<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 September 30, 1997
------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 000-21786
---------
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 October
31, 1997, was 20,320,046 (21,336,048 after giving effect to the 5% stock
dividend declared on October 31, 1997).
Page 1
Exhibit Index on Pages A to D
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
Form 10-Q for the quarter ended September 30, 1997
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
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 10
- ------- ---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
PART II. OTHER INFORMATION 24
- ------- ------------------
ITEM 6. Exhibits and Reports on Form 8-K 24
- ------- --------------------------------
SIGNATURES 25
- ----------
EXHIBIT INDEX A-D
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</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED BALANCE SHEET
($ in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Cash $ 8,939 $ 2,492
Residual certificate 7,550
Receivables 96,882 60,668
Mortgage-backed securities 196,675 123,447
Mortgage loans held for sale 893,656 678,888
Mortgage servicing rights, net 128,713 109,815
Premises and equipment, net 24,287 21,135
Goodwill and other intangibles 8,221
Accrued interest on loans held for sale 4,004 4,491
Other assets 35,217 27,458
----------- -----------
Total assets $ 1,404,144 $ 1,028,394
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Short-term borrowings $ 1,129,065 $ 805,730
Long-term borrowings 6,485
Accrued expenses 13,438 11,386
Other liabilities 76,573 53,977
----------- -----------
Total liabilities 1,225,561 871,093
----------- -----------
Stockholders' equity
Common stock 210 193
Additional paid-in capital 171,151 149,653
Retained earnings 11,190 12,007
Unearned shares of employee stock ownership plan (3,968) (4,552)
----------- -----------
Total stockholders' equity 178,583 157,301
----------- -----------
Total liabilities and stockholders' equity $ 1,404,144 $ 1,028,394
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except share information)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------------------------- --------------------------------
1997 1996 1997 1996
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Interest income $ 53,301 $ 49,809 $ 21,613 $ 14,508
Interest expense (39,115) (37,029) (17,078) (10,008)
------------ ------------ ------------ ------------
Net interest income 14,186 12,780 4,535 4,500
Net gain on sale of mortgage loans 71,578 59,348 29,328 19,312
Gain on sale of mortgage servicing rights 5,948 964 3,237 775
Loan servicing fees 23,049 21,379 7,711 7,520
Other income 572 404 146 106
------------ ------------ ------------ ------------
Total revenues 115,333 94,875 44,957 32,213
------------ ------------ ------------ ------------
EXPENSES
Salary and employee benefits 43,631 37,830 16,487 12,315
Occupancy expense 5,328 4,125 1,886 1,485
Amortization of mortgage servicing rights 13,673 11,064 4,840 3,748
General and administrative expenses 29,580 14,608 17,837 4,858
------------ ------------ ------------ ------------
Total expenses 92,212 67,627 41,050 22,406
------------ ------------ ------------ ------------
Income before income taxes 23,121 27,248 3,907 9,807
Income tax expense (8,713) (10,340) (1,340) (3,626)
------------ ------------ ------------ ------------
Net income $ 14,408 $ 16,908 $ 2,567 $ 6,181
============ ============ ============ ============
Weighted average shares (retroactively 20,902,473 18,916,081 21,260,707 19,914,160
adjusted for the 5% stock dividend declared ============ ============ ============ ============
on October 31, 1997)*
Net income per common share $ 0.69 $ 0.89 $ 0.12 $ 0.31
============ ============ ============ ============
</TABLE>
* The provisions of Accounting Principles Board Opinion No. 15, "Earnings
per Share" required 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 third quarter of 1997 and the nine
months ended September 30, 1997 includes common stock equivalents while
such equivalents are excluded for the comparable periods of the prior
year.
See accompanying notes to consolidated financial statements.
4
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
($ in thousands, except share information)
(Unaudited)
<TABLE>
<CAPTION>
Unearned
Common Stock Additional Shares of Employee
Nine Months Ended ----------------------- Paid-in Retained Stock Ownership
September 30, 1996 Shares Amount Capital Earnings Plan Total
- --------------------------- ---------- --------- --------- ---------- --------- --------
<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
Stock dividend adjustment 1,261,332 13 17,115 (17,128)
Cash dividend (542) (542)
Shares committed to be
released under ESOP 111 300 411
Shares issued under Dividend
Reinvestment and Stock
Purchase Plan and Stock
Investment Plan 25,107 * 157 157
Loans to ESOP (2,365) (2,365)
Net income 16,908 16,908
---------- ----- -------- -------- -------- --------
Balance, September 30, 1996 19,279,863 $ 193 $149,589 $ 9,963 $ (4,065) $155,680
========== ===== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Unearned
Common Stock Additional Shares of Employee
Nine Months Ended ---------------------- Paid-in Retained Stock Ownership
September 30, 1997 Shares Amount Capital Earnings Plan Total
- --------------------------- ---------- -------- --------- -------- -------- -------
<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
Cash dividends (1,739) (1,739)
Acquisition of Meritage Mortgage
Corporation 673,197 6 7,162 7,168
Exercise of stock options 62,000 1 379 380
Shares committed to be
released under ESOP 213 584 797
Shares issued under Dividend
Reinvestment and Stock
Purchase Plan and Stock
Investment Plan 5,599 * 18 (78) (60)
Retroactive adjustment for the 5%
stock dividend declared on
October 31, 1997 1,002,467 10 13,398 (13,408)
Net income 14,408 14,408
---------- ----- -------- ------- ------- --------
Balance, September 30, 1997 21,051,811 $ 210 $171,151 $11,190 $(3,968) $178,583
========== ===== ======== ======= ======= ========
</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>
- -----------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30,
1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 14,408 $ 16,908
Adjustments to reconcile net
income to cash (used in) provided by operating activities:
Depreciation and amortization 16,191 12,980
Employee Stock Ownership Plan compensation 797 291
Provision for estimated foreclosure losses 2,605
Increase in receivables (36,214) (1,451)
Acquisition of mortgage loans (7,799,804) (7,928,301)
Proceeds from sales of mortgage loans and mortgage-backed securities 7,583,386 8,279,643
Acquisition of mortgage servicing rights (175,232) (174,941)
Sales of mortgage servicing rights 146,004 157,532
Net gain on sales of mortgage loans and servicing rights (77,526) (60,312)
Decrease in accrued interest on loans 487 4,757
Increase in other assets (6,679) (8,948)
Increase in residual certificates (7,550)
Increase in accrued expenses and other liabilities 24,648 3,162
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (314,479) 301,320
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of premises and equipment, net (5,500) (6,587)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,500) (6,587)
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from borrowings 20,666,472 25,933,824
Repayment of borrowings (20,336,652) (26,272,671)
Issuance of restricted stock 328 256
Shares issued under Dividend Reinvestment and Stock Purchase Plan
and Stock Investment Plan (60) 157
Acquisition of Meritage Mortgage Corporation (1,750)
Debt issuance costs (553)
Cash dividends (1,739) (542)
Net proceeds of public offering 47,451
Exercise of stock options 380
Loans to Employee Stock Ownership Plan (1,954)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 326,426 (293,479)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash 6,447 1,254
Cash, beginning of period 2,492 2,161
- -----------------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 8,939 $ 3,415
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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 and
financial position 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 beginning in the first quarter of
1997. In February 1997 the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share", 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
third quarter of 1997 reported pursuant to the provisions of SFAS No. 128
after retroactive adjustment for a 5% stock dividend declared on October
31, 1997, would both be $0.12. Basic and diluted earnings per share for the
first nine months of 1997 reported pursuant to the provisions of SFAS No.
128 after retroactive adjustment for a 5% stock dividend declared on
October 31, 1997, would be $0.71 and $0.69, respectively. Adoption of SFAS
No. 128 should not result in any change in earnings per share for 1996 and
prior periods.
Effective April 1, 1997, the Company completed a merger with Meritage
Mortgage Corporation (Meritage), in which it exchanged approximately
$1.75 million of cash and 537,846 (564,738 after retroactive adjustment
for the 5% stock dividend declared on October 31, 1997) noncontingent
shares of RBMG common stock for all the outstanding stock of Meritage.
This transaction was accounted for under the purchase method of
accounting. In addition, 406,053 (426,355 after retroactive adjustment for
the 5% stock dividend declared on October 31, 1997) shares of RBMG common
stock were issued contingent upon Meritage achieving specified
increasingly higher levels of subprime mortgage production during the 31
months following closing. During the third quarter, 135,351 (142,118 after
retroactive adjustment for the 5% stock dividend declared on October 31,
1997) contingent shares of RBMG common stock were released. The fair
market value of
7
<PAGE> 8
the remaining contingent shares has been excluded from the purchase price
for purposes of recording goodwill and from outstanding shares for purposes
of earnings per share computations. As each specified increasingly higher
subprime mortgage production level is achieved, the corresponding fair
market value of the associated contingent shares will be recorded as
additional goodwill and such shares will prospectively be treated as
outstanding for purposes of earnings per share computations. The purchase
price for the Meritage merger has been allocated to tangible and
identifiable assets and liabilities based upon management's estimate of
their respective fair values with the excess of estimated cost over the
fair value of the net assets acquired allocated to goodwill. Goodwill and
other intangible assets are being amortized over a 20 year period using the
straight line method. Amortization expense for the third quarter and nine
month periods ended September 30, 1997 was approximately $103 and $181,
respectively. In connection with the acquisition, the following is a
schedule of the allocation of the purchase price:
<TABLE>
<CAPTION>
Release of Through
At Acquisition Contingent September
on April 1, 1997 Shares 30, 1997
---------------- ---------- ---------
<S> <C> <C> <C>
Cash paid $ 1,750 $ - $ 1,750
Estimated fair market value of
shares of RBMG common stock issued or released 4,748 2,441 7,189
Deferred merger cost 463 - 463
---------------- ---------- ---------
Total purchase price 6,961 2,441 9,402
Fair value of net assets acquired 1,000 - 1,000
---------------- ---------- ---------
Goodwill and intangibles $ 5,961 $ 2,441 $ 8,402
================ ========== =========
</TABLE>
On April 18, 1997 the Company entered into separate definitive merger
agreements with Resource Bancshares Corporation (RBC) and Walsh Holding
Co., Inc. (Walsh) pursuant to which the Company, subject to approval by
shareholders of the Company and satisfaction of other terms and conditions,
would acquire all of the outstanding shares of RBC and Walsh. On November
3, 1997, the Company and Walsh announced mutual termination of their merger
agreement. Accordingly, during the third quarter of 1997, the Company
recorded a $2.3 million ($1.4 million after-tax) charge related
to joint termination of the Company's merger agreement with Walsh.
During the second quarter of 1997, the Company sold approximately $107
million of subprime mortgage loans to Walsh and recognized a gain of
approximately $3.7 million on those sales. Approximately $76 million of
such loans were included in a Walsh securitization which was completed in
June of 1997. The remaining loans were expected to be included in Walsh's
next securitization. However, during the third quarter the Company
repurchased the remaining $31 million of loans from Walsh and included
those loans in its first subprime securitization transaction which was
completed on September 29, 1997. Also during the third quarter, the
Company advanced approximately $3.8 million to Walsh in connection with
certain other transactions. In conjunction therewith at September 30,
1997, receivables of approximately $9.9 million are outstanding and due
from Walsh to the Company. Such receivables are cross-collateralized and
secured by an interest in a residual certificate and certain other assets.
The Company remains committed to completion of its pending merger with RBC.
RBC, a financial services company, originates and purchases, sells and
services small-ticket equipment leases through its Republic Leasing Company
division and originates and services commercial mortgage loans through its
Laureate subsidiaries. RBC, as of September 30, 1997, owned approximately
36% of the Company's common stock. Pursuant to the terms of the definitive
merger agreement between RBC and the Company and subject to shareholder and
regulatory approvals, RBC will merge with the Company in a transaction that
will be accounted for under the purchase method of accounting. The
agreement provides for the Company to issue approximately 2 million
additional shares of common stock, 2.1 million after giving effect to the
5% stock dividend declared on October 31, 1997, (in addition to the 7.4
million shares of Company stock currently owned by RBC, 7.8 million shares
after giving effect to the 5% stock dividend declared on October 31, 1997)
to the shareholders of RBC. As of September 30, 1997 the Company has
deferred approximately $1.0 million of merger costs related to this
transaction.
During 1995 and 1996 the Company's scale of operations grew dramatically as
did the balances in its operating receivable accounts. The rapid growth
outpaced the Company's back-office capacities to timely process activities
and research, review, resolve and collect on the resultant items. During a
third quarter review it became apparent that $7.9 million of operating
receivables may be unrecoverable due to passage of time, an associated
practical inability to conduct further research and other reasons.
Accordingly, the Company recorded a special charge of $7.9 million ($4.8
million after-tax) to fully-reserve the items.
8
<PAGE> 9
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
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 September 3, 1993,
when the Company sold 58% of its common stock in an initial public offering. As
a result, RBC retained a significant ownership interest in the Company. As of
September 30, 1997, RBC owns approximately 36% of the outstanding common stock
of the Company.
The Company is principally engaged in the purchase and origination of
mortgage loans, which it aggregates into mortgage-backed securities issued or
guaranteed by Freddie Mac, Fannie Mae and Ginnie Mae. The Company sells the
mortgage-backed securities it creates to institutional purchasers with the
rights to service the underlying loans being retained by the Company. The
servicing rights retained are generally sold separately but may be held for
extended periods by the Company.
LOAN PRODUCTION
A summary of loan production by source for the periods indicated is set forth
below:
<TABLE>
<CAPTION>
($in thousands) Nine Months Ended September 30, Quarter Ended September 30,
(Unaudited) ------------------------------- -------------------------------
1997 1996 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Loan Production:
Correspondent Division $5,690,799 $6,310,198 $2,136,619 $1,725,329
Wholesale Division 1,349,408 1,077,812 501,239 341,116
Retail Division 509,528 503,654 195,655 193,235
Subprime 230,199 96,441
---------- ---------- ---------- ----------
Total Loan Production $7,779,934 $7,891,664 $2,929,954 $2,259,680
========== ========== ========== ==========
</TABLE>
10
<PAGE> 10
A summary of key information relevant to industry loan production activity is
set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Quarter Ended September 30,
(Unaudited) -----------------------------------------
1997 1996
---------------- -------------------
<S> <C> <C>
U. S. 1-4 Family Mortgage Originations Statistics (1)
U. S. 1-4 Family Mortgage Originations $239,000,000 $184,000,000
Adjustable Rate Mortgage Market Share 20.00% 32.00%
Estimated Fixed Rate Mortgage Originations $191,000,000 $125,000,000
Company Information
Loan Production $ 2,929,954 $ 2,259,680
Estimated Company Market Share 1.23% 1.23%
</TABLE>
(1) Source: Mortgage Bankers Association of America, Economics Department.
Mortgage loan production increased 30% to $2.9 billion for the third quarter
of 1997 from $2.3 billion for the third quarter of 1996. The net increase in
loan production is primarily due to an estimated 53% increase in fixed rate
mortgage origination volume between the comparable periods.
Historically, the Company has been focused on purchasing loans through its
correspondents. In order to diversify its sources of loan volume, the Company
started a wholesale operation that purchased its first loan in May 1994, a
retail operation which originated its first loan in May 1995 and a subprime
division which was started in mid-1996, but did not commence significant
business operations until the first quarter of 1997.
Correspondent Loan Production
The Company purchases mortgage loans through a network of approved
correspondents, which handle the majority of the loan origination functions. The
Company's correspondents are primarily mortgage lenders, large mortgage brokers
and smaller savings and loan associations and commercial banks.
The Company continues to emphasize correspondent loan production as its
primary business focus because of the lower fixed expenses and capital
investment required of the Company. That is, the Company can develop a cost
structure that is more directly variable with loan production because the
correspondent incurs most of the fixed costs of operating and maintaining branch
office networks and of identifying and interacting directly with loan
applicants.
A summary of key information relevant to the Company's correspondent loan
production activities is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Nine Months Ended At or For the Quarter Ended
(Unaudited) September 30, September 30,
---------------------------------- ---------------------------------
1997 1996 1997 1996
---------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C>
Correspondent Loan Production $ 5,690,799 $ 6,310,198 $ 2,136,619 $ 1,725,329
Estimated Correspondent Market Share 0.88% 1.06% 0.89% 0.94%
Approved Correspondents 934 849 934 849
</TABLE>
The 24% increase in correspondent loan production to $2.1 billion for the
third quarter of 1997 from $1.7 billion for the third quarter of 1996 was
primarily due to the nationwide increase in mortgage production which resulted
primarily from the improved mortgage interest rate environment during the third
quarter of
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<PAGE> 11
1997 as compared to the same period of the previous year. The Company's
correspondent loan production increase is also attributable to the decline in
the adjustable rate mortgage (ARM) share of the U.S. market to an estimated 20%
for the third quarter of 1997 from an estimated 32% for the third quarter of
1996. The Company is primarily focused on the purchase and origination of fixed
rate 1-4 family residential mortgage loans and therefore is more competitively
advantaged in economic environments that favor fixed rate mortgages over ARMs.
The number of approved correspondents increased by 85 or 10% to 934 at September
30, 1997, from 849 at September 30, 1996.
Wholesale Loan Production
The Company receives loan applications at its wholesale branches from its
network of approved brokers, underwrites the loans, funds the loans at closing
and prepares all closing documentation. The wholesale branches also handle
shipping and follow-up procedures on these loans. Although the establishment of
wholesale branch offices involves the incurrence of the fixed expenses
associated with maintaining those offices, wholesale operations also provide for
higher profit margins than correspondent loan production. Additionally, each
branch office can serve a relatively sizable geographic area by establishing
relationships with large numbers of independent mortgage loan brokers who bear
much of the cost of identifying and interacting directly with loan applicants.
A summary of key information relevant to the Company's wholesale production
activities is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Nine Months At or For the Quarter
(Unaudited) Ended September 30, Ended September 30,
------------------------------------ ---------------------------------
1997 1996 1997 1996
--------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
Wholesale Loan Production $ 1,349,408 $ 1,077,812 $ 501,239 $ 341,116
Estimated Wholesale Market Share 0.21% 0.18% 0.21% 0.19%
Wholesale Division Direct
Operating Expenses $ 8,029 $ 6,363 $ 3,065 $ 2,107
Approved Brokers 2,956 2,147 2,956 2,147
Number of Branches 14 12 14 12
Number of Employees 126 118 126 118
</TABLE>
The $160.1 million, or 47% increase in wholesale loan production to $501.2
million for the third quarter of 1997 from $341.1 million for the third quarter
of 1996 relates to the Company's addition of two new branches and over 800 new
brokers between September 30, 1996 and September 30, 1997. The increase is also
attributable to the overall nationwide increase in mortgage loan production for
the third quarter of 1997 compared to the third quarter of 1996.
Retail Loan Production
In order to further diversify its sources of revenue, the Company started a
retail division in May 1995. Each retail branch handles all aspects of loan
origination, from taking the application, to processing, underwriting and
closing the mortgage loan.
A summary of key information relevant to the Company's retail production
activities is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Nine Months At or For the Quarter
(Unaudited) Ended September 30, Ended September 30,
--------------------------------- ----------------------------------
1997 1996 1997 1996
----------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Retail Loan Production $ 509,528 $ 503,654 $ 195,655 $ 193,235
Estimated Retail Market Share 0.08% 0.08% 0.08% 0.11%
Retail Division Operating Expenses $ 12,700 $ 11,785 $ 4,407 $ 3,953
Number of Branches 6 6 6 6
Number of Employees 218 201 218 201
</TABLE>
The Company's retail loan production remained generally consistent for the
quarter and nine months ended September 30, 1996 and September 30, 1997. The
division's operating expenses increased slightly for the
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<PAGE> 12
third quarter and first nine months of 1997 compared to the same periods of the
prior year because of the increased number of employees at September 30, 1997
compared to September 30, 1996. The number of employees increased as a result
of the opening of four new satellite offices.
Strategically, the Company remains focused on accumulation of loan production
through third-party correspondent and wholesale broker channels because of the
relatively lower fixed expenses and capital investments required, among other
reasons. As part of its ongoing business processes, the Company in conjunction
with an investment banking firm, is currently reviewing the compatibility of
the retail operation with its primary business focus. A number of strategic
alternatives are being considered in by the Company.
Subprime Loan Production
A summary of key information relevant to the Company's subprime production
activities that were started in mid-1996, but did not commence significant
business operations until the first quarter of 1997 is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Nine Months At or For the Quarter
(Unaudited) Ended September 30, Ended September 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
----------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Subprime Loan Production $ 230,199 N/A $ 96,441 N/A
Subprime Division Operating Expenses $ 6,729 N/A $ 3,200 N/A
Number of Brokers 661 N/A 661 N/A
Number of Employees 116 N/A 116 N/A
</TABLE>
During the third quarter of 1997, the Company originated/purchased
$96.4 million in subprime mortgage loans through its retail telemarketing and
wholesale broker channels. The subprime division served 661 brokers as of
September 30, 1997.
LOAN SERVICING
A summary of key information relevant to the Company's loan servicing
activities is set forth below:
<TABLE>
<CAPTION>
($ in thousands) At or For the Nine Months At or For the Quarter
(Unaudited) Ended September 30, Ended September 30,
------------------------------------ --------------------------------
1997 1996 1997 1996
----------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
Underlying Unpaid Principal Balances:
Beginning Balance $ 6,670,267 $ 5,562,930 $ 7,239,065 $ 5,926,199
Loan Production (net of servicing
released production) 7,864,319 7,839,837 3,054,529 2,234,824
Net Change in Work-in-Process (379,131) 297,635 (142,736) 231,201
Bulk Acquisitions 774,097 1,354,592 1,293,705
Sales of Servicing (7,102,140) (7,744,335) (2,801,046) (2,778,861)
Paid-In-Full Loans (486,965) (331,688) (201,385) (85,349)
Amortization, Curtailments and Others, net (344,081) (438,897) (152,061) (281,645)
------------ ------------ ------------ ------------
Ending Balance $ 6,996,366 $ 6,540,074 $ 6,996,366 $ 6,540,074
------------ ------------ ------------ ------------
Subservicing Ending Balance 3,066,256 2,888,014 3,066,256 2,888,014
============ ============ ============ ============
Total Underlying Unpaid Principal Balances $ 10,062,622 $ 9,428,088 $ 10,062,622 $ 9,428,088
============ ============ ============ ============
Loan Servicing Fees $ 23,049 $ 21,379 $ 7,711 $ 7,520
Cash Operating Expenses 78,539 56,563 36,210 18,658
Coverage Ratio 29% 38% 21% 40%
Average Underlying Unpaid Principal
Balances (including subservicing) $ 9,225,094 $ 8,796,418 $ 9,683,313 $ 8,974,362
Weighted Average Note Rate* 7.82% 7.91% 7.82% 7.91%
Weighted Average Servicing Fee* 0.41% 0.39% 0.41% 0.39%
Delinquency (30+ days)* 3.76% 3.73% 3.76% 3.73%
Number of Servicing Division Employees 125 128 125 128
</TABLE>
* These statistics apply to the Company's owned servicing portfolio.
The $709.0 million or 8% increase in the average underlying unpaid principal
balance of mortgage loans being serviced for the third quarter of 1997 as
compared to the third quarter of 1996 is primarily related to bulk acquisitions
of $774.1 million during the first nine months of 1997.
13
<PAGE> 13
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1996
SUMMARY
Total revenues of the Company increased 22% to $115.3 million for the
first nine months of 1997 as compared to $94.9 million for the first nine months
of 1996. The $20.4 million increase in revenues was primarily due to a $17.2
million increase in gains on sales of loans and servicing rights. This increase
was offset by a $22.0 million increase in operating expenses (exclusive of
amortization of mortgage servicing rights and taxes). The increase in gains on
sales of loans and servicing rights is primarily due to improved production
margins and gains derived from the Company's growing subprime division. The
increase in operating expenses is primarily attributable to a $2.3 million
pre-tax charge related to joint termination of the Company's merger agreement
with Walsh Holding Company, Inc. and a special charge of $7.9 million pre-tax
for nonrecoverable operating receivables. Higher operating costs associated with
increased loan servicing volumes and the Company's expansion of subprime
operations also contributed to the increase. Direct operating costs related to
the Company's expansion into subprime operations account for approximately $6.7
million, or 31%, of the total increase in operating expenses (exclusive of
amortization and taxes) for the first nine months of 1997.
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 (the difference between interest rates earned
on loans and mortgage-backed securities and interest rates paid on
interest-bearing sources of funds) for the nine months ended September 30, 1997
and September 30, 1996. All dollars are in thousands; the information presented
is unaudited.
<TABLE>
<CAPTION>
Variance
Average Volume Average Rate Interest Attributable to
- ---------------------------------------- ---------------- -----------------
1997 1996 1997 1996 1997 1996 Variance Rate Volume
- ---------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Mortgages Held for Sale
$909,185 $864,901 7.82% 7.68% and Mortgage-Backed $53,301 $49,809 $3,492 $ 942 $2,550
- ---------------------------------------- Securities ------------------------------------------------
INTEREST EXPENSE
$436,248 $321,643 4.88% 4.60% Warehouse Line $15,916 $11,071 $4,845 $ 900 $3,945
446,697 516,397 5.59% 5.64% Gestation Line 18,680 21,788 (3,108) (167) (2,941)
20,486 8.19% Servicing Secured Line 1,256 (1,256) (1,256)
58,493 20,363 6.44% 5.87% Servicing Receivable Line 2,819 894 1,925 247 1,678
4,213 10,475 8.13% 8.50% Other Borrowings 256 667 (411) (12) (399)
Facility Fees & Other Charges 1,444 1,353 91 91
- ---------------------------------------- ------------------------------------------------
$945,651 $889,364 5.53% 5.56% Total Interest Expense $39,115 $37,029 $2,086 $ 968 $1,118
- ---------------------------------------- ------------------------------------------------
2.29% 2.12% Net Interest Income $14,186 $12,780 $1,406 $ (26) $1,432
================= ================================================
</TABLE>
Net interest income increased 11% to $14.2 million for the first nine months
of 1997 compared to $12.8 million for the first nine months of 1996. The $1.4
million increase in net interest income is primarily attributable to an increase
of 17 basis points in the interest-rate spread to 229 basis points for 1997 as
compared to 212 basis points for 1996. The increased spread is primarily
attributed to inclusion of higher yielding subprime production in the current
year's inventory of mortgages held for sale.
14
<PAGE> 14
NET GAINS ON SALES OF MORTGAGE LOANS AND MORTGAGE SERVICING RIGHTS
Net gains on sales of mortgage loans and mortgage servicing rights increased
$17.2 million to $77.5 million for the first nine months of 1997 as compared to
$60.3 million for the first nine months of 1996. As further discussed below,
this increase is primarily due to increased profit margins on sales of mortgage
loans and mortgage servicing rights.
Net Gain on Sale of Mortgage Loans
A reconciliation of the gain on sale of agency-eligible mortgage loans for
the periods indicated follows:
<TABLE>
<CAPTION>
($ in thousands) For the Nine Months Ended
September 30,
------------------------------
(Unaudited) 1997 1996
----------- -----------
<S> <C> <C>
Gross proceeds on sales of mortgage loans $ 7,426,512 $ 8,279,643
Initial unadjusted acquisition cost of
mortgage loans sold, net
of hedge results 7,422,340 8,271,259
----------- -----------
Unadjusted gain on sale of mortgage loans 4,172 8,384
Loan origination and correspondent program
administrative fees
23,852 26,921
----------- -----------
Unadjusted aggregate margin 28,024 35,305
Acquisition basis allocated to mortgage
servicing rights (SFAS
No. 122 and SFAS No. 125) 32,661 24,338
Net change in deferred administrative fees 1,394 (295)
----------- -----------
Net gain on sale of agency-eligible
mortgage loans $ 62,079 $ 59,348
=========== ===========
</TABLE>
The Company sold agency-eligible loans during the first nine months of 1997
with an aggregate unpaid principal balance of $7.4 billion compared to sales of
$8.3 billion for the first nine months of 1996. The amount of proceeds received
on sales of mortgage loans exceeded the initial unadjusted acquisition cost of
the loans sold by $4.2 million (6 basis points) for the first nine months of
1997 as compared to $8.4 million (10 basis points) for the first nine months of
1996. The Company received administrative fees of $23.9 million (32 basis
points) on these loans during the first nine months of 1997 and $26.9 million
(33 basis points) during the first nine months of 1996. The Company allocated
$32.7 million (44 basis points) in the first nine months of 1997 to basis in
mortgage servicing rights versus $24.3 million (29 basis points) during the
first nine months of 1996 in accordance with SFAS No. 125 and SFAS No. 122. Net
gain on sale of mortgage loans increased to $62.1 million for the first nine
months of 1997 versus $59.3 million for the same period of 1996.
A reconciliation of the gain on sale of subprime mortgage loans for the
periods indicated follows:
<TABLE>
<CAPTION>
($ in thousands) For the Nine Months Ended
September 30,
----------------------------
(Unaudited) 1997 1996
---------- ---------
<S> <C> <C>
Gross proceeds on sales of subprime mortgage $230,102 N/A
loans
Initial acquisition cost of subprime mortgage
loans sold, net of fees 228,153 N/A
-------- ---
Unadjusted gain on sale of subprime mortgage loans 1,949 N/A
Initial capitalization of residual certificate 7,550 N/A
-------- ---
Net gain on sale of subprime mortgage loans $ 9,499 N/A
======== ===
</TABLE>
On September 29, 1997, the Company completed its first securitization of
subprime mortgage loans through its newly-formed and wholly-owned subsidiary,
RBMG Funding Co. The asset-backed transaction was collateralized by
$91.7 million of subprime mortgage loans. The residual certificate was valued
by an independent third party and will be marked to market on a quarterly
basis.
15
<PAGE> 15
Gain on Sale of Mortgage Servicing Rights
A reconciliation of the components of gain on sale of mortgage servicing rights
for the periods indicated follows:
<TABLE>
<CAPTION>
($ in thousands) For the Nine Months Ended
September 30,
----------------------------
(Unaudited) 1997 1996
----------- -----------
<S> <C> <C>
Underlying unpaid principal balances of
mortgage loans on which
servicing rights were sold
during the period $ 6,584,487 $ 7,751,124
=========== ===========
Gross proceeds from sales of mortgage
servicing rights $ 146,004 $ 157,532
Initial acquisition basis, net of
amortization and hedge results 113,158 132,628
----------- -----------
Unadjusted gain on sale of mortgage
servicing rights 32,846 24,904
Acquisition basis allocated from mortgage
loans, net of amortization (SFAS No. 122
and SFAS No. 125) (26,898) (23,940)
=========== ===========
Gain on sale of mortgage servicing rights $ 5,948 $ 964
=========== ===========
</TABLE>
During the first nine months of 1997, the Company completed 25 sales of
mortgage servicing rights representing $6.6 billion of underlying unpaid
principal mortgage loan balances. This compares to 26 sales of mortgage
servicing rights representing $7.8 billion of underlying unpaid principal
mortgage loan balances in the first nine months of 1996. Unadjusted gain on sale
of mortgage servicing rights was $32.8 million for the first nine months of
1997, up from $24.9 million for the first nine months of 1996. The Company
reduced this unadjusted gain by $26.9 million (41 basis points) in the first
nine months of 1997 versus a $23.9 million (31 basis points) reduction in the
first nine months of 1996, in accordance with SFAS No. 125 and SFAS No. 122. The
$5.0 million increase in gain on sale of mortgage servicing rights is primarily
related to several bulk sales of available-for-sale mortgage servicing rights
during the first nine months of 1997.
NET SERVICING MARGIN
Loan servicing fees were $23.0 million for the first nine months of 1997,
compared to $21.4 million for the first nine months of 1996, an increase of 8%.
This increase is primarily related to an increase in the average aggregate
underlying unpaid principal balance of mortgage loans serviced to $9.2 billion
during the first nine months of 1997 from $8.8 billion during the first nine
months of 1996, an increase of 5%. Similarly, amortization of mortgage servicing
rights also increased to $13.7 million during the first nine months of 1997 from
$11.1 million during the first nine months of 1996, an increase of 23%. As a
result, net servicing margin decreased to $9.4 million during the first nine
months of 1997, compared to $10.3 million for the first nine months of 1996, a
decrease of 9%.
Included in loan servicing fees for the first nine months of 1997 and the
first nine months of 1996 are subservicing fees received by the Company of
$367,000 and $858,000, respectively. The subservicing fees are associated with
temporary subservicing agreements between the Company and purchasers of mortgage
servicing rights.
16
<PAGE> 16
The following table summarizes the net servicing margin for the first nine
months of both 1997 and 1996:
<TABLE>
<CAPTION>
($ in thousands) For the Nine Months Ended
September 30,
---------------------------
(Unaudited) 1997 1996
---------- ----------
<S> <C> <C>
Loan servicing fees $ 23,049 $ 21,379
Amortization of mortgage
servicing rights 13,673 11,064
---------- ----------
Net servicing margin $ 9,376 $ 10,315
========== ==========
Average underlying unpaid
principal balance of
mortgage loans serviced $9,225,094 $8,796,418
---------- ----------
</TABLE>
EXPENSES
The $22.0 million increase in operating expenses (excluding amortization of
mortgage servicing rights) was centered in salary and employee benefits and
general and administrative expenses which increased $5.8 million, or 15% and
$15.0 million, or 102%, respectively. The Company increased its employee
headcount by 107 from 1,028 at September 30, 1996, to 1,135 at September 30,
1997. The increased employee headcount and associated increase in salary and
employee benefit costs are primarily attributable to expansion of subprime
operations through the Company's acquisition of Meritage Mortgage Corporation.
Overall, the subprime division accounted for 116 new positions and for $6.7
million of the total $22.0 million increase in operating expenses. The increase
in general and administrative expenses is primarily attributable to a $2.3
million pre-tax charge related to termination of the Company's merger agreement
with Walsh Holding Company, Inc. and the recording of a special charge of $7.9
million pre-tax relating to certain nonrecoverable operating receivables.
INCOME TAX EXPENSE
Income tax expense includes both federal and state income taxes. The
effective tax rates for the nine months ended September 30, 1997 and 1996 were
37.7% and 37.9%, respectively. Income tax expense decreased by 16% to $8.7
million for the first nine months of 1997 from $10.3 million for the first nine
months of 1996 due to the above-described factors that resulted in a 15% or
$4.1 million decrease in income before taxes.
RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1997, COMPARED TO QUARTER
ENDED SEPTEMBER 30, 1996
SUMMARY
Total revenues of the Company increased 40% to $45.0 million for the third
quarter of 1997 as compared to $32.2 million for the third quarter of 1996. The
$12.7 million increase in revenues was primarily due to a $12.5 million increase
in gains on sales of loans and servicing rights, which was offset by a $17.6
million increase in operating expenses (exclusive of amortization of mortgage
servicing rights and taxes). The increase in gains on sales of loans and
servicing rights is attributable to the Company's increased loan production
volumes during the third quarter of 1997 and to improved production margins and
gains derived from the Company's growing subprime division. The increase in
operating expenses is primarily attributable to a $2.3 million pre-tax charge
related to termination of the Company's merger agreement with Walsh Holding
Company, Inc. and a special charge of $7.9 million pre-tax for nonrecoverable
operating receivables. Higher operating costs associated with increased loan
servicing volumes and the Company's expansion of subprime operations also
contributed to the increase. Direct operating costs related to the Company's
expansion into subprime operations account for approximately $3.2 million, or
18%, of the total increase in operating expenses (exclusive of amortization and
taxes) for the third quarter of 1997.
17
<PAGE> 17
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 (the difference between interest rates earned
on loans and mortgage-backed securities and interest rates paid on
interest-bearing sources of funds) for the third quarter of 1997 and the third
quarter of 1996. All dollars are in thousands; the information presented is
unaudited.
<TABLE>
<CAPTION>
Variance
Average Volume Average Rate Interest Attributable to
- ---------------------------------------- -------------------------------------------------
1997 1996 1997 1996 1997 1996 Variance Rate Volume
- ---------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income
Mortgages Held for Sale
and Mortgage-Backed
$1,102,862 $729,538 7.84% 7.95% Securities $21,613 $14,508 $7,105 $(318) $7,423
- ---------------------------------------- ------------------------------------------------
Interest Expense
$ 504,375 $291,280 5.03% 4.36% Warehouse Line $ 6,391 $ 3,192 $3,199 864 2,335
576,109 417,834 5.88% 5.64% Gestation Line 8,539 5,923 2,616 372 2,244
Servicing Secured Line
87,553 16,560 6.56% 5.98% Servicing Receivable Line 1,447 249 1,198 131 1,067
6,580 978 7.93% 8.95% Other Borrowings 132 22 110 (16) 126
Facility Fees & Other 569 622 (53) (53)
Charges
- ---------------------------------------- ------------------------------------------------
$1,174,617 $726,652 5.77% 5.47% Total Interest Expense $17,078 $10,008 $7,070 $1,351 $5,719
- ---------------------------------------- ------------------------------------------------
2.07% 2.48% Net Interest Income $ 4,535 $ 4,500 $ 35 $(1,669) $1,704
================= ================================================
</TABLE>
Net interest income increased 1% to $4.5 million for the third quarter of
1997 compared to $4.5 million for the third quarter of 1996. The slight increase
in net interest income is attributable to the 51% increase in the average volume
of mortgages held for sale and mortgage-backed securities for the third quarter
of 1997 from that of the third quarter of 1996 offset by the 41 basis point
decrease in the interest rate spread from 248 basis points for the third quarter
of 1996 to 207 basis points for the third quarter of 1997. The Company's
long-term mortgages and mortgage-backed securities are generally sold and
replaced within 30 to 35 days. Accordingly, the Company generally borrows at
rates based upon short-term indices, while earning asset yields are based upon
long-term rate indices. Thus, the decrease in interest-rate spread was primarily
the result of narrower spreads between long-term and short-term rates in the
third quarter of 1997 compared to the third quarter of 1996.
NET GAINS ON SALES OF MORTGAGE LOANS AND MORTGAGE SERVICING RIGHTS
Net gains on sales of mortgage loans and mortgage servicing rights increased
$12.5 million to $32.6 million for the third quarter of 1997 as compared to
$20.1 million for the third quarter of 1996. As further discussed below, this
increase is primarily due to improved profit margins on sales.
18
<PAGE> 18
Net Gain on Sale of Mortgage Loans
A reconciliation of the gain on sale of agency-eligible mortgage loans for
the periods indicated follows:
<TABLE>
<CAPTION>
($ in thousands) For the Quarter Ended September 30,
-----------------------------------
(Unaudited) 1997 1996
------------ -----------
<S> <C> <C>
Gross proceeds on sales of mortgage loans $2,837,133 $2,223,612
Initial unadjusted acquisition cost of mortgage loans
sold, net of hedge results $2,837,111 $2,221,287
---------- ----------
Unadjusted gain on sale of mortgage loans 22 2,325
Loan origination and correspondent administrative fees 9,716 8,211
---------- ----------
Unadjusted aggregate margin 9,738 10,536
Acquisition basis allocated to mortgage servicing
rights (SFAS No. 122 and SFAS No. 125) 14,541 8,757
Net change in deferred administrative fees 332 19
---------- ----------
Net gain on sale of agency-eligible mortgage loans
$ 24,611 $ 19,312
========== ==========
</TABLE>
The Company sold loans during the third quarter of 1997 with an aggregate
unpaid principal balance of $2.8 billion compared to sales of $2.2 billion for
the third quarter of 1996. The amount of proceeds received on sales of mortgage
loans exceeded the initial unadjusted acquisition cost of the loans sold by
$20 thousand for the third quarter of 1997 as compared to $2.3 million (10
basis points) for the third quarter of 1996. The Company received loan
origination and correspondent administrative fees of $9.7 million (34 basis
points) on these loans during the third quarter of 1997 and $8.2 million (37
basis points) during the third quarter of 1996. The Company allocated $14.5
million (51 basis points) in the third quarter of 1997 to basis in mortgage
servicing rights versus $8.8 million (39 basis points) during the third quarter
of 1996 in accordance with SFAS No. 125 and SFAS No. 122. As a result, net gain
on sale of mortgage loans increased to $24.6 million for the third quarter of
1997 versus $19.3 million for the third quarter of 1996.
A reconciliation of the gain on sale of subprime mortgage loans for the
periods indicated follows:
<TABLE>
<CAPTION>
($ in thousands) For the Quarter Ended September 30,
-----------------------------------
(Unaudited) 1997 1996
--------------- ----------------
<S> <C> <C>
Gross proceeds on sales of subprime mortgage loans $ 110,893 N/A
Initial acquisition cost of subprime mortgage loans sold,
net of fees 113,726 N/A
--------------- ----------------
Unadjusted loss on sale of subprime mortgage loans (2,833) N/A
Initial capitalization of residual certificate 7,550 N/A
--------------- ----------------
Net gain on sale of subprime mortgage loans $ 4,717 N/A
=============== ================
</TABLE>
19
<PAGE> 19
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 September 30,
---------------------------------------
(Unaudited) 1997 1996
-------------- ---------------
<S> <C> <C>
Underlying unpaid principal balances of
mortgage loans on which servicing rights
were sold during the period $ 2,800,277 $ 2,778,998
=========== ===========
Gross proceeds from sales of mortgage
servicing rights $ 61,927 $ 54,977
Initial acquisition cost, net of
amortization and
hedge results 47,213 42,592
----------- -----------
Unadjusted gain on sale of mortgage
servicing rights 14,714 12,385
Acquisition basis allocated from mortgage
loans, net of amortization (SFAS No. 122
and SFAS No. 125) (11,477) (11,610)
=========== ===========
Gain on sale of mortgage servicing rights $ 3,237 $ 775
=========== ===========
</TABLE>
During the third quarter of 1997, the Company completed seven sales of
mortgage servicing rights representing $2.8 billion of underlying unpaid
principal mortgage loan balances. This compares to ten sales of mortgage
servicing rights representing $2.8 billion of underlying unpaid principal
mortgage loan balances in the third quarter of 1996. Unadjusted gain on sale of
mortgage servicing rights was $14.7 million for the third quarter of 1997, up
from $12.4 million for the third quarter of 1996. The Company reduced this
unadjusted gain by $11.5 million (41 basis points) in the third quarter of 1997
versus an $11.6 million (42 basis points) reduction in the third quarter of 1996
in accordance with SFAS No. 125 and SFAS No. 122. The $2.5 million increase in
gain on sale of mortgage servicing rights is primarily related to a bulk sale of
$585 million of underlying unpaid principal balances of available-for-sale
mortgage servicing rights which accounts for $2.9 million of the total third
quarter of 1997 gain.
NET SERVICING MARGIN
Loan servicing fees were $7.7 million for the third quarter of 1997, compared
to $7.5 million for the third quarter of 1996, an increase of 3%. This increase
is primarily related to an increase in the average aggregate underlying unpaid
principal balance of mortgage loans serviced to $9.7 billion during the third
quarter of 1997 from $9.0 billion during the third quarter of 1996, an increase
of 8%. Similarly, amortization of mortgage servicing rights also increased to
$4.8 million during the third quarter of 1997 from $3.7 million during the third
quarter of 1996, an increase of 30%. As a result, net servicing margin
decreased 24% to $2.9 million for the third quarter of 1997 from $3.8 million
during the third quarter of 1996.
Included in loan servicing fees for the third quarter of 1997 and the third
quarter of 1996 are subservicing fees received by the Company of $140,000 and
$180,000, respectively. The subservicing fees are associated with temporary
subservicing agreements between the Company and purchasers of mortgage servicing
rights.
20
<PAGE> 20
The following table summarizes the net servicing margin for the third
quarters of both 1997 and 1996:
<TABLE>
<CAPTION>
($ in thousands) For the Quarter Ended September 30,
-----------------------------------
(Unaudited) 1997 1996
----------- ----------
<S> <C> <C>
Loan servicing fees $ 7,711 $ 7,520
Amortization of mortgage servicing rights 4,840 3,748
========== ==========
Net servicing margin $ 2,871 $ 3,772
========== ==========
Average underlying unpaid principal balance
of mortgage loans serviced $9,683,313 $8,974,362
---------- ----------
</TABLE>
EXPENSES
The $17.6 million increase in operating expenses (excluding amortization of
mortgage servicing rights) was centered in salary and employee benefits and
general and administrative expenses which increased $4.2 million, or 34%, and
$13.0 million, or 267%, respectively. Through the end of the third quarter of
1997, the Company increased its employee headcount by 107 from 1,028 at
September 30, 1996, to 1,135 at September 30, 1997. The increased employee
headcount and associated increase in salary and employee benefit costs are
primarily attributable to expansion of subprime operations through the Company's
acquisition of Meritage Mortgage Corporation. Overall, the subprime division
accounted for 116 new positions and for $3.2 million, or 18%, of the total $17.6
million increase in operating expenses. The increase in general and
administrative expenses is primarily attributable to a $2.3 million pre-tax
charge related to termination of the Company's merger agreement with Walsh
Holding Company, Inc. and the recording of a special charge of $7.9 million
pre-tax relating to certain nonrecoverable operating receivables.
INCOME TAX EXPENSE
Income tax expense includes both federal and state income taxes. The
effective tax rates for the third quarter of 1997 and 1996 were 36.7% and 37.0%,
respectively. Income tax expense decreased by 63% to $1.3 million for the third
quarter of 1997 from $3.6 million for the third quarter of 1996 due to the
above-described factors that resulted in a 60% or $5.9 million decrease in
income before taxes.
21
<PAGE> 21
FINANCIAL CONDITION
During the third quarter of 1997, the Company experienced a 9% increase in
the volume of mortgage loans originated and acquired compared to the second
quarter of 1997. Mortgage loan production increased to $2.9 billion during the
third quarter of 1997 from $2.7 billion during the second quarter of 1997. The
September 30, 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 third quarter of 1997. The number of correspondents approved to do business
in the Company's correspondent lending program increased to 934 at September 30,
1997, from 871 at December 31, 1996.
The Company continued expansion of the wholesale network between December
31, 1996, and September 30, 1997, with the addition of 1,524 brokers to the
Company's approved list, increasing the number of approved wholesale brokers
from 2,322 at December 31, 1996, to 2,956 at September 30, 1997.
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 $1.1
billion at September 30, 1997, versus $802.3 million at December 31, 1996, an
increase of 36%. The Company's servicing portfolio (exclusive of loans under
subservicing agreements) increased to $7.0 billion at September 30, 1997, from
$6.7 billion at December 31, 1996, an increase of 5%.
Short-term borrowings, which are the Company's primary source of funds,
totaled $1.1 billion at September 30, 1997, compared with $805.7 million at
December 31, 1996, an increase of 40%. The increase in the balance outstanding
at September 30, 1997, resulted from the increased funding requirements related
to the increase in the balance of mortgage loans held for sale and
mortgage-backed securities at September 30, 1997, as compared to the balance at
December 31, 1996. Long-term borrowings totaled $6.5 million at September 30,
1997. There were no long-term borrowings at December 31, 1996.
22
<PAGE> 22
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 1998. 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 31,1998, 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, 1998, 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, 1998, 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 has also entered into a $200 million, 364-day term subprime
revolving credit facility, which expires in July 1998. The facility includes
covenants substantially the same as those described above with respect to the
warehouse line of credit.
The Company was in compliance with the above-mentioned debt covenants at
September 30, 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 $1.2 billion.
The Company entered into a $6.6 million note agreement in May 1997. This debt
is secured by the Company's corporate headquarters. The terms of the agreement
require the Company to make 120 equal monthly principal and interest payments
based upon a fixed interest rate of 8.07%.
23
<PAGE> 23
Part II. OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
- (a) A list of the exhibits required by this Form 10-Q, along with
the exhibit index can be found on pages A to D following the
signature page.
- (b) None.
24
<PAGE> 24
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)
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: November 14, 1997
25
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <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
4.4 Amendment No. 1 dated as of July 30, 1997 to and under the --
Second Amended and Restated Secured Revolving/Term Credit
Agreement dated as of July 31, 1996, among the Registrant,
the Banks and Co-Agents named therein and The Bank of New
York as Collateral Agent
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
</TABLE>
A
<PAGE> 26
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
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
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, Jr., 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
</TABLE>
B
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
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
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
</TABLE>
C
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
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
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, incorporated by reference to
Exhibit 10.38 of the Registrant's Quarterly Report on Form
10-Q for the period ended March 31, 1997 *
10.39 Form of Incentive Stock Option Agreement (Omnibus Stock *
Award Plan) incorporated by reference to Exhibit 10.40 of
the Registrant's Quarterly Report on Form 10-Q for the
period ended March 31, 1997 *
10.40 Form of Non-Qualified Stock Option Agreement (Non-Qualified *
Stock Option Plan), incorporated by reference to Exhibit
10.41 of the Registrant's Quarterly Report on Form 10-Q for
the period ended March 31, 1997 *
10.41 Amendment to Resource Bancshares Mortgage Group, Inc.
Omnibus Stock Award Plan, Formula Stock Option Plan and
Non-Qualified Stock Option Plan, incorporated by reference
to Exhibit 10.42 of the Registrant's Quarterly Report on
Form 10-Q for the period ended March 31, 1997 *
10.42(A)Agreement of Merger dated April 18, 1997 between Resource
Bancshares Mortgage Group, Inc., RBC Merger Sub, Inc. and
Resource Bancshares Corporation incorporated by reference
to Annex A of the Registrant's Registration No.333-29245 *
(B)First Amendment to Agreement of Merger dated April 18, --
1997 between Resource Bancshares Mortgage Group, Inc., RBC
Merger Sub, Inc. and Resource Bancshares Corporation
10.43 Agreement of Merger dated April 18, 1997 between Resource
Bancshares Mortgage Group, Inc., Carolina Merger Sub, Inc.
and Walsh Holding Co., Inc. incorporated by reference to
Annex B of the Registrant's Registration No.333-29245 *
10.44(A)Mutual Release and Settlement Agreement between the
Registrant, Lee E. Shelton and Constance P. Shelton dated
January 31, 1997 incorporated by reference to Exhibit 10.44
of the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1997 *
(B)Amendment to Mutual Release and Settlement Agreement --
between the Registrant, Lee E. Shelton and Constance P.
Shelton dated January 31, 1997
10.45 Note Agreement between the Registrant and UNUM Life
Insurance Company of America dated May 16, 1997
incorporated by reference to Exhibit 10.45 of the
Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1997 *
</TABLE>
D
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
11.1 Statement re Computation of Net Income per Share
-----
27.1 Financial Data Schedule
-----
</TABLE>
- ---------------------------------
* Incorporated by reference
E
<PAGE> 1
AMENDMENT NO. 1
Dated as of July 30, 1997
to and under
SECOND AMENDED AND RESTATED
SECURED REVOLVING/TERM CREDIT AGREEMENT
Dated as of July 31, 1996
Resource Bancshares Mortgage Group, Inc. ("RBMG"), the banks listed on
the signature pages hereof (the "Banks"), Bank One, Texas, National
Association, First Bank National Association and NationsBank of Texas, N.A., as
Co-Agents, and The Bank of New York, as Agent and Collateral Agent, agree as
follows:
1. Credit Agreement. Reference is made to the Second Amended
and Restated Secured Revolving/Term Credit Agreement, dated as of July 31,
1996, among Resource Bancshares Mortgage Group, Inc., 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 (the "Credit Agreement"). Terms used in this Amendment No. 1
(this "Amendment") that are defined in the Credit Agreement and are not
otherwise defined herein are used herein with the meanings therein ascribed to
them. The Credit Agreement as amended by this Amendment is and shall continue
to be in full force and effect and is hereby in all respects confirmed,
approved and ratified.
2. Amendments to the Credit Agreement. Upon and after the
Amendment Effective Date (as defined below),
(a) Section 1.03 shall be amended by:
(i) deleting from clause (a)(i)(A)(1) thereof the
figure "2.00%", and inserting in lieu thereof the figure "1.750%";
(ii) deleting from clause (a)(i)(A)(2) thereof the
figures "2.00%" and "0.875%", and inserting in lieu thereof the figures "1.75%"
and "0.625%", respectively;
(iii) deleting from clause (a)(i)(B) thereof the
figures "1.50%" and "1.625%" (in each place appearing), and inserting in lieu
thereof the figures "1.250%" and "1.375%", respectively;
(iv) deleting from clause (a)(i)(C) thereof the
figures "1.25%", and "1.375%" (in each place appearing), and inserting in lieu
thereof the figures "1.000%" and
<PAGE> 2
"1.125%", respectively; and
(v) deleting from clause (a)(ii) thereof the figures
"0.875%", "1.625%" and "1.375%", and inserting in lieu thereof the figures
"0.625%", "1.375%" and "1.125%", respectively;
(b) Section 1.04 shall be amended by deleting therefrom the
date "October 20, 1997", and inserting in lieu thereof the date "October 20,
1998";
(c) Section 1.08 shall be amended by (i) deleting the figure
"0.25%" from clause (a) thereof, and inserting in lieu thereof the figure
"0.225%", (ii) deleting clause (b) thereof in its entirety, and re-lettering
clause (c) thereof as clause (b), and (iii) inserting a proviso at the end of
clause (a) thereof as follows:
"; provided that so long as the Borrower's long term unsecured senior
debt shall be rated either (a) BBB- or better by Standard & Poor's
Ratings Group or (b) Baa3 or better by Moody's Investors Service,
Inc., such commitment fee shall be 0.20% with respect to HFI and
Receivables Commitments and 0.15% with respect to HFS Commitments.";
(d) Section 6.01(c)(i)(A) shall be amended by (i) replacing
the figure "$100,000" appearing therein with the figure "$250,000" and (ii)
restating the definition of "measuring period" appearing therein in its
entirety as follows:
"`measuring period' means, as of any date, the period of 12 consecutive
months ending on such date";
(e) Section 8.08 shall be amended and restated in its
entirety as follows:
"Section 8.08. Resignation and Removal of the Agent.08. Resignation
and Removal of the Agent.08. Resignation and Removal of the Agent. (a) The
Agent may at any time give notice of its resignation to the Banks and the
Borrower which shall be effective upon the earlier of (i) the date a successor
Agent shall have accepted its appointment as Agent, and (ii) the 30th day after
the giving of such notice. Upon receipt of any such notice of resignation, the
Required Banks may, with the approval of the Borrower, which approval shall not
be unreasonably withheld, appoint a successor Agent. If no successor Agent
shall have been so appointed and have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation, then the Borrower
may appoint a successor Agent which shall be one of the Banks other than the
Bank that is the retiring Agent.
(b) The Required Banks may agree to remove the Agent
with or without cause by giving notice to the Agent,
provided, however, that such removal shall not become
effective until the Required Banks, after consultation with
the Borrower, shall have appointed a successor Agent that
agrees to assume all of the duties and obligations of the
Agent under this Agreement and each of the other Loan
Documents and the appointment of such successor Agent does
not cause the Borrower to incur any additional expenses under
the Loan Documents. If no successor Agent shall have been so
appointed by the Required Banks and
2
<PAGE> 3
shall have accepted such appointment within 30 days after
after the Banks given notice to the Agent, then the Agent
being removed may, on behalf of the Required Banks and
after consultation with the Borrower, appoint a successor
Agent.
(c) Upon the acceptance by any Person of its
appointment as a successor Agent, (i) such Person shall
thereupon succeed to and become vested with all the rights,
powers, privileges and future duties and obligations of the
retiring or removed Agent and the retiring or removed Agent
shall be discharged from its future duties and obligations as
Agent under the Loan Documents and (ii) the retiring or
removed Agent shall promptly transfer all Collateral within
its possession or control to the possession or control of the
successor Agent and shall execute and deliver such notices,
instructions and assignments as may be necessary or desirable
to transfer the rights of the Agent with respect to the
Collateral to the successor Agent. After the resignation or
removal of any Agent, the provisions of this Article 8 shall
continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the
Agent.";
(f) Section 10.01 shall be amended by inserting therein, in
proper alphabetical order, the following new definitions:
"`Amendment No. 1' means Amendment No. 1, dated as of
July 30, 1997, to and under the Second Amended and Restated
Secured Revolving/Term Credit Agreement, dated as of July
31, 1996."
"`Effective Date' means the `Amendment Effective Date'
as such term is defined in Amendment No. 1.";
(g) Annex B shall be amended as follows:
(i) by inserting the phrase "less, to the extent not
already deducted, the amount of any non-cash revenues constituting
Net-Income" at the end of the definition of "Cash Flow";
(ii) by inserting the word "such" immediately
preceding the phrase "Regulatory Change" where last appearing in the
definition of "Enacted";
(iii) by (A) inserting the phrase "or a Subsidiary"
immediately following the word "RBMG" where first appearing, and (B)
inserting the phrase "or such Subsidiary's, as the case may be,"
immediately following the word "RBMG's", where first appearing, in the
definition of "Permitted Guaranty";
(iv) by inserting the phrase "the Intercreditor
Agreement (if any)" immediately following the phrase "the Notes," in
the definition of "Loan Documents";
(v) by (A) deleting clause (a)(ii) from the
definition of "Permitted Lien" and inserting in lieu thereof:
3
<PAGE> 4
"(ii) any Lien on the assets of any Person
securing Indebtedness of such Person to which
Section 4 of Annex D is not applicable",
and (B) inserting the phrase "and its Subsidiaries" immediately
following the word "RBMG" in clause (iv) thereof;
(vi) by inserting the phrase ", the Secured B/C
Mortgage Warehousing Revolving Credit Agreement" immediately following
the phrase "the Second Amended and Restated Secured Revolving/Term
Credit Agreement" in the definition of "Syndicated Credit Agreements";
(vii) by (A) deleting the word "and" immediately
preceding clause (c) of the definition of "Syndicated Credit Agreement
Effective Date", and inserting in lieu thereof a comma, and (B)
inserting a new clause (d) at the end thereof as follows:
"and (d) the "Effective Date' as that term is defined
in the Secured B/C Mortgage Warehousing Revolving Credit
Agreement"; and
(viii) by inserting therein, in proper alphabetical
order, the following new definition:
"`Secured B/C Mortgage Warehousing Revolving Credit
Agreement' means the Secured B/C Mortgage Warehousing
Revolving Credit Agreement, dated as of July 30, 1997, among
RBMG, the Banks party thereto, The First National Bank of
Chicago, as Documentation Agent, First Union National Bank,
as Syndication Agent, and The Bank of New York, as Agent.";
(h) Section 1 of Annex C shall be amended and restated in its
entirety as follows:
"Section 1. Organization; Power; Qualification. RBMG
and each Subsidiary are corporations or limited liability companies
duly organized, validly existing and in good standing under the laws
of their respective jurisdictions of organization, have the power and
authority to own their respective properties and to carry on their
respective businesses as now being and hereafter proposed to be
conducted and are duly qualified and in good standing as foreign
business entities, and are authorized to do business, in all
jurisdictions in which the character of their respective properties or
the nature of their respective businesses requires such qualification
or authorization, except for qualifications and authorizations the
lack of which, singly or in the aggregate, has not had and does not
have a significant possibility of having a Materially Adverse Effect
on (a) RBMG or (b) the Collateral.";
(i) Section 2 of Annex C shall be amended and restated in its
entirety as
4
<PAGE> 5
follows:
"Section 2. Subsidiaries. On the Syndicated Credit
Agreement Date, RBMG has no Subsidiaries other than as set
forth on Schedule Annex C-2.";
(j) Annex C shall be amended by adding thereto a new Schedule
Annex C-2 in the form attached hereto as Schedule Annex C-2;
(k) Section 1 of Annex D shall be amended by (i) deleting the
term "Syndicated Credit Agreement Loan Documents" therefrom and
inserting in lieu thereof the phrase "Loan Documents (as defined in
any Syndicated Credit Agreement)" and (ii) deleting therefrom the word
"corporate" appearing in clause (a) thereof;
(l) Section 4 of Annex D shall be amended by deleting the
phrase "In the case of IMI: the IMI Loans." and inserting in lieu
thereof the phrase "In the case of any Subsidiary:
(i) Indebtedness under any Syndicated Credit
Agreement, (ii) other Indebtedness incurred
by such Subsidiary in connection with a
secured mortgage warehousing loan facility
entered into by such Subsidiary, (iii)
daylight overdrafts and (iv) other
Indebtedness incurred by such Subsidiary in
an aggregate principal amount outstanding
at any time not in excess of $5,000,000.";
(m) Section 5 of Annex D shall be amended by (A) deleting the
phrase ", in the case of RBMG," therefrom and (B) deleting the phrase
"the Guaranty of the IMI Loans" appearing in clause (c) and inserting
in lieu thereof the phrase "Guaranties by RBMG of the obligations of
Subsidiaries (other than in respect of Indebtedness of such
Subsidiaries) incurred in the ordinary course of business of such
Subsidiaries, provided that the maximum aggregate liabilities so
guaranteed by RBMG for all such Subsidiaries may not exceed
$10,000,000";
(n) Section 8 of Annex D shall be amended by (i) deleting
from subsection (b) thereof the word "Subsidiaries" and inserting in
lieu thereof the word "Persons", and (ii) by deleting from subsection
(b) thereof the phrase "an Indebtedness-Free Subsidiary" and inserting
in lieu thereof the phrase "a Wholly-Owned Subsidiary";
(o) Section 9 of Annex D shall be amended by (i) inserting
the parenthetical phrase "(as defined in both of the Second Amended
and Restated Secured Mortgage Warehousing Revolving Credit Agreement
and the Secured B/C Mortgage Warehousing Revolving Credit Agreement)"
immediately following the phrase "Mortgage-Backed Securities"
appearing in clauses (b) and (d) thereof and (ii) replacing the figure
"$2,500,000" appearing in clause (f) thereof with the figure
"$5,000,000"; and
5
<PAGE> 6
(p) Section 10 of Annex D shall be amended by (i) inserting
the parenthetical phrase "(as defined in both of the Second Amended
and Restated Secured Mortgage Warehousing Revolving Credit Agreement
and the Secured B/C Mortgage Warehousing Revolving Credit Agreement)"
immediately following the phrase "Mortgage-Backed Securities"
appearing in such clause (a)(i) and (ii) replacing the word "IMI"
appearing therein with the phrase "its Subsidiaries";
(q) Section 11 of Annex D shall be amended by replacing the
word "IMI" appearing therein with the phrase "a Subsidiary";
(r) Section 1 of Annex E shall be amended by (i) inserting
the word "and" immediately following clause (i)(v) thereof, (ii)
replacing the comma and the word "and" appearing at the end of clause
(i)(vi) thereof and (iii) deleting clause (i)(vii) thereof in its
entirety; and
(s) Section 2 of Annex E shall be amended by replacing the
date "March 31, 1996" appearing in clause (a) thereof with the date
"March 31, 1997".
3. Representations and Warranties. In order to induce the
Banks, the Collateral Agent, the Co-Agents and the Agent to agree to amend the
Credit Agreement, RBMG hereby represents and warrants, as follows:
RBMG has the corporate power and authority to execute, deliver and
perform this Amendment and the Credit Agreement as amended by this Amendment
(the Credit Agreement, as so amended, the "Revised Credit Agreement") and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Amendment and the Revised Credit Agreement. This Amendment
and the Revised Credit Agreement have been duly executed and delivered on
behalf of RBMG, and this Amendment and the Revised Credit Agreement constitute
legal, valid and binding obligations of RBMG, enforceable against it in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and by general principles of equity. The execution,
delivery and performance of this Amendment and the Revised Credit Agreement do
not and will not (a) violate any Applicable Law or any Contract to which RBMG
or any Subsidiary is a party or by which RBMG or any Subsidiary or any of their
respective properties may be bound, (b) require any license, consent,
authorization, approval or any other action by, or any notice to or filing or
registration with, any Governmental Authority or other Person or (c) result in
the creation or imposition of any Lien on any asset of RBMG except as
contemplated by the Loan Documents.
Each of the foregoing representations and warranties shall be made at
and as of the Amendment Effective Date.
4. Conditions to Effectiveness; Amendment Effective Date.
This Amendment shall be effective as of the date first written above, but shall
not become effective as of such date until the date (the "Amendment Effective
Date") that: (a) the Agent shall have received this Amendment duly executed by
RBMG, the Agent, the Collateral Agent, the Co-Agents and each Bank, and (b)
RBMG shall have paid to the Agent all expenses payable under
6
<PAGE> 7
the Credit Agreement for which invoices have been delivered to RBMG, including,
without limitation, the fees and expenses of Winthrop, Stimson, Putnam &
Roberts.
5. Loan Outstandings. Each Bank listed on the signature pages
hereto hereby agrees to make, on the Amendment Effective Date, such payments to
the Agent, in the amounts and for the account of such other Banks as the Agent
shall direct, so that after giving effect to such payments, all of the Loans
outstanding under the Credit Agreement shall be pro rata based on the
Commitments set forth on Annex A hereto.
6. Governing Law. The rights and duties of the parties under
this Amendment shall, pursuant to New York General Obligations Law Section
5-1401, be governed by the law of the State of New York.
7. Counterparts. This Amendment may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto were upon the same instrument.
8. Headings. Section headings in this Amendment are included
herein for convenience and reference only and shall not constitute a part of
this Amendment for any other purpose.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officers all as of the
Amendment Effective Date.
RESOURCE BANCSHARES MORTGAGE
GROUP, INC.
By
---------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Agent, Collateral Agent and a Bank
By
---------------------------------
Name: Patricia M. Dominus
Title: Vice President
BANK ONE, TEXAS, N.A.
as Co-Agent and a Bank
By
---------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION,
as Co-Agent and a Bank
By
---------------------------------
Name:
Title:
<PAGE> 9
NATIONSBANK OF TEXAS, N.A.,
as Co-Agent and a Bank
By
---------------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION
By
---------------------------------
Name:
Title:
NATIONAL CITY BANK OF KENTUCKY
By
---------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK
By
---------------------------------
Name:
Title:
GUARANTY FEDERAL BANK, FSB
By
---------------------------------
Name:
Title:
<PAGE> 10
FLEET BANK N.A.
By
---------------------------------
Name:
Title:
COMERICA BANK
By
---------------------------------
Name:
Title:
CREDIT LYONNAIS, NEW YORK BRANCH
By
---------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
---------------------------------
Name:
Title:
MARINE MIDLAND BANK
By
---------------------------------
Name:
Title:
<PAGE> 11
UNION BANK OF CALIFORNIA, N.A.
By
---------------------------------
Name:
Title:
BANKERS TRUST COMPANY
By
---------------------------------
Name:
Title:
HIBERNIA NATIONAL BANK
By
---------------------------------
Name:
Title:
LASALLE NATIONAL BANK
By
---------------------------------
Name:
Title:
PNC BANK, KENTUCKY, INC.
By
---------------------------------
Name:
Title:
11
<PAGE> 12
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By
---------------------------------
Name:
Title:
By
---------------------------------
Name:
Title:
<PAGE> 13
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS
Receivables
and Notice Addresses Commitment Commitment
Commitment ---------- ----------
- ----------------------
THE BANK OF NEW YORK $6,000,000 $5,250,000
$3,750,000
Domestic Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
LIBOR Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
Notice Address:
The Bank of New York
One Wall Street
New York, NY 10286
Telex No.:
Telecopy No.:
(212) 635-8268
(212) 635-6468
Telephone No.:
(212) 635-7887
(212) 635-6467
(212) 635-8267
Attention: Patricia M. Dominus
13
<PAGE> 14
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- ---------------------- ---------- ---------- -----------
BANK ONE, TEXAS, $6,000,000 $5,250,000 $3,750,000
NATIONAL ASSOCIATION
Domestic Lending Office:
Bank One, Texas,
National Association
1717 Main Street
Dallas, TX 75201
LIBOR Lending Office:
Bank One, Texas, National Association
1717 Main Street
Dallas, TX 75201
Notice Address:
Bank One, Texas, National Association
1717 Main Street
Dallas, TX 75201
Telex No.:
Telecopy No.: (214) 290-2054
Telephone No.: (214) 290-2376
Attention: Douglas Dixon
2
<PAGE> 15
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
FIRST BANK NATIONAL $6,000,000 $5,250,000 $3,750,000
ASSOCIATION
Domestic Lending Office:
First Bank National Association
Mortgage Banking Services
601 Second Avenue South
Minneapolis, MN 55402-4302
LIBOR Lending Office:
First Bank National Association
Mortgage Banking Services
601 Second Avenue South
Minneapolis, MN 55402-4302
Notice Address:
First Bank National Association
Mortgage Banking Services
601 Second Avenue South
Minneapolis, MN 55402-4302
Telex No.:
Telecopy No.: (612) 973-0826
Telephone No.: (612) 973-0572
(612) 973-0609
Attention: John P. Crenshaw
David R. Peterson
3
<PAGE> 16
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
BANK OF AMERICA NT&SA $4,800,000 $4,200,000 $3,000,000
Domestic Lending Office:
Bank of America NT&SA
1130 South Figueroa Street
Los Angeles, CA 90015
Attention: Tina Dao
LIBOR Lending Office:
Bank of America NT&SA
1130 South Figueroa Street
Los Angeles, CA 90015
Attention: Tina Dao
Notice Address:
Bank of America NT&SA
Mortgage Warehousing Unit #6739
24022 Calle de la Plata, Suite 405
Laguna Hills, CA 92653
Telex No.:
Telecopy No.: (714) 951-4046/4055
Telephone No.: (714) 951-4171
Attention: Donald L. Eppley
4
<PAGE> 17
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
FIRST UNION NATIONAL $6,000,000 $5,250,000 $3,750,000
BANK
Domestic Lending Office:
First Union National Bank
301 South College Street DC-6
Charlotte, NC 28288-0166
LIBOR Lending Office:
First Union National Bank
301 South College Street DC-6
Charlotte, NC 28288-0166
Notice Address:
First Union National Bank
301 South College Street DC-6
Charlotte, NC 28288-0166
Telex No.:
Telecopy No.: (704) 374-7102
Telephone No.: (704) 383-5374
Attention: Carolyn Eskridge
5
<PAGE> 18
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
GUARANTY FEDERAL BANK, $6,000,000 $5,250,000 $3,750,000
FSB
Domestic Lending Office:
Guaranty Federal Bank, FSB
Mortgage Finance Division - 10th Floor
8333 Douglas Avenue
Dallas, Texas 75225
LIBOR Lending Office:
Guaranty Federal Bank, FSB
Mortgage Finance Division - 10th Floor
8333 Douglas Avenue
Dallas, Texas 75225
Notice Address:
Guaranty Federal Bank, FSB
Mortgage Finance Division - 10th Floor
8333 Douglas Avenue
Dallas, Texas 75225
Telex No.: (214) 360-2865
Telecopy No.: (214) 360-1660
Telephone No.: (214) 360-1968
Attention: James B. Clapp
6
<PAGE> 19
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
COMERICA BANK $3,600,000 $3,150,000 $2,250,000
Domestic Lending Office:
Comerica Bank
One Detroit Center
500 Woodward Avenue
Detroit, MI 48226
LIBOR Lending Office:
Comerica Bank
One Detroit Center
500 Woodward Avenue
Detroit, MI 48226
Notice Address:
Comerica Bank
One Detroit Center
500 Woodward Avenue
Detroit, MI 48226
Telex No.:
Telecopy No.: (313) 222-9295
Telephone No.: (313) 222-9285
Attention: Von L. Ringger
7
<PAGE> 20
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
FLEET BANK, NATIONAL $6,000,000 $5,250,000 $3,750,000
ASSOCIATION
Domestic Lending Office:
Fleet Bank N.A.
Mortgage Banking Dept.
175 Water Street, 28/F
New York, NY 10038
LIBOR Lending Office:
Fleet Bank N.A.
Mortgage Banking Dept.
175 Water Street, 28/F
New York, NY 10038
Notice Address:
Fleet Bank N.A.
Mortgage Banking Dept.
175 Water Street, 28/F
New York, NY 10038
Telex No.:
Telecopy No.: (212) 602-3704
Telephone No.: (212) 602-3631
Attention: Robert W. Pierson
8
<PAGE> 21
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
NATIONSBANK OF TEXAS, $6,000,000 $5,250,000 $3,750,000
N.A.
Domestic Lending Office:
NationsBank of Texas, N.A.
901 Main Street
Dallas, TX 75202
LIBOR Lending Office:
NationsBank of Texas, N.A.
901 Main Street
Dallas, TX 75202
Notice Address:
NationsBank of Texas, N.A.
901 Main Street
Dallas, TX 75202
Telex No.:
Telecopy No.: (214) 508-0338
Telephone No.: (214) 508-0975
Attention: Elizabeth Kurilecz
9
<PAGE> 22
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
THE FIRST NATIONAL $4,000,000 $3,500,000 $2,500,000
BANK OF CHICAGO
Domestic Lending Office:
The First National Bank
of Chicago
One First National Plaza
16th Floor, Mail Suite 0098
Chicago, IL 60670-0098
LIBOR Lending Office:
The First National Bank
of Chicago
One First National Plaza
16th Floor, Mail Suite 0098
Chicago, IL 60670-0098
Contact: Peter Scarpelli (312) 732-1068
Telecopy No.: (312) 732-3852
Notice Address:
The First National Bank
of Chicago
One First National Plaza
16th Floor, Mail Suite 0098
Chicago, IL 60670-0098
Telex No.: (312) 732-6222
Telecopy No.: (312) 732-4423
Telephone No.: (312) 732-1100
(312) 732-1188
Attention: Patrick Power
Ann Chudacoff
10
<PAGE> 23
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
[S] [C] [C] [C]
NATIONAL CITY BANK OF $4,000,000 $3,500,000 $2,500,000
KENTUCKY
Domestic Lending Office:
National City Bank, Kentucky
421 West Market Street
Louisville, KY 40202
LIBOR Lending Office:
National City Bank, Kentucky
421 West Market Street
Louisville, KY 40202
Notice Address:
National City Bank, Kentucky
421 West Market Street
Louisville, KY 40202
Telex No.:
Telecopy No.: (502) 581-4154
Telephone No.: (502) 581-6455
Attention: Robert J. Ogburn
11
<PAGE> 24
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
MARINE MIDLAND BANK $1,000,000 $875,000 $625,000
Domestic Lending Office:
Marine Midland Bank
One Marine Midland Center, 27th Floor
Buffalo, NY 14203
LIBOR Lending Office:
Marine Midland Bank
One Marine Midland Center, 27th Floor
Buffalo, NY 14203
Notice Address:
Marine Midland Bank
One Marine Midland Center, 27th Floor
Buffalo, NY 14203
Telex No.:
Telecopy No.: (716) 841-4199
Telephone No.: (716) 841-2931
Attention: David S. DePasquale
12
<PAGE> 25
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
CREDIT LYONNAIS $3,200,0 $2,800,000 $2,000,000
Domestic Lending Office:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
LIBOR Lending Office:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Notice Address:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Telex No.: 423494/235655/02723
Telecopy No.: (212) 261-3401
Telephone No.: (212) 261-7408
(212) 261-7367
Attention: Gregory Raue
Kathleen Deacy
13
<PAGE> 26
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
BANKERS TRUST $2,000,000 $1,750,000 $1,250,000
Domestic Lending Office:
Bankers Trust
280 Park Avenue - 23 West
New York, NY 10017
LIBOR Lending Office:
Bankers Trust
280 Park Avenue - 23 West
New York, NY 10017
Notice Address:
Bankers Trust
280 Park Avenue - 23 West
New York, NY 10017
Telex No.:
Telecopy No.: (212) 454-3821
Telephone No.: (212) 454-3198
Attention: Kevin M. McCann
14
<PAGE> 27
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- -----------
UNION BANK OF CALIFORNIA $2,200,000 $1,925,000 $1,375,000
Domestic Lending Office:
Union Bank of California
350 California St., 11th Floor
San Francisco, CA 94104
LIBOR Lending Office:
Union Bank of California
350 California St., 11th Floor
San Francisco, CA 94104
Notice Address:
Union Bank of California
350 California St., 11th Floor
San Francisco, CA 94104
Telex No.: 188316/UnionSFO UT
Telecopy No.: (415) 705-7037
Telephone No.: (415) 705-7062
(415) 705-7090
Attention: Donald Rubin
15
<PAGE> 28
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
PNC BANK $3,600,000 $3,150,000 $2,250,000
Domestic Lending Office:
PNC Bank
Two Tower Center - 18th
East Brunswick, NJ 08816
LIBOR Lending Office:
PNC Bank
Two Tower Center - 18th
East Brunswick, NJ 08816
Notice Address:
PNC Bank
Two Tower Center - 18th
East Brunswick, NJ 08816
Telex No.:
Telecopy No.: (908) 220-3737
Telephone No.: (908) 220-3515
Attention: Glenn Hedde
16
<PAGE> 29
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
LASALLE NATIONAL BANK $3,600,000 $3,150,000 $2,250,000
Domestic Lending Office:
LaSalle National Bank
120 South LaSalle - 4th Floor
Chicago, IL 60603
LIBOR Lending Office:
LaSalle National Bank
120 South LaSalle - 4th Floor
Chicago, IL 60603
Notice Address:
LaSalle National Bank
120 South LaSalle - 4th Floor
Chicago, IL 60603
Telex No.:
Telecopy No.: (312) 904-6382
Telephone No.: (312) 904-7460
Attention: John Swift
17
<PAGE> 30
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
UNION BANK OF $2,000,000 $1,750,000 $1,250,000
SWITZERLAND
Domestic Lending Office:
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, NY 10171
LIBOR Lending Office:
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, NY 10171
Notice Address:
Union Bank of Switzerland,
New York, Branch
299 Park Avenue
New York, NY 10171
Telex No.:
Telecopy No.: (212) 821-4541
Telephone No.: (212) 821-3020
Attention: Bob Mendeles
18
<PAGE> 31
Annex A
Revolving/Term
Banks, Lending Offices HFI HFS Receivables
and Notice Addresses Commitment Commitment Commitment
- -------------------- ---------- ---------- ----------
HIBERNIA NATIONAL BANK $4,000,000 $3,500,000 $2,500,000
Domestic Lending Office:
Hibernia National Bank
313 Carondelet Street
New Orleans, LA 70130
LIBOR Lending Office:
Hibernia National Bank
313 Carondelet Street
New Orleans, LA 70130
Notice Address:
Hibernia National Bank
313 Carondelet Street
New Orleans, LA 70130
Telex No.:
Telecopy No.: (504) 533-5344
Telephone No.: (504) 533-3041
Attention: Skip Santos
19
<PAGE> 32
SCHEDULE ANNEX C-2
SCHEDULE OF SUBSIDIARIES
Meritage Mortgage Corporation
Intercounty Mortgage, Inc.
Carolina Merger Sub, Inc.
RBC Merger Sub, Inc.
Corridor Mortgage Company, LLC
RBMG Subsidiary Inc.
20
<PAGE> 33
EXECUTION COPY
AMENDMENT NO. 3
Dated as of July 30, 1997
to and under
SECOND AMENDED AND RESTATED
SECURED MORTGAGE WAREHOUSING REVOLVING CREDIT AGREEMENT
Dated as of July 31, 1996
and
AMENDMENT NO. 1
Dated as of July 30, 1997
to and under
SECOND AMENDED AND RESTATED MORTGAGE WAREHOUSING
SECURITY AND COLLATERAL AGENCY AGREEMENT
Dated as of July 31, 1996
Resource Bancshares Mortgage Group, Inc. ("RBMG"), the banks listed on the
signature pages hereof (the "Banks"), Bank One, Texas, National Association,
First Bank National Association and NationsBank of Texas, N.A., as Co-Agents,
LaSalle National Bank (formerly LaSalle National Trust, N.A.), as Collateral
Agent, and The Bank of New York, as Agent, agree as follows:
1. Credit Agreement; Security and Collateral Agency Agreement. Reference
is made to (a) the Second Amended and Restated Secured Mortgage Warehousing
Revolving Credit Agreement, dated as of July 31, 1996, among Resource
Bancshares Mortgage Group, Inc., Intercounty Mortgage, Inc., 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 (the
"Credit Agreement") and (b) the Second Amended and Restated Mortgage
Warehousing Security and Collateral Agency Agreement, dated as of July 31,
1996, among Resource Bancshares Mortgage Group, Inc., Intercounty Mortgage,
Inc., The Bank of New York, as Agent, and LaSalle National Bank (formerly
LaSalle National Trust, N.A.), as Collateral Agent (the "Security and
Collateral Agency Agreement"). Terms used in this Amendment No. 3 and
Amendment No. 1 (this "Amendment") that are defined in the Credit Agreement and
are not otherwise defined herein are used herein with the meanings therein
ascribed to them. Each of the Credit Agreement and the Security and Collateral
Agency Agreement, as amended by this Amendment, is and shall continue to be in
full force and effect and is hereby in all respects confirmed, approved and
ratified.
<PAGE> 34
2. Amendments to the Credit Agreement. Upon and after the Amendment
Effective Date (as defined below),
(a) Section 1.03 shall be amended by (i) restating clauses (a)(i)(A), (B)
and (C) in their entirety as follows:
"(a) Rates(a) Rates(a) Rates(a) Rates. (i) (A) Mortgage Warehousing
Loans(i) (A) Mortgage Warehousing Loans(i) (A) Mortgage Warehousing
Loans(i) (A) Mortgage Warehousing Loans. Each Mortgage Warehousing Loan
shall bear interest on the outstanding principal amount thereof until due at a
rate per annum equal to,
(1) so long as it is a Dry Funding Mortgage Warehousing Loan
(aa) that is a LIBOR Rate Loan, the applicable Adjusted
LIBOR Rate plus the Applicable Margin, and
(bb) that is a Federal Funds Rate Loan (x) with respect
to so much of the principal amount of such Federal Funds Rate
Loan as on any day exceeds the applicable Balance Funded
Amount on such day, the Federal Funds Rate plus the
Applicable Margin and (y) with respect to so much of the
principal amount of such Federal Funds Rate Loan as on such
day does not exceed such Balance Funded Amount on such day,
the Applicable Margin (the 'Dry Warehousing Balance Funded
Rate'), and
(2) so long as it is a Wet Funding Mortgage Warehousing Loan
(aa) that is a LIBOR Rate Loan, the applicable Adjusted
LIBOR Rate plus the Applicable Margin, plus 0.10%,
(bb) that is a Federal Funds Rate Loan (x) with respect
to so much of the principal amount of such Federal Funds Rate
Loan as on any day exceeds the applicable Balance Funded
Amount on such day, the Federal Funds Rate plus the
Applicable Margin, plus 0.10%, and (y) with respect to so
much of the principal amount of such Federal Funds Rate Loan
as on such day does not exceed such Balance Funded Amount on
such day plus the Applicable Margin, plus 0.10% (the 'Wet
Warehousing Balance Funded Rate').
(3) so long as it is an Aged Wet Funding Mortgage Warehousing
Loan
(aa) that is a LIBOR Rate Loan, the applicable Adjusted
LIBOR Rate plus the Applicable Margin, plus 0.50%,
(bb) that is a Federal Funds Rate Loan (x) with respect
to so much of the principal amount of such Federal Funds Rate
Loan as on any day exceeds the applicable Balance Funded
Amount on such day, the Federal
2
<PAGE> 35
Funds Rate plus the Applicable Margin, plus 0.50%, and (y)
with respect to so much of the principal amount of such
Federal Funds Rate Loan as on such day does not exceed such
Balance Funded Amount on such day, the Applicable Margin plus
0.50% (the 'Aged Wet Warehousing Balance Funded Rate').
(B) Working Capital Loans(B) Working Capital Loans(B) Working
Capital Loans(B) Working Capital Loans. Each Working Capital Loan shall
bear interest on the outstanding principal amount thereof until due at a
rate per annum equal to,
(1) so long as it is a LIBOR Rate Loan, the applicable
Adjusted LIBOR Rate plus 1.25%, and
(2) so long as it is a Federal Funds Rate Loan (x) with
respect to so much of the principal amount of such Federal Funds
Rate Loan as on any day exceeds the applicable Balance Funded
Amount on such day, the Federal Funds Rate plus 1.25% and (y) with
respect to so much of the principal amount of such Federal Funds
Rate Loan as on such day does not exceed the Balance Funded Amount
on such day, 1.25% (the 'Working Capital Balance Funded Rate').
(C) Swing Loans(C) Swing Loans(C) Swing Loans(C) Swing Loans. Each
Swing Loan shall bear interest on the outstanding principal amount
thereof until due at a rate per annum equal to:
(1) with respect to so much of the principal amount of such
Loan as on any day exceeds the applicable Balance Funded Amount on
such day, the Federal Funds Rate plus, if such Swing Loan is a Dry
Funding Swing Loan, the Applicable Margin, if such Swing Loan is a
Wet Funding Swing Loan, the Applicable Margin plus 0.10% and if
such Swing Loan is an Aged Wet Funding Swing Loan, the Applicable
Margin plus 0.50%; and
(2) with respect to so much of the principal amount of such
Loan as on such day does not exceed the Balance Funded Amount on
such day, if such Swing Loan is a Dry Funding Swing Loan, the
Applicable Margin (the 'Dry Swing Loan Balance Funded Rate'), if
such Swing Loan is a Wet Funding Swing Loan, the Applicable Margin
plus 0.10% (the 'Wet Swing Loan Balance Funded Rate') and if such
Swing Loan is an Aged Wet Funding Swing Loan, the Applicable Margin
plus 0.50% (the 'Aged Wet Swing Loan Balance Funded Rate')."; and
(ii) deleting the figures "0.60%", "0.90%" and "1.50%" from
clause (ii) thereof, and inserting in lieu thereof the phrases "the
Applicable Margin", "the Applicable Margin plus 0.10%" and "the
Applicable Margin plus 0.50%", respectively;
(b) Section 1.05(c) shall be amended by restating the last sentence
thereof in its entirety as follows:
3
<PAGE> 36
"The Borrower shall give the Agent prompt notice of the
failure of a contemplated sale of a Mortgage Loan or a Mortgage-Backed
Security to settle and of the amount of the repayment referred to above
in this Section 1.05(c) that, as a result of such failure, will not be
made.";
(c) Section 1.08 shall be restated in its entirety as follows:
"Section 1.08. Fees.08. Fees.08. Fees.08. Fees.
(a) Facility Fees(a) Facility Fees(a) Facility Fees(a) Facility
Fees. The Borrowers shall pay to the Agent for the account of each Bank
a facility fee on the daily average amount of such Bank's aggregate
Commitments for each day from the Effective Date to the Termination Date
at a rate per annum equal to the Applicable Facility Fee Percentage,
payable quarterly in arrears on the last day of March, June, September
and December during each year from the Effective Date through the
Termination Date, on the Termination Date and on the date of each
reduction of Commitments pursuant to Section 1.07(a) (to the extent then
accrued and unpaid on the amount of such reduction).
(b) Amendment Fee(b) Amendment Fee(b) Amendment Fee(b) Amendment
Fee. The Borrowers shall pay to the Agent for the account of each Bank
an amendment fee for each amendment of this Agreement in an amount equal
to $1,000, except that this Section 1.08(b) shall not apply to the first
two amendments made during any consecutive 12 month period and, for
purposes of this Section 1.08(b), an increase in the Commitments pursuant
to Section 1.07(b) (other than an increase in the Commitments to an
amount in excess of $750,000,000) shall not constitute an 'amendment.'";
(d) A new Section 4.03 shall be added, reading in its entirety as
follows:
"Section 4.03 Walsh Acquisition. RBMG shall not, and shall not
permit any Subsidiary to, merge or consolidate with Walsh Holding Co.,
Inc., ('Walsh') or any Subsidiary of Walsh, or acquire all or
substantially all of the assets or business from or Capital Securities of
Walsh or any Subsidiary of Walsh, without the prior written consent of
Banks having more than 75% of the aggregate amount of the Commitments at
the time of such merger, consolidation or acquisition.";
(e) Section 6.01(c)(i)(A) shall be amended by (i) replacing the
figure "$100,000" appearing therein with the figure "$250,000" and (ii)
restating the definition of "measuring period" appearing therein in its
entirety as follows:
"'measuring period' means, as of any date, the period of 12 consecutive
months ending on such date";
(f) Section 6.01(j) shall be amended by inserting the phrase
", either prior to the Security Release Date or subsequent to the Security Date"
immediately following the phrase "the Security Interest" appearing in clause
(ii) thereof;
4
<PAGE> 37
(g) Section 8.08 shall be amended and restated in its entirety as
follows:
"Section 8.08. Resignation and Removal of the Agent.08.
Resignation and Removal of the Agent.08. Resignation and Removal of the
Agent.08. Resignation and Removal of the Agent. (a) The Agent may at
any time give notice of its resignation to the Banks and RBMG which shall
be effective upon the earlier of (i) the date a successor Agent shall
have accepted its appointment as Agent, and (ii) the 30th day after the
giving of such notice. Upon receipt of any such notice of resignation,
the Required Banks may, with the approval of RBMG, which approval shall
not be unreasonably withheld, appoint a successor Agent. If no successor
Agent shall have been so appointed and have accepted such appointment
within 30 days after the retiring Agent's giving of notice of
resignation, then RBMG may appoint a successor Agent which shall be one
of the Banks other than the Bank that is the retiring Agent.
(b) The Required Banks may agree to remove the Agent with or
without cause by giving notice to the Agent, provided, however,
that such removal shall not become effective until the Required
Banks, after consultation with RBMG, shall have appointed a
successor Agent that agrees to assume all of the duties and
obligations of the Agent under this Agreement and each of the other
Loan Documents and the appointment of such successor Agent does not
cause RBMG to incur any additional expenses under the Loan
Documents. If no successor Agent shall have been so appointed by
the Required Banks and shall have accepted such appointment within
30 days after the Banks given notice to the Agent, then the Agent
being removed may, on behalf of the Required Banks and after
consultation with RBMG, appoint a successor Agent.
(c) Upon the acceptance by any Person of its appointment as a
successor Agent, (i) such Person shall thereupon succeed to and
become vested with all the rights, powers, privileges and future
duties and obligations of the retiring or removed Agent and the
retiring or removed Agent shall be discharged from its future
duties and obligations as Agent under the Loan Documents and (ii)
the retiring or removed Agent shall promptly transfer all
Collateral within its possession or control to the possession or
control of the successor Agent and shall execute and deliver such
notices, instructions and assignments as may be necessary or
desirable to transfer the rights of the Agent with respect to the
Collateral to the successor Agent. After the resignation or
removal of any Agent, the provisions of this Article 8 shall
continue in effect for its benefit in respect of any actions taken
or omitted to be taken by it while it was acting as the Agent.";
(h) Section 9.10(a)(ii) shall be amended by inserting the phrase
"and the Borrowers (which consent shall not be unreasonably withheld)"
immediately following the phrase "consented to by the Agent" in clause
(A)(1)(aa) thereof;
(i) A new Section 9.25 shall be added, reading in its entirety as
follows:
5
<PAGE> 38
"Section 9.25. Release of Security. Unless a Default shall
have occurred and be continuing, promptly after the first date (the
'Security Release Date') upon which (a) RBMG's S&P senior unsecured debt
rating is BBB+ or better or RBMG's Moody's senior unsecured debt rating
is Baa1 or better, and (b) RBMG shall have delivered to the Agent such
UCC-1 financing statements, together with such other instruments and
other documents as the Agents may request, the possession of which is
necessary or appropriate in the determination of the Agents to create or
perfect a security interest in favor of the Agents, the Collateral Agent
and the Banks, in the Collateral under Applicable Law, in each case
undated and executed in blank, the Collateral Agent, on behalf of
itself, the Agents and the Banks, shall, at RBMG's expense, execute and
deliver to RBMG such instruments of release, UCC termination statements
and other documents as RBMG may reasonably request in order to release
the Security Interest; provided that, after any such release, on the
first date (the 'Security Date') upon which RBMG's S&P senior unsecured
debt rating is less than BBB+ and the RBMG's Moody's senior unsecured
debt rating is less than Baa1, (x) the Agent or the Collateral Agent may
file any or all of the items referred to in clause (b) above as it shall
determine is necessary or appropriate to create or perfect a security
interest in favor of the Agents, the Collateral Agent and the Banks,
effective on or after the Security Date, in the Collateral under
Applicable Law, and (y) on the tenth day after the Security Date, RBMG
shall, and shall cause the other Borrower to, execute and deliver a
security agreement, in form and substance satisfactory to the Agents,
together with such other instruments and other documents as the Agents
may request, the possession of which is necessary or appropriate in the
determination of the Agents to create or perfect a security interest in
favor of the Agents, the Collateral Agent and the Banks, effective on
the Security Date, in the Collateral under Applicable Law."; and
(j) Section 10.01 shall be amended as follows:
(i) by restating the definition of "Approved Investor"
therein in its entirety as follows:
"'Approved Investor' means FNMA, FHLMC, GNMA, SONYMA or any
other financial institution listed on Schedule 10.01-A. The Agent
and the Co-Agents may from time to time agree in writing to add
financial institutions to the list set forth on Schedule 10.01-A.
The Agent shall give prompt notice to the Co-Agents of any request
of RBMG to add a financial institution or institutions and attempt
to obtain a response from the Co-Agents to such request within
seven Business Days of its receipt. The Agent shall give notice to
the Banks of any determination to add a financial institution or
institutions to Schedule 10.01-A. Should a response not be
forthcoming within such period, the request shall be deemed to have
been denied. The Agent and Co-Agents may in their sole discretion
remove any financial institution from the list set forth in
Schedule 10.01-A; provided that prior to any such removal of an
Approved Investor, the Agent shall give RBMG and each Bank notice
of, and an opportunity to discuss, any such proposed removal.";
6
<PAGE> 39
(ii) by inserting the word "completed" immediately before the
phrase "one-to-four family" in each place appearing in clause (o) of the
definition of "Eligible Mortgage Collateral";
(iii) by inserting the phrase "(a) in the case that such Mortgage
Loan is a refinancing of an existing mortgage loan, the appraised value
of the Property encumbered thereby, and (b) in any other case,"
immediately before the phrase "the lesser of", and changing the symbols
"(a)" and "(b)" to "(i)" and "(ii)", respectively, in the definition of
"Loan-to-Value Ratio";
(iv) by inserting therein, in proper alphabetical order, the
following new definitions:
"'Amendment No. 3' means Amendment No. 3, dated as of July 30,
1997, to and under the Second Amended and Restated Secured Mortgage
Warehousing Revolving Credit Agreement, dated as of July 31, 1996."
"'Applicable Facility Fee Percentage' means, for any day, the
percentage set forth below based on the Tier with the highest debt
rating applicable on such day, as follows:
Tier Applicable Fee Percentage
---- -------------------------
Tier I 0.100%
Tier II 0.125%
Tier III 0.150%;
provided that if two Tiers would be applicable on any day and
(i) such Tiers are more than one Tier apart or (ii) Tier III is
one of the applicable Tiers as a result of RBMG's Indebtedness not
being rated by one of Moody's and S&P, the Applicable Fee Percentage
for such day shall be the percentage set forth above for the Tier that
is one Tier above the lower of such two Tiers (it being understood
that Tier III is the lowest Tier). For purposes hereof, 'Tier I'
shall apply for so long as RBMG's S&P senior unsecured debt rating is
BBB or better or RBMG's Moody's senior unsecured debt rating is Baa2
or better, 'Tier II' shall apply for so long as RBMG's S&P senior
unsecured debt rating is BBB- or RBMG's Moody's senior unsecured debt
rating is Baa3, and 'Tier III' shall apply for so long as RBMG's S&P
senior unsecured debt rating is less than BBB- and Moody's senior
unsecured debt rating is less than Baa3 and for long as RBMG's
Indebtedness is not rated by either or both of S&P and Moody's."
7
<PAGE> 40
"'Applicable Margin' means, for any day, the percentage set
forth below based on the Tier with the highest debt rating
applicable on such day, as follows:
Tier Applicable Margin
---- -----------------
Tier I 0.350%
Tier II 0.375%
Tier III 0.450%;
provided that if two Tiers would be applicable on any day and
(i) such Tiers are more than one Tier apart or (ii) Tier III is one
of the applicable Tiers as a result of RBMG's Indebtedness not
being rated by one of Moody's and S&P, the Applicable Margin for
such day shall be the percentage set forth above for the Tier that
is one Tier above the lower of such two Tiers (it being understood
that Tier III is the lowest Tier). For purposes hereof, 'Tier I'
shall apply for so long as RBMG's S&P senior unsecured debt rating
is BBB or better or RBMG's Moody's senior unsecured debt rating is
Baa2 or better, 'Tier II' shall apply for so long as RBMG's S&P
senior unsecured debt rating is BBB- or RBMG's Moody's senior
unsecured debt rating is Baa3, and 'Tier III' shall apply for so
long as RBMG's S&P senior unsecured debt rating is less than BBB-
and RBMG's Moody's senior unsecured debt rating is less than Baa3
and for so long as RBMG's Indebtedness is not rated by either or
both of S&P and Moody's."
"'Effective Date' means the 'Amendment Effective Date' as such
term is defined in Amendment No. 3."
"'Intercreditor Agreement' means the Intercreditor Agreement,
dated as of July 30, 1997, among The Bank of New York, as Agent,
and as agent under the Secured B/C Mortgage Warehousing Revolving
Credit Agreement, LaSalle National Bank (formerly LaSalle National
Trust, N.A.), as Collateral Agent, and as collateral agent under
the B/C Mortgage Warehousing Security and Collateral Agency
Agreement, and the other agents, co-agents and lending institutions
party thereto."
"'Security Date' has the meaning ascribed to that term in
Section 9.25."
"'Security Release Date' has the meaning ascribed to that term
in Section 9.25.";
(k) Section 10.02 shall be amended by adding a new clause (g) thereto,
reading in its entirety as follows:
"(g) Any term defined in both Section 10.01 and Annex B shall
have the meaning ascribed thereto in Section 10.01.";
(l) Annex B shall be amended as follows:
8
<PAGE> 41
(i) by inserting the phrase "less, to the extent not already
deducted, the amount of any non-cash revenues constituting Net-Income" at
the end of the definition of "Cash Flow";
(ii) by inserting the word "such" immediately preceding the phrase
"Regulatory Change" where last appearing in the definition of "Enacted";
(iii) by (A) inserting the phrase "or a Subsidiary" immediately
following the word "RBMG" where first appearing, and (B) inserting the
phrase "or such Subsidiary's, as the case may be," immediately following
the word "RBMG's", where first appearing, in the definition of "Permitted
Guaranty";
(iv) by inserting the phrase "the Intercreditor Agreement (if any)"
immediately following the phrase "the Notes," in the definition of "Loan
Documents";
(v) by (A) deleting clause (a) (ii) from the definition of
"Permitted Lien" and inserting in lieu thereof:
"(ii) any Lien on the assets of any Person securing
Indebtedness of such Person to which Section 4 of Annex D is not
applicable.",
and (B) inserting the phrase "and its Subsidiaries" immediately following
the word "RBMG" in clause (iv) thereof;
(vi) by inserting the phrase ", the Secured B/C Mortgage Warehousing
Revolving Credit Agreement" immediately following the phrase "the Second
Amended and Restated Secured Revolving/Term Credit Agreement" in the
definition of "Syndicated Credit Agreements";
(vii) by (A) deleting the word "and" immediately preceding clause
(c) of the definition of "Syndicated Credit Agreement Effective Date",
and inserting in lieu thereof a comma, and (B) inserting a new clause (d)
at the end thereof as follows:
"and (d) the 'Effective Date' as that term is defined in the
Secured B/C Mortgage Warehousing Revolving Credit Agreement"; and
(viii) by inserting therein, in proper alphabetical order, the
following new definition:
"'Secured B/C Mortgage Warehousing Revolving Credit Agreement'
means the Secured B/C Mortgage Warehousing Revolving Credit
Agreement, dated as of July 30, 1997, among RBMG, the Banks party
thereto, The First National Bank of Chicago, as Documentation
Agent, First Union National Bank, as Syndication Agent, and The
Bank of New York, as Agent.";
9
<PAGE> 42
(m) Section 1 of Annex C shall be amended and restated in its entirety as
follows:
"Section 1. Organization; Power; Qualification. RBMG and each
Subsidiary are corporations or limited liability companies duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of organization, have the power and authority to
own their respective properties and to carry on their respective
businesses as now being and hereafter proposed to be conducted and are
duly qualified and in good standing as foreign business entities, and are
authorized to do business, in all jurisdictions in which the character of
their respective properties or the nature of their respective businesses
requires such qualification or authorization, except for qualifications
and authorizations the lack of which, singly or in the aggregate, has not
had and does not have a significant possibility of having a Materially
Adverse Effect on (a) RBMG or (b) the Collateral.";
(n) Section 2 of Annex C shall be amended and restated in its entirety as
follows:
"Section 2. Subsidiaries. On the Syndicated Credit Agreement
Date, RBMG has no Subsidiaries other than as set forth on Schedule Annex
C-2.";
(o) Annex C shall be amended by adding thereto a new Schedule Annex C-2 in
the form attached hereto as Schedule Annex C-2.
(p) Section 1 of Annex D shall be amended by (i) deleting the term
"Syndicated Credit Agreement Loan Documents" therefrom and inserting in lieu
thereof the phrase "Loan Documents (as defined in any Syndicated Credit
Agreement)" and (ii) deleting therefrom the word "corporate" appearing in
clause (a) thereof;
(q) Section 4 of Annex D shall be amended by deleting the phrase "In the
case of IMI: the IMI Loans." and inserting in lieu thereof the phrase "In the
case of any Subsidiary:
(i) Indebtedness under any Syndicated Credit Agreement, (ii) other
Indebtedness incurred by such Subsidiary in connection with a secured
mortgage warehousing loan facility entered into by such Subsidiary, (iii)
daylight overdrafts and (iv) other Indebtedness incurred by such
Subsidiary in an aggregate principal amount outstanding at any time not
in excess of $5,000,000.";
(r) Section 5 of Annex D shall be amended by (A) deleting the phrase ", in
the case of RBMG," therefrom and (B) deleting the phrase "the Guaranty of the
IMI Loans" appearing in clause (c) and inserting in lieu thereof the phrase
"Guaranties by RBMG of the obligations of Subsidiaries (other than in respect
of Indebtedness of such Subsidiaries) incurred in the ordinary course of
business of such Subsidiaries, provided that the maximum aggregate liabilities
so guaranteed by RBMG for all such Subsidiaries may not exceed $10,000,000";
10
<PAGE> 43
(s) Section 8 of Annex D shall be amended by (i) deleting from subsection
(b) thereof the word "Subsidiaries" and inserting in lieu thereof the word
"Persons", and (ii) by deleting from subsection (b) thereof the phrase "an
Indebtedness-Free Subsidiary" and inserting in lieu thereof the phrase "a
Wholly-Owned Subsidiary";
(t) Section 9 of Annex D shall be amended by (i) inserting the
parenthetical phrase "(as defined in both of the Second Amended and Restated
Secured Mortgage Warehousing Revolving Credit Agreement and the Secured B/C
Mortgage Warehousing Revolving Credit Agreement)" immediately following the
phrase "Mortgage-Backed Securities" appearing in clauses (b) and (d) thereof
and (ii) replacing the figure "$2,500,000" appearing in clause (f) thereof with
the figure "$5,000,000";
(u) Section 10 of Annex D shall be amended by (i) inserting the
parenthetical phrase "(as defined in both of the Second Amended and Restated
Secured Mortgage Warehousing Revolving Credit Agreement and the Secured B/C
Mortgage Warehousing Revolving Credit Agreement)" immediately following the
phrase "Mortgage-Backed Securities" appearing in such clause (a)(i) and (ii)
replacing the word "IMI" appearing therein with the phrase "its Subsidiaries";
(v) Section 11 of Annex D shall be amended by replacing the word "IMI"
appearing therein with the phrase "a Subsidiary";
(w) Section 1 of Annex E shall be amended by (i) inserting the word "and"
immediately following clause (i)(v) thereof, (ii) replacing the comma and the
word "and" appearing at the end of clause (i)(vi) thereof and (iii) deleting
clause (i)(vii) thereof in its entirety; and
(x) Section 2 of Annex E shall be amended by replacing the date "March 31,
1996" appearing in clause (a) thereof with the date "March 31, 1997".
3. Amendments to Security and Collateral Agency Agreement. Upon and after
the Amendment Effective Date (as defined below),
(a) Section 4 shall be amended by deleting the phrase "20 Business Days"
appearing therein and inserting in lieu thereof the phrase "20 days";
(b) Section 8 shall be amended by adding thereto new clauses (e) and (f),
reading in their entirety as follows:
"(e) From time to time until the Agent notifies the Collateral
Agent (by telephone, telefacsimile or otherwise) that an Event of Default
has occurred and is continuing and that it should cease to release
Collateral pursuant to this Section 8(e), the Collateral Agent is hereby
authorized upon written request of RBMG to release documentation relating
to Mortgage Loans constituting 'Collateral' (as such term is defined in
the Secured B/C Mortgage Warehousing Revolving Credit Agreement) ('B/C
Collateral') to the 'Collateral Agent' (as such term is defined in the
Secured B/C Mortgage Warehousing Revolving Credit Agreement) (the 'B/C
Collateral Agent') for
11
<PAGE> 44
the purpose of perfecting the Lien granted to the B/C Collateral Agent
pursuant to the 'Security Agreement' (as such term is defined in the
Secured B/C Mortgage Warehousing Revolving Credit Agreement) (the 'B/C
Mortgage Warehousing Security and Collateral Agency Agreement').
(f) Upon the occurrence of the Security Release Date, subject to
the conditions set forth in Section 9.25 of the Credit Agreement, upon
the request of the Pledgor, the Collateral Agent shall, at the Pledgor's
expense, execute and deliver to the Pledgor such instruments of release,
UCC termination statements and other documents (including all Collateral
theretofore delivered to the Collateral Agent by the Pledgor) as the
Pledgor may reasonably request in order to release the Security
Interest.";
(c) Section 16 shall be amended by (i) inserting the phrase "or the B/C
Collateral Agent" immediately following the phrase "to the Collateral Agent" in
clause (b) thereof and (ii) inserting the phrase "the grant of the security
interest to the B/C Collateral Agent in Collateral constituting B/C Collateral
pursuant to the B/C Mortgage Warehousing Security and Collateral Agency
Agreement" immediately following the phrase "Mortgage-Backed Securities under
Take-Out Commitments" in clause (b) thereof; and
(d) Attachment 5 thereto shall be restated in its entirety as set forth on
Attachment 5 hereto.
4. Representations and Warranties. In order to induce the Banks, the
Collateral Agent, the Co-Agents and the Agent to agree to amend the Credit
Agreement and the Security and Collateral Agency Agreement, RBMG hereby
represents and warrants, as follows:
RBMG has the corporate power and authority to execute, deliver and perform
this Amendment and each of the Credit Agreement and the Security and Collateral
Agency Agreement, as amended by this Amendment (the Credit Agreement, as so
amended, together with the Security and Collateral Agency Agreement, as so
amended, the "Revised Agreements"), and has taken all necessary corporate
action to authorize the execution, delivery and performance of this Amendment
and each of the Revised Agreements. This Amendment and each of the Revised
Agreements have been duly executed and delivered on behalf of RBMG, and this
Amendment and each of the Revised Agreements constitute legal, valid and
binding obligations of RBMG, enforceable against it in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally and by general principles of equity. The execution, delivery and
performance of this Amendment and each of the Revised Agreements do not and
will not (a) violate any Applicable Law or any Contract to which RBMG or any
Subsidiary is a party or by which RBMG or any Subsidiary or any of their
respective properties may be bound, (b) require any license, consent,
authorization, approval or any other action by, or any notice to or filing or
registration with, any Governmental Authority or other Person or (c) result in
the creation or imposition of any Lien on any asset of RBMG except as
contemplated by the Loan Documents.
12
<PAGE> 45
Each of the foregoing representations and warranties shall be made at and
as of the Amendment Effective Date.
5. Conditions to Effectiveness; Amendment Effective Date. This Amendment
shall be effective as of the date first written above, but shall not become
effective as of such date until the date (the "Amendment Effective Date") that:
(a) the Agent shall have received this Amendment duly executed by RBMG, the
Agent, the Collateral Agent, the Co-Agents and each Bank, and (b) RBMG shall
have paid to the Agent all expenses payable under the Credit Agreement for
which invoices have been delivered to RBMG, including, without limitation, the
fees and expenses of Winthrop, Stimson, Putnam & Roberts.
6. Loan Agreement Outstandings. Each Bank listed on the signature pages
hereto hereby agrees to make, on the Amendment Effective Date, such payments to
the Agent, in the amounts and for the account of such other Banks as the Agent
shall direct, so that, after giving effect to such payments, all of the Loans
outstanding under the Credit Agreement shall be pro rata based on the
Commitments set forth on Annex A hereto.
7. Governing Law. The rights and duties of the parties under this
Amendment shall, pursuant to New York General Obligations Law Section 5-1401,
be governed by the law of the State of New York.
8. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto were upon the same instrument.
9. Headings. Section headings in this Amendment are included herein for
convenience and reference only and shall not constitute a part of this
Amendment for any other purpose.
13
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers all as of the Amendment Effective
Date.
RESOURCE BANCSHARES MORTGAGE
GROUP, INC.
By
--------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Agent and a Bank
By
--------------------------
Name: Patricia M. Dominus
Title: Vice President
BANK ONE, TEXAS, N.A.,
as Co-Agent and a Bank
By
--------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION,
as Co-Agent and a Bank
By
--------------------------
Name:
Title:
14
<PAGE> 47
NATIONSBANK OF TEXAS, N.A.,
as Co-Agent and a Bank
By
--------------------------
Name:
Title:
LASALLE NATIONAL BANK,
as Collateral Agent
By
--------------------------
Name:
Title:
LASALLE NATIONAL BANK,
as a Bank
By
--------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION
By
--------------------------
Name:
Title:
NATIONAL CITY BANK OF KENTUCKY
By
--------------------------
Name:
Title:
15
<PAGE> 48
FIRST UNION NATIONAL BANK
By
--------------------------
Name:
Title:
GUARANTY FEDERAL BANK, FSB
By
--------------------------
Name:
Title:
FLEET BANK N.A.
By
--------------------------
Name:
Title:
COMERICA BANK
By
--------------------------
Name:
Title:
CREDIT LYONNAIS, NEW YORK BRANCH
By
--------------------------
Name:
Title:
16
<PAGE> 49
THE FIRST NATIONAL BANK OF CHICAGO
By
--------------------------
Name:
Title:
MARINE MIDLAND BANK
By
--------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By
--------------------------
Name:
Title:
BANKERS TRUST COMPANY
By
--------------------------
Name:
Title:
HIBERNIA NATIONAL BANK
By
--------------------------
Name:
Title:
17
<PAGE> 50
PNC BANK, KENTUCKY, INC.
By
--------------------------
Name:
Title:
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By
--------------------------
Name:
Title:
By
--------------------------
Name:
Title:
18
<PAGE> 51
ANNEX A
MORTGAGE WAREHOUSING
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
THE BANK OF NEW YORK $48,245,614.04 $1,754,385.96
Domestic Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
LIBOR Lending Office:
The Bank of New York
One Wall Street
New York, NY 10286
Notice Address:
The Bank of New York
One Wall Street
New York, NY 10286
Telex No.:
Telecopy No.: (212) 635-8268
(212) 635-6468
Telephone No.: (212) 635-7887
(212) 635-6467
(212) 635-8267
Attention: Patricia M. Dominus
<PAGE> 52
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
BANK ONE, TEXAS,
NATIONAL ASSOCIATION $43,421,052.63 $1,578,947.37
Domestic Lending Office:
Bank One, Texas,
National Association
1717 Main Street
Dallas, TX 75201
LIBOR Lending Office:
Bank One, Texas,
National Association
1717 Main Street
Dallas, TX 75201
Notice Address:
Bank One, Texas,
National Association
1717 Main Street
Dallas, TX 75201
Telex No.:
Telecopy No.: (214) 290-2275
(214) 290-2054
Telephone No.: (214) 290-2376
Attention: Douglas Dixon
2
<PAGE> 53
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
GUARANTY FEDERAL BANK, FSB $26,535,087.72 $964,912.28
Domestic Lending Office:
Guaranty Federal Bank, FSB
Mortgage Finance Division - 10th Floor
8333 Douglas Avenue
Dallas, Texas 75225
LIBOR Lending Office:
Guaranty Federal Bank, FSB
Mortgage Finance Division - 10th Floor
8333 Douglas Avenue
Dallas, Texas 75225
Notice Address:
Guaranty Federal Bank, FSB
Mortgage Finance Division - 10th Floor
8333 Douglas Avenue
Dallas, Texas 75225
Telex No.: (214) 360-2865
Telecopy No.: (214) 360-1660
Telephone No.: (214) 360-1968
Attention: James B. Clapp
3
<PAGE> 54
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
FLEET BANK, N.A. $31,842,105.26 $1,157,894.74
Domestic Lending Office:
Fleet Bank, N.A.
Mortgage Banking Department
175 Water Street, 28th Floor
New York, NY 10038
LIBOR Lending Office:
Fleet Bank, N.A.
Mortgage Banking Department
175 Water Street, 28th Floor
New York, NY 10038
Notice Address:
Fleet Bank, N.A.
Mortgage Banking Department
175 Water Street, 28th Floor
New York, NY 10038
Telex No.:
Telecopy No.: (212) 602-3704
Telephone No.: (212) 602-3631
Attention: Robert W. Pierson
4
<PAGE> 55
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
NATIONSBANK OF TEXAS, N.A. $43,421,052.63 $1,578,947.37
Domestic Lending Office:
NationsBank of Texas
901 Main Street, 14th Floor
Dallas, Texas 75202
LIBOR Lending Office:
NationsBank of Texas
901 Main Street, 14th Floor
Dallas, Texas 75202
Notice Address:
NationsBank of Texas
901 Main Street, 67th Floor
Dallas, Texas 75202
Telex No.:
Telecopy No.: (214) 508-0338
Telephone No.: (214) 508-0975
(214) 508-9349
Attention: Elizabeth Kurilecz
5
<PAGE> 56
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
NATIONAL CITY BANK OF KENTUCKY $26,535,087.72 $964,912.28
Domestic Lending Office:
National City Bank, Kentucky
Mortgage Companies Division
421 West Market Street, LO-4
Louisville, KY 40202
LIBOR Lending Office:
National City Bank, Kentucky
Mortgage Companies Division
421 West Market Street, LO-4
Louisville, KY 40202
Notice Address:
National City Bank, Kentucky
Mortgage Companies Division
421 West Market Street, LO-4
Louisville, KY 40202
Telex No.:
Telecopy No.: (502) 581-4154
(502) 581-7874
Telephone No.: (502) 581-6455
Attention: Robert J. Ogburn
6
<PAGE> 57
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION $38,596,491.23 $1,403,508.77
Domestic Lending Office:
Bank of America
1130 South Figueroa Street
Los Angeles, CA 90015
Attention: Tina Dao
LIBOR Lending Office:
Bank of America
1130 South Figueroa Street
Los Angeles, CA 90015
Attention: Tina Dao
Notice Address:
Bank of America
Mortgage Warehousing Unit #6739
24022 Calle de la Plata, Suite 405
Laguna Hills, CA 92653
Telex No.:
Telecopy No.: (714) 951-4046/4055
Telephone No.: (714) 951-4171
Attention: Donald L. Eppley
7
<PAGE> 58
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
CREDIT LYONNAIS $24,122,807.02 $ 877,192.98
Domestic Lending Office:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
LIBOR Lending Office:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Notice Address:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Telex No.: 423494/235655/02723
Telecopy No.: (212) 261-3401
Telephone No.: (212) 261-7408
(212) 261-7367
Attention: Gregory Raue
Kathleen Deacy
8
<PAGE> 59
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
COMERICA BANK $26,535,087.72 $ 964,912.28
Domestic Lending Office:
Comerica Bank
One Detroit Center
500 Woodward Avenue, 7th Floor
Detroit, MI 48226
LIBOR Lending Office:
Comerica Bank
One Detroit Center
500 Woodward Avenue, 7th Floor
Detroit, MI 48226
Notice Address:
Comerica Bank
One Detroit Center
500 Woodward Avenue, 7th Floor
Detroit, MI 48226
Telex No.:
Telecopy No.: (313) 222-9295
Telephone No.: (313) 222-9285
Attention: Von L. Ringger
Michael F. Kastner
9
<PAGE> 60
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
FIRST UNION NATIONAL BANK $31,842,105.26 $1,157,894.74
Domestic Lending Office:
First Union National Bank
301 S. College Street DC-6
Charlotte, NC 28288-0166
LIBOR Lending Office:
First Union National Bank
301 S. College Street DC-6
Charlotte, NC 28288-0166
Notice Address:
First Union National Bank
301 S. College Street DC-6
Charlotte, NC 28288-0166
Telex No.: n/a
Telecopy No.: (704) 383-5056
Telephone No.: (704) 383-5374
Attention: Carolyn Eskridge
10
<PAGE> 61
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
FIRST BANK NATIONAL
ASSOCIATION $43,421,052.63 $1,578,947.37
Domestic Lending Office:
First Bank National Association
Mortgage Banking Services
First Bank Place - MPFP0801
601 Second Avenue South
Minneapolis, MN 55402-4302
LIBOR Lending Office:
First Bank National Association
Mortgage Banking Services
First Bank Place - MPEP0801
601 Second Avenue South
Minneapolis, MN 55402-4302
Notice Address:
First Bank National Association
Mortgage Banking Services
First Bank Place - MPEP0801
601 Second Avenue South
Minneapolis, MN 55402-4302
Telex No.:
Telecopy No.: (612) 973-0826
Telephone No.: (612) 973-0572
(612) 973-0609
Attention: John P. Crenshaw
David R. Peterson
11
<PAGE> 62
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
THE FIRST NATIONAL
BANK OF CHICAGO $26,535,087.72 $964,912.28
Domestic Lending Office:
The First National Bank
of Chicago
One First National Plaza
16th Floor, Mail Suite 0098
Chicago, IL 60670-0098
LIBOR Lending Office:
The First National Bank
of Chicago
One First National Plaza
16th Floor, Mail Suite 0098
Chicago, IL 60670-0098
Contact: Peter Scarpelli
(312) 732-1068
Telecopy No.: (312) 732-3852
Notice Address:
The First National Bank
of Chicago
One First National Plaza
16th Floor, Mail Suite 0098
Chicago, IL 60670-0098
Telex No.: (312) 732-6222
Telecopy No.: (312) 732-4423
Telephone No.: (312) 732-1100
(312) 732-1188
Attention: Patrick Power
Ann Chudacoff
12
<PAGE> 63
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
UNION BANK OF CALIFORNIA $14,473,684.21 $526,315.79
Domestic Lending Office:
Union Bank of California
350 California St., 11th Floor
San Francisco, CA 94104
LIBOR Lending Office:
Union Bank of California
350 California St., 11th Floor
San Francisco, CA 94104
Notice Address:
Union Bank of California
350 California St., 11th Floor
San Francisco, CA 94104
Telex No.: 188316/UnionSFO UT
Telecopy No.: (415) 705-7037
Telephone No.: (415) 705-7062
(415) 705-7090
Attention: Donald Rubin
13
<PAGE> 64
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
MARINE MIDLAND BANK $14,473,684.21 $526,315.79
Domestic Lending Office:
Marine Midland Bank
One Marine Midland Center
Buffalo, N.Y. 14203
LIBOR Lending Office:
Marine Midland Bank
One Marine Midland Center
Buffalo, N.Y. 14203
Notice Address:
Marine Midland Bank
One Marine Midland Center
Buffalo, N.Y. 14203
Telex No.:
Telecopy No.: (716) 841-2707
Telephone No.: (716) 841-2931
Attention: David S. DePasquale
14
<PAGE> 65
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
BANKERS TRUST $19,298,245.61 $701,754.39
Domestic Lending Office:
Bankers Trust
280 Park Avenue - 23 West
New York, NY 10017
LIBOR Lending Office:
Bankers Trust
280 Park Avenue - 23 West
New York, NY 10017
Notice Address:
Bankers Trust
280 Park Avenue - 23 West
New York, NY 10017
Telex No.:
Telecopy No.: (212) 454-3821
Telephone No.: (212) 454-3198
Attention: Kevin M. McCann
15
<PAGE> 66
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
PNC BANK KENTUCKY, INC. $26,535,087.72 $964,912.28
Domestic Lending Office:
PNC Bank Kentucky, Inc.
500 W. Jefferson St., Suite 1200
Louisville, KY 40202
LIBOR Lending Office:
PNC Bank Kentucky, Inc.
500 W. Jefferson St., Suite 1200
Louisville, KY 40202
Notice Address:
PNC Bank Kentucky, Inc.
500 W. Jefferson St., Suite 1200
Louisville, KY 40202
Telex No.:
Telecopy No.: (908) 220-3737
Telephone No.: (908) 220-3515
Attention: Glenn Hedde
16
<PAGE> 67
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
LASALLE NATIONAL BANK $23,157,894.74 $842,105.26
Domestic Lending Office:
LaSalle National Bank
120 South LaSalle - 4th Floor
Chicago, IL 60603
LIBOR Lending Office:
LaSalle National Bank
120 South LaSalle - 4th Floor
Chicago, IL 60603
Notice Address:
LaSalle National Bank
120 South LaSalle - 4th Floor
Chicago, IL 60603
Telex No.:
Telecopy No.: (312) 904-6382
Telephone No.: (312) 904-7460
Attention: Ben Schreiner/John Swift
17
<PAGE> 68
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
UNION BANK OF SWITZERLAND, $12,061,403.51 $438,596.49
NEW YORK BRANCH
Domestic Lending Office:
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, NY 10171
LIBOR Lending Office:
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, NY 10171
Notice Address:
Union Bank of Switzerland,
New York, Branch
299 Park Avenue
New York, NY 10171
Telex No.:
Telecopy No.: (212) 821-4541
Telephone No.: (212) 821-3020
Attention: Bob Mendeles
18
<PAGE> 69
Annex A
Mortgage Warehousing
Banks, Lending Offices Warehousing Working Capital
and Notice Addresses Loan Commitments Commitments
------------------------ ---------------- ---------------
HIBERNIA NATIONAL BANK $28,947,368.42 $1,052,631.58
Domestic Lending Office:
Hibernia National Bank
313 Carondelet Street
New Orleans, LA 70130
LIBOR Lending Office:
Hibernia National Bank
313 Carondelet Street
New Orleans, LA 70130
Notice Address:
Hibernia National Bank
313 Carondelet Street
New Orleans, LA 70130
Telex No.:
Telecopy No.: (504) 533-5344
Telephone No.: (504) 533-3041
Attention: Edward K. Santos
19
<PAGE> 70
SCHEDULE ANNEX C-2
SCHEDULE OF SUBSIDIARIES
Meritage Mortgage Corporation
Intercounty Mortgage, Inc.
Carolina Merger Sub, Inc.
RBC Merger Sub, Inc.
Corridor Mortgage Company, LLC
RBMG Subsidiary Inc.
<PAGE> 71
ATTACHMENT 5
TO SECURITY AGREEMENT
LaSalle National Bank
TRANSMITTAL LETTER
(Direct Investor Shipping)
[Date]
[NAME AND ADDRESS OF INVESTOR]
Re: Purchase of Mortgage Loans from
Resource Bancshares Mortgage Group, Inc.
----------------------------------------
Ladies and Gentlemen:
Pursuant to the terms and conditions set forth below, we hereby deliver to
___________________________ (the "Investor"), with this letter, the original
executed promissory note(s) and other documentation, all as set forth on
Schedule 1 attached hereto (the "Mortgage Loan Documentation") evidencing the
mortgage loan(s) described on Schedule 1 attached hereto (the "Mortgage
Loan(s)"). LaSalle National Bank, as collateral agent (the "Secured Party")
for the agents and lenders under the Second Amended and Restated Mortgage
Warehousing Revolving Credit Agreement, dated as of July 31, 1996, among
Resource Bancshares Mortgage Group, Inc. ("RBMG"), Intercounty Mortgage, Inc.,
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 (the "Credit Agreement"), has a perfected first lien security
interest in the Mortgage Loan(s) for the benefit of the agents and lenders
under the Credit Agreement, pursuant to a Second Amended and Restated Mortgage
Warehousing Security and Collateral Agency Agreement among the Secured Party,
RBMG, IMI and The Bank of New York, as Agent. The Secured Party expressly
retains and reserves all of its rights in the Mortgage Loan(s), the Mortgage
Loan Documentation and all related security instruments, files and documents
(the "Loan Documents") until the Investor has paid the Secured Party the
Warehouse Purchase Amount (as hereinafter defined) for the Mortgage Loan(s) in
accordance with this letter.
By taking physical possession of this letter, the Mortgage Loan
Documentation and the other Loan Documents, the Investor hereby agrees: (i) to
hold in trust, as bailee for the Secured Party, the Mortgage Loan Documentation
and all Loan Documents that it receives related to the Mortgage Loan(s), until
its status as bailee is terminated as set forth herein; (ii) not to release or
deliver, or authorize the release or delivery of, any of the Mortgage Loan
Documentation or any
<PAGE> 72
other Loan Document to RBMG or any other person or take any other action with
respect to the Mortgage Loan Documentation or any Loan Document which release,
delivery or other action could cause the security interest of the Secured Party
to become unperfected or which could otherwise jeopardize the perfected security
interest of the Secured Party in the Mortgage Loan(s); (iii) to deliver, or
to cause to be delivered, the Warehouse Purchase Amount only to the Secured
Party's Receiving Bank (as defined below) pursuant to the terms set forth below
and to honor a change in such terms only upon receipt of written instruction by
the Secured Party; (iv) to return the Mortgage Loan Documentation immediately to
the Secured Party (A) upon receipt of a written request by the Secured Party,
(B) in the event that the Investor elects not to purchase the Mortgage Loan(s),
or (C) in the event that the Mortgage Loan Documentation requires completion
and/or correction and (v) to remit the Warehouse Purchase Amount to the Secured
Party's Receiving Bank (as defined below) only in accordance with the wire
instructions set forth below or in accordance with the written instructions of
the Secured Party. Please note that should the Investor remit the Warehouse
Purchase Amount to any other entity or Person, the Secured Party will not
consider the Warehouse Purchase Amount to have been paid and will not release
its security interest or terminate the responsibilities of the Investor as
bailee for the Secured Party until the Warehouse Purchase Amount has been
properly remitted to the Secured Party's Receiving Bank (as defined below) as
set forth herein.
The Secured Party agrees that its security interest in the Mortgage
Loan(s) shall be fully released and the responsibilities of the Investor as
bailee shall terminate upon the Investor's irrevocable payment to the Secured
Party of an amount (the "Warehouse Purchase Amount") equal to the greater of
(1) the purchase price for the Mortgage Loan(s) agreed to by the Investor and
RBMG and (2) $___________, which is the full amount of all outstanding Loans
(as defined in the Credit Agreement) made by Banks (as defined in the Credit
Agreement) in respect of the Mortgage Loan(s). If the Secured Party consents
to the payment of a Warehouse Purchase Amount for the Mortgage Loan(s) that is
less than the amount of the outstanding Loans (as defined in the Credit
Agreement) with respect to the Mortgage Loan(s), as set forth in clause (2) of
the preceding sentence, the Secured Party shall release its security interest
in the Mortgage Loan(s) only upon full payment of the remaining outstanding
Loans (as defined in the Credit Agreement) with respect to such Mortgage
Loan(s). All payments by the Investor shall be remitted via federal funds
pursuant to the following wire transfer instructions.
Wire transfer instructions:
Receiving Bank:
Address:
ABA Number:
Account Name:
Account Number:
2
<PAGE> 73
In the event of any inconsistency between the provisions of this letter
and the provisions of any other instrument or document delivered by the Secured
Party to the Investor with this letter or in connection with the Mortgage
Loan(s), including, without limitation, any "release" or similar document, the
provisions of this letter shall control.
------------------------------------
By:
---------------------------------
Its:
--------------------------------
3
<PAGE> 1
EXHIBIT 10.42(B)
FIRST AMENDMENT TO AGREEMENT OF MERGER
FIRST AMENDMENT TO AGREEMENT OF MERGER, dated as of September 18, 1997
(the "First Amendment"), among RESOURCE BANCSHARES MORTGAGE GROUP, INC., a
Delaware corporation ("RBMG"), RBC MERGER SUB, INC., a South Carolina
corporation and a wholly owned subsidiary of RBMG ("Merger Sub"), and RESOURCE
BANCSHARES CORPORATION, a South Carolina corporation ("RBC").
WHEREAS, pursuant to the terms of that certain Agreement of Merger dated
April 18, 1997 among RBMG, Merger Sub and RBC (the "Agreement"), RBMG will
acquire all of the common stock of RBC through the merger of Merger Sub with
and into RBC, and the stockholders of RBC will receive shares of common stock
of RBMG in proportion to their interests in RBC; and
WHEREAS, the parties wish to amend the Agreement to provide for a later
termination date;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Section 8.01(b) of the Agreement is amended by deleting the date
"November 1, 1997" in both places where it appears and substituting in lieu
thereof in both places the date "January 31, 1998" and by deleting the date
"December 1, 1997" and substituting in lieu thereof the date "February 28,
1998".
2. Except as amended hereby, the terms, conditions, covenants,
agreements, representations and warranties contained in the Agreement shall
remain unaffected hereby and shall continue in full force and effect.
3. This First Amendment may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
RESOURCE BANCSHARES CORPORATION
By:
----------------------------------------
Edward J. Sebastian
Its: Chairman of the Board and Chief Executive
Officer
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
By:
----------------------------------------
David W. Johnson, Jr
Its: Vice Chairman of the Board and Managing
Director
RBC MERGER SUB, INC.
By:
----------------------------------------
Edward J. Sebastian
Its: President
2
<PAGE> 1
EXHIBIT 10.48
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
7909 Parklane Road
Columbia, SC 29223
July 29, 1997
Mr. Lee E. Shelton
109 Shallowbrook Drive
Columbia, SC 29223
Dear Lee:
Reference is made (i) to the Mutual Release and Settlement Agreement dated
as of January 31, 1997 among Resource Bancshares Mortgage Group, Inc. ("RBMG"),
Lee E. Shelton ("Shelton") and Constance P. Shelton (the "Agreement") and (ii)
to Montgomery Securities' ("Montgomery's") standard form of Notice of Option
Exercise and Payment Authorization referred to in Section 2.1(a)(3) of the
Agreement (the "Authorization"). The purpose of this letter is to streamline
the cashless exercise procedures contemplated by Section 2.1(a)(3) of the
Agreement by positioning Montgomery to execute Shelton's option exercise
instructions from time to time without obtaining an Authorization signed by
RBMG.
In consideration of the mutual promises set forth below, and for other
good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, RBMG and Shelton agree as follows:
1. The parties stipulate that Shelton currently holds options
(collectively, the "Options") to purchase 429,195 shares of RBMG common stock
("REMI"). Except for Options to purchase 85,839 REMI shares, which Options are
scheduled to vest on June 3, 1998, all of the options are currently vested.
All of the Options are "nonqualified" stock options. In each case the exercise
price per share is currently $6.12, and the expiration date is May 26, 2003.
Shelton represents and warrants to, and agrees with, RBMG, for the benefit of
RBMG and Montgomery, that until he gives written notice to RBMG and Montgomery
he will exercise Options and resell the underlying REMI shares only through
Montgomery.
2. RBMG agrees with Shelton, for the benefit of Shelton and Montgomery,
that compliance with the procedures specified in this paragraph 2 will be
entirely satisfactory to RBMG as regards any and all exercises of vested
Options and REMI share resale transactions contemplated and executed by or for
Shelton. Shelton may initiate an Option exercise by delivering to Montgomery,
by telecopier or otherwise, a properly completed and executed (by Shelton but
not necessarily by RBMG) Authorization or successor form. After satisfying
itself that Shelton's instructions are not inconsistent with the Option details
stipulated in paragraph 1 above (giving effect to other Option exercises and
resales that may have been effected from time to time), Montgomery will arrange
to pay RBMG by wire transfer as soon as possible, generally on the next trading
day, an amount (collectively, the "Advanced Funds") equal to (1) the aggregate
exercise price for such Options plus (2) 36.45%, subject to any change in
applicable
<PAGE> 2
law (currently consisting of 28.00% as the minimum federal personal income tax
withholding percentage, 7.00% as the South Carolina personal income tax
withholding percentage plus 1.45% as the Medicare tax withholding percentage),
of (A) the price, net of any discounts, commissions and other selling expenses,
at which the REMI shares underlying the Options so exercised by Shelton were
resold by Montgomery for Shelton's account less (B) the aggregate exercise
price for such Option plus (3) any unpaid Social Security tax (currently 6.2%
of the first $65,400 of Shelton's income from RBMG in any year after 1997).
Within two trading days of RBMG's receipt of the Advanced Funds and RBMG's
receipt, via facsimile or otherwise in its office of the Chief Financial
Officer or other person performing the duties thereof (with a copy delivered
via facsimile or otherwise, to the General Counsel of RBMG or other person
performing the duties thereof), of Montgomery's "Calculation of Advanced Funds"
in substantially the form attached hereto as Exhibit A, RBMG will instruct the
REMI share transfer agent(s) to issue a certificate or certificates (free of
"stop transfer" orders and other restrictions) representing the REMI shares
underlying the Options so exercised in the name or names, in the amount or
amounts and otherwise in accordance with instructions furnished by Montgomery.
3. The Agreement remaining in full force and effect. This letter, which
may be executed in counterparts, shall be construed in accordance with the laws
of the State of South Carolina.
If your understanding of our agreement is in accordance with this letter,
then please sign a copy of it and return the signed copy to our legal counsel,
John W. Currie, Esq., whereupon this letter will become a binding agreement
between us effective the date first written above.
Very truly yours,
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
By: /s/ Edward J. Sebastian
-----------------------------------------------------------
Edward J. Sebastian, Chairman and Chief Executive Officer
Agreed:
/s/ Lee E. Shelton
- --------------------------------------------------------------
Lee E. Shelton
ACKNOWLEDGMENT
Montgomery understands the cashless exercise arrangements specified above
by RBMG and Shelton and, accordingly, is prepared to execute Shelton's Option
exercise instructions from time to time in accordance therewith, in each case
without obtaining an Authorization signed by RBMG, until informing RBMG and
Shelton that it will no longer so execute such instructions or until receiving
from RBMG or Shelton a written notice of revocation of such arrangements.
MONTGOMERY SECURITIES
By: /s/ Wilson T. Hileman
------------------------------------
Wilson T. Hileman, Managing Director
<PAGE> 3
EXHIBIT A
Calculation of Advanced Funds
<TABLE>
<S> <C>
No. REMI shares underlying exercised options:
----------
Gross sales price less any expenses $
Aggregate exercise price
----------
Gross margin $
----------
Withholding taxes on gross margin:
Federal (28.00% of gross margin) $
SC (7.00% of gross margin)
Medicare (1.45% of gross margin)
Social Security
----------
Total withholding taxes $
----------
Total withholding taxes $
Aggregate exercise price
----------
Total amount wired to RBMG $
==========
</TABLE>
<PAGE> 1
EXHIBIT 11.1
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
STATEMENT RE: COMPUTATION OF PRIMARY
and FULLY DILUTED EARNINGS PER SHARE
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, 1997 September 30, 1997
------------------- ---------------------
<S> <C> <C>
Net income $ 2,567 $ 14,408
Primary earnings per share (1) $ 0.12 $ 0.69
Fully diluted earnings per share (1) $ 0.12 $ 0.69
</TABLE>
1)The number of common shares outstanding used to compute net income per share
was 20,573,847 and 20,281,774 for the quarter and nine months ended September
30,1997, respectively. The provisions of Accounting Principles Board Opinion No.
15, "Earnings per Share" required 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 third quarter of 1997 and the nine months ended September
30, 1997, includes common stock equivalents. Primary and fully diluted earnings
per share for the quarter ended September 30, 1997, were both calculated based
on weighted average shares outstanding of 21,227,999. Primary and fully diluted
earnings per share for the nine months ended September 30, 1997, were both
calculated based on weighted average shares outstanding of 20,872,932, which
assumes the exercise of options covering 1,332,587 shares, excludes 270,702
contingent shares and computes incremental shares using the treasury stock
method. The weighted average shares for both the nine months and the third
quarter of 1997 have been retroactively adjusted for the 5% stock dividend
declared on October 31, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 8,939
<SECURITIES> 0
<RECEIVABLES> 96,882
<ALLOWANCES> 0
<INVENTORY> 1,219,044
<CURRENT-ASSETS> 1,371,636
<PP&E> 32,999
<DEPRECIATION> 8,712
<TOTAL-ASSETS> 1,404,144
<CURRENT-LIABILITIES> 1,219,076
<BONDS> 6,485
0
0
<COMMON> 210
<OTHER-SE> 178,373
<TOTAL-LIABILITY-AND-EQUITY> 1,404,144
<SALES> 53,301
<TOTAL-REVENUES> 115,333
<CGS> 62,632
<TOTAL-COSTS> 92,212
<OTHER-EXPENSES> 29,580
<LOSS-PROVISION> 2,605
<INTEREST-EXPENSE> (39,115)
<INCOME-PRETAX> 23,121
<INCOME-TAX> (8,713)
<INCOME-CONTINUING> 23,121
<DISCONTINUED> 0
<EXTRAORDINARY> 10,147
<CHANGES> 0
<NET-INCOME> 14,408
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
