<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Resource Bancshares Mortgage Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 57-0962375
------------------------- -------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7909 Parklane Road, Columbia, South Carolina 29223
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(Address of principal executive offices) (Zip code)
Employment Agreement between Resource Bancshares
Mortgage Group, Inc. and Lee E. Shelton
--------------------------------------------------------
(Full title of the plan)
Edward J. Sebastian
Resource Bancshares Mortgage Group, Inc.
7909 Parklane Road
Columbia, South Carolina 29223
------------------------------------------
(Name and address of agent for service)
Telephone number, including area code, of agent for service: (803) 741-3000
<TABLE>
<CAPTION>
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CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum Amount of
Title of securities Amount to be offering price per aggregate offering registration
to be registered registered(1) share(2) price fee
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<S> <C> <C> <C> <C>
Common stock, par
value $.01 per share 43,286 shares $14.19 $614,228.34 $186.13
</TABLE>
(1) Together with an indeterminable number of additional shares which may be
necessary to adjust the number of shares reserved for issuance pursuant to
such plan as the result of any future stock split, stock dividend or
similar adjustment of the registrant's outstanding common stock.
(2) Estimated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended, solely for the purpose of calculating the registration fee based
on the average of the high and low prices of Resource Bancshares Mortgage
Group, Inc. common stock as reported on the Nasdaq National Market System
on April 17, 1997.
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PART I: INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this registration statement in accordance with the
Note to Part I of Form S-8.
Explanatory Note: Pursuant to General Instruction C of Form S-8, this
registration statement contains as an exhibit a prospectus meeting the
requirements of Part I of Form S-3 relating to reoffers and resales of shares of
common stock, par value $.01 per share, of the registrant that have been
acquired by Lee E. Shelton pursuant to an employment agreement between Mr.
Shelton and the registrant.
PART II: INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The registrant hereby incorporates by reference in this registration
statement the following documents:
(a) The registrant's annual report on Form 10-K for the year ended
December 31, 1996.
(b) The registrant's current report on Form 8-K dated April 21, 1997.
(c) The description of the registrant's common stock, par value $.01
per share, set forth in the registrant's registration statement on Form 8-A
dated May 18, 1993.
All documents subsequently filed by the registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment to this registration statement which indicates that all
securities offered hereby have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be a part hereof from the date of filing of such
documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of
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another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Subsection (c) of Section 145 provides that to the extent a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Other subsections of Section 145: (i) provide that indemnification provided
for by Section 145 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled; (ii) provide that indemnification
provided for by Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators; and (iii) empower the corporation to purchase and
maintain insurance on behalf of a director, officer, employee or agent of the
corporation, or any person who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145. Paragraph (c) of
Article Seventh of the registrant's Restated Certificate of Incorporation
contains a parallel provision.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a
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provision eliminating or limiting the personal liability of a director to a
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware
or (iv) for any transaction from which the director derived an improper personal
benefit. Paragraph (a) of Article Seventh of the registrant's Restated
Certificate of Incorporation eliminates the personal liability of the
registrant's directors for monetary damages for breach of fiduciary duty except
to the extent that such elimination of liability is not permitted under Delaware
corporate law.
Paragraph (b) of Article Seventh of the registrant's Restated Certificate
of Incorporation provides for indemnification of its directors, officers,
employees and other agents.
The registrant also maintains liability insurance for its directors and
officers which provides for coverage against loss from claims made against
directors and officers in their capacity as such, including liabilities under
the Securities Act of 1933, as amended.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
The shares of the registrant's common stock to be registered for reoffer or
resale pursuant to this registration statement were issued to Lee E. Shelton in
transactions exempt from registration under the Securities Act of 1933, as
amended, pursuant to Section 4(2) of such Act. The shares were issued to Mr.
Shelton pursuant to the terms of an employment agreement between Mr. Shelton and
the registrant, and when he acquired the shares, Mr. Shelton was the Vice
Chairman and a director of the registrant.
ITEM 8. EXHIBITS
See Exhibit Index.
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(A) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(B) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
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recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; and
(C) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(A) and (a)(1)(B) do not apply if the
registration statement is on Form S-3 or S-8 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbia, State of South Carolina, on April 21, 1997.
RESOURCE BANCSHARES MORTGAGE GROUP, INC.
By: /s/ Edward J. Sebastian
----------------------------------------
Edward J. Sebastian, Chairman
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Edward J. Sebastian and David W. Johnson,
Jr., and each of them acting individually, as his attorneys-in-fact, each with
full power of substitution, for him in any and all capacities, to sign any and
all amendments to this registration statement and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Edward J. Sebastian Director, Chairman April 21, 1997
- ------------------------------ and Chief Executive
Edward J. Sebastian Officer (principal
executive officer)
/s/ Steven F. Herbert Senior Executive Vice April 21, 1997
- ------------------------------ President and Chief
Steven F. Herbert Financial Officer
(principal financial
and accounting officer)
/s/ John C. Baker Director April 21, 1997
- ------------------------------
John C. Baker
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Director
- ------------------------------
Stuart M. Cable
/s/ John W. Currie Director and April 21, 1997
- ------------------------------ Secretary
John W. Currie
Director
- ------------------------------
Boyd M. Guttery
/s/ David W. Johnson, Jr. Director April 21, 1997
- ------------------------------ and Vice Chairman
David W. Johnson, Jr.
/s/ John O. Wolcott Director April 21, 1997
- ------------------------------
John O. Wolcott
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EXHIBIT INDEX
Exhibit
- -------
4.1 Restated Certificate of Incorporation of the registrant,
incorporated by reference to Exhibit 3.3 of the registrant's
Registration No. 33-53980
4.2 Amended and Restated Bylaws of the registrant, incorporated
by reference to Exhibit 3.4 of the registrant's Registration
No. 33-53980
4.3 Form of Certificate evidencing shares of the registrant's
common stock, par value $.01 per share, incorporated by
reference to Exhibit 3.3 of the registrant's Registration
No. 33-53980
23 Consent of Price Waterhouse LLP
24 Power of Attorney (included as part of the signature page of
this registration statement)
99 Reoffer Prospectus
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EXHIBIT 23
CONSENT OF PRICE WATERHOUSE LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 3, 1997, which appears on
page 56 of the 1996 Annual Report to Shareholders of Resource Bancshares
Mortgage Group, Inc., which is incorporated by reference in Resource Bancshares
Mortgage Group, Inc.'s Annual Report on Form 10-K for the year ended December
31, 1996.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Columbia, South Carolina
April 18, 1997
<PAGE> 1
EXHIBIT 99
REOFFER PROSPECTUS
43,286 Shares
Resource Bancshares Mortgage Group, Inc.
Common Stock, Par Value $.01 Per Share
This reoffer prospectus (the "Prospectus") relates to the resale or offer
for sale for the account of Lee E. Shelton on the National Association of
Securities Dealers National Market System ("NASDAQ"), or otherwise, of 43,286
shares of common stock, par value $.01 per share ("Common Stock"), of Resource
Bancshares Mortgage Group, Inc., a Delaware corporation (the "Company"), that
have been acquired by Mr. Shelton, former Vice Chairman and director of the
Company, pursuant to an employment agreement between Mr. Shelton and the
Company. The Company will not receive any of the proceeds from the sale of the
shares offered hereby. All expenses incurred in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"), and the
offering of the securities hereby will be borne by the Company, but all selling
and other expenses incurred by Mr. Shelton will be borne by Mr. Shelton.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 21, 1997.
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street N.W., Washington, D.C. 20549
and at the Commission's regional offices located at 7 World Trade Center, New
York, New York 10048, and at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street NW, Washington, D.C. 20549. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's World Wide Web site is http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-8 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement, including the exhibits filed as a part thereof,
which may be inspected at the principal office of the Commission, without
charge, at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the Registration Statement may be obtained from the Commission at
its principal office at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of prescribed fees. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete, and, where the contract or the document has been filed as an exhibit
to the Registration Statement, each such statement is qualified in all respects
by reference to the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed with the Commission by the
Company pursuant to the Exchange Act, are incorporated herein by reference and
made a part hereof:
(1) The Company's annual report on Form 10-K for the year ended December
31, 1996.
(2) The Company's current report on Form 8-K dated April 21, 1997.
(3) The description of the Common Stock set forth in the Company's
registration statement on Form 8-A dated May 18, 1993.
2
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All documents filed after the date of this Prospectus by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any and all of
the documents referred to above that have been incorporated by reference in this
Prospectus, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents. Written or telephone
requests for such copies should be directed to Resource Bancshares Mortgage
Group, Inc., Investor Relations, 7909 Parklane Road, Columbia, SC 29223, (803)
741-3000.
The Company, which commenced operations in 1992, is a Delaware corporation
headquartered at 7909 Parklane Road, Columbia, South Carolina 29223. The
Company's telephone number at such address is (803) 741-3000.
3
<PAGE> 4
RISK FACTORS
INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES CERTAIN RISKS.
PROSPECTIVE PURCHASERS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS, IN
ADDITION TO THE OTHER INFORMATION INCLUDED IN, OR INCORPORATED BY REFERENCE
INTO, THIS PROSPECTUS, WHEN EVALUATING THE COMPANY AND ITS BUSINESS IN MAKING AN
INVESTMENT DECISION.
GENERAL BUSINESS RISKS
The Company's business is subject to various business risks, including
competition from other mortgage companies. Economic conditions affect the
decision to buy or sell residences as well as the number of residential mortgage
loan delinquencies and foreclosures, the value of collateral supporting loan
portfolios, administrative costs in evaluating and processing mortgage loan
applications and the costs and availability of funds that mortgage banking
companies rely upon in order to make or purchase loans. Changes in the level of
consumer confidence, tax laws, real estate values, prevailing interest rates and
investment returns expected by the financial community could make mortgage loans
of the types originated or purchased by the Company less attractive to borrowers
or investors.
INTEREST RATE FLUCTUATIONS
Changes in interest rates can have differing effects on various aspects of
the Company's business, particularly in the areas of volume of mortgage loans
originated or purchased, net interest income, sales of mortgage loans and the
value of the Company's mortgage servicing rights.
Volume of Mortgage Loans Produced
---------------------------------
In periods of declining interest rates, demand for mortgage loans
typically increases, particularly for mortgage loans used to refinance existing
loans. In periods of rising interest rates, demand for mortgage loans typically
declines. The Company could be adversely affected by a decline in demand for
mortgage loans in the areas where the Company originates or purchases loans.
Net Interest Income
-------------------
Net interest income (interest earned less interest expense) is
directly related to the difference between the yield earned on mortgage loans
originated or purchased by the Company and the cost of funds borrowed by the
Company ("spread"). The factors which can affect the spread include interest
rates charged by lenders, the relationship between long term and short term
interest rates and the use of compensating balances (escrow funds held on
deposit with lending banks) to decrease interest rates charged on borrowed
funds. There can be no assurance that the spread will
4
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not decrease from its current level. A decrease in the spread would have a
negative effect on the Company's net interest income.
Sales of Mortgage Loans
-----------------------
Gains or losses on sales of mortgage loans may result from changes in
interest rates from the time the interest rate on the customer's mortgage loan
application is established to the time the Company sells the loan. Such a change
in interest rates could result in a gain or loss upon the sale of such loans. In
order to reduce the effect of interest rate changes on the gain or loss on loan
sales, the Company commits to sell mortgage loans to investors for delivery at a
future time for a stated price. At any given time, the Company has committed to
sell all of its mortgage loans that are closed ("warehouse loans") and a
percentage of the mortgage loans which are not yet closed but for which the
interest rate has been established ("pipeline loans"). To manage the interest
rate risk of the Company's pipeline loans, the Company continuously projects the
percentage of the pipeline loans it expects to close and, on the basis of such
projections, enters into forward sales commitments to sell such loans.
If interest rates make an unanticipated change, the actual percentage
of mortgage loans that close may differ from the projected percentage. The
resultant mismatching of commitments to purchase loans and commitments to sell
loans may have an adverse effect on the profitability of operations. A sudden
increase in interest rates can cause a higher percentage of mortgage loans to
close than projected. To the degree that this may not have been anticipated, the
Company may not have made commitments to sell these additional loans and
consequently may incur significant losses upon their sale, adversely affecting
results of operations. Likewise, if a lower percentage of mortgage loans close
than was projected, due to a sudden decrease in interest rates or otherwise, the
Company may have committed to sell more loans than actually close and as a
result may incur significant losses in fulfilling these commitments, adversely
affecting results of operations. This risk is greater during times of volatility
of interest rates.
Value of Mortgage Servicing Rights
----------------------------------
The value of the Company's mortgage servicing rights may be adversely
affected if mortgage interest rates decline and anticipated loan prepayments
increase. As interest rates on mortgage loans decline and the economic
advantages to borrowers of refinancing mortgage loans increase, increases in the
rate of mortgage loan prepayments may reduce the value of the Company's mortgage
servicing rights. If the rate of prepayment of the related mortgage loans
exceeds the rate assumed by the Company, due to a significant reduction in
interest rates or otherwise, accelerated amortization or impairment provisions
against servicing rights may become necessary, thereby decreasing earnings.
Mortgage loans originated or purchased at lower interest rates are less likely
to be prepaid as interest rates increase. The value of the mortgage servicing
rights associated with
5
<PAGE> 6
such mortgage loans generally will increase in periods of rising interest rates.
SALES OF MORTGAGE SERVICING RIGHTS
The prices obtained by the Company upon the sale of its mortgage servicing
rights depend upon a number of factors, including the general supply of and
demand for mortgage servicing rights, as well as prepayment and delinquency
rates on the portfolio of mortgage servicing rights being sold. Interest rate
changes can affect the ability to sell or the profitability of a sale of
mortgage servicing rights to a third party. Purchasers of mortgage servicing
rights analyze a variety of factors, including prepayment sensitivity of
servicing rights, to determine the purchase price they are willing to pay. Thus,
in periods of declining interest rates, sales of mortgage servicing rights
related to higher interest rate loans may be less profitable than sales of
mortgage servicing rights related to lower interest rate loans. Because these
factors are largely beyond the control of the Company, there can be no assurance
that the current level of profitability from the sale of mortgage servicing
rights will be maintained.
FLUCTUATIONS IN PERFORMANCE
The Company's operating results can fluctuate substantially from period to
period as a result of a number of factors, including the volume of loan
production, interest rates, the level of amortization of mortgage servicing
rights required by prepayment rates and the performance of the Company's
servicing portfolio hedge. In particular, the Company's results are strongly
influenced by the level of loan production, which is influenced by the interest
rate environment and other economic factors. Accordingly, the net income of the
Company may fluctuate substantially from period to period.
LIABILITIES UNDER REPRESENTATIONS AND WARRANTIES
In the ordinary course of business, the Company makes representations and
warranties to the purchasers and insurers of mortgage loans and the purchasers
of mortgage servicing rights regarding compliance with laws, regulations and
program standards and as to accuracy of information. Under certain
circumstances, the Company may become liable for certain damages or may be
required to repurchase a loan if there has been a breach of representations or
warranties. The Company generally receives similar representations and
warranties from the correspondents from whom it purchases loans. However, in the
event of breaches of such representations and warranties, the Company is subject
to the risk that a correspondent may not have the financial capacity to
repurchase loans when called upon to do so by the Company or otherwise respond
to demands made by the Company. Although the Company has not incurred losses in
any material respect as a result of mortgage loan repurchases due to breaches in
representations and warranties, there can be no assurance that the Company will
not experience such losses in the future.
6
<PAGE> 7
DELINQUENCY AND DEFAULT RISKS
The Company originates and purchases conventional loans as well as loans
insured by the Federal Housing Administration ("FHA") or partially guaranteed by
the Veterans Administration ("VA"). In the case of conventional loans, the
Company is generally at risk for any mortgage loan default until the loan is
sold (typically less than 45 days). Once the Company sells the loan, the risk of
loss from mortgage loan default and foreclosure generally passes to the
purchaser or insurer of the loan. The Company has from the time an FHA or VA
mortgage loan is originated or purchased until the first payment is due, a
minimum of 31 days, to request insurance or a guarantee certificate. Once the
insurance or the guarantee certificate is issued, the Company has no risk of
default except with respect to certain losses related to foreclosures of FHA
mortgage loans and losses which exceed the VA's guarantee limitation.
The Company is affected by mortgage loan delinquencies and defaults on
mortgage loans that it services. Under certain types of servicing contracts,
when mortgage loan payments are delinquent the servicer must forward all or part
of the scheduled payments to the owner of the mortgage loan. Also, to protect
their liens on mortgaged properties, owners of mortgage loans usually require
the servicer to advance mortgage and hazard insurance and tax payments on
schedule when sufficient escrow funds may not be available. In the case of
mortgage loans partially guaranteed by the VA and serviced by the Company, the
Company may be responsible for foreclosure and disposition losses which exceed
the VA's guarantee limitations. Generally, under current guidelines, the VA
guarantees between 25% and 50% (depending on the size of the loan) of the
original principal amount of a mortgage loan up to a maximum amount of $50,750.
In the case of loans insured by the FHA, the Company will not be reimbursed for
certain amounts if foreclosure becomes necessary. Such amounts include interest
on the mortgage loan for the first two months subsequent to the loan becoming
delinquent and a portion of the costs of foreclosure (generally limited to
one-third of such costs). The servicer generally is reimbursed ultimately by the
mortgage loan owner or from liquidation proceeds. However, in the interim, the
servicer must absorb the cost of funds advanced during the time the advance is
outstanding. Further, the servicer must bear the increased costs of attempting
to collect on delinquent and defaulted mortgage loans. In addition, if a default
is not cured, the mortgage loan will be prepaid as a result of foreclosure
proceedings. As a consequence, the Company is required to forego servicing
income from the time such loan becomes delinquent and into the future.
Management maintains a reserve for possible losses at a level considered
adequate to provide for known and inherent risks related to foreclosure and
disposition losses. Management's evaluation of an adequate level of foreclosure
reserves considers past loss experience, industry loss experience, geographic
and product concentrations, delinquency trends, economic conditions and other
relevant factors. While management uses the best currently available information
to make such evaluations, future adjustments to the foreclosure reserve will be
required as conditions and assumptions are revised in response to changes in
trends and the other factors and assumptions relevant to management's
evaluations.
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In limited conditions the Company could be subject to the risk of liability
for the removal of environmental pollutants from properties upon which it has
foreclosed.
FORWARD SALE ARRANGEMENTS
In connection with its mortgage loan sales programs, which involve the sale
of mortgage loans, mortgage-backed securities and servicing rights on a forward
or other deferred delivery and payment basis, the Company has credit risk
exposure to the extent purchasers are unable to meet the terms of their forward
purchase contracts. As is customary in the marketplace, none of the forward
payment obligations of any of the Company's counterparties is currently secured
or subject to margin requirements. Although the Company has never suffered a
loss as a result of a default by a forward contract counterparty, the Company
attempts to limit its credit exposure on forward sales arrangements on mortgage
loans and mortgage-backed securities by entering into forward contracts only
with institutions that the Company believes are acceptable credit risks and by
limiting exposure to any single counterparty by selling to a number of
investors. For example, it is the Company's current policy based on the
Company's current size that not more than the lesser of (i) $350 million or (ii)
40% of the total of the forward purchase contracts outstanding at any time be
with any single counterparty. All counterparties are obligated to settle such
sales in accordance with the terms of the related forward sale agreement. The
Company also attempts to limit its exposure on produced servicing sales forward
contracts by only selling to institutions that the Company believes are
acceptable credit risks. Generally, such sales are with a limited number of
large nationally recognized servicers.
REGULATION
The operations of the Company are subject to extensive regulation by
federal and state governmental authorities and agencies including FNMA, FHLMC,
GNMA, the FHA and the VA. Consequently, the Company is subject to various laws,
rules and regulations and judicial and administrative decisions that, among
other things, regulate credit-granting activities, govern secured transactions
and establish collection, repossession and claims handling procedures and other
trade practices. Failure to comply with requirements can lead to loss of
approved status, termination of servicing contracts without compensation to the
servicer, demands for indemnification or mortgage loan repurchases, class action
lawsuits and administrative enforcement actions. Although the Company believes
that it is in compliance in all material respects with applicable federal, state
and agency laws, rules and regulations, there can be no assurance that more
restrictive laws, rules and regulations will not be adopted in the future which
could make compliance more difficult or expensive, restrict the Company's
ability to originate, purchase or sell mortgage loans, further limit or restrict
the amount of interest and other fees that may be earned or charged on mortgage
loans originated, purchased or serviced by the Company or otherwise adversely
affect the business or prospects of the Company.
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Certain states require that interest must be paid to mortgagors on funds
deposited by them in escrow to cover mortgage-related payments such as property
taxes and insurance premiums. The Company currently does business in ten such
states, and loans from these states amounted to approximately 35.4% of the
Company's mortgage servicing rights portfolio at December 31, 1996. Federal
legislation which has been proposed from time to time, if enacted, would
establish in all states a uniform requirement for the payment of interest on
such escrow accounts and otherwise regulate such escrow accounts in ways which
would negatively affect the benefits which the Company derives from such
accounts. It is impossible to predict whether such legislation or any similar
legislation regulating escrow practices will be enacted, or if enacted, what
form it will take. If any additional legislative restrictions are imposed on the
Company by state or federal laws or regulations, the effect on the Company's
results of operations would depend on the requirements of such laws or
regulations, and such effect could be materially adverse.
FEDERAL PROGRAMS
The Company's ability to generate funds by sales of mortgage-backed
securities is largely dependent upon the continuation of programs administered
by FNMA, FHLMC and GNMA, which facilitate the issuance of such securities, as
well as the Company's continued eligibility to participate in such programs. In
addition, approximately 38% (based on 1996 mortgage loan production) of the
Company's business is dependent upon the continuation of various programs
administered by the FHA, which insures mortgage loans, and the VA, which
partially guarantees mortgage loans. Although the Company is not aware of any
proposed permanent actions, the discontinuation of, or a significant reduction
in, the operation of such programs could have a material adverse effect on the
Company's operations. The Company anticipates that it will continue to remain
eligible to participate in such programs, but any significant impairment of such
eligibility would materially adversely affect its operations. In addition, the
mortgage loan products eligible for such programs may be changed from time to
time by the sponsor. The profitability of specific types of mortgage loan
products may vary depending on a number of factors, including the administrative
costs to the Company of originating or purchasing such types of mortgage loans.
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COMPETITION
The Company faces strong competition in originating, purchasing and selling
mortgage loans and mortgage servicing rights. The Company's competition is
principally from savings and loan associations, other mortgage companies,
commercial banks and, to a lesser degree, credit unions and insurance companies.
Many of these institutions have greater financial and other resources than the
Company and a significant number of branch offices in the areas in which the
Company conducts operations. Increased competition for mortgage loans from
larger lenders may result in a decrease in the volume of loans produced by the
Company, thereby possibly reducing the Company's revenues.
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS; POSSIBLE ISSUANCE OF
PREFERRED STOCK
Certain provisions of the Company's Restated Certificate of Incorporation
(the "Certificate") and Amended and Restated Bylaws (the "Bylaws") could delay
or frustrate the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving the Company, even if such events
could be beneficial to the interests of the stockholders. For example, the
Certificate and the Bylaws provide certain limitations on the calling of a
special meeting of stockholders and the Bylaws require advance notice before
certain proposals can be considered at stockholder meetings. Pursuant to the
Certificate, shares of preferred stock may be issued in the future without
further stockholder approval and upon such terms and conditions, and having such
rights, privileges and preferences, as the Board of Directors may determine. The
ability to issue preferred stock provides desirable flexibility in connection
with acquisitions and other corporate transactions. However, the rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
any preferred stock that may be issued in the future, and the issuance of
preferred stock could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from acquiring, a majority of
the outstanding voting stock of the Company. The Company has no present plans to
issue any shares of preferred stock.
DEPENDENCE ON KEY INDIVIDUALS
The success of the Company is in large part dependent upon the efforts of
Edward J. Sebastian, Chairman and Chief Executive Officer, and David W. Johnson,
Jr., Vice Chairman. The loss of the services of either of these officers could
have a material adverse effect upon the Company if a suitable replacement could
not be quickly retained. The Company has obtained key man life insurance
policies on Messrs. Sebastian and Johnson in the amount of $2,000,000 each. The
Company also has entered into certain employment and employment related
agreements with Mr. Johnson.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the offering
hereunder. All expenses incurred in connection with the registration under the
Securities Act and the offering of the securities hereby will be borne by the
Company, but all selling and other expenses incurred by Mr. Shelton will be
borne by Mr. Shelton.
SELLING SECURITY HOLDER
This Prospectus covers reoffers and resales by Lee E. Shelton, who was Vice
Chairman and a director of the Company from October 23, 1992 until January 31,
1997, of 43,286 shares of Common Stock that have been acquired by Mr. Shelton
pursuant to an employment agreement between Mr. Shelton and the Company. As of
April 21, 1997, Mr. Shelton owned 9,316 shares of Common Stock in addition to
the shares covered by this Prospectus and held options to acquire an additional
429,195 shares of Common Stock.
PLAN OF DISTRIBUTION
The Shares of Common Stock covered by this Prospectus (the "Shares") may be
sold from time to time by Mr. Shelton on NASDAQ on terms to be determined at
the time of each sale. Alternatively, Mr. Shelton may offer Shares from time to
time to or through underwriters, dealers or brokers, who may receive
consideration in the form of discounts and commissions. Such compensation,
which may exceed ordinary brokerage commissions, may be paid by Mr. Shelton
and/or the purchasers of the Shares for whom such underwriters, dealers and
brokers may act. Mr. Shelton also may make private sales of the Shares, either
directly to investors or indirectly through brokers.
The Shares may be sold from time to time in one or more transactions at a
fixed offering price, which may be changed, at varying prices determined at the
time of sale or at negotiated prices.
The Company has no knowledge of any agreements between Mr. Shelton and any
brokers or dealers in respect of discounts or commissions or for the exclusive
or coordinated sale of the Shares.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold by Mr. Shelton in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states Shares may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirements is available and is satisfied.
The Company and Mr. Shelton have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
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RESOURCE BANCSHARES MORTGAGE GROUP, INC.
43,286 SHARES
COMMON STOCK, PAR VALUE $.01 PER SHARE
REOFFER PROSPECTUS
APRIL 21, 1997
TABLE OF CONTENTS
Page
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Available Information 2
Incorporation of Certain
Documents by Reference 2
Risk Factors 4
Use of Proceeds 11
Selling Security Holder 11
Plan of Distribution 11
