120,000)                   --


General and administrative expenses...........................              1,787,558               791,945
                                                                     ----------------      ----------------

Net loss......................................................       $     (2,097,396)     $     (1,387,560)
                                                                     -----------------     -----------------

Other Comprehensive Income (Loss):
   Unrealized net (loss) gain on securities:
   Unrealized holding (loss) gain arising during period.......             (2,206,383)               74,050
   Add: reclassification adjustment for net realized loss
       included in net loss...................................              2,293,685             2,404,857
                                                                      ---------------       ---------------
   Other comprehensive income.................................                 87,302             2,478,907
                                                                      ---------------       ---------------

Comprehensive (loss) income...................................        $    (2,010,094)      $     1,091,347
                                                                      ================      ===============


Net loss per share:
   Basic......................................................        $         (0.15)      $         (0.09)
                                                                      ================      ================

   Diluted....................................................        $         (0.15)      $         (0.09)
                                                                      ================      ================

Weighted average number of shares outstanding:
   Basic......................................................             14,038,983            14,847,825
                                                                      ===============       ===============

   Diluted....................................................             14,038,983            14,847,825
                                                                      ===============       ===============

                                        See notes to financial statements.`

`STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2001

------------------------------------------------------------------------------------------------------------------
                                                          ACCUMULATED
                                                             OTHER
                                            ADDITIONAL   COMPREHENSIVE    ACCUMULATED   TREASURY      TOTAL
                                 COMMON      PAID-IN        INCOME       DISTRIBUTIONS   STOCK     STOCKHOLDERS'
                                 STOCK       CAPITAL        (LOSS)         AND LOSSES   AT COST       EQUITY
------------------------------------------------------------------------------------------------------------------

BALANCE
   DECEMBER 31, 2000...........$ 20,119  $283,012,967    $(3,673,678)  $(183,071,421)  $(32,848,431)  $63,439,556
                                                         ------------                                 -----------

Comprehensive income:
  Net loss.....................      --            --             --      (2,097,396)            --    (2,097,396)
                                                                                                      ------------
  Other comprehensive income:
   Unrealized holding loss
   arising during the year           --            --     (2,206,383)             --             --    (2,206,383)
year
   Reclassification adjustment
     for net realized loss
     included in net loss......      --            --      2,293,685              --             --     2,293,685
                                                         -----------                                  -----------
  Other comprehensive income...      --            --         87,302              --             --        87,302
                                                                                                      -----------
Comprehensive income...........      --            --             --              --             --    (2,010,094)
                               --------  ------------    -----------    ------------    -----------  -------------

BALANCE
   MARCH 31, 2001..............$ 20,119  $283,012,967    $(3,586,376)  $(185,168,817)  $(32,848,431)  $61,429,462
                               ========  ============    ============  ==============  =============  ===========


                                        See notes to financial statements.`

`FOR THE THREE MONTHS ENDED
---------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS (UNAUDITED)                                  MARCH 31, 2001         MARCH 31, 2000
---------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .....................................................        $   (2,097,396)       $   (1,387,560)
Adjustments to reconcile net loss to
    net cash provided by operating activities:
    Amortization of mortgage premiums and discounts, net......              (202,408)             (168,925)
    Net realized loss on sale of securities and interest rate
      agreement...............................................             4,993,685             2,404,857
    Unrealized gain on interest rate agreement................            (2,580,000)                   --
Change in assets and liabilities:
    Decrease in interest and principal paydowns receivables...               712,262               424,185
    Decrease in margin deposits on repurchase agreement.......                    --               425,000
    Decrease (increase) in prepaid expenses...................               136,530            (1,908,823)
    (Decrease) increase in accrued interest payable...........              (413,638)              117,926
    Increase in accounts payable and accrued expenses.........                41,892               260,787
    Increase in payable to manager............................             1,219,285                22,214
                                                                      --------------        --------------

    Net cash provided by operating activities.................             1,810,212               189,661
                                                                      --------------        --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities........................................           (55,048,842)          (61,704,494)
Payable for securities acquired...............................           (23,321,844)                   --
Proceeds from sale of securities..............................           231,678,601            83,622,052
Proceeds from sale of interest rate agreement.................               260,000                    --
Principal payments on securities and mortgage loans...........            14,166,026             1,095,783
                                                                      --------------        --------------
    Net cash provided by investing activities.................           167,733,941            23,013,341
                                                                      --------------        --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from repurchase agreements...........................         1,960,972,986            87,818,000
Repayments of repurchase agreements...........................        (2,087,092,405)          (81,273,000)
Payments for repurchase of common stock.......................                    --               (97,875)
                                                                      --------------         --------------
    Net cash provided by (used in) financing
    activities................................................          (126,119,419)            6,447,125
                                                                      ---------------       --------------


NET INCREASE IN CASH AND CASH EQUIVALENTS                                 43,424,734            29,650,127

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD.........................................             3,542,209            16,065,024
                                                                      --------------        --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD......................        $   46,966,943        $   45,715,151
                                                                      ==============        ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest paid...............................................        $    3,617,805        $      461,953
                                                                      ==============        ==============

  NONCASH FINANCING ACTIVITIES:
  Net change in unrealized gain on
    available-for-sale securities.............................        $       87,302        $    2,478,907
                                                                      ==============        ==============

                                            See notes to financial statements.`

Laser Mortgage Management, Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1.     ORGANIZATION AND SIGNIFICANT
ACCOUNTING POLICIES

LASER Mortgage Management, Inc. (the "Company") was incorporated in Maryland on
September 3, 1997. The Company commenced its operations on November 26, 1997.

On
April 25, 2001, the Board of Directors unanimously approved the liquidation and
dissolution of the Company. The Company will submit a plan of liquidation and
dissolution to stockholders for their approval at the annual meeting anticipated
to be held during the next three months. Assuming stockholder approval, in
accordance with the plan of liquidation and dissolution as it is presently
envisioned, the Board of Directors would provide for an initial cash
distribution, after obtaining approval of the Delaware Court of Chancery, of
approximately $3.00 per outstanding common share, with additional cash
distributions resulting from the disposition of the Company's remaining assets
expected to occur within the following three years, after providing for
expenses.

On
May 8, 2001, the Company filed a preliminary proxy statement on Schedule 14A
with the Securities and Exchange Commission. The preliminary proxy statement
seeks stockholder approval for, among other things, the proposed reincorporation
of the Company under the laws of the State of Delaware through the merger of the
Company with and into a newly formed, wholly-owned Delaware subsidiary of the
Company, and the subsequent plan of liquidation and dissolution of the surviving
Delaware entity.

During
the first quarter and continuing into the second quarter of 2001, in
contemplation of either a liquidation or sale of the Company, the Company has
been reducing its portfolio of mortgage securities and the leverage financing
used to maintain the portfolio. If a plan of liquidation is approved by the
stockholders, the Company will adopt the liquidation basis of accounting.
Because substantially all of the Company's assets and liabilities are
carried at approximate fair value, management believes that adoption of
liquidation basis accounting would not have a material impact on the
Company's financial statements. However, changes in market conditions, the
timing of individual sales, and other factors may affect the amounts ultimately
realized, and those amounts may differ, perhaps materially, from the March 31,
2001 carrying values.

Basis
of Presentation - The accompanying unaudited financial statements
have been prepared in conformity with generally accepted accounting principles
("GAAP") for interim financial statements and the instructions to Form
10-Q and Article 10, Rule 10-01 of Regulation S-X. Accordingly, these unaudited
financial statements do not include all of the information and footnotes
required by GAAP for complete financial statements. In the opinion of the
Company's management, all adjustments, consisting only of normal recurring
accruals, considered necessary for a fair presentation have been included in
these financial statements. These unaudited interim financial statements should
be read in conjunction with the audited financial statements included in the
Company's Annual Report on Form 10-K, as amended by Form 10-K/A, for the
year ended December 31, 2000. Operating results for any interim period are not
necessarily indicative of results that may be expected for a full year. Prior
period financial statements have been reclassified, where appropriate, to
conform to the current presentation.

A
summary of the Company's significant accounting policies follows:

Cash
Equivalents - Cash equivalents consist of an overnight repurchase
agreement. The amount reported in the balance sheet represents the amount
advanced under the agreement.

Investments
- The Company invests primarily in mortgage-backed securities and mortgage
loans. The mortgage-backed securities include privately issued or U.S.
government or agency issued mortgage pass-through certificates, collateralized
mortgage obligations and other securities representing interests in, or
obligations backed by, pools of mortgage loans (collectively, "Mortgage
Securities"). The Company may also invest in other debt and equity
securities ("Other Securities" and, together with Mortgage Securities,
"Securities"). The mortgage loans are secured by first or second liens
on single-family residential, multi-family residential, commercial or other real
property ("Mortgage Loans" and, together with Securities,
"Investments").

In
accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", the Company classifies its Securities as
available-for-sale. The available-for-sale classification requires that those
Securities be carried at estimated fair value, with unrealized gains and losses
reported on the balance sheet as a separate component of stockholders'
equity within accumulated other comprehensive loss. This classification is
appropriate since the Company may need to sell, from time to time, any of its
Securities as part of its overall management of its balance sheet.

Unrealized
losses on Securities that are considered other-than-temporary, as measured by
the amount of decline in estimated fair value attributable to
other-than-temporary factors, are recognized in income and the cost basis of the
Securities is adjusted. Other-than-temporary unrealized losses are based on
management's assessment of various factors affecting the expected cash flow
from the Securities, including the level of interest rates, an
other-than-temporary deterioration of the credit quality of the underlying
mortgages, the credit protection available to the related mortgage pool and a
significant change in the prepayment characteristics of the underlying
collateral.

The
Company's Mortgage Loans are carried at their unpaid principal balance, net
of unamortized discount or premium.

Interest
income is accrued based on the outstanding principal or notional amount of the
Investments and their contractual terms. Premiums and discounts associated with
the purchase of the Investments are amortized into interest income over the
lives of the Investments using the effective yield method.

Investment
transactions are recorded on the date the Investments are purchased or sold.
Purchases of newly-issued securities are recorded when all significant
uncertainties regarding the characteristics of such Investments are removed,
generally shortly before settlement date.

Realized
gains and losses on Investment transactions are determined on the specific
identification basis.

Interest
Rate Agreements - The Company follows an interest-rate
risk-management strategy designed to protect against the adverse effects of
major interest rate changes through the use of derivative interest rate
agreements. Interest rate agreements that have been used by the Company consist
of a purchased interest rate cap ("cap") and interest rate swaps
("swap").

A
cap is a contractual agreement for which the Company pays an initial premium in
return for subsequent cash flows to the Company to the extent that a specific
interest rate index exceeds the contractual fixed rate, applied to a notional
amount. The amount of the risk of loss on a cap is the premium paid. Caps are
recorded at their estimated fair value with changes in fair value reported in
the statement of operations. Interest payments received are recorded as a
component of net interest income in the statement of operations.

A
swap is a contractual agreement in which a series of interest rate cash flows
are exchanged over a prescribed period based on a notional amount. Usually,
swaps involve the exchange of fixed rate and floating rate interest payments.
Swaps used by the Company that are designated as hedges of certain Securities
are recorded at their estimated fair value with changes in fair value reported
in accumulated other comprehensive loss on the balance sheet consistent with the
reporting of unrealized gains and losses on the related Securities. Net payments
or receipts on these swaps are recognized as adjustments to interest income as
they accrue. Swaps not designated as hedges are carried at estimated fair value
with changes reflected in the statement of operations. The realized gain or loss
on terminated swaps is deferred and amortized as an interest yield adjustment
over the shorter of the remaining original term of the swap or the remaining
holding period of the Securities. Gains and losses on swaps associated with
Securities that have been sold are recognized as part of the realized gain or
loss on sale. The Company monitors the effectiveness of swap transactions by
ensuring that the notional amount of the swap is less than the principal amount
of the Securities being hedged, the maturity of the swaps do not exceed the
maturity of the Securities being hedged and the interest rate index on the
Securities being hedged correlates with the interest rate index for the paying
leg of the swap.

Repurchase
Agreements  The Company utilizes repurchase agreements to
finance most of its Investments. The repurchase agreements are collateralized by
certain of the Company's Investments and bear interest rates that generally
move in close relation to the one-month London Interbank Offered Rate
("LIBOR"). The amount reported in the balance sheet represents the
contractual amount to be repaid under such agreements.

Fair
Value of 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. The fair values of the Company's Investments,
interest rate agreements and securities sold, not yet purchased are based on
prices and valuations provided by dealers who make markets in these financial
instruments. The fair values reported reflect estimates and may not necessarily
be indicative of the amounts the Company could realize in a current market
exchange. The carrying values of cash equivalents, interest receivable and
payable, repurchase agreements and other financial assets and liabilities
approximates their estimated fair value because of the short-term nature of
these financial instruments.

Income
Taxes - The Company has elected to be taxed as a Real Estate
Investment Trust ("REIT") and intends to continue to comply with the
provisions of the Internal Revenue Code of 1986, as amended (the
"Code") with respect thereto. Accordingly, the Company should not be
subject to Federal income tax to the extent of its distributions to stockholders
as long as certain asset, income and stock ownership tests are met.

Use
of Estimates- The preparation of financial statements in
conformity with GAAP principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.

Recent Accounting Pronouncements - On January 1, 2001, the Company
adopted the provisions of SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an Amendment of
Statement No. 133." The adoption of the provisions of these accounting
pronouncements with respect to the Company's sole derivative instrument at that
time, the interest rate agreement, had no impact on the Company's financial
condition or results of operations.

2.     MORTGAGE SECURITIES

The
following table sets forth the current principal amount, unamortized premium or
discount, amortized cost, gross unrealized gains and losses and estimated fair
values of the Company's available-for-sale Mortgage Securities, excluding
interest-only mortgage derivatives ("IOs"), as of March 31, 2001 and
December 31, 2000:

`MARCH 31, 2001

                           AGENCY
                           FIXED/
                       FLOATING RATE          NON-
                          MORTGAGE          MORTGAGE
                         SECURITIES       SUBORDINATES         TOTAL

Current, principal    $112,150,529         $5,722,553     $117,873,082
amount

Unamortized discount    (1,192,950)          (600,000)      (1,792,950)
Unamortized premium        371,262                 --          371,262
                         ---------          ---------        ---------

Amortized cost         111,328,841          5,122,553      116,451,394

Gross unrealized         2,399,786                 --        2,399,786
gains
Gross unrealized                --          (3,352,893)      (3,352,893)
                         ---------          -----------      -----------
losses

Estimated fair value  $113,728,627         $1,769,660     $115,498,287
                      ============         ==========     ============`

`DECEMBER 31, 2000

                         AGENCY
                         FIXED/
                        FLOATING
                          RATE                       NON-
                        MORTGAGE     MORTGAGE       MORTGAGE
                       SECURITIES   SUBORDINATES   SUBORDINATES    TOTAL

Current principal     $271,728,664   $7,316,580     $5,722,553   $284,767,797
amount

Unamortized discount    (3,939,630)          --       (600,000)    (4,539,630)
Unamortized premium      1,117,677        2,684                     1,120,361
                      ------------   ----------      ---------   ------------

Amortized cost         268,906,711    7,319,264      5,122,553    281,348,528

Gross unrealized         6,290,740           --             --      6,290,740
gains
Gross unrealized           (16,251)      (7,256)    (3,352,893)    (3,376,400)
                      ------------   ----------     ----------   ------------
losses

Estimated fair value  $275,181,200   $7,312,008     $1,769,660   $284,262,868
                      ============   ==========     ==========   ============`

The
current notional amount, amortized cost, gross unrealized gains and losses and
estimated fair value of the Company's available-for-sale IOs as of March
31, 2001 and December 31, 2000 are summarized as follows:

`MARCH 31, 2001
                                                        FIXED RATE
                                                       RESIDENTIAL

                   Current notional amount           $  37,051,737
                                                     =============

                   Amortized cost                    $  10,182,560

                   Gross unrealized gains                   --
                   Gross unrealized losses              (2,633,269)
                                                     --------------

                   Estimated fair value              $  7,549,291
                                                     ============`

`DECEMBER 31, 2000
                                FIXED RATE             FIXED RATE                TOTAL
                                RESIDENTIAL            COMMERCIAL

Current notional amount          $104,492,206           $99,844,649            $204,336,855
                                 ============           ===========            ============

Amortized cost                   $31,815,356            $ 6,070,699            $37,886,055

Gross unrealized gains                   --                 114,987                114,987
Gross unrealized losses           (6,703,005)                   --              (6,703,005)
                           ------------------     ----------------       ------------------

Estimated fair value             $25,112,351            $ 6,185,686            $31,298,037
                                 ===========            ===========            ===========`

On
October 23, 2000 the Company filed suit in the Southern District of New York
against Asset Securitization Corporation ("ASC"), Nomura Asset Capital
Corporation and Nomura Securities International, Inc. alleging that the
defendants defrauded the Company into purchasing approximately $19.0 million
worth of ASC securities by failing to disclose, among other things, that one of
largest loans in the mortgage pool was seriously troubled. The Company is
seeking rescission of the purchase of the Securities. On December 8, 2000, the
defendants filed a motion to dismiss the action, which motion is currently
pending. During the fourth quarter of 2000, the Company recognized the probable
other-than temporary impairment of the ASC securities. A recovery of this
Investment may be possible, but management is unable to predict the likelihood
of this occurrence.

3.     MORTGAGE LOANS

At
March 31, 2001 and December 31, 2000, the Company's Mortgage Loans were as
follows:

`MARCH 31, 2001        DECEMBER 31, 2000


Principal amount                   $   2,386,067           $     2,647,455
Unamortized premium                       27,337                    52,383
                                   -------------           ---------------
Amortized cost                     $   2,413,404           $     2,699,838
                                   =============           ===============`

At
March 31, 2001 and December 31, 2000, the amortized cost of the Mortgage Loans
approximated their estimated fair value.

4.     INTEREST RATE AGREEMENTS

Caps

The
Company used a cap, during 2000 and continuing into January 2001, to reduce the
risk of rising interest rates on the cost of the short-term repurchase
agreements used to finance its Investments.

As
a result of the reduction in interest rates in January 2001, the Company closed
out the existing cap, with a notional amount of $100.0 million, for $260,000 in
cash and recognized a net loss of $(120,000) in the statement of operations that
is comprised of a realized loss of $(2,700,000) and an unrealized gain of
$2,580,000 from the reversal of the unrealized loss on the cap at December 31,
2000 due to its sale. During the second quarter of 2000, the Company purchased
this cap for a premium of $2,960,000. The cap agreement had a term of three
years and provided for monthly payments of interest to the Company to the extent
that the one-month LIBOR exceeded 6.54% as applied to the notional amount. By
December 31, 2000, the Company had recorded an unrealized loss of $(2,580,000)
in the statement of operations with respect to the cap to reflect its estimated
fair value of $380,000 in the balance sheet at that time.

5.     REPURCHASE AGREEMENTS

The
Company has entered into repurchase agreements to finance most of its
Investments. The repurchase agreements are collateralized by the market value of
the Company's Investments and bear interest rates that generally move in
close relation to one-month LIBOR.

At
March 31, 2001 and December 31, 2000, the Company had $113,757,581 and
$239,877,000, respectively, of repurchase agreements outstanding with a weighted
average borrowing rate of 5.14% and 6.66%, respectively, and a weighted average
remaining maturity of 1 day and 11 days, respectively. All of the repurchase
agreements outstanding at March 31, 2001 mature within 30 days. The associated
accrued interest expense payable on the outstanding repurchase agreements
amounted to $146,492 and $560,130 at March 31, 2001 and December 31, 2000,
respectively. At March 31, 2001 and December 31, 2000, the repurchase agreements
were collateralized by Investments that had an estimated fair value of
approximately $112,864,000 and $249,500,000, respectively.

6.     STOCKHOLDERS' EQUITY

Treasury
Stock - In 1998, the Board of Directors of the Company approved
the repurchase of up to $40.0 million of the Company's common stock. The
Company did not repurchase any shares during the three months ended March 31,
2001 and repurchased 25,000 shares for $97,875 during the three months ended
March 31, 2000 pursuant to the common stock repurchase program. At each of March
31, 2001 and December 31, 2000, an aggregate 6,079,766 shares, respectively, of
the Company's issued common stock had been reacquired.

7.     EARNINGS (LOSS) PER SHARE ("EPS" OR "LPS")

Basic
EPS is computed by dividing the net income (loss) attributable to common shares
by the weighted average number of common shares outstanding during the period.
The calculation of diluted EPS considers the effect of all dilutive potential
common shares that were outstanding during the period under the Company's
Long-Term Stock Incentive Plan. Basic and diluted LPS for the three months ended
March 31, 2001 and 2000 was as follows:

`FOR THE THREE MONTHS ENDED
                                     MARCH 31, 2001
                    NET LOSS             SHARES           PER-SHARE
                  (NUMERATOR)         (DENOMINATOR)         AMOUNT

Basic LPS        $ (2,097,396)         14,038,983        $      (0.15)
                 =============         ==========        =============

Diluted LPS      $ (2,097,396)         14,038,983        $      (0.15)
                 =============         ==========        =============


                                   FOR THE THREE MONTHS ENDED
                                    MARCH 31, 2000
                    NET LOSS             SHARES           PER-SHARE
                  (NUMERATOR)         (DENOMINATOR)        AMOUNT

Basic LPS        $ (1,387,560)         14,847,825        $      (0.09)
                 =============         ==========        =============

Diluted LPS      $ (1,387,560)         14,847,825        $      (0.09)
                 =============         ==========        =============`

For
the three months ended March 31, 2001 and 2000, there were no deferred common
shares reserved for issuance.

For
the three months ended March 31, 2001, there were no outstanding options to
purchase common shares of the Company. For the three months ended March 31,
2000, options to purchase 10,000 shares of the Company's common stock were
outstanding and were excluded from the computation of diluted LPS for the three
months then ended because the strike price ($15.00) was greater than the average
daily market price of the Company's common stock for the period rendering
them anti-dilutive.

8.     MANAGEMENT AGREEMENT

Since November 1, 1999, Mariner Mortgage Management, L.L.C. ("Mariner") has
served as the external manager of the Company and is responsible for the
day-to-day management of the Company's Investments and operations.

Under
the current management agreement, which was entered into on November 1, 2000 and
terminates on November 1, 2001, Mariner is entitled to be paid an incentive fee
upon the earlier of (1) the termination date or (2) the date on which the Board
of Directors adopts resolutions approving the liquidation and dissolution,
referred to as the anniversary date, which they did on April 25, 2001, equal to
the number of shares outstanding on the applicable date, multiplied by:

| |  | 10% of the difference between the 15-day average closing market price (plus any
distributions per share other than common stock) of the Company's common
stock preceding November 1, 2001 (or such earlier anniversary date, as set forth
in the agreement) and $3.317 per share (which approximates the average closing
price of the Company's common stock for the fifteen days ended October 31,
2000) up to the equivalent of $3.50 per share;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 15% of the difference between the 15-day average closing market price (plus any
distributions per share other than common stock) of the Company's common
stock preceding November 1, 2001 or on the anniversary date, whichever is
earlier, and $3.50 per share up to $4.00 per share; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 20% of the difference between the 15-day average closing market price (plus any
distributions per share other than common stock) of the Company's common
stock preceding November 1, 2001 or on the anniversary date, whichever is
earlier, and $4.00 per share.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based
upon this calculation, an incentive fee of $1,219,285 was accrued in the
financial statements as of March 31, 2001 and subsequently paid to Mariner.
Mariner is not entitled to receive any other fee upon the adoption of the
proposed plan of liquidation and dissolution.

In
accordance with the terms of the management agreement, Mariner will continue to
receive its base management fee of $50,000 per month until the termination of
the management agreement.

For
the period November 1, 1999 to November 1, 2000, the annual base fee under the
terms of the management agreement was payable monthly in cash and based on 0.45%
of the aggregate value of the Company's outstanding equity as of the end of
such month; the annual incentive fee calculation for that period was similar to
the current computation

Pursuant
to the terms of the Mariner management agreement in effect during the three
months ended March 31, 2001 and 2000, the Company incurred base fees of $150,000
and $64,968, respectively, and incentive fees of $1,219,285 and $464,518,
respectively.

The
current management agreement is terminable by the Company without cause or
penalty on 30 days' notice and by Mariner on 90 days' notice.

* * * * *

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

The
following discussion should be read in conjunction with the Company's financial
statements as of and for the three months ended March 31, 2001 and notes thereto
and with the audited financial statements included in the Company's Annual
Report on Form 10-K, as amended by Form 10-K/A, for the year ended December 31,
2000.

Forward-Looking Statements

"Safe
Harbor" statement under the Private Securities Litigation Reform Act of
1995: Statements in this discussion regarding the Company and its business,
which are not historical facts, are "forward-looking statements" that
involve risks and uncertainties. Risks and uncertainties, which could cause
results to differ from those discussed in the forward-looking statements herein,
are listed in the Company's Annual Report filed on Form 10-K, as amended by
Form 10-K/A.

General

Recent Developments

On
April 25, 2001, the Board of Directors unanimously approved the liquidation and
dissolution of the Company. The Company will submit a plan of liquidation and
dissolution to stockholders for their approval at the annual meeting anticipated
to be held during the next three months. Assuming stockholder approval, in
accordance with the plan of liquidation and dissolution as it is presently
envisioned, the Board of Directors would provide for an initial cash
distribution, after obtaining approval of the Delaware Court of Chancery, of
approximately $3.00 per outstanding common share, with additional cash
distributions resulting from the disposition of the Company's remaining assets
expected to occur within the following three years, after providing for
expenses.

On
May 8, 2001, the Company filed a preliminary proxy statement on Schedule 14A
with the Securities and Exchange Commission. The preliminary proxy statement
seeks stockholder approval for, among other things, the proposed reincorporation
of the Company under the laws of the State of Delaware through the merger of the
Company with and into a newly formed, wholly-owned Delaware subsidiary of the
Company, and the subsequent plan of liquidation and dissolution of the surviving
Delaware entity.

Results of Operations for the Three Months Ended March 31,
2001 Compared to the Three Months Ended March 31, 2000

Net Income (Loss) Summary

General.
For the three months ended March 31, 2001, the Company had net income of $1.5
million, or $0.11 per weighted average share, excluding aggregate net losses
from investment activities and the interest rate agreement of $(2.4) million, or
$(0.17) per share, and the accrued incentive fee of $(1.2) million, or $(0.09)
per share. For the three months ended March 31, 2001, the weighted average
number of shares of Common Stock outstanding was 14,038,983; no distributions or
dividends were declared or paid and return on average equity was (2.5)% on an
actual basis.

For
the three months ended March 31, 2000, the Company had net income of $1.5
million, or $0.10 per weighted average share, excluding a net loss from
investment activities of $(2.4) million, or $(0.16) per share, and the accrued
incentive fee of $(0.5) million, or $(0.03) per share. For the three months
ended March 31, 2000, the weighted average number of shares of Common Stock
outstanding was 14,847,825, no dividends or distributions were declared or paid
and return on average equity was (1.89)% on an actual basis.

Losses
from investment activities. For the three months ended March 31, 2001, the
Company sold securities and recorded a net realized loss of $(2.3) million, or
$(0.16) per share. Also during this period, the Company recorded a $0.1 million
increase in other comprehensive income from the unrealized net gain on
securities for an overall net loss in stockholders' equity from securities
of $(2.2) million.

For
the three months ended March 31, 2000, the Company sold securities and recorded
a net realized loss of $(2.4) million or $(0.16) per share. Also during this
period, the Company recorded a $2.5 million increase in other comprehensive
income from the unrealized net gain on securities for an overall net gain in
stockholders' equity from securities of $0.1 million.

Interest Income and Average Interest Earning Asset
Yield

The
Company had average interest earning assets of $281.3 million for the three
months ended March 31, 2001 compared to $133.1 million for the three months
ended March 31, 2000. The Company earns interest income primarily from its
portfolio of investments and cash equivalents. The table below shows, for the
three months ended March 31, 2001 and 2000, the Company's average balance
of cash equivalents, investments, the yields earned on each type of interest
earning asset, the yield on average interest earning assets and total interest
income.

`AVERAGE INTEREST EARNING ASSETS YIELDS AND INTEREST INCOME
                                               (dollars in thousands)
                                                      Total                 Yield on   Yield on
                                         Average     Average    Yield on     Average    Average
                              Average   Amortized   Interest     Average    Amortized   Interest   Total
                               Cash      Cost of     Earning      Cash       Cost of    Earning    Interest
                            Equivalents Investments  Assets    Equivalents Investments   Assets    Income
For the three months
  ended:
March 31, 2001              $  15,728  $ 265,568   $ 281,296       5.30%       7.68%      7.55%   $  5,308
March 31, 2000              $  33,250  $  99,897   $ 133,147       5.98%       7.55%      7.17%   $  2,389`

During
the three months ended March 31, 2001, the Company began to reduce its portfolio
of Mortgage Securities and Mortgage Derivatives in contemplation of a
liquidation or sale of the Company.

Interest Expense and the Average Cost of Funds

The
Company incurs interest expense primarily from borrowed funds under short-term
repurchase agreements that finance most of its portfolio of investments.
Interest expense is calculated in the same manner for tax and GAAP purposes. The
Company generally has structured its borrowings to closely correlate the
Company's cost of borrowed funds with changes in one-month LIBOR, although
the Company may choose to extend the maturity of its liabilities at any time,
subject to the lender's consent.

The
table below shows, for the three months ended March 31, 2001 and 2000, the
Company's average borrowed funds, interest expense and average cost of
funds compared to average one and six-month LIBOR.

`AVERAGE COST OF FUNDS
                                                    (dollars in thousands)

                                                                           Average     Average    Average
                                                                           One-Month   Cost of    Cost of
                                                                           LIBOR       Funds      Funds
                                                                           Relative    Relative   Relative
                                                                             to          to         to
                    Average              Average    Average     Average    Average     Average    Average
                    Borrowed   Interest  Cost of    One-Month   Six-Month  Six-Month   One-Month  Six-Month
                      Funds     Expense    Funds      LIBOR       LIBOR      LIBOR       LIBOR      LIBOR
For the three
months ended:
March 31, 2001      $219,076   $ 3,204      5.85%      5.51%       5.18%      0.33%       0.34%      0.67%
March 31, 2000      $ 39,615   $   580      5.79%      5.92%       6.32%     (0.40)%     (0.13)%    (0.53)%`

During
the first quarter of 2001, interest rates decreased primarily in connection with
the interest rate setting actions taken by the Federal Reserve Board
("FRB") in comparison to the first quarter of 2000 during which
interest rates increased due primarily to converse rate setting actions taken by
the FRB.

Interest Rate Agreements

The
Company follows an interest-rate risk-management strategy designed to protect
against the adverse effects of major interest rate changes through the use of
derivative interest rate agreements. Interest rate agreements that have been
used by the Company consist of a purchased interest rate cap ("cap")
and interest rate swaps ("swaps").

As
a result of the reduction in interest rates in January 2001, the Company closed
out the existing cap, with a notional amount of $100.0 million, for $0.3 million
in cash and recognized a net loss of $(0.1) million in the statement of
operations that is comprised of a realized loss of $(2.7) million and an
unrealized gain of $2.6 million from the reversal of the unrealized loss on the
cap at December 31, 2000 due to its sale. During the second quarter of 2000, the
Company purchased this cap for a premium of $3.0 million to reduce the risk of
rising interest rates on the cost of the short-term repurchase agreements used
to finance its investments. The cap agreement had a term of three years and
provided for monthly payments of interest to the Company to the extent that the
one-month LIBOR exceeded 6.54% as applied to the notional amount. By December
31, 2000, the Company had recorded an unrealized loss of $(2.6) million in the
statement of operations with respect to the cap to reflect its estimated fair
value of $0.4 million in the balance sheet at that time.

The
Company did not enter into any swaps or caps during the three months ended March
31, 2001 and 2000.

Net Interest Income

Net
interest income, which equals total interest income less total interest expense,
amounted to $2.1 million for the three months ended March 31, 2001 compared to
$1.8 million for the three months ended March 31, 2000. Net interest rate
spread, which equals the yield on the Company's interest earning assets
(excluding cash and cash equivalents) less the average cost of funds for the
period was 1.83% for the three months ended March 31, 2001 compared to 1.76% for
the three months ended March 31, 2000.

The
table below shows the components of net interest income, yield on average
interest earning assets and average cost of funds for the three months ended
March 31, 2001 and 2000.

`COMPONENTS OF NET INTEREST INCOME
                                                  (dollars in thousands)

                                                                 Yield
                                                                  on
            Average                         Interest             Average    Average
            Amortized Interest    Average   Income on   Total   Amortized  Balance of   Total    Average    Net
            Cost of   Income on    Cash       Cash     Interest  Cost of   Repurchase Interest  Cost of  Interest
           Investment Investment Equivalent Equivalents Income  Investment Agreements  Expense    Funds    Income

For the
 three
months
ended:
March 31,
 2001      $265,568  $ 5,099     $15,728    $ 209      $ 5,308    7.68%    $219,076   $ 3,204    5.85%   $ 2,104
March 31,
 2000       $99,897  $ 1,884     $33,250    $ 505      $ 2,389    7.55%    $ 39,615   $   580    5.79%   $ 1,809`

The
overall increase in net interest income was due primarily to the Company's
higher average investment portfolio partially offset by the increased level of
financing.

Credit Considerations

At
March 31, 2001 and December 31, 2000, the Company had limited its exposure to
credit losses on its portfolio by holding 97% and 94%, respectively, of its
investments in Mortgage Securities issued by FNMA, GNMA and FHLMC (including
IOs, fixed/floating rate mortgage securities and fixed rate pass-through
mortgage securities).

General and Administrative Expenses

General
and administrative expenses ("operating expense" or "G&A
expense") for the three months ended March 31, 2001, consist of management
and incentive fees incurred to Mariner of $1.4 million and professional and
other expenses of $0.4 million. G&A expenses were $0.8 million for the three
months ended March 31, 2000, consisting primarily of $0.5 million of management
and incentive fees incurred to Mariner. There were no differences in the
calculation of G&A expense for taxable and GAAP income purposes. The
"Efficiency Ratio" is the G&A expense divided by the net interest
income.

`G&A EXPENSE RATIOS
                                           (dollars in thousands)

                                                                    Total G&A
                                                                    Expense/    Total G&A
                                                                     Average     Expense/
                                                                    Interest     Average
                                                                     Earning   Stockholders'
                    Management  Incentive  Other G&A   Total G&A     Assets       Equity    Efficiency
                        Fee        Fee      Expense     Expense     (Actual)     (Actual)      Ratio




For the three
 months
ended:
March 31, 2001       $    150    $  1,219  $    419    $  1,788      0.64%         2.67%       84.97%
March 31, 2000       $     65    $    464  $    261    $    792      0.59%         1.08%       43.77%`

Net Loss and Return on Average Stockholders' Equity

Net
loss was $(2.1) million for the three months ended March 31, 2001 compared to
net loss of $(1.4) million for the three months ended March 31, 2000. Return on
average stockholders' equity, on an actual basis, for the three months
ended March 31, 2001 was (2.50)% compared to (1.89)% for the three months ended
March 31, 2000.

The
table below shows, on an actual basis, for the three months ended March 31, 2001
and March 31, 2000 the Company's net interest income, losses from
investment activities, and G&A expense each as a percentage of average
stockholders' equity, and the return on average stockholders' equity.

`COMPONENTS OF RETURN ON AVERAGE STOCKHOLDERS' EQUITY
                                                                                         Return on
                                                      Losses from                         Average
                                   Net Interest        Investment                      Stockholders'
                                      Income           Activities      G&A Expense        Equity

For the three months ended:
 March 31, 2001                         2.50%            (2.87)%           2.13%           (2.50)%
 March 31, 2000                         2.46%            (3.27)%           1.08%           (1.89)%`

Distributions and Taxable Income

The
Company has elected to be taxed as a REIT under the Code. Accordingly, the
Company intends to distribute substantially all of its taxable income for each
year to stockholders, including income resulting from gains on sales of
securities. For the three months ended March 31, 2001 and March 31, 2000, the
Company did not make any capital distributions or declare any dividends.

If
the plan of liquidation and dissolution is adopted by the Company's
stockholders, the Company currently contemplates that, unless the liquidation
takes longer than 24 months, it will continue to qualify as a REIT prior to the
final distribution of assets. However, in order for the Company to continue to
qualify as a REIT, it must satisfy a number of asset, income and distribution
tests, and there can be no assurances that it will be able to satisfy these
tests throughout the period during which it would liquidate its
assets.

Financial Condition

Investments

As
of March 31, 2001 and December 31, 2000, the Company's portfolio consisted
of:

`AS OF MARCH 31, 2001                 AS OF DECEMBER 31, 2000
                                             --------------------                 -----------------------
                                        Dollar Amount                          Dollar Amount
            SECURITIES                  (IN MILLIONS)        PERCENTAGE        (IN MILLIONS)       PERCENTAGE
            ----------                  -------------        ----------        -------------       ----------
Agency Certificates................        $113.7              90.7%              $275.2              86.5%
Subordinate Interests..............          --                   --                 7.3               2.3%
IOs................................           7.6               6.0%                31.3               9.8%
Mortgage Loans.....................           2.4               1.9%                 2.7               0.8%
Other fixed-income assets..........           1.8               1.4%                 1.8               0.6%
                                     -------------------- ----------------- -------------------- ---------------
   Total...........................        $125.5             100.0%              $318.3             100.0%
                                     ==================== ================= ==================== ===============`

During
the first quarter and continuing into the second quarter of 2001, in
contemplation of either a liquidation or sale of the Company, the Company has
been reducing its portfolio of Mortgage Securities and the leverage financing
used to maintain the portfolio.

At
March 31, 2001 and December 31, 2000, the Company had on its balance sheet $1.8
million and $4.5 million, respectively, of total unamortized discount (which is
the difference between the remaining principal value and the current historical
amortized cost of investments acquired at a price below principal value) and
$0.4 million and $1.2 million, respectively, of total unamortized premium (which
is the difference between the remaining principal amount and the current
historical amortized cost of investments acquired at a price above principal
value) included as part of the amortized cost of the Company's Mortgage
Assets. Unamortized discount balances are accreted as an increase in interest
income over the life of Mortgage Assets purchased at a discount to principal
value and unamortized premium balances are amortized as a decrease in interest
income over the life of Mortgage Assets purchased at a premium to principal
value.

Mortgage
principal repayments received were $14.2 million and $1.1 million for the three
months ended March 31, 2001 and March 31, 2000, respectively. In the event of a
sustained increase in principal prepayment activity with respect to the
Company's Mortgage Assets, the amortization of the overall unamortized net
discount on the Company's Mortgage Assets would be accelerated resulting in
an increase in net interest income.

The
tables below summarize the Company's investments at March 31, 2001 and
December 31, 2000.

`SECURITIES (EXCLUDING IOs)
                                           (dollars in thousands)
                                                               Amortized                 Estimated
                                                                Cost to                 Fair Value
                         Current                                Current                 to Current    Weighted
                        Principal      Net       Amortized     Principal    Estimated    Principal    Average
                         Amount      Discount       Cost        Amount      Fair Value    Amount    Life (Years)

March 31, 2001         $ 117,873   $   (1,422)  $  116,451      98.79%     $   115,498      97.99%       5.8
December 31, 2000      $ 284,768   $   (3,419)  $  281,349      98.80%     $   284,263      99.82%       4.8

                                               MORTGAGE LOANS
                                           (dollars in thousands)
                                                               Amortized                 Estimated
                                                                Cost to                 Fair Value
                         Current                                Current                 to Current    Weighted
                        Principal      Net       Amortized     Principal    Estimated    Principal    Average
                         Amount      Premium        Cost        Amount      Fair Value    Amount    Life (Years)

March 31, 2001         $ 2,386     $   27         $ 2,413        101.15%   $  2,413       101.15%        16.3
December 31, 2000      $ 2,648     $   52         $ 2,700        101.98%   $  2,700       101.98%        17.1`

`IO SECURITIES
                                        (dollars in thousands)
                                                     Amortized                  Estimated
                                                      Cost to                  Fair Value
                             Current                  Current                  to Current    Weighted
                            Notional    Amortized     Notional     Estimated    Notional     Average
                             Amount        Cost        Amount     Fair Value     Amount    Life (Years)

March 31, 2001             $   37,052  $   10,183     27.48%     $    7,549        20.83%       3.9
December 31, 2000          $  204,337  $   37,886     18.54%     $   31,298        15.32%       6.8`

The
table below shows gross and net unrealized gains and (losses) on all
available-for-sale securities in the Company's portfolio at March 31, 2001
and December 31, 2000.

`UNREALIZED GAINS AND LOSSES
                                             (dollars in thousands)
                                                           AT MARCH 31, 2001            AT DECEMBER 31, 2000
                                                           -----------------            --------------------
Unrealized Gain                                              $        2,400               $        6,405
Unrealized Loss                                                      (5,986)                     (10,079)
                                                             ---------------              ---------------
Net Unrealized Loss                                          $       (3,586)              $       (3,674)
                                                             ===============              ===============
Net Unrealized Loss as % of  Investments
  Principal/Notional Amount                                           (2.28)%                      (0.75)%
Net Unrealized Loss as % of Investments Amortized Cost                (2.78)%                      (1.14)%`

The
following table sets forth a schedule of Pass-Through Certificates and Mortgage
Loans owned by the Company at March 31, 2001 and December 31, 2000 classified by
issuer and by ratings categories.

`PASS-THROUGH CERTIFICATES AND MORTGAGE LOANS BY ISSUER AND CREDIT RATING
                                                 (dollars in thousands)

                                             AT MARCH 31, 2001                       AT DECEMBER 31, 2000
                                             -----------------                       --------------------
                                     CARRYING VALUE       PORTFOLIO MIX      CARRYING VALUE       PORTFOLIO MIX
                                     --------------       -------------      --------------       -------------
Agency Certificates..............    $    113,729             90.7%          $   275,181              86.5%
Privately Issued Certificates:
   A Rating......................              --               --                 7,312               2.3%
   BB/Ba Rating and below........           1,770              1.4%                1,770               0.6%
IOs..............................           7,549              6.0%               31,298               9.8%
Mortgage Loans...................           2,413              1.9%                2,700               0.8%
                                     ------------                            -----------
              Total..............    $    125,461                            $   318,261
                                     ============                            ===========`

The
following tables set forth information about the Company's portfolio of
Subordinate Interests, IOs and other fixed-income assets as of March 31, 2001
and December 31, 2000.

`SUBORDINATE INTERESTS
                      (dollars in thousands)

                                   ESTIMATED FAIR VALUE AT
                                   -----------------------
   DESCRIPTION         MARCH 31, 2001             DECEMBER 31, 2000
   -----------         --------------             -----------------
   Commercial          $         --                 $       7,312


                          IO SECURITIES
                      (dollars in thousands)

                                             ESTIMATED FAIR VALUE AT
                                             -----------------------
   DESCRIPTION          COUPON      MARCH 31, 2001         DECEMBER 31, 2000
   -----------          ------      --------------         -----------------
   Residential          Fixed         $  7,549                $     25,112
   Commercial           Fixed                  --             $      6,186


                          OTHER FIXED-INCOME ASSETS
                            (dollars in thousands)

                                     ESTIMATED FAIR VALUE AT
                                     -----------------------
   DESCRIPTION              MARCH 31, 2001         DECEMBER 31, 2000
   -----------              --------------         -----------------
   CBO/CLO                  $  1,770                  $     1,770`

Borrowings

To
date, the Company's debt has consisted entirely of borrowings
collateralized by a pledge of the Company's investments. These borrowings
appear on the balance sheet as repurchase agreements. Substantially all of the
Company's investments are currently accepted as collateral for such
borrowings. The Company has not established, and currently does not intend to
establish, permanent lines of credit. The Company has obtained, and believes it
will be able to continue to obtain, short-term financing in amounts and at
interest rates consistent with the Company's financing objectives. At March
31, 2001 and December 31, 2000, the Company had borrowings outstanding from two
and three lenders, respectively. Such borrowings are generally short-term (up to
30-day terms) and may be renewed by the lender at its discretion.

During
the three months ended March 31, 2001, the term to maturity of the
Company's borrowings has ranged from one to 30 days, with a weighted
average remaining maturity of one day at March 31, 2001 while during the three
months ended March 31, 2000, the term to maturity ranged from one day to 90 days
with a weighted average remaining maturity of 12 days at December 31, 2000. At
March 31, 2001, the Company had outstanding $113.8 million of repurchase
agreements compared to $239.9 million outstanding at December 31, 2000. All of
the Company's borrowings have a cost of funds which adjusts periodically
based on a fixed spread over or under one-month LIBOR. At March 31, 2001 and
December 31, 2000, the weighted average cost of funds for all of the
Company's borrowings was 5.14% and 6.7%, respectively. This decrease was
due primarily to the interest rate setting actions taken by the FRB. At March
31, 2001, investments actually pledged had an estimated fair value of $112.9
million compared to $249.5 million at December 31, 2000.

Liquidity

Liquidity,
which is the Company's ability to turn non-cash assets into cash, allows
the Company to purchase additional securities and to pledge additional assets to
secure existing borrowings should the value of pledged assets decline. Potential
immediate sources of liquidity for the Company include cash balances and unused
borrowing capacity. Unused borrowing capacity varies over time as the market
value of the Company's securities varies. The Company's balance sheet
also generates liquidity on an on-going basis through mortgage principal
repayments and net earnings held prior to payment as dividends. Should the
Company's needs ever exceed these on-going sources of liquidity plus the
immediate sources of liquidity discussed above, management believes that the
Company's securities could in most circumstances be sold to raise cash;
however, if in the unlikely event the Company is forced to liquidate a
significant portion of its Mortgage Assets that qualify as qualified real estate
assets to repay borrowings, there can be no assurance that it will be able to
maintain its REIT status.

The
availability of financing for the Company's portfolio has been stable
during the three months ended March 31, 2001 and 2000.

In
November 1999, the Board of Directors increased the amount of Common Stock
authorized to be repurchased under the Company's stock repurchase program
to $40.0 million. No shares of common stock were repurchased during the three
months ended March 31, 2001. During the three months ended March 31, 2000 the
Company repurchased 25,000 shares of Common Stock for $0.1 million pursuant to
the repurchase program. At March 31, 2001, an aggregate 6,079,766 shares of the
Company's issued common stock had been reacquired at an aggregate cost of
$32.8 million.

Stockholders' Equity

The
Company uses "available-for-sale" accounting treatment for its securities; these
assets are carried on the balance sheet at estimated fair value rather than
historical amortized cost. Based upon such "available-for-sale" accounting
treatment, the Company's stockholders' equity base at March 31, 2001 was $61.4
million, or $4.38 per outstanding common share, compared to $63.4 million, or
$4.52 per outstanding common share, at December 31, 2000. If the Company had
used historical amortized cost accounting, the Company's stockholders' equity
base at March 31, 2001 would have been $65.0 million, or $4.63 per outstanding
common share compared to $67.1 million, or $4.78 per outstanding common share,
at December 31, 2000.

With
the Company's "available-for-sale" accounting treatment, unrealized fluctuations
in fair values of assets do not impact GAAP net income but rather are reflected
on the balance sheet by changing the carrying value of the assets and reflecting
the change in stockholders' equity under "Accumulated Other Comprehensive Income
(Loss)." By accounting for its assets in this manner, the Company hopes to
provide useful information to stockholders and creditors and to preserve
flexibility to sell assets in the future .

As
a result of this mark-to-market accounting treatment, the book value and book
value per share of the Company are likely to fluctuate far more than if the
Company used historical amortized cost accounting. As a result, comparison with
companies that use historical cost accounting for some or all of their balance
sheet may be misleading.

Unrealized
changes in the estimated net fair value of securities have one direct effect on
the Company's potential earnings and dividends: positive mark-to-market changes
will increase the Company's stockholders' equity base and allow the Company to
increase its borrowing capacity while negative changes in the net fair value of
the Company's securities might impair the Company's liquidity position,
requiring the Company to sell assets with the likely result of realized losses
upon sale. "Accumulated Other Comprehensive Income (Loss)" was $(3.6) million,
or (2.78)% of the amortized cost of securities, at March 31, 2001, and $(3.7)
million, or (1.14)% of the amortized cost of securities, at December 31, 2000.

The
table below shows the Company's stockholders' equity capital base as reported
and on a historical amortized cost basis at March 31, 2001 and at December 31,
2000. The historical amortized cost stockholders' equity basis is influenced by
issuances of common stock, the level of GAAP earnings as compared to dividends
declared, and other factors. The GAAP reported stockholders' equity base is
influenced by these factors plus changes in the "Accumulated Other Comprehensive
Income (Loss)" account.

`STOCKHOLDERS' EQUITY
                          (dollars in thousands, except per share data)

                                 Historical                       GAAP       Historical      GAAP
                                 Amortized    Net Unrealized    Reported     Amortized     Reported
                                    Cost         Losses on    Stockholders'     Cost     Stockholders'
                               Stockholders'    Securities       Equity     Stockholders'   Equity
                                   Equity       Available-        Base         Equity     (Book Value
                                    Base         for-Sale     (Book Value)   Per Share     Per Share)

At March 31, 2001                 $65,015        $(3,586)        $61,429       $4.63         $4.38
At December 31, 2000              $67,114        $(3,674)       $ 63,440       $4.78         $4.52`

Capital and Leverage Strategies

The
Company's operations were leveraged approximately 2.9 to 1 at March 31, 2001
compared to 5.2 to 1 at December 31, 2000. During the three months ended March
31, 2001, in contemplation of either a liquidation or sale of the Company, the
Company has been reducing its portfolio of mortgage securities and the leverage
financing used to maintain the portfolio. Consequently, the Company's
equity-to-assets ratio increased to approximately 35% at March 31, 2001 from
approximately 19% at December 31, 2000. Currently, the Company finances most
securities acquisitions primarily by borrowing against or "leveraging" its
existing portfolio and using the proceeds to acquire additional Mortgage Assets.
The Company's target for its equity-to-assets ratio depends on market conditions
and other relevant factors.

The
equity-to-assets ratio is total stockholders' equity as a percentage of total
assets. The Company's total stockholders' equity, for purposes of this
calculation, equals the Company's stockholders' equity determined in accordance
with GAAP. For purposes of calculating the equity-to-assets ratio, the Company's
total assets include the value of the Company's investment portfolio on a
marked-to-market-basis. For purchased Mortgage Assets, the Company obtains
market quotes for its Mortgage Assets from independent broker-dealers that make
markets in securities similar to those in the Company's portfolio. The Board of
Directors has discretion to deviate from or change the Company's indebtedness
policy at any time. However, the Company endeavors to maintain an adequate
capital base to protect against interest rate environments in which the
Company's financing and hedging costs might exceed interest income from its
Mortgage Assets.

Inflation

Virtually
all of the Company's assets and liabilities are financial in nature. As a
result, interest rates are expected to influence the Company's performance
more directly than inflation.

While
changes in interest rates do not necessarily correlate with inflation rates or
changes in inflation rates, interest rates ordinarily increase during periods of
high or increasing inflation and decrease during periods of low or declining
inflation. Accordingly, management believes that the Company's financial
condition or results of operations will be influenced by inflation to the extent
interest rates are affected by inflation.

Item 3.  Quantitative and Qualitative
Disclosures About Market Risk

Market Risk

Market
risk is the exposure to loss resulting from changes in interest rates, foreign
currency exchange rates, commodity prices and equity prices. The primary market
risk to which the Company is exposed is interest rate risk, which is highly
sensitive to many factors, including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors beyond the control of the Company. Changes in the general level of
interest rates can affect the spread between the Company's interest-earning
assets and interest-bearing liabilities. Changes in the level of interest rates
also can affect, among other things, the value of the Company's Mortgage
Securities and its ability to realize gains from the sale of such assets.

The
Company may utilize a variety of financial instruments, including interest rate
swaps, caps, floors and other interest rate exchange contracts, in order to
limit the effects of interest rates on its operations. The use of these types of
derivatives to hedge interest-earning assets and/or interest-bearing liabilities
carries certain risks, including the risk that losses on a hedge position will
reduce the funds available for payments to holders of securities and, indeed,
that such losses may exceed the amount invested in such instruments. The
profitability of the Company may be adversely affected during any period as a
result of changing interest rates.

The
following table quantifies the potential changes in net portfolio value as of
March 31, 2001 should interest rates go up or down (shocked) 200 basis points,
assuming the yield curves of the rate shocks will be parallel to each other. Net
portfolio value is defined as interest-earning assets net of interest-bearing
liabilities. All changes in value are measured as percentage changes from the
projected net portfolio value at the base interest rate scenario. The base
interest rate scenario assumes interest rates at March 31, 2001 and various
estimates regarding prepayment and all activities are made at each level of rate
shock. Actual results could differ significantly from these estimates.

`MARCH 31, 2001
                                            PROJECTED PERCENTAGE CHANGE IN
        CHANGE IN INTEREST RATE                   NET PORTFOLIO VALUE
        -----------------------                   -------------------
+ 200 Basis Points                                      (4.91)%
+ 100 Basis Points                                      (1.57)%
  Base Interest Rate                                      --
- 100 Basis Points                                       0.07%
- 200 Basis Points                                       2.68%`

Asset and Liability Management

Asset and
liability management is concerned with the timing and magnitude of the repricing
of assets and liabilities. The Company's objective is to attempt to control
risks associated with interest rate movements. Methods for evaluating interest
rate risk include an analysis of the Company's interest rate sensitivity "gap,"
which is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period. A
gap is considered positive when the amount of interest-rate sensitive assets
exceeds the amount of interest-rate sensitive liabilities. A gap is considered
negative when the amount of interest-rate sensitive liabilities exceeds the
amount of interest-rate sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income, while
a positive gap would tend to result in an increase in net interest income.
During a period of declining interest rates, a negative gap would tend to result
in an increase in net interest income, while a positive gap would tend to affect
net interest income adversely. Because different types of assets and liabilities
with the same or similar maturities may react differently to changes in overall
market rates or conditions, changes in interest rates may affect net interest
income positively or negatively even if an institution were perfectly matched in
each maturity category.

The
following table sets forth the estimated maturity or repricing of the Company's
interest-earning assets and interest-bearing liabilities at March 31, 2001. The
amounts of assets and liabilities shown within a particular period were
determined in accordance with the contractual terms of the assets and
liabilities, except (i) floating-rate securities are included in the period in
which their interest rates are first scheduled to adjust and not in the period
in which they mature and (ii) fixed-rate Mortgage Assets reflect estimated
prepayments, which were estimated based on analyses of broker estimates.
Management believes that these assumptions approximate actual experience and
considers them reasonable; however, the interest rate sensitivity of the
Company's assets and liabilities in the table could vary substantially if
different assumptions were used or actual experience differs from the historical
experience on which the assumptions are based.

`MARCH 31, 2001
                                          ----------------------------------------------------------------
                                                                      More than 1
                                            Within 3      4 to 12      Year to 3      3 Years
                                             MONTHS        MONTHS        YEARS        AND OVER     TOTAL
                                          ------------  ------------  -----------    ----------   --------
                                                          (dollars in thousands)
Rate-Sensitive Assets:
   Mortgage Assets and
   cash equivalents....................   $   143,771   $       50    $       152   $    28,146   $  172,119

Rate-Sensitive Liabilities:
   Repurchase agreements...............      (113,758)          --             --            --     (113,758)
                                          ------------  ----------    -----------   -----------   ----------

Interest rate sensitivity gap..........   $    30,013   $       50    $       152   $    28,146   $   58,361
                                          ===========   ==========    ===========   ===========   ==========

Cumulative interest rate sensitivity
   gap.................................   $    30,013   $   30,063    $    30,215   $    58,361   $   58,361
                                          ===========   ==========    ===========   ===========   ==========

Cumulative interest rate sensitivity
    gap as a percentage of total
    rate-sensitive assets..............          17.4%        17.5%         17.6%         33.9%        33.9%`

PART II.     OTHER INFORMATION

Item 1     Legal Proceedings

On
October 23, 2000, the Company filed suit in federal court in the Southern
District of New York against Asset Securitization Corp., Nomura Asset Capital
Corp. and Nomura Securities International Inc. alleging that the defendants
defrauded the Company into purchasing over $19.0 million worth of mortgage
pass-through certificates by failing to disclose among other things, that one of
largest loans in the mortgage pool was seriously troubled. On December 8, 2000,
the defendants filed a motion to dismiss the action, which motion is currently
pending. The Company is seeking rescission of the purchase of the mortgage
pass-through certificates.

Item 2     Changes in
Securities and Use of Proceeds

Not applicable.

Item 3     Defaults
Upon Senior Securities

Not applicable.

Item 4      Submission of Matters
to a Vote of Security Holders

None.

Item 5     Other Information

On
March 7, 2001, the Company announced that its Board of Directors had authorized
management and legal counsel to prepare a plan of liquidation and that
concurrent with the preparation of the plan of liquidation, the Board of
Directors has authorized the Company's management to engage a financial advisor
to consider a sale or merger of the Company as an alternative to liquidation.

On
April 25, 2001, the Board of Directors unanimously approved the liquidation and
dissolution of the Company. The Company will submit a plan of liquidation and
dissolution to stockholders for their approval at the annual meeting anticipated
to be held during the next three months. Assuming stockholder approval, in
accordance with the plan of liquidation and dissolution as it is presently
envisioned, the Board of Directors would provide for an initial cash
distribution, after obtaining approval of the Delaware Court of Chancery, of
approximately $3.00 per outstanding common share, with additional cash
distributions resulting from the disposition of the Company's remaining assets
expected to occur within the following three years, after providing for
expenses.

On
May 8, 2001, the Company filed a preliminary proxy statement on Schedule 14A
with the Securities and Exchange Commission. The preliminary proxy statement
seeks stockholder approval for, among other things, the proposed reincorporation
of the Company under the laws of the State of Delaware through the merger of the
Company with and into a newly formed, wholly-owned Delaware subsidiary of the
Company, and the subsequent plan of liquidation and dissolution of the surviving
Delaware entity.

Item 6     Exhibits
and Reports on Form 8-K

(a)  Exhibits

None.

(b)  Reports

On
March 7, 2001, the Company filed a Current Report on Form 8-K pursuant to Item 5
relating to certain announcements by the Company.

On
April 25, 2001, the Company filed a Current Report on a Form 8-K pursuant to
Item 5 relating to certain announcements by the Company.

SIGNATURES

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

| | Dated: May 14, 2001 |  | LASER MORTGAGE MANAGEMENT, INC.
By  /s/ Charles R. Howe II
       Charles R. Howe II
       Chief Financial Officer
       (principal accounting officer)
       (authorized officer of registrant)
| | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

EXHIBIT INDEX

|Exhibit Number
3.1
3.2 | Exhibit
Articles of Incorporation of the
Registrant (Incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-11 (File No. 333-35673))
Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-11 (File No. 333-35673))
|---------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------