1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 30, 1996
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 000-21786
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
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(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 57-0962375
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7909 Parklane Road, Columbia, SC 29223
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (803)741-3000
------------------------------
Indicate by check mark whether the registrant 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 each shorter period that the registrant was
required to file reports) and has been subject to such filing requirements for
the past 90 days.
YES X NO
----- -----
The number of shares of common stock of the Registrant outstanding as of
October 31, 1996, was 19,279,863.
Page 1
Exhibit Index on Pages A to D
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
Form 10-Q for the quarter ended September 30, 1996
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT
PAGE
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PART I. FINANCIAL INFORMATION
- ---------------------------------
Item 1. Financial Statements - (Unaudited)
- -------------------------------------------
Consolidated Balance Sheet 3
Consolidated Statement of Income 4
Consolidated Statement of Changes in Stockholders' Equity 5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of 8
- ---------------------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
PART II. OTHER INFORMATION 21
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ITEM 6. Exhibits and Reports on Form 8-K 21
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SIGNATURES 22
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EXHIBIT INDEX A-D
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED BALANCE SHEET
($ in thousands)
September 30, December 31
1996 1995
------------- -----------
ASSETS (Unaudited)
Cash $ 3,415 $ 2,161
Receivables 59,344 57,893
Mortgage-backed securities 108,604 22,391
Mortgage loans held for sale 634,204 1,012,838
Mortgage servicing rights, net 107,357 99,912
Premises and equipment, net 20,985 16,314
Accrued interest on loans held for sale 4,707 9,464
Other assets 19,072 10,124
--------- -----------
Total assets $ 957,688 $ 1,231,097
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Short-term borrowings $ 732,240 $ 1,005,557
Long-term borrowings 65,530
Accrued expenses 14,048 10,036
Other liabilities 55,720 56,570
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Total liabilities 802,008 1,137,693
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Stockholders' equity
Common stock 193 146
Additional paid-in capital 149,589 84,533
Retained earnings 9,963 10,725
Unearned shares of employee stock ownership plan (4,065) (2,000)
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Total stockholders' equity 155,680 93,404
--------- -----------
Total liabilities and stockholders' equity $ 957,688 $ 1,231,097
========= ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except share information)
(Unaudited)
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ---------- -----------
REVENUES
Interest income $ 49,809 $ 28,357 $ 14,508 $ 17,167
Interest expense (37,029) (22,963) (10,008) (13,995)
---------- ---------- ---------- ----------
Net interest income 12,780 5,394 4,500 3,172
Net gain on sale of mortgage loans 59,348 16,830 19,312 13,733
Gain on sale of mortgage servicing rights 964 6,027 775 188
Loan servicing fees 21,379 17,433 7,520 6,344
Other income 404 1,704 106 446
---------- ---------- ---------- ----------
Total revenues 94,875 47,388 32,213 23,883
---------- ---------- ---------- ----------
EXPENSES
Salary and employee benefits 37,830 18,517 12,315 9,842
Occupancy expense 4,125 1,955 1,485 886
Amortization of mortgage servicing rights 11,064 6,605 3,748 2,458
General and administrative expenses 14,608 7,210 4,858 3,260
---------- ---------- ---------- ----------
Total expenses 67,627 34,287 22,406 16,446
---------- ---------- ---------- ----------
Income before income taxes 27,248 13,101 9,807 7,437
Income tax expense (10,340) (5,012) (3,626) (2,841)
---------- ---------- ---------- ----------
Net income $ 16,908 $ 8,089 $ 6,181 $ 4,596
========== ========== ========== ==========
Weighted average shares 18,015,315 15,476,855 18,965,867 15,387,790
========== ========== ========== ==========
Net income per common share $ 0.94 $ 0.52 $ 0.33 $ 0.30
========== ========== ========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
($ in thousands, except share information)
(Unaudited)
For the Nine Months Ended
September 30, 1995 Common Stock Unearned Shares of
- -------------------------- --------------------- Additional Paid- Retained Employee Stock
Shares Amount In Capital Earnings Ownership Plan Total
---------- ------ ---------------- --------- ------------------ ---------
Balance, December 31, 1994 11,944,304 $ 119 $ 60,157 $ 20,338 $ $ 80,614
Issuance of restricted stock 43,402 * 406 406
Stock dividend adjustment 2,550,258 26 23,805 (23,831)
Loans to ESOP (1,500) (1,500)
Net income 8,088 8,088
---------- ----- --------- --------- -------- ---------
Balance, September 30, 1995 14,537,964 $ 145 $ 84,368 $ 4,595 $ (1,500) $ 87,608
========== ===== ========= ========= ======== =========
For the Nine Months Ended
September 30, 1996
- --------------------------
Balance, December 31, 1995 14,550,462 $ 146 $ 84,533 $ 10,725 $ (2,000) $ 93,404
Issuance of restricted stock 16,410 * 256 256
Net proceeds of public offering 3,426,552 34 47,417 47,451
Stock dividend adjustment 1,261,332 13 17,115 (17,128)
Cash dividend (542) (542)
Shares issued or purchased under dividend
reinvestment and stock
purchase plan and employee
stock purchase plan 25,107 * 157 157
Loans to ESOP (2,365) (2,365)
Shares committed to be
released under ESOP 111 300 411
Net income 16,908 16,908
---------- ----- --------- --------- -------- ---------
Balance, September 30, 1996 19,279,863 $ 193 $ 149,589 $ 9,963 $ (4,065) $ 155,680
========== ===== ========= ========= ======== =========
* Amount less than $1
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in thousands)
(Unaudited)
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Nine Months Ended September 30,
1996 1995
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OPERATING ACTIVITIES:
Net income $ 16,908 $ 8,089
Adjustments to reconcile net
income to cash provided by (used in) operating activities:
Depreciation and amortization 12,980 7,289
Net increase in allowance for estimated foreclosure losses 291
Increase in receivables (1,451) (4,779)
Acquisition of mortgage loans (7,928,301) (4,382,696)
Proceeds from sales of mortgage loans and mortgage-backed securities 8,279,643 3,617,406
Acquisition of mortgage servicing rights (174,941) (71,512)
Sales of mortgage servicing rights 157,532 33,249
Net gain on sales of mortgage loans and servicing rights (60,312) (22,857)
Decrease (increase) in accrued interest on loans 4,757 (4,874)
Increase in other assets (8,948) (2,450)
Increase in accrued expenses and other liabilities 3,162 30,923
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 301,320 (792,212)
- ------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of premises and equipment, net (6,587) (3,730)
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Net cash used in investing activities (6,587) (3,730)
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FINANCING ACTIVITIES:
Proceeds from borrowings 25,933,824 14,119,293
Repayment of borrowings (26,272,671) (13,320,839)
Stock dividend adjustment (1)
Issuance of restricted stock 256 406
Net proceeds of public offering 47,451
Cash dividend (542)
Activity under Employee Stock Ownership Plan, net (1,954) (1,500)
Shares issued under dividend reinvestment and stock purchase plan 157
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Net cash (used in) provided by financing activities (293,479) 797,359
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Net increase in cash 1,254 1,417
Cash, beginning of period 2,161 232
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Cash, end of period $ 3,415 $ 1,649
============================================================================================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
Note 1 - Basis of Presentation:
The financial information included herein should be read in
conjunction with the consolidated financial statements and related
notes of Resource Bancshares Mortgage Group, Inc. (the Company),
included in the Company's December 31, 1995, Annual Report on Form
10-K. Certain financial information, which is normally included in
financial statements prepared in accordance with generally accepted
accounting principles, is not required for interim financial
statements and has been omitted. The accompanying interim
consolidated financial statements are unaudited. However, in the
opinion of management of the Company, all adjustments, consisting of
normal recurring items, necessary for a fair presentation of operating
results for the periods shown have been made. Certain prior period
amounts have been reclassified to conform to current period
presentation.
Prior to April 1, 1995, and in conjunction with the acquisition of
mortgage loans, the Company capitalized as mortgage servicing rights
the portion of the purchase price which represented the premium paid
for the right to service the mortgage loans. The amount capitalized
was subsequently reduced if the mortgage loans were sold at a gain.
Effective April 1, 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 122, "Accounting for Mortgage
Servicing Rights-An Amendment of FASB Statement No. 65." Accordingly,
effective April 1, 1995, and as required by SFAS No. 122, the Company
now allocates the total cost of a whole mortgage loan to the mortgage
servicing right (MSR) and the loan (without servicing rights) based on
relative fair values. The amount capitalized is no longer required to
be reduced if the mortgage loan is sold at a gain. The market value
of the servicing rights for purposes of allocating cost and evaluating
impairments is estimated based upon forward committed delivery prices
allocated thereto under the terms of existing contracts to sell the
underlying MSRs. The Company periodically assesses its capitalized
MSRs for impairment (on a stratified basis) based on the fair values
of those rights. Impairment would be recognized as a valuation
allowance for each impaired stratum.
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Financial Information, the Consolidated Financial Statements of the
Company (and the notes thereto) and the other information included or
incorporated by reference into the Company's 1995 Annual Report on Form 10-K
and the interim Consolidated Financial Statements contained herein. To the
extent that any statement below (or elsewhere in this document) is not a
statement of historical fact and could be considered a forward-looking
statement, the "Risk Factors" discussion set forth in the Company's final
Prospectus dated March 11, 1996 identifies important factors that could cause
actual results to differ materially from those in the forward-looking statement.
THE COMPANY
Resource Bancshares Mortgage Group, Inc. (the Company), was organized
under Delaware law in 1992 to acquire and operate the mortgage banking business
of Resource Bancshares Corporation (RBC), which commenced operations in May
1989. The assets and liabilities of the mortgage banking business of RBC were
transferred to the Company on June 3, 1993, when the Company sold 58% of its
common stock in an initial public offering. As a result, RBC retained a
significant ownership interest in the Company. As of September 30, 1996, RBC
owns approximately 38% of the outstanding common stock of the Company.
The Company is principally engaged in the purchase and origination of
mortgage loans, which it aggregates into mortgage-backed securities issued or
guaranteed by the Federal Home Loan Mortgage Corporation (FHLMC), the Federal
National Mortgage Association (FNMA) and the Government National Mortgage
Association (GNMA). The Company sells the mortgage-backed securities it
creates to institutional purchasers with the rights to service the underlying
loans being retained by the Company. The servicing rights retained are
generally sold separately but may be held for extended periods by the Company.
LOAN PRODUCTION
A summary of loan production by source for the periods indicated is
set forth below:
($ in thousands)
(Unaudited) Nine Months Ended September 30, Quarter Ended September 30,
1996 1995 1996 1995
------------------------------- -------------------------------
Loan Production:
Correspondent Division $ 6,310,198 $ 3,904,614 $ 1,725,329 $ 2,273,338
Wholesale Division 1,077,812 381,777 341,116 243,810
Retail Division 503,654 96,304 193,235 88,457
----------- ----------- ----------- -----------
Total Loan Production $ 7,891,664 $ 4,382,695 $ 2,259,680 $ 2,605,605
=========== =========== =========== ===========
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Average estimated market share for the third quarter of 1996 was 1.23%
as compared to 1.39% for the comparable period of 1995. Historically, the
Company was exclusively focused on purchasing loans through its correspondents.
In order to diversify its sources of loan volume, the Company started a
wholesale operation, which purchased its first loan in May of 1994, and a
retail operation, which originated its first loan in May of 1995. Accordingly,
correspondent operations accounted for 76% of the Company's loan production and
0.94% of total market share for the third quarter of 1996 as compared to 87%
and 1.22% for the third quarter of 1995.
Correspondent Loan Production
A summary of key information relevant to the Company's correspondent
loan production activities is set forth below:
At or For the Quarter Ended
($ in thousands) September 30,
(Unaudited) 1996 1995
--------------------------------
Estimated U. S. 1-4 Family Mortgage Originations
Statistics (1)
U. S. 1-4 Family Mortgage Originations $ 184,000,000 $ 187,000,000
Adjustable Rate Mortgage Market Share 32.00% 23.00%
Company Information
Correspondent Loan Production $ 1,725,329 $ 2,273,338
Estimated Market Share of Correspondent Division 0.94% 1.22%
Approved Correspondents 849 691
(1) Source: Mortgage Bankers Association of America, Economics
Department.
The 24% decrease in correspondent loan production to $1.7 billion for
the third quarter of 1996 from $2.3 billion for the third quarter of 1995 was
primarily due to the nationwide decline in mortgage production which is related
to the mortgage interest rate environment, and the increase in the adjustable
rate mortgage (ARM) share of the U.S. market to an estimated 32% for the third
quarter of 1996 from an estimated 23% for the third quarter of 1995. The
Company is primarily focused on purchase and origination of fixed rate 1-4
family residential mortgage loans. As such, the Company is competitively
disadvantaged in economic environments which tend to favor originations of ARMs
(generally higher long-term fixed rate and steeper yield curve environments
tend to favor ARM originations) over fixed rate mortgages. The number of
approved correspondents increased by 158 or 23% to 849 at September 30, 1996,
from 691 at September 30, 1995.
Wholesale Loan Production
A summary of key information relevant to the Company's wholesale
production activities is set forth below:
($ in thousands) At or For the Nine months At or For the Quarter
(Unaudited) Ended September 30, Ended September 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- --------- --------- ---------
Wholesale Loan Production $1,077,812 $ 381,777 $ 341,116 $ 243,810
Wholesale Division Direct
Operating Expenses $ 6, 363 $ 2,093 $ 2,107 $ 1,097
Approved Brokers 2,147 819 2,147 819
Number of Branches 12 10 12 10
Number of Employees 118 85 118 85
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The $97 million increase in wholesale loan production to $341 million
for the third quarter of 1996 from $244 million for the third quarter of 1995
relates to the Company's expansion into these activities which began in May of
1994. That is, during the third quarter of 1995, this division was still in
the latter phase of its initial startup stage. Similarly, the numbers of
approved brokers, branches and employees has also increased significantly.
Retail Loan Production
A summary of key information relevant to the Company's retail
production activities that commenced in May of 1995 is set forth below:
($ in thousands) At or For the Nine months At or For the Quarter
(Unaudited) Ended September 30, Ended September 30,
------------------------- ------------------------
1996 1995 1996 1995
--------- --------- --------- -------
Retail Loan Production $ 503,654 $ 96,304 $ 193,235 $88,457
Retail Division Operating Expenses $ 11,785 $ 4,293 $ 3,953 $ 3,104
Number of Branches 6 6 6 6
Number of Employees 201 148 201 148
LOAN SERVICING
A summary of key information relevant to the Company's loan servicing
activities is set forth below:
($ in thousands) At or For the Nine months At or For the Quarter
(Unaudited) Ended September 30, Ended September 30,
-------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Underlying Unpaid Principal Balances:
Beginning Balance $ 5,562,930 $ 4,039,847 $ 5,926,199 $ 4,560,740
Loan Production (net of servicing
released production) 7,839,837 3,809,034 2,234,824 2,347,140
Net Change in Work-in-Process 297,635 20,179 231,201 4,560
Bulk Acquisitions 1,354,592 334,346 1,293,705
Sales of Servicing (7,744,335) (1,556,530) (2,778,861) (605,845)
Paid-In-Full Loans (331,688) (179,104) (85,349) (120,027)
Amortization, Curtailments, and Others, net (438,897) (873,350) (281,645) (592,146)
----------- ----------- ----------- -----------
Ending Balance $ 6,540,074 $ 5,594,422 $ 6,540,074 $ 5,594,422
=========== =========== =========== ===========
Loan Servicing Fees $ 21,379 $17,433 $7,520 $6,344
Cash Operating Expenses 56,563 27,682 18,658 13,988
Coverage Ratio 38% 63% 40% 45%
Average Underlying Unpaid Principal Balances $ 6,298,846 $ 4,593,482 $ 6,576,798 $ 5,168,528
Weighted Average Note Rate 7.91% 7.87% 7.91% 7.87%
Weighted Average Servicing Fee 0.39% 0.42% 0.39% 0.42%
Delinquency (30+ days) including bankruptcies 3.73% 3.53% 3.73% 3.53%
and foreclosures
Number of Servicing Division Employees 128 102 128 102
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The $1.4 billion or 27% increase in the average underlying unpaid
principal balance of mortgage loans being serviced for the third quarter of
1996 as compared to the third quarter of 1995 is primarily related to the
Company's acquisition of approximately $1.3 billion of servicing rights during
the third quarter of 1996.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO THE
NINE MONTHS ENDED SEPTEMBER 30, 1995
SUMMARY
Total revenues of the Company increased 100% to $94.9 million for the
first nine months of 1996 as compared to $47.4 million for the first nine
months of 1995. The $47.5 million increase in revenues was primarily due to a
$7.4 million increase in net interest income and a $37.5 million increase in
gains on sales of loans and servicing rights, which were partially offset by a
$28.9 million increase in operating expenses (exclusive of amortization and
taxes). The increase in net interest income is primarily due to the improved
net interest margins associated with the steeper 1996 yield curve environment
as well as increased year-to-date volume of loans originated and purchased.
The increase in gains on sales of loans and servicing rights is related to
improved production margins and increased loan production volumes for the first
nine months of 1996. The increase in operating expenses is primarily
attributable to increased costs associated with increased loan production and
loan servicing volumes and increased costs associated with expansion into
wholesale and retail operations. Direct costs related to the Company's
expansion into retail and wholesale operations account for approximately $7.5
million and $4.3 million, or 22% and 13%, respectively, of the total increase
in operating expenses for the first nine months of 1996 compared to the same
period of the prior year.
The following sections discuss the components of the Company's results
of operations in greater detail.
NET INTEREST INCOME
The following table analyzes net interest income in terms of rate and
volume variances of the interest spread for the nine months ended September 30,
1996, and 1995 (the difference between interest rates earned on loans and
mortgage-backed securities and interest rates paid on interest-bearing sources
of funds). All dollars are in thousands; the information presented is
unaudited.
Variance
Average Volume Average Rate Interest Attributable to
- ------------------------------------- --------------------- ---------------------
1996 1995 1996 1995 1996 1995 Variance Rate Volume
- ------------------------------------- ---------------------------------------------------------
INTEREST INCOME
---------------
Mortgages Held for Sale and
$ 864,901 $ 475,592 7.68% 7.95% Mortgage-Backed Securities $ 49,809 $ 28,357 $ 21,452 $ (1,760) $ 23,212
- ------------------------------------- ---------------------------------------------------------
INTEREST EXPENSE
----------------
$ 321,643 $ 225,935 4.60% 4.98% Warehouse Line $ 11,071 $ 8,410 $ 2,661 (901) $ 3,562
516,397 225,185 5.64% 6.22% Gestation Line 21,788 10,474 11,314 (2,231) 13,545
20,486 40,375 8.19% 7.83% Servicing Secured Line 1,256 2,364 (1,108) 57 (1,165)
20,363 2,561 5.87% 6.26% Servicing Receivable Line 894 120 774 (60) 834
10,475 4,891 8.50% 8.75% Other Borrowings 667 320 347 (19) 366
Facility Fees & Other Charges 1,353 1,275 78 78
- ------------------------------------- ---------------------------------------------------------
$ 889,364 $ 498,947 5.56% 6.15% Total Interest Expense $ 37,029 $ 22,963 $ 14,066 $ (3,154) $ 17,220
- ------------------------------------- ---------------------------------------------------------
2.12% 1.80% Net Interest Income $ 12,780 $ 5,394 $ 7,386 $ 1,394 $ 5,992
============== =========================================================
Net interest income increased 137% to $12.8 million for the first nine
months of 1996 compared to $5.4 million for the first nine months of 1995. The
$7.4 million increase in net interest income is primarily attributable to the
82% increase in the average volume of mortgages held for sale and
mortgage-backed securities for the first nine months of 1996 from that of the
first nine months of 1995. Net interest income
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also increased due to an increase in the interest-rate spread of 32 basis
points to 212 basis points for 1996 as compared to 180 basis points for 1995.
NET GAINS ON SALES OF MORTGAGE LOANS AND MORTGAGE SERVICING RIGHTS
Net gains on sales of mortgage loans and mortgage servicing rights
increased $37.5 million to $60.3 million for the first nine months of 1996 as
compared to $22.9 million for the first nine months of 1995. As further
discussed below, this increase is primarily due to higher volumes of mortgage
loans and mortgage servicing rights sold during the first nine months of 1996
compared to the first nine months of 1995, as well as the effects of increased
profit margins on sales.
Net Gain on Sale of Mortgage Loans
A reconciliation of the effects of SFAS No. 91, SFAS No. 65, and SFAS
No. 122 on the gain on sale of mortgage loans for the periods indicated
follows:
($ in thousands) For the Nine Months Ended September 30,
(Unaudited) ---------------------------------------
1996 1995
--------------- -----------------
Gross proceeds on sales of mortgage loans $ 8,279,643 $ 3,617,406
Initial unadjusted acquisition cost of mortgage
loans sold 8,271,259 3,617,662
----------- -----------
Unadjusted gain (loss) on sale of mortgage loans 8,384 (256)
Administrative fees collected 26,921 8,904
----------- -----------
Unadjusted aggregate margin 35,305 8,648
Acquisition basis allocated to mortgage servicing
rights (SFAS No. 122) 24,338 9,168
Gains deferred to reduce mortgage servicing
rights (SFAS No. 65) (922)
Net change in deferred administrative fees
(SFAS No. 91) (295) (64)
----------- -----------
Net gain on sale of mortgage loans $ 59,348 $ 16,830
=========== ===========
The Company sold loans during the first nine months of 1996 with an
aggregate unpaid principal balance of $8.3 billion compared to sales of $ 3.6
billion for the first nine months of 1995. The amount of proceeds received on
sales of mortgage loans exceeded the initial unadjusted acquisition cost of the
loans sold by $8.4 million (10 basis points) for the first nine months of 1996
as opposed to a $0.3 million loss (-1 basis point) for the first nine months of
1995. The Company received administrative fees of $26.9 million (33 basis
points) on these loans during the first nine months of 1996 and $8.9 million
(25 basis points) during the first nine months of 1995. The Company had
allocated $24.3 million to basis in mortgage servicing rights for loans sold in
the first nine months of 1996 as compared to $9.2 million allocated to loans
sold in the first nine months of 1995. This is a result of the adoption of
SFAS No. 122 for loans acquired after April 1, 1995. Also, there was no gain
deferred against mortgage servicing rights during the first nine months of 1996
due to the adoption of SFAS No. 122, while $0.9 million was deferred during the
comparable period of 1995. As a result, net gain on sale of mortgage loans
increased to $59.3 million for the first nine months of 1996 versus $16.8
million for 1995. This increase was primarily due to the 129% increase in the
volume of mortgage loans sold, as well as a 19 basis-point increase in the
unadjusted aggregate margin from 24 basis points for the first nine months of
1995 to 43 basis points for the first nine months of 1996.
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Although implementation of SFAS No. 122 accounts for a significant
portion of the increase in the amount reported as net gain on sale of mortgage
loans, implementation also accounts for a significant portion of the decrease
in the amount reported as gain on sale of mortgage servicing rights, as
discussed below.
Gain on Sale of Mortgage Servicing Rights
A reconciliation of the components of gain on sale of mortgage servicing rights
for the periods indicated follows:
($ in thousands) For the Nine Months Ended September 30,
(Unaudited) ---------------------------------------
1996 1995
---------------- -----------------
Underlying unpaid principal balances of
mortgage loans on which servicing rights
were sold during the period $ 7,751,124 $ 1,665,500
=========== ===========
Gross proceeds from sales of mortgage
servicing rights $ 157,532 $ 33,249
Initial acquisition cost, net of amortization 132,628 28,083
----------- -----------
Unadjusted gain on sale of mortgage
servicing rights 24,904 5,166
Acquisition basis allocated from mortgage
loans, net of amortization (SFAS No. 122) (23,940) (2,745)
Previously deferred administrative fees and gain
on sale of mortgage loans recognized (SFAS
No. 65 and No. 91) 3,606
----------- -----------
Gain on sale of mortgage servicing rights $ 964 $ 6,027
=========== ===========
During the first nine months of 1996, the Company completed 26 sales
of mortgage servicing rights representing $7.8 billion of underlying unpaid
principal mortgage loan balances. This compares to 10 sales of mortgage
servicing rights representing $1.7 billion of underlying unpaid principal
mortgage loan balances in the first nine months of 1995. Unadjusted gain on
sale of mortgage servicing rights was $24.9 million for the first nine months
of 1996, up from $5.2 million for 1995. The Company reduced this unadjusted
gain by $23.9 million in the first nine months of 1996 due to the adoption of
SFAS No. 122 effective April 1, 1995. Similarly, prior to adoption of SFAS No.
122, the Company recognized $3.6 million in previously deferred administrative
fees and gain on sales of mortgage loans. As discussed above, SFAS No. 122
does not require that gains on sale of mortgage loans or administrative fees be
deferred as a reduction of basis in mortgage servicing rights. Thus, the $5.1
million decline in gain on sale of mortgage servicing rights is primarily
related to adoption of SFAS No. 122.
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NET SERVICING MARGIN
Loan servicing fees were $21.4 million for the first nine months of
1996, compared to $17.4 million for the first nine months of 1995, an increase
of 23%. This increase is primarily related to an increase in the average
aggregate underlying unpaid principal balance of mortgage loans serviced to
$6.3 billion during the first nine months of 1996 from $4.6 billion during the
first nine months of 1995, an increase of 37%. Similarly, amortization of
mortgage servicing rights also increased to $11.1 million during the first nine
months of 1996 from $6.6 million during the first nine months of 1995, an
increase of 68%. The increase in amortization is primarily attributed to the
growth in the average balance of the mortgage loans serviced. As a result, net
servicing margin decreased to $10.3 million during the first nine months of
1996, compared to $10.8 million during the first nine months of 1995, a
decrease of 5%.
Included in loan servicing fees for the first nine months of 1996 and
the first nine months of 1995 are subservicing fees received by the Company of
$858,000 and $560,000, respectively. The subservicing fees are associated with
temporary subservicing agreements between the Company and purchasers of
mortgage servicing rights.
The following table summarizes the net servicing margin for the first
nine months of 1996 and 1995:
($ in thousands) For the Nine Months Ended September 30,
(Unaudited) -----------------------------------------
1996 1995
----------- -----------
Loan servicing fees $ 21,379 $ 17,433
Amortization of mortgage servicing rights 11,064 6,605
----------- -----------
Net servicing margin $ 10,315 $ 10,828
=========== ===========
Average underlying unpaid principal balance
of mortgage loans serviced $ 6,298,846 $ 4,593,482
=========== ===========
OTHER INCOME
Other income decreased by $1.3 million during the first nine months of
1996 compared to the first nine months of 1995, primarily due to the
prospective recharacterization of certain loan related gain and loss amounts in
connection with the implementation of SFAS No. 122.
EXPENSES
The $28.9 million increase in operating expenses (excluding
amortization of mortgage servicing rights) was primarily comprised of a $19.3
million, or 104% increase in salary and employee benefits; as well as a $7.4
million, or 103% increase in general and administrative expenses. The Company
increased its employee headcount by 664 from 364 at the beginning of 1995, to
1,028 at September 30, 1996. The increased employee headcount, associated
increase in salary and employee benefit costs, as well as additional general
and administrative costs was necessitated by the Company's increased loan
production and average loan servicing volume, which were up 80% and 37%,
respectively. Employee headcount attributable to expansion of the wholesale
division and establishment of the retail division accounted for 304 of the total
664 increase and for $11.8 million of the total $33.3 million increase in
operating expenses for the comparative nine month period.
14
15
INCOME TAX EXPENSE
Income tax expense includes both federal and state income taxes. The
effective tax rates for 1996 and 1995 were 37.9% and 38.3%, respectively.
Income tax expense increased by 106% to $10.3 million for the first nine months
of 1996 from $5.0 million for the first nine months of 1995 due to the
above-described factors that resulted in a 108% or $14.1 million increase in
income before taxes.
RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1996, COMPARED TO THE
QUARTER ENDED SEPTEMBER 30, 1995
SUMMARY
Total revenues of the Company increased 35% to $32.2 million for the
third quarter of 1996 as compared to $23.9 million for the third quarter of
1995. The $8.3 million increase in revenues was primarily due to a $1.3
million increase in net interest income and a $6.2 million increase in gains on
sales of loans and servicing rights, which were partially offset by a $4.7
million increase in operating expenses (exclusive of amortization and taxes).
The increase in net interest income is primarily due to improved net interest
margins associated with the steeper 1996 yield curve environment. The increase
in gains on sales of loans and servicing rights is related to the Company's
improved production margins. The increase in operating expenses is primarily
attributable to increased costs associated with increased loan servicing
volumes and increased costs associated with expansion in the wholesale and
retail operations. Direct costs related to the Company's expansion in the
retail and wholesale operations account for approximately $0.8 million and $1.0
million, or 14% and 17%, respectively, of the total increase in operating
expenses for the third quarter of 1996 compared to the same period of the prior
year.
The following sections discuss the components of the Company's results
of operations in greater detail.
NET INTEREST INCOME
The following table analyzes net interest income in terms of rate and
volume variances of the interest spread for the three months ended September
30, 1996, and 1995 (the difference between interest rates earned on loans and
mortgage-backed securities and interest rates paid on interest-bearing sources
of funds). All dollars are in thousands; the information presented is
unaudited.
Variance
Average Volume Average Rate Interest Attributable to
- ------------------------------------- --------------------- ---------------------
1996 1995 1996 1995 1996 1995 Variance Rate Volume
- ------------------------------------- ---------------------------------------------------------
INTEREST INCOME
---------------
Mortgages Held for Sale and
$ 729,538 $ 868,844 7.95% 7.90% Mortgage-Backed Securities $ 14,508 $ 17,167 $ (2,659) $ 93 $ (2,752)
- ------------------------------------- ---------------------------------------------------------
INTEREST EXPENSE
----------------
$ 291,280 $ 351,177 4.36% 5.34% Warehouse Line $ 3,192 $ 4,731 $ (1,539) $ (732) $ (807)
417,834 478,163 5.64% 6.16% Gestation Line 5,923 7,425 (1,502) (566) (936)
58,532 7.69% Servicing Secured Line 1,134 (1,134) (1,134)
16,560 7,600 5.98% 6.29% Servicing Receivable Line 249 120 129 (13) 142
978 13,731 8.95% 9.25% Other Borrowings 22 320 (298) (298)
Facility Fees & Other Charges 622 265 357 357
- ------------------------------------- ---------------------------------------------------------
$ 726,652 $ 909,203 5.47% 6.10% Total Interest Expense $ 10,008 $ 13,995 $ (3,987) $ (1,311) $ (2,676)
- ------------------------------------- ---------------------------------------------------------
2.48% 1.80% Net Interest Income $ 4,500 $ 3,172 $ 1,328 $ 1,404 $ (76)
============== =========================================================
15
16
Net interest income increased 42% to $4.5 million for the third
quarter of 1996 compared to $3.2 million for the third quarter of 1995. The
$1.3 million increase in net interest income is primarily attributable to the
20% decrease in the average volume of debt for the third quarter of 1996 from
that of the third quarter of 1995. The interest rate spread increased by 68
basis points to 248 basis points for 1996 as compared to 180 basis points for
1995. The Company's long-term mortgages and mortgage-backed securities are
generally sold and replaced within 30 to 35 days. Accordingly, the Company
generally borrows at rates based upon short-term indices, while its earning
asset yields are based upon long-term rate indices. Thus, the increase in
interest-rate spread was primarily the result of larger spreads between
long-term and short-term rates in the third quarter of 1996 versus the third
quarter of 1995.
NET GAINS ON SALES OF MORTGAGE LOANS AND MORTGAGE SERVICING RIGHTS
Net gains on sales of mortgage loans and mortgage servicing rights
increased $6.2 million to $20.1 million for the third quarter of 1996 as
compared to $13.9 million for the third quarter of 1995. As further discussed
below, this increase is primarily due to higher volumes of mortgage servicing
rights sold during the third quarter of 1996 compared to the third quarter of
1995 and the effects of improved profit margins on sales.
Net Gain on Sale of Mortgage Loans
A reconciliation of the effects of SFAS No. 91, SFAS No. 65, and SFAS
No. 122 on the gain on sale of mortgage loans for the periods indicated follows:
($ in thousands) For the Quarter Ended September 30,
(Unaudited) ------------------------------------
1996 1995
----------- -----------
Gross proceeds on sales of mortgage loans $ 2,223,612 $ 2,382,668
Initial unadjusted acquisition cost of mortgage
loans sold $ 2,221,287 2,382,342
----------- -----------
Unadjusted gain (loss) on sale of mortgage loans 2,325 326
Administrative fees collected 8,211 5,929
----------- -----------
Unadjusted aggregate margin 10,536 6,255
Acquisition basis allocated to mortgage servicing
rights (SFAS No. 122) 8,757 7,520
Net change in deferred administrative fees
(SFAS No. 91) 19 (42)
----------- -----------
Net gain on sale of mortgage loans $ 19,312 $ 13,733
=========== ===========
The Company sold loans during the third quarter of 1996 with an
aggregate unpaid principal balance of $2.2 billion compared to sales of $2.4
billion for the third quarter of 1995. The amount of proceeds received on
sales of mortgage loans exceeded the initial unadjusted acquisition cost of the
loans sold by $2.3 million (10 basis points) for the third quarter of 1996 as
compared to $0.3 million (1 basis point) for the third quarter of 1995. The
Company received administrative fees of $8.2 million (37 basis points) on these
loans during the third quarter of 1996 and $5.9 million (25 basis points)
during the third quarter of 1995. The Company had allocated $8.8 million to
basis in mortgage servicing rights for loans sold in the third quarter of 1996
as compared to $7.5 million allocated to loans sold in the third quarter of
1995. This is a result of the adoption of SFAS No. 122 for loans acquired after
April 1, 1995. As a result, net gain on sale of mortgage loans increased to
$19.3 million for the third quarter of 1996 versus $13.7 million for the third
quarter of 1995. This increase was primarily due to the 21 basis-point
increase in the aggregate unadjusted margin from 26 basis points for the third
quarter of 1995 to 47 basis points for the third quarter of 1996.
16
17
Gain on Sale of Mortgage Servicing Rights
A reconciliation of the components of gain on sale of mortgage servicing rights
for the periods indicated follows:
($ in thousands) For the Quarter Ended September 30,
(Unaudited) -----------------------------------
1996 1995
-------------- ------------
Underlying unpaid principal balances of mortgage
loans on which servicing rights were sold
during the period $ 2,778,998 $ 749,178
=========== =========
Gross proceeds from sales of mortgage servicing rights $ 54,977 $ 16,655
Initial acquisition cost, net of amortization 42,592 13,722
----------- ---------
Unadjusted gain on sale of mortgage servicing rights 12,385 2,933
Acquisition basis allocated from mortgage loans,
net of amortization (SFAS No. 122) (11,610) (2,745)
----------- ---------
Gain on sale of mortgage servicing rights $ 775 $ 188
=========== =========
During the third quarter of 1996, the Company completed 10 sales of
mortgage servicing rights representing $2.8 billion of underlying unpaid
principal mortgage loan balances. This compares to four sales of mortgage
servicing rights representing $0.7 billion of underlying unpaid principal
mortgage loan balances in the third quarter of 1995. Unadjusted gain on sale
of mortgage servicing rights was $12.4 million for the third quarter of 1996,
up from $2.9 million for 1995. The Company reduced this unadjusted gain by
$11.6 million in the third quarter of 1996 due to the adoption of SFAS No. 122
effective April 1, 1995.
NET SERVICING MARGIN
Loan servicing fees were $7.5 million for the third quarter of 1996,
compared to $6.3 million for the third quarter of 1995, an increase of 19%.
This increase is primarily related to an increase in the average aggregate
underlying unpaid principal balance of mortgage loans serviced to $6.6 billion
during the third quarter of 1996 from $5.2 billion during the third quarter of
1995, an increase of 27%. Similarly, amortization of mortgage servicing rights
also increased to $3.7 million during the third quarter of 1996 from $2.5
million during the third quarter of 1995, an increase of 52%. The increase in
amortization is primarily attributed to the growth in the average balance of
the mortgage loans serviced. As a result, net servicing margin remained
constant at $3.8 million during the third quarter of 1996, compared to $3.9
million during the third quarter of 1995.
Included in loan servicing fees for the third quarter of 1996 and the
third quarter of 1995 are subservicing fees received by the Company of $180,000
and $187,000, respectively. The subservicing fees are associated with
temporary subservicing agreements between the Company and purchasers of
mortgage servicing rights.
17
18
The following table summarizes the net servicing margin for the third
quarters of 1996 and 1995:
($ in thousands) For the Quarter Ended September 30,
(Unaudited) -----------------------------------
1996 1995
----------- -----------
Loan servicing fees $ 7,520 $ 6,344
Amortization of mortgage servicing rights 3,748 2,458
----------- -----------
Net servicing margin $ 3,772 $ 3,886
=========== ===========
Average underlying unpaid principal balance of
mortgage loans serviced $ 6,576,798 $ 5,168,528
=========== ===========
OTHER INCOME
Other income decreased by approximately $0.3 million during the third
quarter of 1996 compared to the third quarter of 1995, primarily due to the
prospective recharacterization of certain loan related gain and loss amounts in
connection with the implementation of SFAS No. 122.
EXPENSES
The $4.7 million increase in operating expenses (excluding
amortization of mortgage servicing rights) was primarily comprised of a $2.5
million, or 25% increase in salary and employee benefits; as well as a $1.6
million or 49% increase in general and administrative expenses. Through the
end of the third quarter of 1996, the Company increased its employee headcount
by 181 from 847 at September 30, 1995, to 1,028 at September 30, 1996. The
increased employee headcount, associated increase in salary and employee
benefit costs, as well as additional general and administrative costs, was
necessitated by the Company's average loan servicing volume which was up 27%.
Employee headcount attributable to expansion of the wholesale division and
establishment of the retail division accounted for 86 of the total 181 increase
and for $1.9 million of the total $6.0 million increase in operating expenses.
INCOME TAX EXPENSE
Income tax expense includes both federal and state income taxes. The
effective tax rates for 1996 and 1995 were 37.0% and 38.2%, respectively.
Income tax expense increased by 28% to $3.6 million for the third quarter of
1996 from $2.8 million for the third quarter of 1995 due to the above-described
factors that resulted in a 32% or $2.4 million increase in income before taxes.
18
19
FINANCIAL CONDITION
During the latter part of March 1996, the Company completed a public
offering of 3,842,961 shares of common stock priced at $14.50 per share. The
Company sold 2,530,000 shares in the offering, while certain stockholders sold
the remaining 1,312,961 shares. In a concurrent private placement, the Company
sold an additional 896,552 shares of common stock at the offering price of
$14.50 per share to RBC, which owned approximately 41% of the Company's
outstanding common stock prior to the public offering and private placement and
approximately 38% immediately thereafter. Net proceeds to the Company after
underwriting discounts and offering expenses totaled approximately $47.4
million. Proceeds of the offering were used to repay indebtedness to RBC and
were otherwise used for other general corporate purposes, including the
continued growth and general expansion of the Company's business activities.
During the third quarter of 1996, the Company continued to establish
new correspondent relationships. The number of correspondents approved to do
business in the Company's correspondent lending program increased to 849 at
September 30, 1996 from 803 at June 30, 1996.
The Company continued expanding during the third quarter of 1996.
There were approximately 2,147 wholesale brokers approved to do business with
the Company at September 30, 1996 as compared to approximately 1,694 at June
30, 1996.
The Company's retail division, operating under the name of Intercounty
Mortgage, Inc., employed 201 people at September 30, 1996 with offices in New
York (4), New Jersey and Pennsylvania at September 30, 1996.
The Company continues to face the same challenges as other companies
within the mortgage banking industry and as such is not immune from significant
volume declines precipitated by a rise in interest rates or other factors
beyond the Company's control. Management of the Company recognizes these
challenges and continues to manage the Company accordingly.
Mortgage loans held for sale and mortgage-backed securities totaled
$742.8 million at September 30, 1996 versus $693.3 million at June 30, 1996, an
increase of 7%. The Company's servicing portfolio (exclusive of loans under
subservicing agreements) increased to $6.5 billion at September 30, 1996 from
$5.9 billion at June 30, 1996, an increase of 10%.
Short-term borrowings, which are the Company's primary source of
funds, totaled $732.2 million at September 30, 1996, compared to $684.0 million
at June 30, 1996, an increase of 7%. The increase in the balance outstanding
at September 30, 1996, resulted from increased funding requirements related to
an increase in the balance of mortgage loans held for sale and mortgage-backed
securities at September 30, 1996. At September 30, 1996 there are no long-term
borrowings.
Other liabilities totaled $55.7 million as of September 30, 1996,
compared to the June 30, 1996, balance of $45.3 million, an increase of $10.4
million or 23%. The increase in other liabilities resulted primarily from a
decrease at month end in the volume of loans acquired through certain
correspondent funding programs of the Company.
19
20
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash flow requirement involves the funding of
loan production, which is met primarily through external borrowings. The
Company has entered into a 364-day, $570 million warehouse line of credit
provided by a syndicate of unaffiliated banks which expires in July 1997. The
credit agreement includes covenants requiring the Company to maintain (i) a
minimum net worth of $130 million, plus net income subsequent to July 31, 1996
and capital contributions and minus permitted dividends, (ii) a ratio of total
liabilities to net worth of not more than 8.0 to 1.0, excluding debt incurred
pursuant to gestation and repurchase financing agreements, (iii) its
eligibility as a servicer of GNMA, FHA, VA, FNMA and FHLMC mortgage loans and
(iv) a mortgage servicing rights portfolio with an underlying unpaid principal
balance of at least $4 billion. The provisions of the agreement also restrict
the Company's ability (i) to pay dividends in any fiscal quarter which exceed
50% of the Company's net income for the quarter or (ii) to engage significantly
in any type of business unrelated to the mortgage banking business and the
servicing of mortgage loans.
The Company has also entered into an uncomitted gestation financing
arrangement. The interest rate on funds borrowed pursuant to the gestation
line is based on a spread over the Federal Funds rate. The gestation line has
a funding limit of $1 billion.
Additionally, the Company entered into a $200 million, 364-day term
revolving credit facility with a syndicate of unaffiliated banks. An $80
million portion of the revolver facility converts on July 31,1997, into a
four-year term loan and the facility is secured by the Company's servicing
portfolio designated as "available-for sale". A $70 million portion of the
revolver facility matures on July 31, 1997 and is secured by the Company's
servicing portfolio designated as "held-for-sale". A $50 million portion of the
revolver facility matures on July 31, 1997 and is secured by a first-priority
security interest in receivables on servicing rights sold. The facility
includes covenants identical to those described above with respect to the
warehouse line of credit.
The Company entered into a $6.6 million, 364-day revolving credit
facility secured by certain real property of the Company. The facility
included covenants substantially the same as those described above with respect
to the warehouse line of credit. This revolving credit facility expired in the
third quarter of 1996.
The Company was in compliance with the covenants at September 30,
1996. Although management anticipates continued compliance, there can be no
assurance that the Company will be able to comply with the debt covenants
specified for each of these financing agreements. Failure to comply could
result in the loss of the related financing.
Beginning in June 1995, the Company has from time to time borrowed up
to $19 million on a short-term unsecured basis from RBC. Interest on these
borrowings is at the prime rate. There was no indebtedness to RBC at September
30, 1996. The Company has no plans in the foreseeable future to borrow from
RBC.
20
21
PART II. OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
- (A) A LIST OF THE EXHIBITS REQUIRED BY THIS FORM 10-Q, ALONG WITH
THE EXHIBIT INDEX CAN BE FOUND ON PAGES A TO D FOLLOWING THE
SIGNATURE PAGE.
- (B) THERE WERE NO REPORTS ON FORM 8-K FILED DURING THIS REPORTING
PERIOD.
21
22
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
----------------------------------------
(Registrant)
/s/ Steven F. Herbert
----------------------------
Steven F. Herbert
Executive Vice President and
Chief Financial Officer
(signing in the capacity of (i) duly authorized
officer of the registrant and (ii) principal
financial officer of the registrant)
DATED: November 6, 1996
22
23
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
3.1 Restated Certificate of Incorporation of the Registrant incorporated by reference to
Exhibit 3.3 of the Registrant's Registration No. 33-53980 *
3.2 Amended and Restated Bylaws of the Registrant incorporated by reference to
Exhibit 3.4 of the Registrant's Registration No. 33-53980 *
4.1 Specimen Certificate of Registrant's Common Stock incorporated by reference *
to Exhibit 4.1 of the Registrant's Registration No. 33-53980
4.2 Second Amended and Restated Secured Revolving/Term Credit Agreement dated
as of July 31, 1996, between the Registrant and the Banks Listed on the Signature
Pages Thereof, Bank One, Texas, National Association, First Bank National
Association, NationsBank of Texas, N.A. and Texas Commerce Bank,
National Association, as Co-agents and The Bank of New York as Agent and
Collateral Agent -----
4.3 Second Amended and Restated Revolving/Term Security Collateral Agency Agreement
dated as of July 31, 1996, between the Registrant and The Bank of New York as Collateral
Agent and Secured Party -----
10.1 Employment Agreement dated June 3, 1993, between the Registrant and *
David W. Johnson, Jr. as amended by amendment dated October 22, 1993
incorporated by reference to Exhibit 10.1 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993
10.2 Employment Agreement dated June 3, 1993, between the Registrant and *
Lee E. Shelton as amended by amendment dated October 22, 1993 incorporated
by reference to Exhibit 10.2 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993
10.3 Tax Agreement dated May 26, 1993, between Resource Bancshares Corporation (RBC) *
and the Registrant incorporated by reference to Exhibit 10.3 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993
10.4 Formation Agreement dated May 26, 1993, among Republic National Bank, the *
Registrant, RBC and 1st Performance National Bank incorporated by reference to
Exhibit 10.4 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993
10.5 Office Building Lease dated March 8, 1991, as amended by Modification of Office *
Lease dated October 1, 1991, incorporated by reference to Exhibit 10.5 of the Registrant's
Registration No. 33-53980
10.6 Assignment and Assumption of Office Lease incorporated by reference to Exhibit 10.6 *
of the Registrant's Registration No. 33-53980
10.8 (A) Stock Option Agreement between the Registrant and David W. Johnson, Jr. *
incorporated by reference to Exhibit 10.8 (A) of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993
A
24
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
10.8 (B) Stock Option Agreement between the Registrant and Lee E. Shelton incorporated
by reference to Exhibit 10.8 (B) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993
10.9 (A) Termination Agreement dated June 3, 1993, between the Registrant and *
David W. Johnson, Jr. incorporated by reference to Exhibit 10.9 (A) of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993
(B) Termination Agreement dated June 3, 1993, between the Registrant and
Lee E. Shelton incorporated by reference to Exhibit 10.9 (B) of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993
10.10 (A) Deferred Compensation Agreement dated June 3, 1993, between the Registrant and *
David W. Johnson, Jr. incorporated by reference to Exhibit 10.10 (A) of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993
(B) Deferred Compensation Agreement dated June 3, 1993, between the Registrant and
Lee E. Shelton incorporated by reference to Exhibit 10.10 (B) of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993
(C) Deferred Compensation Rabbi Trust, for David W. Johnson, dated January 19, 1994,
between RBC and First Union National Bank of North Carolina incorporated by reference
to Exhibit 10.10 (C) of the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993
(D) Deferred Compensation Rabbi Trust, for Lee E. Shelton dated January 19, 1994,
between RBC and First Union National Bank of North Carolina incorporated by
reference to Exhibit 10.10 (D) of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993
10.11 Registration Rights Agreement dated May 26, 1993, between RBC and the Registrant *
incorporated by reference to Exhibit 10.11 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993
10.12 Phantom Stock Plan as amended January 26, 1995, incorporated by reference to Exhibit 10.12 *
of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994
10.13 Form of Phantom Stock Agreement incorporated by reference to Exhibit 10.13 of the *
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993
10.14 Retirement Savings Plan incorporated by reference to Exhibit 10.14 of the Registrant's *
Annual Report on Form 10-K for the year ended December 31, 1993
10.15 Retirement Savings Trust dated as of January 10, 1994, by and between the Company *
and First Trust Corporation incorporated by reference to Exhibit 10.15 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993
10.16 Flexible Benefits Plan incorporated by reference to Exhibit 10.16 of the Registrant's *
Annual Report on Form 10-K for the year ended December 31, 1993
B
25
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
10.17 Section 125 Plan incorporated by reference to Exhibit 10.17 of the Registrant's Annual *
Report on Form 10-K for the year ended December 31, 1993
10.18 Pension Plan incorporated by reference to Exhibit 10.18 of the Registrant's Annual *
Report on Form 10-K for the year ended December 31, 1993
10.19 Governmental Real Estate Sub-Lease-Office, between Resource Bancshares Mortgage *
Group, Inc. and the South Carolina Department of Labor, Licensing and Regulation
incorporated by reference to Exhibit 10.19 of the Registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1994
10.20 First Sub-Lease Amendment to Governmental Real Estate Sub-Lease-Office, *
between Resource Bancshares Mortgage Group, Inc. and the South Carolina Department
of Labor, Licensing and Regulation incorporated by reference to Exhibit 10.20 of the
Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1994
10.21 Amendment I to Pension Plan incorporated by reference to Exhibit 10.21 of the Registrant's *
Annual Report on Form 10-K for the year ended December 31, 1994
10.22 Amendment II to Pension Plan incorporated by reference to Exhibit 10.22 of the Registrant's *
Annual Report on Form 10-K for the year ended December 31, 1994
10.23 Amendment I to Retirement Savings Plan incorporated by reference to Exhibit 10.23 *
of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994
10.24 Phantom 401(k) Plan incorporated by reference to Exhibit 10.24 of the Registrant's *
Annual Report on Form 10-K for the year ended December 31, 1994
10.25 Pension Restoration Plan incorporated by reference to Exhibit 10.25 of the Registrant's *
Annual Report on Form 10-K for the year ended December 31, 1994
10.26 Stock Investment Plan incorporated by reference to Exhibit 4.1 of the Registrant's *
Registration No. 33-87536
10.27 Amendment I to Stock Investment Plan incorporated by reference to Exhibit 10.27 *
of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994
10.29 Employee Stock Ownership Plan incorporated by reference to Exhibit 10.29 *
of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994
10.30 Amended Resource Bancshares Mortgage Group, Inc. Successor Employee Stock *
Ownership Trust Agreement dated December 1, 1994, between the Registrant and
Marine Midland Bank incorporated by reference to Exhibit 10.30 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994
10.31 ESOP Loan and Security Agreement dated January 12, 1995, between the Registrant *
and The Resource Bancshares Mortgage Group, Inc. Employee Stock Ownership Trust
incorporated by reference to Exhibit 10.31 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994
C
26
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
10.33 Phantom Stock Agreement dated January 26, 1995, between the Registrant and
Richard M. Duncan incorporated by reference to Exhibit 10.33 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994 *
10.34 Employment Agreement dated June 30, 1995, between the Registrant and Steven F. Herbert
incorporated by reference to Exhibit 10.34 of the Registrant's Quarterly Report
on Form 10-Q for the period ended September 30, 1995 *
10.35 Phantom Stock Agreement dated July 1, 1995, between the Registrant and Steven F. Herbert
incorporated by reference to Exhibit 10.35 of the Registrant's Quarterly Report
on Form 10-Q for the period ended September 30, 1995 *
10.36 Formula Stock Option Plan incorporated by reference to Exhibit 10.36 of the Registrant's
Quarterly Report on Form 10-Q for the period ended September 30, 1995 *
10.37 Omnibus Stock Award Plan incorporated by reference to Exhibit 10.37 of the Registrant's
Quarterly Report on Form 10-Q for the period ended September 30, 1995 *
10.38 Employment Agreement dated September 25, 1995, between the Registrant and
Richard M. Duncan incorporated by reference to Exhibit 10.38 of the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1995 *
10.39 Request for Extension of Governmental Real Estate Sub-Lease-Office, between the Registrant
and the South Carolina Department of Labor, Licensing and Regulation dated December 12, 1995
incorporated by reference to Exhibit 10.39 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995 *
10.40 First Amendment to Registration Rights Agreement dated March 11, 1996, between
the Registrant and RBC incorporated by reference to Exhibit 10.40 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995 *
10.41 First Amendment to Employee Stock Ownership Plan dated October 31, 1995
incorporated by reference to Exhibit 10.41 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995 *
10.42 Amendment to Pension Plan effective January 1, 1995 incorporated by reference to
Exhibit 10.42 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995 *
10.43 Second Amendment to Retirement Savings Plan effective January 1, 1994 incorporated by
reference to Exhibit 10.43 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995 *
10.44 Amendment to Omnibus Stock Award Plan dated March 22, 1996 incorporated
by reference to Exhibit 10.44 of the Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1996 *
10.45 Second Amendment to Employee Stock Ownership Plan dated August 12, 1996
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11.1 Statement re Computation of Net Income per Share
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27.1 Financial Data Schedule
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* Incorporated by reference
D