10-Q 1 g69344e10-q.txt RESOURCE BANCSHARES MORTGAGE GROUP INC 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- -------------- Commission File Number 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 incorporation or organization) Identification No.) 7909 Parklane Road, Columbia, SC 29223 --------------------------------------------- ---------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (803)741-3000 ------------------------------ Indicate by check mark whether the registrant (i) 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 such shorter period that the registrant was required to file such reports) and (ii) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] The number of shares of common stock of the Registrant outstanding as of April 30, 2001 was 16,573,330. Page 1 Exhibit Index on Pages A to G 2 RESOURCE BANCSHARES MORTGAGE GROUP, INC. Form 10-Q for the quarter ended March 31, 2001 TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT

3 RESOURCE BANCSHARES MORTGAGE GROUP, INC. CONSOLIDATED BALANCE SHEETS ($ IN THOUSANDS)

The accompanying notes are an integral part of these consolidated financial statements. 3 4 RESOURCE BANCSHARES MORTGAGE GROUP, INC. CONSOLIDATED INCOME STATEMENTS ($ IN THOUSANDS EXCEPT SHARE AMOUNTS) (UNAUDITED)

See accompanying notes 5 6 RESOURCE BANCSHARES MORTGAGE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in thousands)

* Cumulative effect of change in accounting principle on other comprehensive income is net of $1,948 in income tax. ** Net change in other comprehensive income is net of $38 in income tax. The accompanying notes are an integral part of these consolidated financial statements. 6 7 RESOURCE BANCSHARES MORTGAGE GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2001 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, 2000, Annual Report on Form 10-K. Certain financial information, which is normally included in financial statements prepared in accordance with generally accepted accounting principles, is not required for interim financial statements and has been omitted. The accompanying interim consolidated financial statements are unaudited. However, in the opinion of management of the Company, all adjustments, consisting of normal recurring items, necessary for a fair presentation of operating results for the periods shown have been made. Certain prior period amounts have been reclassified to conform to current period presentation and for comparability purposes. Note 2 - Earnings (Loss) and Dividends Per Share: The following is a reconciliation of basic earnings (loss) per share from continuing operations to diluted earnings (loss) per share from continuing operations for the quarter ended March 31, 2001 and 2000, respectively:

7 8 The supplemental disclosure above represents the cumulative effect of adopting Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133) on basic and diluted earnings (loss) per share as of January 1, 2001. See Note 3 below for additional information. A cash dividend of $0.11 per share was approved by the Board of Directors on February 6, 2001. This dividend was paid on March 15, 2001 to holders of record as of February 15, 2001. Note 3 - Change in Accounting Principle In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133. SFAS No. 133, as amended by SFAS No.'s 137 and 138, establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (2) a hedge of the exposure to variable cash flows of a forecasted transaction or (3) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security or a foreign-currency denominated forecasted transaction. SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company implemented SFAS No. 133 on January 1, 2001 and recorded certain transition adjustments in the manner prescribed in SFAS No. 133. Under SFAS No. 133, rate lock commitments given to borrowers, correspondents or brokers are considered to be derivatives. The Derivative Implementation Group (DIG) of the FASB has not yet made a final determination as to how mortgage companies should value rate locks. Pending ultimate resolution of this issue by the FASB, the Company has tentatively implemented SFAS No. 133 assuming that the value of such derivatives is zero at rate lock date. Commencing January 1, 2001, the Company records on its balance sheet any changes in value from the date of rate lock to the balance sheet date. The Company hedges the interest rate risk inherent in rate lock commitments with mandatory delivery commitments to sell loans and, to a lesser extent, with options and futures transactions. Mandatory delivery commitments, options and futures are considered to be derivatives under SFAS No. 133. Accordingly, commencing January 1, 2001, these instruments are marked-to-market at the balance sheet date, with the result being reported as an asset or liability in the balance sheet. Certain of the Company's derivatives no longer needed for hedging rate locks are "paired-off" with an opposite position in the same derivative security. Under SFAS No. 133, both positions are derivatives that are marked-to-market and the result carried as assets or liabilities in the balance sheet until settlement date of the respective trades. 8 9 The Company hedges the future cash flows from sale of its inventory of closed loans held-for-sale with mandatory delivery commitments to sell loans. Mandatory delivery commitments are considered to be derivatives under SFAS No. 133 and are to be carried as an asset or liability on the balance sheet. Closed loans are not derivatives and are carried at the lower of cost or market ("LOCOM") on the Company's balance sheet. Under SFAS No. 133, to the extent that the Company establishes statistical correlation between changes in the value of the hedge with changes in the value of the closed loans held-for-sale, it can mark those derivatives to market and record the after tax impact of that in the "Other Comprehensive Income" (OCI) caption in the equity section of the balance sheet. If the LOCOM valuation of closed loans is a net loss, the Company records a charge to earnings. Simultaneously, the Company takes out of OCI a like amount and records it in the income statement as an offset to the LOCOM adjustment. The Company hedges the interest rate risk (prepayment risk) inherent in its servicing rights assets with various instruments including interest rate floors, interest rate corridors, interest rate swaps, interest rate swaptions, CPC call options, PO swaps, treasury futures and agency futures contracts. Each of these instruments is considered to be a derivative under SFAS No. 133 and must be marked-to-market, with the value being reported as an asset or a liability in the balance sheet. Under SFAS No.133 and the guidance provided by the DIG, the Company may elect, at its option, hedge accounting treatment for its servicing rights. If changes in the value of the servicing rights and the hedges meet certain correlation criteria, changes in the fair value of the servicing rights may be offset in the income statement by changes in the fair value of the hedging instrument. The Company may elect not to qualify for hedge accounting treatment. Under SFAS No. 133, the hedges must be marked-to-market through the income statement. In contrast, servicing rights are LOCOM assets under GAAP. When values go down, the impact is recorded through the income statement. When values go up, the increase may be recorded in earnings only to the extent of impairment reserves established by previous writedowns of servicing under SFAS No. 125. The election for hedge treatment must be made at the beginning of the accounting period. The Company did not elect hedge accounting treatment related to servicing rights as of January 1, 2001 or throughout the quarter ended March 31, 2001. Since the Company already carried the value of its servicing hedges on its balance sheet at December 31, 2000, there was no transition adjustment made at January 1, 2001. The Company enters into interest rate swaps to pay fixed rate and receive floating rate as a cash flow hedge of its variable rate debt used to finance its fixed rate lease receivables. Interest rate swaps are considered to be derivatives under SFAS No. 133 and are to be carried at market value as assets or liabilities in the balance sheet. Since this is a cash flow hedge under SFAS No. 133, the after tax impact is charged to or credited to OCI. Under the transition rules of SFAS No. 133, as of January 1, 2001, the Company recognized the value of derivatives on its balance sheet. It recognized in a separate line in its income statement the cumulative effect of changing to SFAS No. 133. That cumulative effect is the difference between retained earnings at December 31, 2000 and the amount of retained earnings that would have been reported at that date if SFAS No. 9 10 133 had been retroactively applied to all prior periods. The table below highlights the impact of this transition adjustment.

In addition to the cumulative effect adjustment above, SFAS No. 133 resulted in an increase in net income net of tax of $640 thousand for the quarter ($0.04 per share). Throughout the quarter, the Company elected not to qualify for hedge accounting treatment for derivatives used to hedge its interest rate exposure on servicing assets. The Company did elect hedge accounting treatment for derivatives hedging the cash flows of loans held-for-sale and the cash flows associated with its variable rate debt used to finance its fixed rate lease receivables. During the quarter ended March 31, 2001, the Company recorded no net gain or loss representing the amount of the hedges' ineffectiveness, and there was no component of the derivative instruments' gain or loss excluded from the assessment of hedge effectiveness. Note 4 - Disposal of Commercial Mortgage Segment: On September 29, 2000, the Company closed on an agreement to sell substantially all of the assets of Laureate to BB&T Corporation of Winston-Salem, N.C. Note 5 - Allocated Revenues and Expenses: Through 2000, the Company reported segment data using agency-eligible production, servicing, reinsurance, subprime production and leasing as its segments. During the last half of 2000, the Company completed a company-wide reorganization designed around business processes rather than traditional product groupings to help the Company to become more customer centric. The new segments are sales, customer fulfillment, servicing, portfolio, leasing and administration. The sales segment includes the sales forces of the agency-eligible and subprime units. The customer fulfillment segment includes all the personnel responsible for underwriting, processing and closing or purchasing loans. The portfolio segment is assumed to own the Company's balance sheet and is responsible for managing the pipeline and inventory of loans, the liquidity of the Company, and the servicing portfolio as well as performance of secondary marketing 10 11 activities. Servicing subservices the loans on behalf of the portfolio segment and external subservicing customers, assists the portfolio segment in transferring loans and servicing to end investors and obtains trailing documentation necessary for final pool certification. Leasing includes all of the sales and operating functions of the Company's leasing operation. Administration includes general corporate administration, information systems, finance, administrative services, legal, human resources and internal audit. Each item of revenue and expense is initially charged or credited to the segment that has the most control over the respective revenues and expenses. The new segment reporting recognizes the existence of internal customer relationships, and the resulting accounting includes transfer pricing based on net value added for billings between segments. Overhead from administration is allocated to the other segments based on headcount and budgeted overhead expenses. During 2001, the Company will present both the old and the new segments to facilitate investor transition to the new view of the Company. Prior period comparative information for the new segments is not available. Following is a summary of the allocated revenues and expenses for each of the Company's operating divisions for the quarters ended March 31, 2001 and 2000, respectively, based upon traditional product groupings: 11 12

(a) Revenues and expenses have been allocated on a direct basis to the extent possible. Management believes that these and all other revenues and expenses have been allocated to the respective divisions on a reasonable basis. 12 13 Following is a summary of the allocated revenues and expenses for each of the Company's operating divisions for the quarter ended March 31, 2001, based upon business processes: 13 14

(a) Revenues and expenses have been allocated on a direct basis to the extent possible. Management believes that these and all other revenues and expenses have been allocated to the respective divisions on a reasonable basis. (b) Includes consolidation eliminations, SFAS No. 91 and No. 133 14 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements of Resource Bancshares Mortgage Group, Inc. (the Company) (and the notes thereto) and the other information included or incorporated by reference into the Company's 2000 Annual Report on Form 10-K. Statements included in this discussion and analysis (or elsewhere in this quarterly report) which are not statements of historical fact are intended to be, and are hereby identified as, "forward looking statements" for purposes of the safe harbor provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, and that actual results could differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, the following which are described herein or in the Company's Annual Report on Form 10-K for the year ended December 31, 2000: (i) interest rate risks, (ii) changes in economic conditions, (iii) competition, (iv) possible changes in regulations and related matters, (v) litigation affecting the mortgage banking business, (vi) delinquency and default risks, (vii) changes in the market for servicing rights, mortgage loans and lease receivables, (viii) environmental matters, (ix) changes in the demand for mortgage loans and leases, (x) changes in the value of residual interests in subprime securitizations, (xi) prepayment risks, (xii) changes in accounting estimates and (xiii) availability and terms of funding sources and other risks and uncertainties. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. THE COMPANY The Company is a financial services company engaged through wholly-owned subsidiaries primarily in the business of mortgage banking, through the purchase (via a nationwide network of correspondents and brokers), sale and servicing of agency-eligible and subprime residential, single-family (i.e. one-four family), first-mortgage loans and the purchase and sale of servicing rights associated with agency-eligible loans. In addition, one of the Company's wholly-owned subsidiaries originates, sells and services small-ticket commercial equipment leases. 15 16 LOAN AND LEASE PRODUCTION A summary of production by source for the periods indicated is set forth below: ($ IN THOUSANDS)

The Company purchases agency-eligible mortgage loans through its correspondents and originates loans through its wholesale and subprime divisions. The Company also has a small-ticket commercial equipment lease operation. Correspondent operations accounted for 72% and 68% of the Company's total production for the quarters ended March 31, 2001 and 2000, respectively. Wholesale and subprime production accounted for 20% and 7%, respectively, of the Company's production for the three months ended March 31, 2001 and 19% and 11%, respectively, of the Company's production for the three months ended March 31, 2000. Lease production accounted for 1% and 2% of the Company's total production for the quarter ended March 31, 2000 and 1999, respectively. A summary of key information relevant to industry loan production activity is set forth below:

(1) Source: Mortgage Bankers Association of America, Economics Department. The Company's total residential mortgage production increased by 106% to $2.7 billion for the first quarter of 2001 from $1.3 billion for the first quarter of 2000. Interest rates began falling in December of 2000 and remained low during the first quarter of 2001 as compared to the first quarter of 2000, resulting in an increase in overall production levels industry-wide. 16 17 Correspondent Loan Production The Company purchases closed mortgage loans through its network of approved correspondent lenders. Correspondents are primarily mortgage lenders, larger mortgage brokers and smaller savings and loan associations and commercial banks that have met the Company's approval requirements. The Company continues to emphasize correspondent loan production as its basic business focus because of the lower fixed expenses and capital investment required of the Company. A summary of key information relevant to the Company's correspondent loan production activities is set forth below:

(1) Source: Mortgage Bankers Association of America, Economics Department. The Company's correspondent loan production increased by 116% to $2.0 billion for the first quarter of 2001 from $0.9 billion for the first quarter of 2000. Mortgage interest rates were low during the first quarter of 2001 when compared to the first quarter of 2000, resulting in an increase in overall production levels industry-wide. The correspondent division expenses decreased by 17% to $8.7 million for the first quarter of 2001 from $10.6 million for the first quarter of 2000. This is a result of the Company's continued efforts to reduce operating expenses through automation and re-engineering of work processes. Wholesale Loan Production The wholesale division receives loan applications through brokers, underwrites the loans, funds the loans at closing and prepares all closing documentation. The Company's operating centers handle all shipping and follow-up procedures on loans. Typically, mortgage is responsible for taking applications and accumulating the information precedent to the Company's processing and underwriting of the loans. Although the establishment of regional operating centers involves the incurrence of fixed expenses associated with maintaining those offices, wholesale operations also generally provide for higher profit margins than correspondent loan production. Additionally, each regional operating center 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. During 2000, the Company completed the process started in 1999 of consolidating from an 18 branch environment into regional operating centers to improve operating cost efficiency levels. The Company's nationwide salesforce is now supported by four such regional operating centers at March 31, 2001. A summary of key information relevant to the Company's wholesale production activities is set forth below: 17 18

(1) Source: Mortgage Bankers Association of America, Economics Department. Wholesale loan production increased 121% ($300.1 million) from $248.1 million for the first quarter of 2000 to $548.2 million for the first quarter of 2001. Commencing in December 2000, interest rates began to fall. Mortgage interest rates remained low during the first quarter of 2001 when compared to the first quarter of 2000, resulting in an increase in overall production levels industry-wide. Subprime Loan Production The Company conducts subprime business through its wholly-owned subsidiary, Meritage Mortgage Corporation (Meritage). A summary of key information relevant to the Company's subprime production activities is set forth below:

Subprime loan production increased by 24% to $189.0 million for the first quarter of 2001 as compared to $152.5 million during the first quarter of 2000. Subprime direct operating expenses decreased by 36% to $5.4 million for the first quarter of 2001 as compared to $8.4 million during the first quarter of 2000. The first quarter of 2000 expenses include a workforce reduction charge of $2.1 million. During 2000, the Company's salespeople commenced working out of their homes or executive suites. The Company centralized subprime processing, underwriting and closing functions into three regional operating centers where a critical mass of volume could be achieved for better operating efficiency. As a result, the Company reduced the direct operating expenses of the subprime division by 129 bps comparing the first quarter of 2001 to the first quarter of 2000, excluding the $2.1 million workforce reduction charge. 18 19 Commercial Mortgage Production On September 29, 2000, the Company closed on an agreement to sell substantially all of the assets of its commercial mortgage division, Laureate Capital Corp., to BB&T Corporation of Winston-Salem, N.C. Lease Production The Company's wholly-owned subsidiary, Republic Leasing Company, Inc. (Republic Leasing), originates and services small-ticket commercial equipment leases. Substantially all of Republic Leasing's lease receivables are acquired from independent brokers who operate throughout the continental United States. A summary of key information relevant to the Company's lease production activities is set forth below:

SERVICING Residential Mortgage Servicing Residential mortgage servicing includes collecting and remitting mortgage loan payments, accounting for principal and interest, holding escrow funds for payment of mortgage-related expenses such as taxes and insurance, making advances to cover delinquent payments, making inspections as required of the mortgaged premises, contacting delinquent mortgagors, supervising foreclosures and property dispositions in the event of unremedied defaults and generally administering mortgage loans. The Company is somewhat unique in that its strategy is to sell substantially all of its produced agency-eligible mortgage servicing rights to other approved servicers. Typically, the Company sells its agency-eligible mortgage servicing rights within 90 to 180 days of purchase or origination. However, for strategic reasons, the Company also strives to maintain a servicing portfolio whose size is determined by reference to the Company's cash operating costs which, in turn, are largely determined by the size of its loan production platform. 19 20 A summary of key information relevant to the Company's agency-eligible loan servicing activities is set forth below:

* These numbers and statistics apply to the Company's owned agency-eligible servicing portfolio and, therefore, exclude the subservicing portfolio. The ending balance for the first quarter of 2001 and 2000, respectively, includes $241,090 and $174,595, respectively, of subprime loans being temporarily serviced until these loans are sold. Of the $8.0 billion and $7.7 billion unpaid principal balance at March 31, 2001 and 2000, $5.4 billion and $6.3 billion, respectively, of the related mortgage servicing right asset is classified as available-for-sale, while $2.6 billion and $1.4 billion, respectively, of the related mortgage servicing right asset is classified as held-for-sale. A summary of agency-eligible servicing statistics follows:

* These numbers and statistics apply to the Company's owned agency-eligible servicing portfolio and, therefore, exclude the subservicing portfolio. The average underlying unpaid principal balance of agency-eligible mortgage loans being serviced and subserviced for the first quarter of 2001 as compared to the first quarter of 2000 decreased $0.1 million, or less than 2%. The Company generally sells servicing rights related to the agency-eligible loans it produces within 90 to 180 days of purchase or origination. While production levels increased during the first quarter of 2001, the average underlying unpaid 20 21 principal balance of agency-eligible mortgage loans being serviced and subserviced decreased due to higher prepayments when compared to the first quarter of 2000. Lease Servicing Republic Leasing services leases that are owned by it and also services leases for investors. A summary of key information relevant to the Company's lease servicing activity is set forth below:

Consolidated Coverage Ratios A summary of the Company's consolidated ratios of servicing fees and net interest income from owned leases to cash operating expenses net of amortization and depreciation follows:

The Company's coverage ratios for the first quarter of 2001 and 2000 were 50% and 50%, respectively. The Company has a target level of between 50% and 80%. In the opinion of the Company's management, market prices for servicing rights were attractive throughout that period. Opportunistically and as market conditions permit, management would expect to remain in line with the stated objective of maintaining a coverage ratio of between 50% and 80%. 21 22 RESULTS OF OPERATIONS - QUARTER ENDED MARCH 31, 2001, COMPARED TO QUARTER ENDED MARCH 31, 2000 SUMMARY BY OPERATING DIVISION (USING TRADITIONAL PRODUCT GROUPINGS) Net income (loss) from continuing operations per common share on a diluted basis for the first quarter of 2001 was $0.05 as compared to ($0.49) for the first quarter of 2000. Following is a summary of the revenues and expenses for each of the Company's operating divisions for the quarters ended March 31, 2001 and 2000, respectively: 22 23

(a) Revenues and expenses have been allocated on a direct basis to the extent possible. Management believes that these and all other revenues and expenses have been allocated to the respective divisions on a reasonable basis. 23 24 AGENCY-ELIGIBLE MORTGAGE OPERATIONS Following is a comparison of the revenues and expenses of the Company's agency-eligible mortgage production operations.

Summary The production revenue to pool delivery ratio increased 5 basis points for the first quarter of 2001 as compared to the first quarter of 2000. Net gain on sale of mortgage loans (55 basis points for the first quarter of 2001 versus 53 basis points for the first quarter of 2000) increased primarily due to an improvement in the competitive environment as a result of reduced mortgage interest rates and the resulting increase in loan production volumes. Net interest income increased from 2 basis points in the first quarter of 2000 to 6 basis points in the first quarter of 2001 primarily as a result of a steepening of the yield curve. The Company's interest income is earned on long-term mortgages. Its borrowings on its mortgage inventory warehouse lines of credit are based upon short-term rates. The production expenses to production ratio decreased 65 basis points from the first quarter of 2000 to the first quarter of 2001. This was primarily due to the further consolidation of regional loan processing centers during the second half of 2000 and the re-engineering of workflows within those processing centers. As a consequence of the foregoing, the Company's net agency-eligible pre-tax production margin increased 70 basis points from the first quarter of 2000 to the first quarter of 2001. 24 25 Net Interest Income The following table analyzes net interest income allocated to the Company's agency-eligible mortgage production activities 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 quarter ended March 31, 2001 and 2000, respectively:

* The interest-rate yield on the warehouse line is net of the benefit of escrow deposits. The 10 basis point increase in the interest-rate spread for the agency-eligible segment was primarily a result of a steepening of the yield curve following the short-term rate cuts made by the Federal Reserve at the end of 2000 and during the first quarter of 2001. The Company's mortgages and mortgage-backed securities are generally sold and replaced within 30 to 35 days. Accordingly, the Company generally borrows at rates based upon short-term indices, while its asset yields are primarily based upon long-term mortgage rates. 25 26 Net Gain on Sale of Agency-Eligible Mortgage Loans A reconciliation of gain on sale of agency-eligible mortgage loans for the periods indicated follows:

Net gain on sale of agency-eligible mortgage loans increased $6.9 million from $6.2 million for the first quarter of 2000 to $13.2 million for the first quarter of 2001. The increase is primarily due to an increase in production and sales volumes and an improvement in margin on sale. Production and sales volumes improved as a result of a lower interest rates during the first quarter of 2001 compared with the first quarter of 2000. The margin increased as a result of an improvement in the competitive environment. AGENCY-ELIGIBLE REINSURANCE OPERATIONS The Company has a captive insurance company, MG Reinsurance Company (MG Reinsurance). MG Reinsurance is licensed as a property and casualty insurer and operates as a monoline captive insurance company assuming reinsurance for PMI policies on agency-eligible mortgage loans initially purchased or produced by the Company. During the first quarter of 2001 and 2000, the Company recognized premium and investment income of approximately $890 thousand and $750 million, respectively, that has been included as other income in the agency-eligible reinsurance segment. 26 27 SUBPRIME MORTGAGE OPERATIONS Following is a comparison of the revenues and expenses of the Company's subprime mortgage production operations for the periods indicated:

Summary During the first quarter of 2001 the subprime unit generated a 52 bps net pre-tax production margin, a 694 bps improvement over the same period of 2000 (558 bps net of a one-time $2.1 million charge related to the Company's reorganization and reengineering in 2000). The $8.4 million increase in production revenues is attributable to the absence of the $7.7 million mark-to-market of the residual interest in subprime securitizations, which were sold for cash during the third quarter of 2000, and the $2.3 million increase in gain on sale of mortgage loans due to the 56% increase in whole loan sales. Due to the reorganization and reengineering efforts completed in 2000, total production expenses to production improved by 265 bps (129 bps or $0.9 million net of the $2.1 million reorganization charge). The improvement is attributable to the $0.9 million decrease in salary and wages net of the reorganization charge and the $0.4 million decrease in general and administrative expenses. These savings were slightly offset by the $0.1 million increase in occupancy expense and the $0.4 million increase in provision expense. 27 28 Net Interest Income The following table analyzes net interest income allocated to the Company's subprime mortgage production activities in terms of rate and volume variances of the interest spread (the difference between interest rates earned on loans and residual certificates and interest rates paid on interest-bearing sources of funds) for the three months ended March 31, 2001 and 2000, respectively.

Net interest income from subprime products decreased $0.7 million for the quarter ended March 31, 2001 compared to the quarter ended March 31, 2000 as a result of the following: (1) during the fourth quarter of 2000, the Company sold its residual certificates resulting in a reduction in interest income of $1.9 million, (2) intercompany net interest increased $1.0 million, and (3) net interest on mortgages held-for-sale decreased $0.3 million due primarily to a drop in the average volume of loans held-for-sale during the quarter ended March 31, 2001. Net Gain on Sale and Securitization of Subprime Mortgage Loans The Company sold subprime mortgage loans for cash on a whole loan basis during the first quarter of 2001 and 2000. Whole loans are generally sold without recourse to third parties with the gain or loss being calculated based on the difference between the carrying value of the loans sold and the gross proceeds received from the purchaser less expenses. Generally, no interest in these loans is retained by the Company. 28 29 A reconciliation of the gain on subprime mortgage whole loan sales for the periods indicated follows:

The net gain on whole loan sales of subprime mortgage loans increased $2.3 million from $2.4 million for the first quarter of 2000 to $4.7 million for the first quarter of 2001. Also, in accordance with Statement of Financial Accounting Standard No. 91, "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases" (SFAS No. 91) the Company reduced its net gain on whole loan sales of subprime mortgage loans by $3.8 million in the first quarter of 2001 as compared to $1.5 million in the first quarter of 2000. There were no securitization transactions during the first quarter of 2001 or 2000. Mark-to-Market on Residual Interests in Subprime Securitizations The Company historically has retained residual certificates in connection with the securitization of subprime loans. For both fiscal 2000 and the first quarter of 2001, the Company executed no securitization transactions of subprime loans. For the quarter ended March 31, 2000, the mark-to-market loss on residuals was approximately $7.7 million. Over the remaining quarters of 2000, the Company further marked down its residual interests in prior subprime securitizations as a result of signing a definitive agreement to sell all of the residual interests remaining on its balance sheet at September 30, 2000. The Company closed on that sale during the fourth quarter of 2000 and currently has not residuals on the balance sheet. 29 30 AGENCY-ELIGIBLE MORTGAGE SERVICING Following is a comparison of the revenues and expenses of the Company's agency-eligible mortgage servicing operations:

Summary The $3.2 million decline in gain on sale of mortgage servicing rights as compared to the first quarter of 2000 is due to the rapid decline in interest rates during the first quarter of 2001 which triggered the Company's fourth quarter servicing production to prepay at an unprecedented speed even before it could be transferred to the takeout buyers. The $0.9 million increase in general and administrative expenses results from lost interest from curtailments on prepaid loans. Loan servicing fees declined to $8.1 million for the first quarter of 2001, compared to $9.4 million for the first quarter of 2000, a decrease of 13%, primarily due to a drop in weighted average servicing fees. Management regularly assesses market prepay trends and adjusts amortization accordingly. Management believes that the value of the Company's mortgage servicing rights are reasonable in light of current market conditions. However, there can be no guarantee that market conditions will not change such that mortgage servicing rights valuations will require additional amortization or impairment charges. 30 31 Net Interest Expense The net interest expense for the first quarter of 2001 and the first quarter of 2000 is composed of benefits from escrow accounts of $1.9 million and $1.8 million, respectively, that is offset by $3.2 million and $3.1 million, respectively, in interest expense. 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:

(Loss) gain on sale of mortgage servicing rights decreased $3.2 million from $0.8 million for the first quarter of 2000 to $(2.4) million for the first quarter of 2001. The decrease in the gain on sale of mortgage servicing rights is primarily attributable the rapid decline in interest rates as described previously in the agency-eligible mortgage servicing operations summary. COMMERCIAL MORTGAGE OPERATIONS On September 29, 2000, the Company closed on an agreement to sell substantially all of the assets of Laureate Capital Corp. to BB&T Corporation of Winston-Salem, N.C. 31 32 LEASING OPERATIONS Following is a summary of the revenues and expenses of the Company's small-ticket equipment leasing operations for the periods indicated:

The 24% increase in leasing production revenue for the first quarter of 2001 as compared to the first quarter of 2000 is primarily due to the 23% increase in the average owned leasing portfolio which is due to the policy of retaining originated leases on the balance sheet. The net pre-tax leasing production margin decreased 283 bps in the first quarter of 2001 as compared to the first quarter of 2000 primarily as a result of the increased provision expenses associated with higher delinquencies as the small business sectors are beginning to exhibit signs of stress. Substantially all of the Company's lease receivables are acquired from independent brokers who operate throughout the continental United States and referrals from independent banks. The Company has made an effort to increase the owned portfolio. Net Interest Income Net interest income for the first quarter of 2001 was $2.7 million as compared to $2.1 million for the first quarter of 2000. This is equivalent to an annualized net interest margin of 3.80% and 4.44% for the first quarter of 2001 and 2000, respectively, based upon average lease receivables owned of $191.7 million and $156.2 million, respectively, and average debt outstanding of $164.1 and $132.3 million, respectively. 32 33 UNUSUAL ITEMS During the first quarter of 2001, the agency-eligible production segment benefited from $700 thousand of over accrued employee benefit expense. This one-time benefit was due to the Company's self-insured health plan experiencing lower than expected claims following the reduction in workforce completed in 2000. During the fourth quarter of 1999, the Company initiated a workforce reduction. The workforce reduction became necessary as the Company adapted to a smaller overall residential mortgage market and intensely competitive pricing conditions. In the first quarter of 2000, the Company reconsidered its current positioning in the market and its corporate, management and leadership structures. As a result, the Company began reorganizing around primary business processes (production/sales, customer fulfillment, servicing and portfolio management) and thus made certain changes in organization at its agency-eligible and subprime units. In connection with the planned reorganization, the Company made certain changes in its senior management team and closed certain regional processing offices. The expense related to these changes was incurred during 2000. The impact of the expense in the first quarter of 2000 related to the workforce reduction and the planned reorganization is summarized below by financial statement component and operating division.

33 34 SUPPLEMENTAL RESULTS OF OPERATIONS - QUARTER ENDED MARCH 31, 2001 SUMMARY BY OPERATING DIVISION (USING SEGMENTS DEFINED BY BUSINESS PROCESSES) Net income (loss) from continuing operations per common share on a diluted basis for the first quarter of 2001 was $0.05 as compared to ($0.49) for the first quarter of 2000. Following is a summary of the revenues and expenses for each of the Company's operating divisions for the quarters ended March 31, 2001 using the Company's new net value added segment reporting: 34 35

SALES The sales segment includes the sales forces of both the agency-eligible and subprime units. Under the Company's net value added (NVA) accounting, Sales is responsible for establishing and maintaining relationships with correspondents and brokers. The Customer Fulfillment segment processes loans on behalf of Sales, and Portfolio funds the closing or acquisition of the loans. Customer Fulfillment charges Sales fees for specific services based upon loan and channel type. The transfer pricing between Sales and Portfolio is based on Portfolio's budgeted margin on sale of loans and budgeted expenses per loan times the actual number of loans produced. The following is a summary of Sale's revenues and expenses and key operating statistics for the quarter ended March 31, 2001: 36 37

Summary As presented previously in the revenue and expense by segment table, the Sales segment contributed 7% of direct revenues and 28% of NVA revenues. Sales contributed 19% and 23% of direct expenses and NVA expenses, respectively. The direct revenue of Sales is comprised of net fees less sales incentives. The Sales segment is responsible for the pricing of fees and sales incentives, which are included in gain on sale of mortgage loans as presented in the Company's consolidated statement of income. As of March 31, 2001 there were 47 and 90 employees related to agency-eligible and subprime sales, respectively. CUSTOMER FULFILLMENT The Customer Fulfillment segment processes, underwrites, closes and performs certain post-closing functions on behalf of Sales. Customer Fulfillment charges Sales fees for specific services based upon loan and channel type. The following is a summary of Customer Fulfillment's revenues and expenses and key operating statistics for the quarter ended March 31, 2001: 37 38

Summary As presented in the revenue and expense by segment table, the Customer Fulfillment segment contributed (-1%) of direct revenues and 34% of NVA revenues. Customer Fulfillment contributed 26% and 35% of direct expenses and NVA expenses, respectively. The Customer Fulfillment segment does not have any actual direct revenues. It is debited with certain acquisition expenses which are classified in gain on sale of mortgage loans in the revenue section of the consolidated statement of income. As of March 31, 2001 there were 272 and 102 Customer fulfillment employees related to agency-eligible and subprime, respectively. PORTFOLIO Under the Company's NVA accounting, the Portfolio segment is assumed to own the Company's balance sheet and is responsible for managing the pipeline and inventory of loans, the liquidity of the Company, and the servicing portfolio as well as performance of secondary marketing activities. Portfolio funds loans on behalf of Sales and sells or securitizes loans for delivery into the secondary market in the form of whole loans, mortgage-backed securities (MBS) and servicing rights. In addition to owning loans, MBSs and servicing rights held-for-sale, Portfolio owns servicing rights held-for-investment. The Servicing segment subservices on behalf of the Portfolio segment. The following is a summary of Portfolio's revenues and expenses and key operating statistics for the quarter ended March 31, 2001: 38 39

Summary As presented in the revenue and expense by segment table, the Portfolio segment contributed 97% of direct revenues and 31% of NVA revenues. The secondary marketing unit contributed 24% of total NVA revenues and 15% of total NVA expenses. The secondary marketing unit is responsible for managing the pipeline and inventory of loans, the liquidity of the Company and selling/securitizing loans for delivery into the secondary markets. Secondary marketing's major direct revenues are net interest income and gain on sale of mortgage loans. Transfer pricing for secondary marketing is calculated using the actual number of loans it "purchases" from Sales times the budgeted margin and budgeted expenses per loan. Secondary marketing's direct expenses include provision expense. The segment's first quarter pre-tax income of $3.1 million is primarily attributable to the actual margin exceeding the budgeted margin due to an improved competitive environment during the first quarter of 2001. As of March 31, 2001 there were 81 Portfolio employees. The servicing assets unit contributed 7% of total NVA revenues and 18% of total NVA expenses. The servicing assets unit is responsible for the management the Company's owned servicing portfolio. Its direct revenues are from the gain (loss) on sale of mortgage servicing rights and servicing fees collected. Direct expenses are mainly amortization and impairment expense ($5.2 million of the $5.4 million). The first quarter loss of $3.2 million is mainly 39 40 attributable to the $2.4 million loss on the sale of mortgage servicing rights relating to high pre-payments on servicing held-for-sale that was sold during the quarter. SERVICING The Servicing segment subservices loans on behalf of the Portfolio segment and external subservicing customers. The Servicing segment also assists the Portfolio segment in transferring loans and servicing to end investors and obtains trailing documentation necessary for final pool certification (these functions are referred to as "Portfolio Support"). Servicing charges Portfolio fees for services rendered based upon the number of loans set-up, serviced and transferred during the month. Fees for trailing documentation follow-up services are charged on a per loan basis and are recognized by Servicing using the "Rule of 78th" method over a 12 month period of time, approximating the timing of the services performed. The following is a summary of Servicing's revenues and expenses and key operating statistics for the quarter ended March 31, 2001:

Summary As presented in the revenue and expense by segment table, the Servicing segment contributed 2% of direct revenues and 13% of NVA revenues. Servicing contributed 13% and 18% of direct expenses and NVA expenses, respectively. The Servicing segment's direct revenues are comprised of miscellaneous servicing fees, third party subservicing fees and other ancillary income related to servicing. One of the larger items included in Servicing's direct expenses is lost interest from curtailments relating to loans that prepay in full. This expense aggregated $978 thousand for the quarter ended March 31, 2001, relating to the high volume of loans prepaying in the lower interest rate environment. Servicing had 156 employees as of March 31, 2001. LEASING OPERATIONS 40 41 See page 33 in the results of operations for the discussion of Leasing's operating statistics. Leasing is not included in the new NVA accounting methodology, and only direct revenue and expenses are presented. ADMINISTRATION Administration includes all corporate functions and support areas including administrative services, information systems, finance, human resources, legal and internal audit services. Administration's expenses are allocated to Sales, Customer Fulfillment, Portfolio and Servicing based upon budgeted administration expenses divided by budgeted headcount times the actual headcount of those four segments.

Summary As described above, the Administration segment is credited or debited with revenues and expenses directly related to corporate and support area functions. These costs are then allocated to the business segments based on headcount. The per headcount rates that are charged to the business segments are set each quarter based on forecasted expenses and headcount. Positive pre-tax income for the administration segment may demonstrate: a) Administration's ability to manage costs below budgeted levels and/or b) the actual headcount of the business segments exceeding the budgeted headcount, resulting in an over-absorption of costs by the business segments. During the quarter ended March 31, 2001, the administrative departments benefited from higher business segment headcounts, due to the higher loan production volumes, which resulted in an over-absorption of costs. To control their own costs, the business segments can attempt to negotiate lower per headcount rates or to control their respective employee headcount, which reduces their respective allocations. Both methods of cost control create pressure upon the administrative segment to further control its costs. Allocation of overhead expenses based on headcount serves to promote the automation of work processes throughout the organization. 41 42 OTHER/ELIMINATION Other/Elimination includes the impact SFAS No. 91 and No. 133, intercompany eliminations, amortization of goodwill, taxes and the transition adjustment due to the implementation of SFAS No.133. 42 43 FINANCIAL CONDITION During the first quarter of 2001, the Company experienced a 58% increase in the volume of production originated and acquired compared to the fourth quarter of 2000. Production increased to $2.7 billion during the first quarter of 2001 from $1.7 billion in the fourth quarter of 2000. The March 31, 2001, locked residential mortgage application pipeline (mortgage loans not yet closed but for which the interest rate has been locked) was approximately $1.3 billion and the application pipeline (mortgage loans for which the interest rate has not yet been locked) was approximately $0.7 billion. This compares to a locked mortgage application pipeline of $0.6 billion and a $0.4 billion application pipeline at December 31, 2000. Mortgage loans held-for-sale and mortgage-backed securities totaled $0.6 billion at March 31, 2001 and $0.5 billion at December 31, 2000. The Company's servicing portfolio (exclusive of loans serviced under subservicing agreements) decreased to $7.9 billion at March 31, 2001, from $8.0 billion at December 31, 2000, a decrease of 1%. Short-term borrowings, which are the Company's primary source of funds, totaled $0.9 billion at March 31, 2001, compared to $0.8 billion at December 31, 2000, an increase of 8%. At March 31, 2001 and December 31, 2000, there were $6.1 million in long-term borrowings. Other liabilities totaled $104.5 million as of March 31, 2001, compared to the December 31, 2000 balance of $91.0 million, an increase of $13.5 million, or 15%. The Company continues to face the same challenges as other production-oriented companies within the mortgage banking industry and as such is not immune from significant volume declines precipitated by competitive pricing, a rise in interest rates and other factors beyond the Company's control. These and other important factors that could cause actual results to differ materially from those reported are listed under the Risk Factors section in the Company's 2000 annual report on Form 10K. LIQUIDITY AND CAPITAL RESOURCES The Company's primary cash-flow requirement involves the funding of loan production, which is met primarily through external borrowings. In July 2000, the Company and its wholly owned subsidiaries RBMG, Inc., Meritage Mortgage Corporation and RBMG Asset Management Company, Inc. (not including the Company, the Restricted Group), entered into a $325 million warehouse line of credit provided by a syndicate of unaffiliated banks that expires in July 2001. The credit agreement includes covenants requiring the Restricted Group to maintain (i) a minimum net worth of $150 million, plus the Restricted Group's net income subsequent to June 30, 2000, plus 90% of capital contributions to the Restricted Group and minus restricted payments, (ii) a ratio of total Restricted Group liabilities to tangible net worth of not more than 8.0 to 1.0, excluding debt incurred pursuant to gestation and repurchase financing agreements, (iii) RBMG, Inc.'s eligibility as a servicer of Ginnie Mae, FHA, VA, Fannie Mae and Freddie Mac mortgage loans, (iv) a mortgage servicing rights portfolio with an underlying unpaid principal balance of at least $5 billion and (v) a ratio of consolidated cash flow to consolidated interest expense (these terms are defined in the loan agreements) of at least 1.25 to 1.00 for any 43 44 period of two consecutive fiscal quarters (the interest rate coverage ratio). The Company also is required to maintain $10 million of liquidity pursuant to the agreement. The provisions of the agreement also restrict the Restricted Group's ability to engage significantly in any type of business unrelated to the mortgage banking and lending business and the servicing of mortgage loans. In July 2000, the Company and the Restricted Group also entered into a $65 million subprime revolving credit facility and a $200 million servicing revolving credit facility, which expire in July 2001. These facilities include covenants identical to those described above with respect to the warehouse line of credit. The Restricted Group was in compliance with the debt covenants in place at March 31, 2001. Although management anticipates continued compliance with current debt covenants, there can be no assurance that the Restricted Group will be able to comply with the debt covenants of these financing agreements. Failure to comply could result in the loss of the related financing. Meritage, RBMG and a bank are parties to a master repurchase agreement, pursuant to which Meritage and RBMG are entitled from time to time to deliver eligible subprime mortgage loans in an aggregate principal amount of up to $150 million to the bank. The master repurchase agreement has been extended through July 2001. RBMG, Inc. and Prime Funding Company entered into a $50 million commercial paper conduit facility in November 2000. The facility expires in November 2001. The Company has 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 executed a $6.6 million note in May 1997. This debt is secured by the Company's corporate headquarters. The terms of the related agreement require the Company to make 120 equal monthly principal and interest payments based upon a fixed interest rate of 8.07%. The note contains covenants similar to those previously described. The Company has entered into a $10.0 million unsecured line of credit agreement that expires in July 2001. The interest rate on funds borrowed is based upon the prime rate announced by a major money center bank. Republic Leasing Corporation ("Republic Leasing"), a wholly-owned subsidiary of the Company, has a $200 million credit facility to provide financing for its leasing portfolio. The warehouse credit agreement matures in August 2001 and contains various covenants regarding characteristics of the collateral and the performance of the leases originated and serviced by Republic Leasing. The warehouse credit agreement also requires the Company to maintain a minimum net worth of $60 million and Republic Leasing to maintain a ratio of total liabilities to net worth of no more than 10.0 to 1.0. 44 45 The Company has been repurchasing its stock pursuant to Board authority since March 1998, and, as of March 31, 2001, the Company had remaining authority to repurchase up to $2.8 million of the Company's common stock in either open market transactions or in private or block trades. Decisions regarding the amount and timing of repurchases will be made by management based upon market conditions and other factors. Shares repurchased are maintained in the Company's treasury account and are not retired. At March 31, 2001, there were 7,237,571 shares held in the Company's treasury account at an average cost of $7.22 per share. NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133. SFAS No. 133, as amended by SFAS No.'s 137 and 138, establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (2) a hedge of the exposure to variable cash flows of a forecasted transaction or (3) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security or a foreign-currency denominated forecasted transaction. SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. The Company implemented SFAS No. 133 on January 1, 2001 and recorded certain transition adjustments in the manner prescribed in SFAS No. 133. Under SFAS No. 133, rate lock commitments given to borrowers, correspondents or brokers are considered to be derivatives. The Derivative Implementation Group (DIG) of the FASB has not yet made a final determination as to how mortgage companies should value rate locks. Pending ultimate resolution of this issue by the FASB, the Company has tentatively implemented SFAS No. 133 assuming that the value of such derivatives is zero at rate lock date. Commencing January 1, 2001, the Company records on its balance sheet any changes in value from the date of rate lock to the balance sheet date. The Company hedges the interest rate risk inherent in rate lock commitments with mandatory delivery commitments to sell loans and, to a lesser extent, with options and futures transactions. Mandatory delivery commitments, options and futures are considered to be derivatives under SFAS No. 133. Accordingly, commencing January 1, 2001, these instruments are marked-to-market at the balance sheet date, with the result being reported as an asset or liability in the balance sheet. Certain of the Company's derivatives no longer needed for hedging rate locks are "paired-off" with an opposite position in the same derivative security. Under SFAS No. 133, both positions 45 46 are derivatives that are marked-to-market and the result carried as assets or liabilities in the balance sheet until settlement date of the respective trades. The Company hedges the future cash flows from sale of its inventory of closed loans held-for-sale with mandatory delivery commitments to sell loans. Mandatory delivery commitments are considered to be derivatives under SFAS No. 133 and are to be carried as an asset or liability on the balance sheet. Closed loans are not derivatives and are carried at the lower of cost or market ("LOCOM") on the Company's balance sheet. Under SFAS No. 133, to the extent that the Company establishes statistical correlation between changes in the value of the hedge with changes in the value of the closed loans held-for-sale, it can mark those derivatives to market and record the after tax impact of that in the "Other Comprehensive Income" (OCI) caption in the equity section of the balance sheet. If the LOCOM valuation of closed loans is a net loss, the Company records a charge to earnings. Simultaneously, the Company takes out of OCI a like amount and records it in the income statement as an offset to the LOCOM adjustment. The Company hedges the interest rate risk (prepayment risk) inherent in its servicing rights assets with various instruments including interest rate floors, interest rate corridors, interest rate swaps, interest rate swaptions, CPC call options, PO swaps, treasury futures and agency futures contracts. Each of these instruments is considered to be a derivative under SFAS No. 133 and must be marked-to-market, with the value being reported as an asset or a liability in the balance sheet. Under SFAS No. 133 and the guidance provided by the DIG, the Company may elect, at its option, hedge accounting treatment for its servicing rights. If changes in the value of the servicing rights and the hedges meet certain correlation criteria, changes in the fair value of the servicing rights may be offset in the income statement by changes in the fair value of the hedging instrument. The Company may elect not to qualify for hedge accounting treatment. Under SFAS No. 133, the hedges must be marked-to-market through the income statement. In contrast, servicing rights are LOCOM assets under GAAP. When values go down, the impact is recorded through the income statement. When values go up, the increase may be recorded in earnings only to the extent of impairment reserves established by previous writedowns of servicing under SFAS No. 125. The election for hedge treatment must be made at the beginning of the accounting period. The Company did not elect hedge accounting treatment related to servicing rights as of January 1, 2001 or throughout the quarter ended March 31, 2001. Since the Company already carried the value of its servicing hedges on its balance sheet at December 31, 2000, there was no transition adjustment made at January 1, 2001. The Company enters into interest rate swaps to pay fixed rate and receive floating rate as a cash flow hedge of its variable rate debt used to finance its fixed rate lease receivables. Interest rate swaps are considered to be derivatives under SFAS No. 133 and are to be carried at market value as assets or liabilities in the balance sheet. Since this is a cash flow hedge under SFAS No. 133, the after tax impact is charged to or credited to OCI. Under the transition rules of SFAS No. 133, as of January 1, 2001, the Company recognized the value of derivatives on its balance sheet. It recognized in a separate line in its income statement the cumulative effect of changing to SFAS No. 133. That cumulative effect is the difference between retained earnings at December 31, 2000 and the amount of retained 46 47 earnings that would have been reported at that date if SFAS No. 133 had been retroactively applied to all prior periods. The table below highlights the impact of this transition adjustment.

Each of the Company's divisions produced positive operating funds during both periods except for agency-eligible production which produced negative operating funds in 2000. The combined positive operating funds were invested to reduce indebtedness, pay dividends, repurchase stock and purchase fixed assets. AGENCY-ELIGIBLE PRODUCTION Generally, the Company purchases agency-eligible mortgage loans which are resold with the rights to service the loans being retained by the Company. The Company then separately sells a large percentage of the servicing rights so produced. When the loans are sold, current accounting principles require that the Company capitalize the estimated fair value of the retained mortgage servicing rights sold and subsequently amortize the servicing rights retained to expense. Accordingly, amounts reported as gains on sale of agency-eligible mortgage loans may not represent positive funds flow to the extent that the associated servicing rights are not sold for cash but are instead retained and capitalized. In this context, the table below reconciles the major elements of pre-tax operating funds flow of the Company's agency-eligible production activities.

AGENCY-ELIGIBLE SERVICING The Company's current strategy is to position itself as a national supplier of agency-eligible servicing rights to the still consolidating mortgage servicing industry. Accordingly, the Company 48 49 generally sells a significant percentage of its produced mortgage servicing rights to other approved servicers under forward committed bulk purchase agreements. However, the Company maintains a relatively small mortgage servicing portfolio. As discussed above, mortgage servicing rights produced or purchased are initially capitalized and subsequently must be amortized to expense. Much like depreciation, such amortization charges are "non-cash". In this context, the table below reconciles the major elements of pre-tax operating funds flow of the Company's agency-eligible mortgage servicing activities.

SUBPRIME PRODUCTION Generally, the Company purchases subprime loans through a wholesale broker network. The Company then sells or securitizes the loans so produced. Existing accounting principles require that at the time loans are securitized, the Company capitalize the estimated fair value of future cash flows to be received in connection with retention by the Company of a residual interest in the securitized loans. Accordingly, amounts reported as gains on sale of subprime mortgage loans may not represent cash gains to the extent that associated residual interests are retained and capitalized. In the first quarter of 2000 and 2001, the Company sold all of its loans to the cash markets. In this context, the table below reconciles the major elements of pre-tax operating funds flow of the Company's subprime mortgage production activities.

49 50 LEASING Generally, the Company originates small-ticket equipment leases for commercial customers that are retained as investments by the Company. Investments in leases originated and retained are financed through a borrowing facility at draw rates that approximate the net cash investment in the related lease. Accordingly, financing activities related to growth in the balance of leases held for investment do not significantly impact operating cash flow. In this context, the table below reconciles the major elements of operating funds flow allocable to leasing activities.

50 51 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK A primary market risk facing the Company is interest rate risk. The Company attempts to manage this risk by striving to balance its loan origination and loan servicing business segments, which are countercyclical in nature. In addition, the Company uses various financial instruments, including derivatives contracts, to manage the interest rate risk related specifically to its committed pipeline, mortgage loan inventory, mortgage backed securities held for sale, servicing rights and leases. The overall objective of the Company's interest rate risk management policies is to mitigate potentially significant adverse effects that changes in the values of these items, resulting from changes in interest rates, might have on the Company's consolidated balance sheet. The Company does not speculate on the direction of interest rates in its management of interest rate risk. For purposes of disclosure in the 2000 Annual Report on Form 10-K, the Company performed various sensitivity analyses that quantify the net financial impact of hypothetical changes in interest rates on its interest rate-sensitive assets, liabilities and commitments. These analyses presume an instantaneous parallel shift of the yield curve. Various techniques are employed to value the underlying financial instruments which rely upon a number of critical assumptions. Actual experience may differ materially from the estimated. To the extent that yield curve shifts are non-parallel and to the extent that actual variations in significant assumptions differ from those applied for purposes of the valuations, the resultant valuations can also be expected to vary. Such variances may prove material. The Company has procedures in place that monitor whether material changes in market risk are likely to have occurred since December 31, 2000. The Company does not believe that there have been any material changes in market risk from those reported in the 2000 Annual Report on Form 10-K. PART II. OTHER INFORMATION ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K - (a) A list of exhibits filed with this Form 10-Q, along with the exhibit index can be found on pages A to G following the signature page. - (b) No reports on Form 8-K were filed during the first quarter of 2001. 51 52 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) Dated: May 15, 2001 /s/ Steven F. Herbert ------------------- --------------------------------- Steven F. Herbert Corporate Senior Executive Vice President and Corporate Chief Financial Officer (signing in the capacity of (i) duly authorized officer of the registrant and (ii) principal financial officer of the registrant) 52 53 INDEX TO EXHIBITS EXHIBITS DESCRIPTION PAGE -------- ----------- ---- 3.1 Restated Certificate of Incorporation of the Registrant * incorporated by reference to Exhibit 3.3 of the Registrant's Registration No. 33-53980 3.2 Certificate of Amendment of Certificate of Incorporation * of the Registrant incorporated by reference to Exhibit 3.2 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1997 3.3 Certificate of Designation of the Preferred Stock of the * Registrant incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-A filed on February 8, 1998 3.4 Amended and Restated Bylaws of the Registrant as amended * through November 8, 2000 incorporated by reference to Exhibit 4.2 of the Registrant's Registration No. 333-55054. 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 Rights Plan dated as of February 6, 1998 between the * Registrant and First Chicago Trust Company of New York incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-A filed on February 8, 1998 4.3 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 10.1 Outside Directors' Stock Option Plan (as amended through * March 19, 2001) is incorporated by reference to Exhibit 10.31 of the Registrant's Annual Report on Form 10-K for the period ended December 31, 2000 10.2 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 10.3 Director Deferred Compensation Plan dated June 2000 * incorporated by reference to Exhibit 10.57 of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 10.4 Outside Director Life Insurance Plan dated June 2000 * incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 10.5 Change of Control Agreement by and between Resource * Bancshares Mortgage Group, Inc. and Steven F. Herbert, dated as of July 27, 2000. 10.6 (A) Employment Agreement dated April 3, 2000, between * Resource Bancshares Mortgage Group, Inc. and Harold Lewis, Jr. incorporated by reference to Exhibit 10.6 (A) of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 A 54 EXHIBITS DESCRIPTION PAGE -------- ----------- ---- (B) Change of Control Agreement dated May 3, 2000, by and * between Resource Bancshares Mortgage Group, Inc. and Harold Lewis, Jr. incorporated by reference to Exhibit 10.6 (B) of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 10.7 (A) Change of Control Agreement dated November 8, 2000 by * and between Resource Bancshares Mortgage Group, Inc. and William M. Ross incorporated by reference to Exhibit 10.7 (A) of the Registrant's Annual Report on Form 10-K for the period ended December 31, 2000 (B) Employment Agreement dated November 1, 2000 between * Resource Bancshares Mortgage Group and William M. Ross incorporated by reference to Exhibit 10.7 (B) of the Registrant's Annual Report on Form 10-K for the period ended December 31, 2000 10.8 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 10.9 (A) 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 (B) 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 (C) 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 . (D) 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 (E) Amendment IV to Pension Plan effective May 31, 2000 * incorporated by reference to Exhibit 10.16 (B) of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 10.10 (A) 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 (B) Amendment to Phantom 401(k) Plan incorporated by * reference to Exhibit 10.17(B) of the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1999 (C) Merger and Transfer Agreement Between The Resource * Bancshares Mortgage Group, Inc. and Fidelity Management Trust Company incorporated by reference to Exhibit 10.53 of the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1999. B 55 EXHIBITS DESCRIPTION PAGE -------- ----------- ---- 10.11 (A) Resource Bancshares Mortgage Group, Inc. Supplemental * Executive Retirement Plan incorporated by reference to Exhibit 10.14 of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1998. (B) First Amendment to Resource Bancshares Mortgage Group, * Inc. Supplemental Executive Retirement Plan dated October 28, 1998 incorporated by reference to Exhibit 10.19 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (C) Second Amendment to Resource Bancshares Mortgage * Group, Inc. Supplemental Executive Retirement Plan dated May 31, 2000 incorporated by reference to Exhibit 10.19 (B) of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 10.12 (A) 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 (B) Resolution of Board of Directors freezing additional * accruals under the Pension Restoration Plan effective May 31, 2000 incorporated by reference to Exhibit 10.20 (B) of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 10.13 (A) Stock Investment Plan incorporated by reference to * Exhibit 4.1 of the Registrant's Registration No. 33-87536 (B) 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 (C) Amendment II to Stock Investment Plan dated November * 30, 1998 incorporated by reference to Exhibit 4.1(c) of the Registrant's Registration Statement No. 333-68909 (D) Amendment III to Stock Investment Plan dated February * 2, 2000 incorporated by reference to Exhibit 10.22 (C) of the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2000 10.14 (A) Change of Control Agreement by and between Resource * Bancshares Mortgage Group, Inc. and Douglas K. Freeman, dated as of January 10, 2000 incorporated by reference to Exhibit 10.23 (A) of the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2000. (B) Employment Agreement between Resource Bancshares * Mortgage Group, Inc. and Douglas K. Freeman dated as of January 10, 2000 incorporated by reference to Exhibit 10.23 (C) of the Registrant's Quarterly Report on Form 10- Q for the period ended March 31, 2000 (C) Incentive Stock Option Agreement pursuant to Resource _____ Bancshares Mortgage Group, Inc. Omnibus Stock Award Plan between the Company and Douglas K. Freeman dated January 10, 2000 C 56 EXHIBITS DESCRIPTION PAGE -------- ----------- ---- (D) Incentive Stock Option Agreement under the Resource _____ Bancshares Mortgage Group, Inc. Omnibus Stock Award Plan between the Company and Douglas K. Freeman dated February 1, 2001 10.15 (A) 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 (B) 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 (C) 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 (D) 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 10.16 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 10.17 (A) ESOP Notes dated January 20, 1998, April 1, 1998, July * 1, 1998 and October 1, 1998 between the Registrant and The Resource Bancshares Mortgage Group, Inc. Employee Stock Ownership Trust incorporated by reference to Exhibit 10.30 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (B) ESOP Notes dated March 8, 1999, April 26, 1999, July * 1, 1999 and October 1, 1999 between the Registrant and The Resource Bancshares Mortgage Group, Inc. Employee Stock Ownership Trust incorporated by reference to Exhibit 10.30 (B) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 10.18 (A) 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 (B) Amendment to Resource Bancshares Mortgage Group, Inc. * 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 D 57 EXHIBITS DESCRIPTION PAGE -------- ----------- ---- (C) First Amendment to the Formula Stock Option Plan * incorporated by reference to Exhibit 99.8 of the Registrant's Registration No. 333-29245 as filed on December 1, 1997 (D) Second Amendment to Resource Bancshares Mortgage * Group, Inc. Formula Stock Option Plan dated October 28, 1998 incorporated by reference to Exhibit 10.34 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (E) Third Amendment to Resource Bancshares Mortgage Group, * Inc. Formula Stock Option Plan incorporated by reference to Exhibit 3.4 of the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 2000 10.19 Form of Indemnity Agreement by and between Resource * Bancshares Mortgage Group, Inc. and Directors and/or Officers of the Corporation. 10.20 (A) Amended and Restated Omnibus Stock Award Plan * incorporated by reference to Exhibit 99.10 of the Registrant's Registration No. 333-29245 filed on December 1, 1997 (B) First Amendment to Omnibus Stock Award Plan and form * of Incentive Stock Option Agreement and Release to the Omnibus Stock Award Plan incorporated by reference to Exhibit 10.44 of the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1998 (E) Second Amendment to Resource Bancshares Mortgage * Group, Inc. Omnibus Stock Award Plan dated October 29, 1998 incorporated by reference to Exhibit 10.37 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (D) Third Amendment to Omnibus Stock Award Plan is * incorporated by reference to Exhibit 10.20 (D) of the Registrant's Annual Report on Form 10-K for the period ended December 31, 2000 10.21 (A) 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 (B) Form of Incentive Stock Option Agreement (Omnibus * Stock Award Plan) effective June 2000 (officer vesting provisions) incorporated by reference to Exhibit 10.38 (B) of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 (C) Form of Incentive Stock Option Agreement (Omnibus * Stock Award Plan) effective June 2000 ($16 vesting provisions) incorporated by reference to Exhibit 10.38 (C) of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 E 58 EXHIBITS DESCRIPTION PAGE -------- ----------- ---- 10.22 (A) 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 (B) 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 (C) First Amendment to Resource Bancshares Mortgage Group, * Inc. Non-Qualified Stock Option Plan dated January 29, 1997 incorporated by reference to Exhibit 10.41 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (D) Second Amendment to the Non-Qualified Stock Option * Plan dated February 6, 1998 incorporated by reference to Exhibit 10.40 of the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1998 (E) Third Amendment to Resource Bancshares Mortgage Group, * Inc. Non-Qualified Stock Option Plan dated October 28, 1998 incorporated by reference to Exhibit 10.43 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (F) Agreement and Release Form of Non-Qualified Stock * Option Agreement incorporated by reference to Exhibit 10.41 of the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1998 10.23 (A) 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 (B) 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 (C) 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 (D) Third Amendment to Amended and Restated Retirement * Savings Plan dated May 31, 2000 incorporated by reference to Exhibit 10.47 (B) of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 10.24 (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 F 59 EXHIBITS DESCRIPTION PAGE -------- ----------- ---- (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 incorporated by reference to Exhibit 10.42 of the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1997 (C) Second Amendment to 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 10.25 (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 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 September 30, 1997 10.26 Preferred Provider Organization Plan for Retired * Executives incorporated by reference to Exhibit 10.43 of the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 1998 10.27 Resource Bancshares Mortgage Group, Inc. Flexible Benefits * Plan Amended and Restated as of January 1, 1998 incorporated by reference to Exhibit 10.51 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 10.28 The Resource Bancshares Mortgage Group, Inc. Nonqualified * Deferred Compensation Plan effective April 1, 1999 incorporated by reference to Exhibit 10.52 of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1999 10.29 (A) Voluntary Employees' Beneficiary Association Trust for * the Employees of Resource Bancshares Mortgage Group, Inc. incorporated by reference to Exhibit 10.53 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 (B) Voluntary Employees' Beneficiary Association Plan for * the Employees of Resource Bancshares Mortgage Group, Inc. incorporated by reference to Exhibit 10.54 of the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2000 10.30 MSC Stock Option Agreement between Resource Bancshares * Mortgage Group, Inc. and Boyd M. Guttery dated February 2, 2000 incorporated by reference to Exhibit 10.55 of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 G 60 EXHIBITS DESCRIPTION PAGE -------- ----------- ---- 10.31 MSC Stock Option Agreement between Resource Bancshares * Mortgage Group, Inc. and Stuart M. Cable dated February 2, 2000 incorporated by reference to Exhibit 10.56 of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000 10.32 (A) 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 (B) Amendment to employment agreement between David W. _____ Johnson, Jr. and the Company dated January 12, 2001 11.1 Statement re: Computation of Net Income per Common Share _____ *Incorporated by reference H

RESOURCE BANCSHARES MORTGAGE GROUP INC 10-Q