<PAGE> 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 March 31, 1997
--------------
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 000-21786
---------
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 57-0962375
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7909 Parklane Road, Columbia, SC 29223
- --------------------------------------- ----------
(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
April 30, 1997, was 20,255,737.
Page 1
Exhibit Index on Pages A to D
<PAGE> 2
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
Form 10-Q for the quarter ended March 31, 1997
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT
PAGE
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 18
ITEM 2. Changes in Securities 18
ITEM 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX A-D
2
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED BALANCE SHEET
($ in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS (Unaudited)
Cash $ 3,677 $ 2,492
Receivables 63,838 60,668
Mortgage-backed securities 194,525 123,447
Mortgage loans held for sale 789,097 678,888
Mortgage servicing rights, net 130,006 109,815
Premises and equipment, net 21,055 21,135
Accrued interest on loans held for sale 5,770 4,491
Other assets 26,723 27,458
----------- -----------
Total assets $ 1,234,691 $ 1,028,394
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Short-term borrowings $ 1,001,329 $ 805,730
Accrued expenses 10,205 11,386
Other liabilities 61,481 53,977
----------- -----------
Total liabilities 1,073,015 871,093
----------- -----------
Stockholders' equity
Common stock 193 193
Additional paid-in capital 150,052 149,653
Retained earnings 15,872 12,007
Unearned shares of employee stock ownership plan (4,441) (4,552)
----------- -----------
Total stockholders' equity 161,676 157,301
----------- -----------
Total liabilities and stockholders' equity $ 1,234,691 $ 1,028,394
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except share information)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Interest income $ 13,455 $ 18,445
Interest expense (9,720) (15,202)
------------ ------------
Net interest income 3,735 3,243
Net gain on sale of mortgage loans 17,027 18,533
Gain on sale of mortgage servicing rights 1,491 66
Loan servicing fees 7,535 7,130
Other income 269 78
------------ ------------
Total revenues 30,057 29,050
------------ ------------
EXPENSES
Salary and employee benefits 12,264 12,666
Occupancy expense 1,592 1,276
Amortization of mortgage servicing rights 4,108 3,670
General and administrative expenses 4,875 4,187
------------ ------------
Total expenses 22,839 21,799
------------ ------------
Income before income taxes 7,218 7,251
Income tax expense (2,748) (2,791)
------------ ------------
Net income $ 4,470 $ 4,460
============ ============
Weighted average common shares outstanding* 19,553,072 16,010,745
============ ============
Net income per common share $ 0.23 $ 0.28
============ ============
</TABLE>
* The provisions of Accounting Principles Board Opinion No. 15, "Earnings per
Share" requires that the Company, effective for the first quarter of 1997,
prospectively commence to report net income per common share on a primary
earnings per share basis. Accordingly, the weighted average shares
outstanding for the first quarter of 1997 includes common stock equivalents
while such equivalents are excluded for the comparable period of the prior
year.
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Unearned Shares of
Three Months Ended Additional Paid- Retained Employee Stock
March 31, 1997 Common Stock In Capital Earnings Ownership Plan Total
------------------ -------------------- ---------------- -------- -------------- ---------
Shares Amount
------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 19,285,020 $ 193 $ 149,653 $ 12,007 $ (4,552) $ 157,301
Issuance of restricted stock 23,528 * 328 328
Shares issued under Dividend
Reinvestment and Stock
Purchase Plan and Stock
Investment Plan 3,290 * 42 (26) 16
Cash dividends (579) (579)
Shares committed to be
released under ESOP 29 111 140
Net income 4,470 4,470
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 31, 1997 19,311,838 $ 193 $ 150,052 $ 15,872 $ (4,441) $ 161,676
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Unearned Shares of
Three Months Ended Additional Paid- Retained Employee Stock
March 31, 1997 Common Stock In Capital Earnings Ownership Plan Total
------------------ -------------------- ---------------- -------- -------------- ---------
Shares Amount
------ ------
<S> <C> <C> <C> <C> <C> <C>
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
Shares issued under Dividend
Reinvestment and Stock
Purchase Plan and Stock
Investment Plan 23,711 * 335 335
Shares committed to be
released under ESOP 47 100 147
Net income 4,460 4,460
---------- ---------- ---------- ---------- ---------- ----------
Balance, March 31, 1996 18,017,135 $ 180 $ 132,588 $ 15,185 $ (1,900) $ 146,053
========== ========== ========== ========== ========== ==========
</TABLE>
* Amount less than $1
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1997 1996
------------ ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 4,470 $ 4,460
Adjustments to reconcile net
income to cash used in operating activities:
Depreciation and amortization 4,856 4,267
Employee Stock Ownership Plan compensation 140 147
Provision for estimated foreclosure losses 265 100
Increase in receivables (3,170) (10,019)
Acquisition of mortgage loans (2,169,288) (3,137,847)
Proceeds from sales of mortgage loans and mortgage-backed securities 2,004,835 3,094,843
Acquisition of mortgage servicing rights (62,007) (54,547)
Sales of mortgage servicing rights 39,159 50,032
Net gain on sales of mortgage loans and servicing rights (18,518) (18,599)
(Increase) decrease in accrued interest on loans (1,279) 817
Decrease (increase) in other assets 910 (22)
Increase in accrued expenses and other liabilities 6,323 6,217
------------ ------------
Net cash used in operating activities (193,304) (60,151)
------------ ------------
INVESTING ACTIVITIES:
Purchases of premises and equipment, net (700) (3,123)
------------ ------------
Net cash used in investing activities (700) (3,123)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from borrowings 5,891,276 10,663,502
Repayment of borrowings (5,695,677) (10,647,124)
Debt issuance costs (175)
Issuance of restricted stock 328 256
Net proceeds of public offering 47,451
Shares issued under Dividend Reinvestment and Stock Purchase Plan
and Stock Investment Plan 16 335
Cash dividends (579)
------------ ------------
Net cash provided by financing activities 195,189 64,420
------------ ------------
Net increase in cash 1,185 1,146
Cash, beginning of year 2,492 2,161
------------ ------------
Cash, end of year $ 3,677 $ 3,307
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
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, 1996, 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.
In June 1996 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities,"
which is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. SFAS No.
125 is based upon consistent application of a financial-components approach
that focuses on control. Under this approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls
and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when
extinguished. The Company adopted SFAS No. 125 effective January 1, 1997,
as required. The requirements of SFAS No. 125 are substantially the same as
those which were previously applicable to the Company pursuant to the
provisions of SFAS No. 122, "Accounting for Mortgage Servicing Rights-An
Amendment of FASB Statement No. 65." Accordingly, adoption of SFAS No. 125
had no material impact on the Company.
As required by Accounting Principles Board Opinion No. 15, "Earnings per
Share," the Company has prospectively implemented a policy of reporting
primary earnings per share effective for the first quarter of 1997. In
February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share"
(SFAS No. 128), which is effective for financial statements issued for
periods ending after December 15, 1997. Early adoption of SFAS No. 128 is
not permitted. Basic and diluted earnings per share for the first quarter
reported pursuant to the provisions of SFAS No. 128 would be $0.24 and
$0.23, respectively.
Note 2 - Subsequent Events
Effective April 1, 1997, the Company completed a merger with Meritage
Mortgage Corporation and on April 21, the Company announced the signing of
separate definitive merger agreements with Walsh Holding Co., Inc. and
Resource Bancshares Corporation.
7
<PAGE> 8
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 1996 Annual Report on Form 10-K and the interim
Consolidated Financial Statements contained herein. Any statements made below
(or elsewhere in this document) that are not statements of historical fact and
could be considered forward-looking in nature within the meaning of the Private
Securities Litigation Reform Act of 1995 are subject to risks and uncertainties
that could cause actual results to differ materially. Such risks and
uncertainties include, but are not limited to, those related to overall
business conditions in the mortgage markets in which RBMG operates, fiscal and
monetary policy, competitive products and pricing, credit risk management,
changes in regulations affecting financial institutions and other risks and
uncertainties discussed from time to time in the Company's SEC filings,
including its 1996 Form 10-K. The Company disclaims any obligation to publicly
announce future events or developments that affect the forward-looking
statements herein.
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 of March 31, 1997, RBC owned
approximately 38% of the outstanding common stock of the Company.
The Company is principally engaged in the purchase and origination of
residential 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
separately sold but may be held for extended periods by the Company.
LOAN PRODUCTION
The Company purchases mortgage loans from its correspondents and through its
wholesale division. The Company originates mortgage loans through its retail
division.
A summary of loan production by source for the periods indicated is set forth
below:
<TABLE>
<CAPTION>
($ in thousands) Quarter Ended March 31,
-----------------------------
(Unaudited) 1997 1996
---------- ----------
<S> <C> <C>
Loan Production:
Correspondent Division $1,652,483 $2,556,751
Wholesale Division 388,905 368,640
Retail Division 127,900 118,169
========== ==========
Total Loan Production $2,169,288 $3,043,560
========== ==========
</TABLE>
8
<PAGE> 9
A summary of key information relevant to industry loan production activity is
set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Quarter Ended March 31,
-------------------------------------
(Unaudited) 1997 1996
------------ ------------
<S> <C> <C>
U. S. 1-4 Family Mortgage Originations Statistics (1)
U. S. 1-4 Family Mortgage Originations $183,000,000 $219,000,000
Adjustable Rate Mortgage (ARM) Market Share 26.00% 20.00%
Estimated Fixed Rate Mortgage Originations $135,000,000 $175,000,000
Company Information
Loan Production $ 2,169,288 $ 3,043,560
Estimated Company Market Share 1.19% 1.39%
</TABLE>
(1) Source: Mortgage Bankers Association of America, Economics Department.
Mortgage loan production decreased 29% to $2.2 billion for the first quarter
of 1997 from $3.0 billion for the first quarter of 1996. The net decline in loan
production is primarily due to an estimated 22% decline in fixed rate mortgage
origination volume between the comparable periods. The Company is primarily
focused on the purchase and origination of fixed-rate, 1-4 family residential
mortgage loans. As such, the Company is competitively disadvantaged in economic
environments that tend to favor ARMs over fixed-rate mortgages. (Generally,
higher long-term fixed-rate and steeper yield-curve environments tend to favor
ARM originations.)
Historically, the Company has been exclusively focused on purchasing loans
through its correspondents. In order to diversify its sources of loan volume,
the Company started a wholesale operation that purchased its first loan in May
1994, a retail operation which originated its first loan in May 1995, and a
subprime division which originated its first loan in April 1996. Accordingly,
correspondent operations accounted for 76% of the Company's loan production for
the first quarter of 1997 as compared to 84% for the first quarter of 1996.
Correspondent Loan Production
Through its correspondents, the Company purchases loans that have been
originated by such correspondents. Correspondents are primarily mortgage
lenders, larger mortgage brokers and smaller savings and loan associations and
commercial banks.
The Company continues to emphasize correspondent loan production as its
primary business focus because of the lower fixed expenses and capital
investment required of the Company. That is, the Company can develop a cost
structure that is more directly variable with loan production because the
correspondent incurs most of the fixed costs of operating and maintaining branch
office networks and of identifying and interacting directly with loan
applicants.
A summary of key information relevant to the Company's correspondent loan
production activities is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Quarter Ended March 31,
-------------------------------------
(Unaudited) 1997 1996
---------- -----------
<S> <C> <C>
Correspondent Loan Production $1,652,483 $2,556,751
Estimated Correspondent Market Share 0.90% 1.17%
Approved Correspondents 897 787
</TABLE>
9
<PAGE> 10
The 35% decrease in correspondent loan production from $2.6 billion for the
first quarter of 1996 to $1.7 billion for the first quarter of 1997 was
primarily due to nationwide increases in mortgage interest rates and the
increase in the ARM share of the U.S. market from 20% in the first quarter of
1996 to an estimated 26% for the first quarter of 1997. Offsetting effects of
the overall decline in national mortgage production, the Company increased its
number of approved correspondents by 110 or 14% from 787 at March 31, 1996, to
897 at March 31, 1997.
Wholesale Loan Production
In May 1994, the Company began its expansion into the wholesale mortgage
banking business. In connection therewith, the Company receives loan
applications through brokers, underwrites the loans, funds the loans at closing
and prepares all closing documentation. The wholesale branches also handle
shipping and follow-up procedures on loans. Although the establishment of
wholesale branch offices involves the incurrence of the fixed expenses
associated with maintaining those offices, wholesale operations also provide for
higher profit margins than correspondent loan production. Additionally, each
branch office can serve a relatively sizable geographic area by establishing
relationships with large numbers of independent mortgage loan brokers who bear
much of the cost of identifying and interacting directly with loan applicants.
A summary of key information relevant to the Company's wholesale production
activities is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Quarter Ended March 31,
---------------------------------------------
(Unaudited) 1997 1996
--------------------- ---------------------
<S> <C> <C>
Wholesale Loan Production $ 388,905 $ 368,640
Estimated Wholesale Market Share 0.21% 0.17%
Wholesale Division Direct Operating Expenses $ 2,234 $ 1,874
Approved Brokers 2,423 1,393
Number of Branches 13 11
Number of Employees 128 106
</TABLE>
The $20 million increase in wholesale loan production from $369 million for
the first quarter of 1996 as compared to $389 million for the first quarter of
1997 relates to the Company's addition of two new branches and over 1,000 new
brokers between March 31, 1996, and March 31, 1997. Similarly, the wholesale
division's operating expenses increased and the division's estimated market
share rose in spite of the decrease in national mortgage production and related
increase in percentage of ARM loans originated.
Retail Loan Production
A summary of key information relevant to the Company's retail production
activities that commenced in May 1995 is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Quarter Ended March 31,
--------------------------------------------
(Unaudited) 1997 1996
------------------- -------------------
<S> <C> <C>
Retail Loan Production $ 127,900 $ 118,169
Estimated Retail Market Share 0.07% 0.05%
Retail Division Operating Expenses $ 4,093 $ 4,078
Number of Branches 6 6
Number of Employees 212 174
</TABLE>
10
<PAGE> 11
The Company's retail loan production increased by $10 million or 8% for the
first quarter of 1997 as compared to the same period of the prior year. The 40%
increase in the retail division's estimated market share for the first quarter
of 1997 as compared to the same period of the prior year resulted primarily from
further development of the division.
LOAN SERVICING
A summary of key information relevant to the Company's loan servicing
activities is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Quarter Ended March 31,
-------------------------------------
(Unaudited) 1997 1996
----------- -----------
<S> <C> <C>
Underlying Unpaid Principal Balances:
Beginning Balance $ 6,670,267 $ 5,562,930
Loan Production (net of servicing released
production) 2,327,189 3,035,555
Net Change in Work-in-Process (261,160) (253,958)
Bulk Acquisitions 605,761
Sales of Servicing (1,711,276) (2,357,099)
Paid-In-Full Loans (132,896) (138,332)
Amortization, Curtailments, and Others, net (77,102) (21,825)
----------- -----------
Ending Balance $ 7,420,783 $ 5,827,271
Subservicing Ending Balance 1,992,983 3,321,714
----------- -----------
Total Underlying Unpaid Principal Balances 9,413,766 9,148,985
=========== ===========
Loan Servicing Fees $ 7,535 $ 7,130
Cash Operating Expenses 18,731 18,129
Coverage Ratio 40% 39%
Average Underlying Unpaid Principal Balances $ 8,886,145 $ 8,674,728
(including subservicing)
Weighted Average Note Rate* 7.78% 7.67%
Weighted Average Servicing Fee* 0.40% 0.41%
Delinquency (30+ days)* 3.74% 2.64%
Number of Servicing Division Employees 133 119
</TABLE>
* These statistics apply to the Company's owned servicing portfolio.
The $211 million or 2% increase in the average underlying unpaid principal
balance of mortgage loans being serviced for the first quarter of 1997 as
compared to the first quarter of 1996 is primarily related to the Company's
acquisitions of approximately $2.0 billion of servicing between March 31, 1996,
and March 31, 1997.
RESULTS OF OPERATIONS - QUARTER ENDED MARCH 31, 1997, COMPARED TO THE QUARTER
ENDED MARCH 31, 1996
Summary
Total revenues of the Company increased 3% to $30.1 million for the first
quarter of 1997 as compared to $29.1 million for the first quarter of 1996. The
$1.0 million increase in revenues was primarily due to a $0.5 million increase
in net interest income and a $0.4 million increase in loan servicing fees. The
$1.0 million increase in revenues was offset by a $1.0 million increase in
operating expenses. The increase in net interest
11
<PAGE> 12
income is primarily due to a 49 basis point increase in net interest margin
associated with the relatively steeper yield curve environment for the first
quarter of 1997. Increased loan servicing fees resulted from the 21% increase in
the average balance of the Company's owned servicing portfolio, which increased
as a combined result of approximately $2.0 billion in bulk acquisitions between
March 31, 1996, and March 31, 1997, as well as increased retention of servicing
rights associated with the Company's production. The increase in operating
expenses is primarily attributable to increased costs associated with increased
loan servicing volumes and with expansion into wholesale and subprime
operations.
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 (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 and the information presented is
unaudited.
<TABLE>
<CAPTION>
Variance
Average Volume Average Rate Interest Attributable to
- ----------------------------------------- --------------------- ---------------------
1997 1996 1997 1996 1997 1996 Variance Rate Volume
- ----------------------------------------- ----------------------------------------------------
<C> <C> <C> <C> <S> <C> <C> <C> <C> <C>
Interest Income
Mortgages Held for Sale and
$722,308 $987,387 7.45% 7.47% Mortgage-Backed $13,455 $18,445 ($4,990) ($38) ($4,952)
Securities
- ----------------------------------------- ----------------------------------------------------
Interest Expense
375,129 355,757 4.60% 4.82% Warehouse Line 4,257 4,261 (4) (236) 232
329,892 589,994 5.32% 5.87% Gestation Line 4,325 8,604 (4,279) (486) (3,793)
57,694 8.24% Servicing Secured Line 1,183 (1,183) (1,183)
38,811 27,597 6.14% 5.85% Servicing Receivable Line 588 402 186 23 163
21,198 8.23% Other Borrowings 434 (434) (434)
Facility Fees & Other 550 318 232 232
Charges
- ----------------------------------------- ----------------------------------------------------
743,832 1,052,240 5.30% 5.81% Total Interest Expense 9,720 15,202 (5,482) (699) (4,783)
- ----------------------------------------- ----------------------------------------------------
2.15% 1.66% Net Interest Income $3,735 $3,243 $492 $661 ($169)
=================== ====================================================
</TABLE>
Net interest income increased 15% to $3.7 million for the first quarter of
1997 as compared to $3.2 million for the first quarter of 1996. The $0.5 million
increase in net interest income is primarily attributable to a 49 basis point
increase in the interest rate spread to 215 basis points for 1997 as compared to
166 basis points for 1996. This increase in net interest spread is due primarily
to a relatively steeper 1997 yield curve environment. 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 indexes while its earning asset yields are based upon long-term rate
indexes. Thus, the increase in interest rate spread was primarily the result of
the steeper yield curve environment.
NET GAINS ON SALES OF MORTGAGE LOANS AND MORTGAGE SERVICING RIGHTS
Net gains on sales of mortgage loans and mortgage servicing rights remained
consistent for the first quarter of 1997 at $18.5 million as compared to $18.6
million for the first quarter of 1996. As further discussed below, in spite of
the decrease in the volumes of mortgage loans and mortgage servicing rights sold
during the first quarter of 1997 compared to the first quarter of 1996, gains on
sales remained consistent as a result of increased profit margins on sales.
Net Gain on Sale of Mortgage Loans
A reconciliation of the gain on sale of mortgage loans for the periods indicated
follows:
12
<PAGE> 13
<TABLE>
<CAPTION>
($ in thousands) For the Quarter Ended March 31,
-------------------------------
(Unaudited) 1997 1996
----------- -----------
<S> <C> <C>
Gross proceeds on sale of mortgage loans $ 2,004,835 $ 3,094,843
Initial unadjusted acquisition cost of mortgage loans sold 2,003,036 3,093,179
----------- -----------
Unadjusted gain on sale of mortgage loans 1,799 1,664
Loan origination and correspondent program administrative fees 6,501 8,775
----------- -----------
Unadjusted aggregate margin 8,300 10,439
Acquisition basis allocated to mortgage servicing rights (SFAS
No. 122 and SFAS No. 125) 8,506 8,179
Net change in deferred administrative fees 221 (85)
----------- -----------
Net gain on sale of mortgage loans $ 17,027 $ 18,533
=========== ===========
</TABLE>
The Company sold loans during the first quarter of 1997 with an aggregate
unpaid principal balance of $2.0 billion compared to sales of $3.1 billion for
the first quarter of 1996. The amount of proceeds received on sales of mortgage
loans exceeded the initial unadjusted acquisition cost of the loans sold by $1.8
million (9 basis points) for the first quarter of 1997 and $1.7 million (5 basis
points) for the first quarter of 1996. The Company received loan origination and
correspondent program administrative fees of $6.5 million (32 basis points) on
these loans during the first quarter of 1997 and $8.8 million (28 basis points)
during the first quarter of 1996. The Company allocated $8.5 million (42 basis
points) in the first quarter of 1997 to basis in mortgage servicing rights, in
accordance with SFAS No. 125, adopted effective January 1, 1997. During the
first quarter of 1996, $8.2 million (26 basis points) was allocated to basis in
mortgage servicing rights, in accordance with SFAS No. 122. Net gain on sale of
mortgage loans decreased to $17.0 million for the first quarter of 1997 versus
$18.5 million for 1996 primarily due to the 35% decrease in the volume of
mortgage loans sold which was partially offset by a 8 basis point increase in
the unadjusted aggregate margin and a 16 basis point increase in the acquisition
basis allocated to mortgage servicing rights for the first quarter of 1997.
Gain on Sale of Mortgage Servicing Rights
A reconciliation of the components of gain on sale of mortgage servicing rights
for the periods indicated follows:
<TABLE>
<CAPTION>
($ in thousands) For the Quarter Ended March 31,
-------------------------------
(Unaudited) 1997 1996
----------- -----------
<S> <C> <C>
Underlying unpaid principal balances of mortgage loans on which
servicing rights were sold during the period $ 1,712,308 $ 2,357,099
=========== ===========
Gross proceeds from sales of mortgage servicing rights 39,159 50,032
Initial acquisition basis, net of amortization 28,745 44,280
----------- -----------
Unadjusted gain on sale of mortgage servicing rights 10,414
5,752
Acquisition basis allocated from mortgage loans, net of
amortization (SFAS No. 122 and SFAS No. 125) (8,923) (5,686)
=========== ===========
Gain on sale of mortgage servicing rights $ 1,491 $ 66
=========== ===========
</TABLE>
During the first quarter of 1997, the Company completed eight sales of
mortgage servicing rights representing $1.7 billion of underlying unpaid
principal mortgage loan balances compared to nine sales of mortgage servicing
rights representing $2.4 billion of underlying unpaid principal mortgage loan
balances in
13
<PAGE> 14
the first quarter of 1996. Unadjusted gain on sale of mortgage servicing rights
was $10.4 million (61 basis points) for the first quarter of 1997, compared to
$5.8 million (24 basis points) for the first quarter of 1996. The Company
reduced this unadjusted gain by $8.9 million in the first quarter of 1997, in
accordance with SFAS No. 125, adopted effective January 1, 1997, compared with a
$5.7 million reduction in the first quarter of 1996, in accordance with SFAS No.
122.
NET SERVICING MARGIN
Loan servicing fees were $7.5 million for the first quarter of 1997, compared
to $7.1 million for the first quarter of 1996, an increase of 6%. This increase
is primarily related to an increase in the average aggregate underlying unpaid
principal balance of mortgage loans serviced to $8.9 billion during the first
quarter of 1997 from $8.7 billion during the first quarter of 1996, an increase
of 2%. Similarly, amortization of mortgage servicing rights also increased to
$4.1 million during the first quarter of 1997 from $3.7 million during the first
quarter of 1996, an increase of 12%. The increase in amortization is primarily
attributed to the growth in the average balance of the mortgage loans serviced.
Net servicing margin remained consistent with the prior year at $3.4 million
during the first quarter of 1997 compared to $3.5 million during the first
quarter of 1996, a decrease of 1%.
Included in loan servicing fees for 1997 and 1996 are subservicing fees
received by the Company of $148,000 and $318,000, respectively. The subservicing
fees are associated with temporary subservicing agreements between the Company
and purchasers of mortgage servicing rights.
The following tables summarizes the net servicing margin for the first
quarter of both 1997 and 1996:
<TABLE>
<CAPTION>
($ in thousands) For the Quarter Ended March 31,
-------------------------------
(Unaudited) 1997 1996
---------- ----------
<S> <C> <C>
Loan servicing fees $ 7,535 $ 7,130
Amortization of mortgage servicing rights 4,108 3,670
---------- ----------
Net servicing margin $ 3,427 $ 3,460
========== ==========
Average underlying unpaid principal balance
of mortgage loans serviced $8,886,145 $8,674,728
========== ==========
</TABLE>
OTHER INCOME
Other income increased during the first quarter of 1997 compared to the first
quarter of 1996, primarily due to an increase in administrative fees received
from sales of servicing released loans during 1997 as compared to 1996.
EXPENSES
The $1.0 million increase in operating expenses was centered in occupancy
expense and general and administrative expenses, which increased $0.3 million
and $0.7 million, respectively. The increase in operating expenses is primarily
attributable to increased costs associated with increased loan servicing volumes
and with expansion into wholesale and subprime operations. Direct operating
costs related to the Company's expansion into subprime operations account for
approximately $442 thousand, or 43% of the total increase in operating expenses
for the first quarter of 1997. Direct operating costs related to the Company's
continuing expansion into wholesale operations account for approximately $360
thousand, or 35% of the total increase in operating expenses for the first
quarter of 1997.
INCOME TAX EXPENSE
14
<PAGE> 15
Income tax expense includes both federal and state income taxes. The
effective tax rates for 1997 and 1996 were 38.1% and 38.5% respectively. Income
tax expense decreased by 2% to $2.7 million for the first quarter of 1997 from
$2.8 million for the first quarter of 1996 due to the above described factors
which resulted in a 0.5% or $33 thousand decrease in income before taxes.
15
<PAGE> 16
FINANCIAL CONDITION
During the first quarter of 1997, the Company experienced a 3% increase in
the volume of mortgage loans originated and acquired compared to the fourth
quarter of 1996. Mortgage loan production increased to $2.2 billion during the
first quarter of 1997 from $2.1 billion during the previous quarter. The March
31, 1997, mortgage application pipeline (mortgage loans not yet closed but for
which the interest rate has been locked) was approximately $1.0 billion.
The Company continued to establish new correspondent relationships during
the first quarter of 1997. The number of correspondents approved to do business
in the Company's correspondent lending program increased to 897 at March 31,
1997, from 871 at December 31, 1996.
The Company continued expansion of the wholesale network between December
31, 1996, and March 31, 1997, with the addition of 101 brokers to the Company's
approved list, increasing the number of approved brokers from 2,322 at December
31, 1996, to 2,423 at March 31, 1997.
The Company's retail division, operating through its wholly-owned
subsidiary, Intercounty Mortgage, Inc., (IMI) employed 212 people at March 31,
1997, and has offices in New York (4), New Jersey and Pennsylvania.
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 $983.6
million at March 31, 1997, versus $802.3 million at December 31, 1996, an
increase of 23%. The Company's servicing portfolio (exclusive of loans under
subservicing agreements) increased to $7.4 billion at March 31, 1997, from $6.7
billion at December 31, 1996, an increase of 11%.
Short-term borrowings, which are the Company's primary source of funds,
totaled $1.0 billion at March 31, 1997, compared with $805.7 million at December
31, 1996, an increase of 24%. The increase in the balance outstanding at March
31, 1997, resulted from increased funding requirements related to the increase
in the balance of mortgage loans held for sale and mortgage-backed securities at
March 31, 1997, as compared to the balance at December 31, 1996. There were no
long-term borrowings at March 31, 1997, or December 31, 1996.
Other liabilities totaled $61.5 million as of March 31, 1997, compared to
the December 31, 1996, balance of $54.0 million, an increase of $7.5 million, or
14%. The increase in other liabilities resulted primarily from an increase at
month end in the volume of loans acquired through certain correspondent funding
programs of the Company.
16
<PAGE> 17
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 to (i) pay dividends in any fiscal quarter which exceed 50% of the
Company's net income for the quarter or (ii) engage significantly in any type of
business unrelated to the mortgage banking business and the servicing of
mortgage loans.
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.
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 was in compliance with the above-mentioned debt covenants at
March 31, 1997. 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.
The Company has also entered into an uncommitted 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 $1.5 billion.
The Company entered into a $5 million unsecured line of credit in September
1996. The line of credit expires in September 1997.
17
<PAGE> 18
Part II. OTHER INFORMATION
Item 2. - Changes in Securities
On February 1, 1997, the Company issued 23,528 shares of its common
stock, par value $0.01 per share, to David W. Johnson, Jr. These shares
were issued pursuant to the terms of Mr. Johnson's employment agreement
dated as of June 3, 1993 and represented a portion of his bonus for
1996. The fair market value of the shares on the date of issuance to
Mr. Johnson was $341,156 based on the closing price of $14.50 per share
on the NASDAQ Market System on such date. The Company believes that the
issuance of the shares to Mr. Johnson was exempt from the registration
requirements of the Securities and Exchange Act of 1993, as amended,
under Section 4 (2) by virtue of his position as Vice Chairman and
Managing Director of the Company.
Item 6. - Exhibits and Reports on Form 8-K
- (a) A list of the exhibits required with 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.
18
<PAGE> 19
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
Senior 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: May 12, 1997
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<C> <S> <C>
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 incorporated by
reference to Exhibit 4.2 of the Registrant's Quarterly Report on Form
10-Q for the period ended September 30, 1996
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 incorporated by
reference to Exhibit 4.3 of the Registrant's Form 10-Q for the period
ended September 30, 1996
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 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
10.3 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
10.4 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
10.5 Assignment and Assumption of Office Lease incorporated by reference to Exhibit 10.6 *
of the Registrant's Registration No. 33-53980
10.6 (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
(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
10.7 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
</TABLE>
A
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<C> <S> <C>
10.8 (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 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
10.9 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
10.10 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
10.11 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
10.12 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
10.13 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
10.14 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
10.15 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
10.16 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
10.17 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
10.18 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
10.19 Stock Investment Plan incorporated by reference to Exhibit 4.1 of the Registrant's
Registration No. 33-87536
10.20 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
10.21 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
10.22 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
</TABLE>
B
<PAGE> 22
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<C> <S> <C>
10.23 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
10.24 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
10.25 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
10.26 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
10.27 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
10.28 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
10.29 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
10.30 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
10.31 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
10.32 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
10.33 Second Amendment to Employee Stock Ownership Plan dated August 12, 1996 *
incorporated by reference to Exhibit 10.45 of the Registrant's Quarterly Report on Form
10-Q for the period ended September 30, 1996
10.34 Resource Bancshares Mortgage Group, Inc. Non-Qualified Stock Option Plan *
dated September 1, 1996 incorporated by reference to Exhibit 10.33 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996
10.35 Amended and Restated Retirement Savings Plan dated April 1, 1996 *
incorporated by reference to Exhibit 10.34 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1996
10.36 First Amendment to Amended and Restated Retirement Savings Plan dated as of *
November 8, 1996 incorporated by reference to Exhibit 10.35 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996
</TABLE>
C
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<C> <S> <C>
10.37 ESOP Loan and Security Agreement dated May 3, 1996, between the *
Registrant and The Resource Bancshares Mortgage Group, Inc. Employee
Stock Ownership Trust incorporated by reference to Exhibit 10.36 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1996
10.38 Second Amendment to Amended and Restated Retirement Savings Plan dated _____
January 1997
10.39 Form of Term Sheet for RBMG/Shelton Settlement, including Amendment to
Stock Option Agreement between the Registrant and Lee E. Shelton _____
10.40 Form of Incentive Stock Option Agreement (Omnibus Stock Award Plan) _____
10.41 Form of Non-Qualified Stock Option Agreement (Non-Qualified Stock Option Plan) _____
10.42 Amendment to Resource Bancshares Mortgage Group, Inc. Omnibus Stock Award
Plan, Formula Stock Ooption plan and Non-Qualified Stock Option Plan _____
11.1 Statement re Computation of Net Income per Share _____
27.1 Financial Data Schedule _____
</TABLE>
- ---------------------------------
* Incorporated by reference
D
<PAGE> 1
EXHIBIT 10.38
STATE OF SOUTH CAROLINA ) SECOND AMENDMENT TO THE
) AMENDED AND RESTATED PLAN
COUNTY OF RICHLAND )
THIS AGREEMENT, made as of this _____ day of January, 1997, by RESOURCE
BANCSHARES MORTGAGE GROUP, INC. (the "Company")
W I T N E S S E T H:
WHEREAS, the Company maintains the Resource Bancshares Mortgage Group,
Inc. Retirement Savings Plan, effective as of July 1, 1993 (the "Plan") for the
benefit of the eligible employees; and
WHEREAS, effective April 1, 1996, the Company amended and restated the
Plan into a prototype plan utilizing the Fidelity Prototype Plan Basic Plan
Document No. 07 and the applicable adoption agreement (the "Restated Plan"); and
WHEREAS, in the opinion of the Board of Directors of the Company, the
provisions of the Restated Plan should be amended so as (1) to shorten the
Restated Plan's eligibility requirements from one year to six months, (2) to
allow monthly entry dates, rather than two entry dates per year, and (3) to
allow monthly changes in deferral elections, rather than two deferral election
periods per year; and
WHEREAS, in Section 10.1 of the Restated Plan, the Company reserved the
right by action of its Board of Directors to amend the Restated Plan.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company covenants and agrees that the Restated
Plan as set forth is amended as follows:
1. Effective April 1, 1997, Section 1.03(a)(1) of the Restated Plan
shall be amended by deleting "one Year of Service. (1,000 Hours of Service is
required during the Eligibility Computation Period.)" and inserting in its place
"six consecutive months of service (no minimum number Hours of Service can be
required)."
2. Effective April 1, 1997, Section 1.03(b) of the Restated Plan shall
be amended by deleting "the first day of each Plan Year and the date six months
later." and inserting "the first day of each month."
3. Effective April 1, 1997, Section 1.05(b)(1)(A) of the Restated Plan
shall be amended by deleting "As of the next Entry Date." and inserting "As of
the first day of each month."
<PAGE> 2
The Company reserves the right by action of the Board of Directors to
amend at any time any of the terms and provisions of this Second Amendment.
Except as expressly or by necessary implication amended hereby, the Restated
Plan shall continue in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed by its duly authorized officers as of the day and year first above
written.
RESOURCE BANCSHARES
MORTGAGE GROUP, INC.
By:
[CORPORATE SEAL]
ATTEST:
John W. Currie, Secretary
<PAGE> 1
EXHIBIT 10.39
TERM SHEET FOR RBMG/SHELTON SETTLEMENT
This Term Sheet is provided in furtherance of settlement negotiations
between attorneys for RBMG and attorneys for Shelton and pursuant to an
agreement among the attorneys that neither the Term Sheet nor any of the
discussions relating to it shall be admissible in any proceeding or used for any
purpose other than in settlement negotiations, except any proceeding to enforce
the terms of the settlement. When signed by both parties, this Term Sheet will
be binding on the parties and constitute the terms and conditions of a
comprehensive settlement between RBMG and Shelton, to be superseded by
definitive agreements and instruments not inconsistent herewith (the "Definitive
Documents").
A. Nonfinancial Terms
1. Agreed Termination Date. Shelton will remain on paid
administrative leave until January 31, 1997 (the "Agreed
Termination Date"), whereupon his employment by RBMG will
terminate. His resignation from RBMG's Board of Directors and
as an officer will become effective upon execution and
delivery of this Term Sheet.
2. RBMG's Terms. Shelton agrees to the nonfinancial terms
requested by RBMG throughout these settlement negotiations:
(1) resignation and mutual rescission of Shelton's Employment
Agreement; (2) release of any and all accrued claims against
RBMG, its affiliated companies ("Affiliates") and their
officers, directors, employees, attorneys, other
representatives and their spouses ("Associates") through the
Agreed Termination Date; (3) release of all claims for
attorney's fees; (4) indemnification of RBMG, and of its
Affiliates and Associates, if Shelton breaches the Term Sheet
or the Definitive Documents and institutes proceedings on any
released claim; (5) confidentiality; (6) nondisparagement of
RBMG and of its Affiliates and Associates; (7)
non-solicitation of employees; (8) waiver of future
employment; (9) non-assistance of others with claims,
administrative charges or causes of action against RBMG and
its Affiliates and Associates accrued to date, except under
compulsion of law; (10) acknowledgement of no assignment of
claims; and (11) release of all claims (including loss of
consortium) by Connie Shelton. Shelton will not discuss RBMG,
its Affiliates or its Associates with FHLMC, FNMA, GNMA, FHA
or VA, except under compulsion of law. RBMG agrees to
reciprocal terms in favor of Shelton and Connie Shelton and
their attorneys with respect to fees and expenses billed to
RBMG and asserted conflicts of interest. Shelton will
indemnify RBMG and its Affiliates and Associates for any loss
caused by Connie Shelton's failure to release such claims.
RBMG will obtain an enforceable covenant by each of RBMG's
directors not to disparage Shelton or Connie Shelton or their
attorneys with respect to the services that they performed in
connection with this settlement and the underlying dispute.
For the purposes hereof, the "attorneys" of Shelton and Connie
Shelton include Stephen G. Morrison, James C. Gray, Claude S.
Scarborough, David E. Dukes, Kenneth E. Young, Patrick
Daugherty and Nelson Mullins Riley & Scarborough, L.L.P.;
Gaston H. Gage, James Y. Preston, William P. Farthing, Jr.,
Jonathan M. Crotty and Parker, Poe, Adams & Bernstein, L.L.P.;
Michael F. Pezzulli and Pezzulli & Associates; Professor
Dennis R. Nolan; John F. Olson and John H. Sturc and Gibson,
Dunn & Crutcher, LLP; Allen W. Groves and Glass, McCullough,
Sherrill & Harrold; and George Hunter McMaster and Tompkins
and McMaster; together with each past or present partner,
<PAGE> 2
shareholder or employee of every such law firm who at any time
provided legal services, or assisted in the provision of legal
services, to Shelton or Connie Shelton.
3. Coordinated Announcements. On the Agreed Termination Date,
RBMG will make a press release announcing Shelton's
resignation to pursue other opportunities. Sebastian will be
quoted as complimenting Shelton for his vital participation in
growing the Company from its infancy through an initial public
offering and secondary stock offering -- both highly
successful -- to its present position as one of the top 10
mortgage companies in the country. Sebastian also will be
quoted as saying that he and the Board of Directors are deeply
appreciative of Lee Shelton's significant contributions and
that they wish him the very best in his future endeavors. All
other similar announcements or statements made to RBMG
employees, financiers, regulators and others will be
consistent with the foregoing. Without limiting the generality
of the foregoing and notwithstanding any other provision of
this Term Sheet, at no time will RBMG state or imply to anyone
that Shelton had any undischarged responsibility (legal or
otherwise) at or in connection with Intercounty Mortgage.
Sebastian will provide Shelton with a signed letter of
reference in the form of Exhibit A to this Term Sheet.
4. Miscellaneous. RBMG represents and warrants to Shelton that
this Term Sheet is a legal, valid and binding obligation of
RBMG, enforceable against RBMG in accordance with its terms.
Shelton represents and warrants to RBMG that this Term Sheet
is a legal, valid and binding obligation of Shelton,
enforceable against Shelton in accordance with its terms. In
connection with the amendments to the terms and conditions of
Shelton's options and restricted stock effected pursuant to
paragraphs B.2 and B.3 below as partial consideration for
Shelton's agreements in this Term Sheet, RBMG represents and
warrants to Shelton that (i) there presently exists no
material nonpublic information concerning RBMG or the market
for its stock (other than (a) the information included in this
Term Sheet and (b) RBMG's financial results for 1996) and
that, (ii) without limiting the generality of the foregoing,
RBMG presently knows of no material nonpublic information
concerning Intercounty Mortgage. RBMG will obtain Johnson's
consent to the settlement with Shelton as contemplated by
Section 17 of Shelton's Employment Agreement. All of the
parties' agreements and understandings will be merged into the
Definitive Documents, which, like this Term Sheet, will be
governed by and construed in accordance with South Carolina
law. RBMG's obligations under this Term Sheet and the
Definitive Documents will be binding on RBMG or any surviving
entity in the event of any acquisition or merger, including
any acquisition by asset purchase. This Term Sheet may be
executed in counterparts.
B. Financial Terms
1. Salary and Bonuses. RBMG will pay Shelton $5 million (less
income tax withholdings) in settlement of amounts owed to him
under his Employment Agreement. On the effective date of the
Definitive Documents (or, if earlier, on the Agreed
Termination Date), such amount will be wired to: Northern
Trust Co., Chicago, ABA# 071000152, Credit J.C. Bradford,
Account # 798630, Re: 116-48206-1-3.
<PAGE> 3
2. Options. Set forth on Exhibit B to this Term Sheet are the
number of vested options on RBMG stock, the number of unvested
options on such stock and the exercise price, as adjusted, of
such options, in each case owned of record by Shelton on the
date hereof. Shelton will become 100% vested in his options
pursuant to the schedule in the Stock Option Agreement. RBMG
will cooperate with a stock broker of Shelton's choice to
enable Shelton, at his expense, to effect "cashless exercises"
of his vested options and such options will remain exercisable
for the remainder of their original ten-year term and be
subject to adjustment for future stock dividends
notwithstanding Shelton's earlier termination from employment.
At its own expense, RBMG will register the exercise of such
options, and the resale of the underlying common stock, on
Form S-8. RBMG will file such registration statement with the
SEC not later than March 31, 1997, and such registration will
remain in effect until registration is no longer required to
permit an unrestricted resale. At Shelton's request, RBMG will
agree to customary indemnification and cross-indemnification
terms and conditions in connection with such registration.
RBMG will allow Shelton to transfer some or all of his options
to members of his immediate family (wife and children) for
estate planning purposes to the extent permitted by General
Instruction A(1)(a) to Form S-8.
3. Restricted Stock. Set forth on Exhibit B to this Term Sheet is
the number of shares of restricted stock in RBMG owned of
record by Shelton on the date hereof. Shelton will be 100%
vested in his restricted stock upon execution and delivery of
the Definitive Documents. Such stock will be subject to
adjustment for future stock dividends. At its own expense,
RBMG will register such stock for resale on Form S-8. RBMG
will file such registration statement with the SEC not later
than March 31, 1997, and such registration will remain in
effect until registration is no longer required to permit an
unrestricted resale. At Shelton's request, RBMG will agree to
customary indemnification and cross-indemnification terms and
conditions in connection with such registration.
4. Rabbi Trust. RBMG will promptly process (and not deny)
Shelton's claim for benefits under his Deferred Compensation
Rabbi Trust so as to assure payment to him of such benefits at
the earliest possible date.
5. 401(k) Plan/Phantom 401(k) Plan. Shelton has elected to
participate in RBMG's 401(k) plan in 1997, but will not accrue
or be eligible for any bonus in 1997 or thereafter. The
remainder of his 1997 contribution will be paid by Shelton
from his 1996 bonus, as in past years. All 401(k) plan and
phantom 401(k) plan benefits will be paid out to Shelton in
accordance with the governing plan documents.
6. Benefit Plans. RBMG will allow Shelton and his family to
participate in any and all employee benefit plans (including,
without limitation, health insurance plans) through the Agreed
Termination Date. Shelton will have COBRA rights thereafter.
7. Life and Disability Insurance. RBMG will continue to pay all
premiums due through the Agreed Termination Date on the life
and disability insurance policies currently in effect for
Shelton.
<PAGE> 4
8. Legal Fees. RBMG will not pay Shelton's lawyers any of their
fees and expenses, whether or not they have heretofore
submitted invoices. Shelton will pay his own legal fees and
expenses.
9. Pension Plan/Pension Restoration Plan. RBMG will consider
Shelton an employee for "plan" purposes through the Agreed
Termination Date. RBMG will provide Shelton with a written pro
forma analysis of the benefits payable to him under his
pension and pension restoration plans (assuming retirement at
either age 55 or age 65), as well as a written description of
the alternatives available to him under such plans.
10. Documents; Personal Property. Promptly following the Agreed
Termination Date, Shelton shall return to RBMG all documents
(including all copies) relating to his employment (as
employee, officer and director) with RBMG other than (i)
documents relating to this settlement and the underlying
dispute and (ii) documents that are Shelton's personal
property. Promptly following the Agreed Termination Date, RBMG
shall return to Shelton all of his personal property.
AGREED ON AND AS OF JANUARY 24, 1997:
--------------------------------------------
Lee E. Shelton
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
By:
----------------------------------------
Edward J. Sebastian
Chief Executive Officer
<PAGE> 5
EXHIBIT A TO TERM SHEET FOR RBMG/SHELTON SETTLEMENT
[RBMG LETTERHEAD]
January 31, 1997
Dear Lee:
The Board, all the RBMG employees, and I would like to extend our very best
wishes to you, Connie and Garrett. We have accomplished some rather remarkable
things together, both at RBMG and Bankers Mortgage, and we are confident of your
continued success. Since 1991, RBMG has completed an initial public offering and
a secondary offering -- both highly successful -- and has risen to become one of
the top ten mortgage companies in the country. A lot has been accomplished, and
we are deeply appreciative of your significant contributions. Thanks again for
all that you have done.
Sincerely,
/s/ Ed Sebastian
<PAGE> 6
EXHIBIT B TO TERM SHEET FOR RBMG/SHELTON SETTLEMENT
1. Shelton's options on RBMG common stock:
a. No. vested: 257,517
b. No. unvested: 171,678
c. Adjusted exercise price: $6.12/share
2. No. shares of restricted RBMG common stock: 43,286
<PAGE> 1
EXHIBIT 10.40
INCENTIVE STOCK OPTION AGREEMENT
Pursuant to
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
OMNIBUS STOCK AWARD PLAN
This Incentive Stock Option Agreement is entered into as of the _____
day of _____________, 199___, between Resource Bancshares Mortgage Group, Inc.,
a Delaware corporation (the "Company"), and _______________________ (the
"Optionee").
1. Definitions.
Capitalized terms used in this Option Agreement but not defined herein
are used herein as defined in the Plan. In addition, throughout this Option
Agreement, the following terms shall have the meanings indicated:
(a) "Exercise Date" shall have the meaning indicated in
paragraph 3 hereof.
(b) "Option Period" shall mean the period commencing on the
date of this Option Agreement and ending at the close of the Company's business
ten years from the date hereof. Notwithstanding the previous sentence, in the
case of an Option granted to a 10% Stockholder, the Option Period shall mean the
period commencing on the date of this Option Agreement and ending at the close
of the Company's business five years from the date hereof.
(c) "Plan" shall mean the Resource Bancshares Mortgage Group,
Inc. Omnibus Stock Award Plan.
(d) "Securities Act" shall mean the Securities Act of 1933, as
amended.
2. Award of Option.
Effective upon the date hereof, and subject to the terms and conditions
set forth herein and in the Plan, the Company has awarded to the Optionee the
option to purchase from the Company, at an exercise price of $_________ per
share, up to but not exceeding in the aggregate ____________ shares of Common
Stock. The Company intends the exercise price to be at least 100% of the Fair
Market Value of the Shares of Common Stock subject to the Option as of the date
of granting the Option. In the case of an Option granted to a 10% Stockholder,
the exercise price of each share of Common Stock covered by the Option is at
least 110% of the Fair Market Value per share of Common Stock on the date of
grant of the Option. It is intended that this Option qualify to the extent
possible as an ISO. The Company shall have no liability if this
<PAGE> 2
Option shall not qualify as an ISO, but this Option shall continue in full force
and effect as an NQSO notwithstanding such failure to so qualify.
3. Exercise of Option.
(a) The Option shall be exercisable, in whole or in part, at
any time and from time to time during the Option Period, but not thereafter, to
the extent set forth in the schedule below.
then the maximum percentage
of the Option Shares that
may be purchased through
if the Exercise Date is: such Exercise Date is:
- ------------------------ ----------------------
earlier than _______________, 20%
___________ or thereafter,
but not later than _________, 40%
___________ or thereafter,
but not later than _________, 60%
___________ or thereafter,
but not later than _________, 80%
___________ or thereafter, 100%
The Exercise Dates contained herein are intended to comply with Code Section
422(d). In the event the aggregate Fair Market Value of the Common Stock with
respect to ISOs exercisable for the first time by Optionee during any calendar
year exceeds $100,000, the Optionee shall give notice (as provided in Section
6(e)) of such fact to the Company. The number of shares of Common Stock subject
to this Option and the per share exercise price under each outstanding Option
shall be adjusted, to the extent the Committee deems appropriate, as provided in
Section 4.1(e) of the Plan. Sections 4.1(e), 4.1(f), 4.1(g) and 4.1(i) of the
Plan are incorporated in this Option Agreement by reference as if fully set
forth herein.
(b) Notwithstanding Section 3(a), the Option shall terminate
and may not be exercised if the Optionee ceases to be employed by the Company,
except: (1) that, if such Optionee's employment terminates for any reason other
than conduct that in the judgment of the Committee involves dishonesty or action
by the Optionee that is detrimental to the best interest of the Company, then
the Optionee may at any time within three months after termination of his or her
employment exercise his or her Option but only to the extent the Option was
exercisable by
2
<PAGE> 3
him or her on the date of termination of employment unless termination of
employment is due to retirement at or after Optionee attains age sixty-five, in
which event the Option shall be exercisable with respect to all Option Shares;
(2) that, if such Optionee's employment terminates on account of total and
permanent disability, then the Optionee may at any time within one year after
termination of his or her employment exercise his or her Option with respect to
all Option Shares; and (3) that, if such Optionee dies while in the employ of
the Company, or within the three or twelve month period following termination of
his or her employment as described in clause (1) or (2) above, then his or her
Option may be exercised at any time within twelve months following his or her
death by the person or persons to whom his or her rights under the Option shall
pass by will or by the laws of descent and distribution with respect to all
Option Shares.
(c) No less than 100 shares of Common Stock may be purchased
upon any one exercise of the Option granted hereby unless the number of shares
purchased at such time is the total number of shares in respect of which the
Option is then exercisable.
(d) Upon exercise of the Option, the Option exercise price
shall be payable in United States dollars, in cash (including by check) or
(unless the Committee otherwise prescribes) in shares of Common Stock owned by
the Optionee for a period exceeding six months, or in a combination of cash and
such Common Stock. If all or any portion of the Option exercise price is paid in
Common Stock owned by the Optionee, then that stock shall be valued at its Fair
Market Value as of the date the Option is exercised. The Option shall be deemed
to be exercised on the date (the "Exercise Date") that the Company receives full
payment of the exercise price for the number of shares for which the Option is
being exercised.
(e) During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee and shall not be assignable or transferable by
the Optionee and no person shall acquire any rights therein. The Option may be
transferred by will or the laws of descent and distribution.
4. Compliance with the Securities Act; No Registration Rights.
Anything in this Option Agreement to the contrary notwithstanding, if,
at any time specified herein for the issuance of Option Shares, any law,
regulation or requirement of any governmental authority having jurisdiction in
the premises shall require the Company or the Optionee, in the judgment of the
Company, to take any action in connection with the shares then to be issued,
then the issuance of such shares shall be deferred until such action shall have
been taken. Nothing in this Option Agreement shall be construed to obligate the
Company at any time to file or maintain the effectiveness of a registration
statement under the Securities Act, or under the securities laws of any state or
other jurisdiction, or to take or cause to be taken any action that may be
necessary in order to provide an exemption from the registration requirements of
the Securities Act under Rule 144 or any other exemption with respect to the
Option Shares or
3
<PAGE> 4
otherwise for resale or other transfer by the Optionee (or by the executor or
administrator of the Optionee's estate or a person who acquired the Option or
any Option Shares or other rights by bequest or inheritance or by reason of the
death of the Optionee) as a result of the exercise of the Option evidenced by
this Option Agreement.
5. Resolution of Disputes.
Any dispute or disagreement that arises under, or as a result of, or
pursuant to, this Option Agreement shall be determined by the Committee in its
absolute and uncontrolled discretion, and any such determination or other
determination by the Committee under or pursuant to this Option Agreement, and
any interpretation by the Committee of the terms of this Option Agreement, shall
be conclusive as to all persons affected thereby.
6. Miscellaneous.
(a) Binding on Successors and Representatives. The parties
understand that this Option Agreement shall be binding not only upon themselves,
but also upon their heirs, executors, administrators, personal representatives,
successors and assigns (including any transferee of a party hereto); and the
parties agree, for themselves and their successors, assigns and representatives,
to execute any instrument that may be necessary or desirable legally to effect
such understanding.
(b) Entire Agreement; Relationship to Plan. The Optionee
acknowledges that he or she has received a copy of the Plan. This Option
Agreement, together with the Plan, constitutes the entire agreement of the
parties with respect to the Option and supersedes any previous agreement,
whether written or oral, with respect thereto. This Option Agreement has been
entered into in compliance with the terms of the Plan; to the extent that any
interpretive conflict may arise between the terms of this Option Agreement and
the terms of the Plan, the terms of the Plan shall control.
(c) Amendment. Neither this Option Agreement nor any of the
terms and conditions herein set forth may be altered or amended orally, and any
such alteration or amendment shall be effective only when reduced to writing and
signed by each of the parties or their respective successors or assigns.
(d) Construction of Terms. Any reference herein to the
singular or plural shall be construed as plural or singular whenever
the context requires.
4
<PAGE> 5
(e) Notices. All notices and requests under this Option
Agreement shall be in writing and shall be deemed to have been given when
personally delivered or sent prepaid certified mail:
(i) if to the Company, to the following address:
Resource Bancshares Mortgage Group, Inc.
7909 Parklane Road
Columbia, South Carolina 29223
Attention: Chairman
or to such other address as the Company shall designate by notice.
(ii) if to the Optionee, to the Optionee's
address appearing in the Company's records,
or to such other address as the Optionee
shall designate by notice.
(f) Governing Law; Submission to Jurisdiction. This Option
Agreement shall be governed by and construed in accordance with the laws of the
State of South Carolina. The parties hereby consent to the exclusive
jurisdiction and venue of the Court of Common Pleas in Richland County, South
Carolina for purposes of adjudicating any issue arising hereunder.
(g) Severability. The invalidity or unenforceability of any
particular provision of this Option Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision was omitted.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the day and year first above written.
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
By:
-------------------------------
Edward J. Sebastian
Chief Executive Officer
OPTIONEE:
------------------------------------- (SEAL)
Name:
5
<PAGE> 1
EXHIBIT 10.41
NON-QUALIFIED STOCK OPTION AGREEMENT
Pursuant to
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
NON-QUALIFIED STOCK OPTION PLAN
This Non-Qualified Stock Option Agreement is entered into as of the
_____day of _____________19__, between Resource Bancshares Mortgage Group, Inc.,
a Delaware corporation (the "Company"), and ____________ (the "Optionee").
1. Definitions.
Capitalized terms used in this Option Agreement but not defined herein
are used herein as defined in the Plan. In addition, throughout this Option
Agreement, the following terms shall have the meanings indicated:
(a) "Exercise Date" shall have the meaning indicated in
paragraph 3 hereof.
(b) "Option Period" shall mean the period commencing on the
date of this Option Agreement and ending at the close of the Company's business
on January 21, 2004.
(c) "Plan" shall mean the Resource Bancshares Mortgage Group,
Inc. Non-Qualified Stock Option Plan.
(d) "Securities Act" shall mean the Securities Act of 1933, as
amended.
2. Award of Option.
Effective upon the date hereof, and subject to the terms and conditions
set forth herein and in the Plan, the Company has awarded to the Optionee the
option to purchase from the Company, at an exercise price of ________ per share,
up to but not exceeding in the aggregate ____________ shares of Common Stock.
3. Exercise of Option.
<PAGE> 2
(a) Except as provided below, on or after January 21, 1999 the
Option shall be exercisable, in whole or in part, at any time and from time to
time during the Option Period, but not thereafter. If not earlier terminated,
the Option shall terminate and may not be exercised if the Optionee ceases to be
employed by the Company except (i) if the Optionee's employment terminates for
any reason other than conduct that in the judgment of the Board involves
dishonesty or action by the Optionee that is detrimental to the best interest of
the Company, then the Optionee may at any time within three months after
termination of the Optionee's employment exercise the Option but only to the
extent the Option was vested (as provided below) on the date of termination of
employment; (ii) if the Optionee's employment terminates on account of total and
permanent disability, then the Optionee may at any time within one year after
termination of the Optionee's employment exercise the Option with respect to all
shares to which it pertains; and (iii) if the Optionee dies while in the employ
of the Company, or within the three month or one year period following
termination of the Optionee's employment as described in clause (i) or (ii)
above, then the Option may be exercised with respect to all shares to which it
pertains at any time within one year following the Optionee's death by the
person or persons to whom the Optionee's rights under the Option shall pass by
will or by the laws of descent and distribution. Notwithstanding anything to the
contrary in this subsection, the Option may not be exercised by anyone after the
expiration of its term.
The Option shall be deemed to be vested as follows:
then the percentage of
the Option that is
if the date is: vested is:
- --------------- ----------
after the date first written
above but on or before
________________ 40%
after ________________ but
on or before
________________, 60%
after ________________ but
on or before
________________, 80%
after ________________, 100%
2
<PAGE> 3
(b) No less than 100 shares of Common Stock may be purchased
upon any one exercise of the Option granted hereby unless the number of shares
purchased at such time is the total number of shares in respect of which the
Option is then exercisable.
(c) Upon exercise of the Option, the Option exercise price
shall be payable in United States dollars, in cash (including by check) or
(unless the Board otherwise prescribes) in shares of Common Stock owned by the
Optionee for a period exceeding six months, or in a combination of cash and such
Common Stock. If all or any portion of the Option exercise price is paid in
Common Stock owned by the Optionee, then that stock shall be valued at its Fair
Market Value as of the date the Option is exercised. The Option shall be deemed
to be exercised on the date (the "Exercise Date") that the Company receives full
payment of the exercise price for the number of shares for which the Option is
being exercised.
(d) During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee and shall not be assignable or transferable by
the Optionee and no person shall acquire any rights therein. The Option may be
transferred by will or the laws of descent and distribution.
4. Compliance with the Securities Act; No Registration Rights.
Anything in this Option Agreement to the contrary notwithstanding, if,
at any time specified herein for the issuance of Option Shares, any law,
regulation or requirement of any governmental authority having jurisdiction in
the premises shall require the Company or the Optionee, in the judgment of the
Company, to take any action in connection with the shares then to be issued,
then the issue of such shares shall be deferred until such action shall have
been taken. Nothing in this Option Agreement shall be construed to obligate the
Company at any time to file or maintain the effectiveness of a registration
statement under the Securities Act, or under the securities laws of any state or
other jurisdiction, or to take or cause to be taken any action that may be
necessary in order to provide an exemption from the registration requirements of
the Securities Act under Rule 144 or any other exemption with respect to the
Option Shares or otherwise for resale or other transfer by the Optionee (or by
the executor or administrator of the Optionee's estate or a person who acquired
the Option or any Option Shares or other rights by bequest or inheritance or by
reason of the death of the Optionee) as a result of the exercise of the Option
evidenced by this Option Agreement.
5. Resolution of Disputes.
Any dispute or disagreement that arises under, or as a result of, or
pursuant to, this Option Agreement shall be determined by the Board in its
absolute and uncontrolled discretion, and any such determination or other
determination by the Board under or pursuant to this Option Agreement, and any
interpretation by the Board of the terms of this Option Agreement, shall be
conclusive as to all persons affected thereby.
3
<PAGE> 4
6. Miscellaneous.
(a) Binding on Successors and Representatives. The parties
understand that this Option Agreement shall be binding not only upon themselves,
but also upon their heirs, executors, administrators, personal representatives,
successors and assigns (including any transferee of a party hereto); and the
parties agree, for themselves and their successors, assigns and representatives,
to execute any instrument that may be necessary or desirable legally to effect
such understanding.
(b) Entire Agreement; Relationship to Plan. The Optionee
acknowledges that he or she has received a copy of the Plan. This Option
Agreement, together with the Plan, constitutes the entire agreement of the
parties with respect to the Option and supersedes any previous agreement,
whether written or oral, with respect thereto. This Option Agreement has been
entered into in compliance with the terms of the Plan; to the extent that any
interpretive conflict may arise between the terms of this Option Agreement and
the terms of the Plan, the terms of the Plan shall control.
(c) Amendment. Neither this Option Agreement nor any of the
terms and conditions herein set forth may be altered or amended orally, and any
such alteration or amendment shall be effective only when reduced to writing and
signed by each of the parties or their respective successors or assigns.
(d) Construction of Terms. Any reference herein to the
singular or plural shall be construed as plural or singular whenever
the context requires.
(e) Notices. All notices and requests under this Option
Agreement shall be in writing and shall be deemed to have been given when
personally delivered or sent prepaid certified mail:
(i) if to the Company, to the following address:
Resource Bancshares Mortgage Group, Inc.
7909 Parklane Road
Columbia, South Carolina 29223
Attention: Chairman
or to such other address as the Company shall designate by notice.
(ii) if to the Optionee, to the Optionee's
address appearing in the Company's records,
or to such other address as the Optionee
shall designate by notice.
4
<PAGE> 5
(f) Governing Law; Submission to Jurisdiction. This Option
Agreement shall be governed by and construed in accordance with the laws of the
State of South Carolina. The parties hereby consent to the exclusive
jurisdiction and venue of the Court of Common Pleas in Richland County, South
Carolina for purposes of adjudicating any issue arising hereunder.
(g) Severability. The invalidity or unenforceability of any
particular provision of this Option Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provisions were omitted.
(h) Dividends. The Company shall pay to the Optionee amounts
in respect of dividends (cash or property) that are paid from time to time on
issued and outstanding Common Stock. The amount paid to the Optionee with
respect to each dividend shall be equivalent to the dividend the Optionee would
have received had the Optionee been the owner of a number of shares of Common
Stock equal to the number of the Optionee's unexercised Options on the dividend
record date.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the day and year first above written.
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
By:
-----------------------------------
Edward J. Sebastian
Chief Executive Officer
OPTIONEE:
(SEAL)
-----------------------------
Name:
5
<PAGE> 1
EXHIBIT 10.42
Amendments to the Resource Bancshares Mortgage Group, Inc. Omnibus Stock Award
Plan, Formula Stock Option Plan and Non-Qualified Stock Option Plan
The directors discussed increasing the number of shares subject to the
Corporation's Omnibus Stock Award Plan (the "Omnibus Plan") and Formula Stock
Option Plan (the "Formula Plan") and decreasing the number of shares subject to
the Non-Qualified Stock Option Plan (the "Non-Qualified Plan"). Upon motion duly
made and seconded, and following full discussion, the number of shares subject
to the Omnibus Plan was increased by 800,000 shares, the number of shares
subject to the Formula Plan was increased by 150,000 shares and the number of
shares subject to the Non-Qualified Plan was decreased to the number of shares
covered by options currently outstanding thereunder.
<PAGE> 1
EXHIBIT 11.1
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE,
PRIMARY and FULLY DILUTED EARNINGS PER SHARE
($ in thousands, except per share amounts)
For the Quarter Ended
March 31, 1997
------------------------------------------------------------------
Net income $ 4,470
Net income per share (1) $ 0.23
Primary and fully diluted earnings per share (2) $ 0.23
1) The number of common shares outstanding used to compute net income per share
was 19,553,072. The provisions of Accounting Principles Board Opinion No. 15,
"Earnings per Share" requires that the Company, effective for the first quarter
of 1997, prospectively commence to report net income per common share on a
primary earnings per share basis. Accordingly, the weighted average shares
outstanding for the first quarter of 1997 includes common stock equivalents.
2) Primary and fully diluted earnings per share for the quarter ended March 31,
1997, was calculated based on weighted average shares outstanding of 19,553,072
and 19,600,812, respectively, which assumes the exercise of options covering
1,394,587 shares and computes incremental shares using the treasury stock
method.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,677
<SECURITIES> 0
<RECEIVABLES> 63,838
<ALLOWANCES> 0
<INVENTORY> 1,113,628
<CURRENT-ASSETS> 1,213,636
<PP&E> 28,172
<DEPRECIATION> 7,117
<TOTAL-ASSETS> 1,234,691
<CURRENT-LIABILITIES> 1,073,015
<BONDS> 0
0
0
<COMMON> 193
<OTHER-SE> 161,676
<TOTAL-LIABILITY-AND-EQUITY> 1,234,691
<SALES> 13,455
<TOTAL-REVENUES> 30,057
<CGS> 17,964
<TOTAL-COSTS> 22,839
<OTHER-EXPENSES> 4,875
<LOSS-PROVISION> 265
<INTEREST-EXPENSE> 9,720
<INCOME-PRETAX> 7,218
<INCOME-TAX> 2,748
<INCOME-CONTINUING> 7,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,470
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
