Resource Bancshares Mortgage Group, Inc. Reports Results For the Third Quarter and the First Nine Months of 1999

    COLUMBIA, S.C., Oct. 27 /PRNewswire / -- Resource Bancshares Mortgage
 Group, Inc. (the Company) (Nasdaq:   RBMG), today announced a net loss for its
 third quarter ended September 30, 1999, of $1.7 million ($0.08 diluted loss
 per share) as compared to net income of $13.3 million ($0.56 diluted earnings
 per share) for the third quarter of 1998.  Net income for the nine months
 ended September 30, 1999, was $12.8 million ($0.60 diluted earnings per
 share), as compared to $36.0 million ($1.53 diluted earnings per share) for
 the same period last year.
     David W. Johnson, Jr., President and CEO of the Company, stated, "Higher
 interest rates drove agency-eligible production volumes lower, leading to a
 modest loss for the quarter.  Even so, operating cash flow was a positive
 $6.2 million (1) ($0.30 per share) for the quarter.  Those funds were deployed
 to support payment of a $2.2 million ($0.11 per share) cash dividend and to
 finance net stock repurchase activities aggregating $5.5 million (2) during
 the quarter."
     Steven F. Herbert, Chief Financial Officer, added, "I'm pleased that our
 strategy of maintaining a variable cost operating structure has enabled us to
 reduce agency-eligible production expenses by 32%, to $16.7 million for the
 quarter as compared to the peak level of $24.6 million for the fourth quarter
 of last year.  We have more work to do, but expenses are expected to continue
 to decline in the quarters ahead."
     Richard M. Duncan, President and CEO of RBMG, Inc., the agency-eligible
 subsidiary of the Company, commented,  "Despite the difficult production
 environment we have positive accomplishments to report.  Late in the quarter
 we deployed the new 'Premier' and 'Preferred' wholesale programs, targeted to
 improve our competitive position.  On the technology front we continue to be
 successful in our electronic mortgage origination efforts.  For the month of
 September, we were Fannie Mae's eighth largest user of Desktop Originator(R)
 (out of over 90 lenders) and the eighteenth largest user of Desktop
 Underwriter(R) (out of over 1,100 lenders).  We have also made significant
 progress toward our goal of deploying a first generation private label
 business-to-business internet capability to correspondents and brokers in the
 first quarter of next year."
     Larry Reed, President and CEO of the Company's subprime subsidiary,
 Meritage Mortgage Corporation, commented, "Subprime results included a
 $0.9 million loss associated with operations and closure of our telemarketing
 operation during the quarter and a $1.3 million expense related to rising
 30-day LIBOR rates, which impacted the value of retained residual interests.
 Absent these costs, the subprime division would have reported a $1.3 million
 pre-tax profit."  Steven F. Herbert stated, "The rising rate environment had
 the opposite effect on the value of our mortgage servicing rights leading to a
 $1.4 million reversal of prior impairment provisions that more than offset the
 $1.3 million adjustment affecting those residual interests."
     David W. Johnson, Jr. stated, "Cash flow remains strong and our financial
 position is solid.  There are no plans to discontinue our dividend and stock
 repurchase programs.  As we adapt our cost structure to the changing
 production environment, we expect to see improvement in our operating
 results."
 
     Results of Operations-Third Quarter and First Nine Months of 1999 Compared
 to Third Quarter and First Nine Months of 1998
 
     Third quarter of 1999 net income as compared to the same quarter of 1998
 benefited from (1) a $1.9 million increase in net interest income attributable
 to the steeper yield curve environment; (2) a $1.0 million increase in the
 gain on sale of servicing rights attributable to rising rates, which benefited
 the current quarter's execution of servicing sales into the secondary markets;
 (3) a $1.0 million decline in salary and employee benefits primarily due to
 lower production volumes, which led to declines in variable compensation costs
 (such as commissions and incentives, overtime and contract labor); (4) a
 $0.9 million decline in amortization and provision for impairment of mortgage
 servicing rights due primarily to a $1.4 million reversal of previously
 recorded impairment provision charges; (5) a $0.9 million decline in general
 and administrative expenses primarily due to the decline in production volume;
 and (6) a decline in income tax expense of $9.6 million due to the lower
 overall earnings level.  These benefits were more than offset by (1) a
 $28.8 million decline in gain on sale of mortgage loans primarily due to
 compressed margins attributable to an aggressive competitive pricing
 environment in the correspondent channel and lower overall production volume;
 (2) a $1.4 million increase in occupancy expense due primarily to the expanded
 scope of the Company's branch and divisional operations; and (3) a
 $0.5 million decline in servicing fees primarily due to lower production
 volumes which resulted in a lower average balance of agency-eligible servicing
 rights held in inventory pending sale as compared to the third quarter of
 1998.
     Net income for the first nine months of 1999 as compared to the same
 period of 1998 benefited from (1) a $7.0 million increase in net interest
 income attributable to the steeper yield curve environment; (2) a $4.7 million
 increase in the gain on sale of servicing rights attributable to rising rates,
 which benefited this period's execution of servicing sales into the secondary
 markets; (3) a $4.8 million increase in servicing fees as the average volume
 serviced in the first nine months of 1999 increased from that serviced during
 the same period of 1998; (4) a $5.3 million decline in salary and employee
 benefits primarily due to lower production volumes which led to declines in
 variable compensation costs (such as commissions and incentives, overtime and
 contract labor); and (5) a decline in income tax expense of $15.9 million due
 to the lower overall earnings level.  These benefits were more than offset by
 (1) a $48.9 million decline in gain on sale of mortgage loans primarily due to
 compressed margins attributable to an aggressive competitive pricing
 environment in the correspondent channel and lower overall production volume;
 and (2) a $4.5 million increase in amortization and provision for impairment
 of mortgage servicing rights due primarily to the higher average balance of
 the agency-eligible and commercial mortgage portfolios between the
 corresponding periods.
     During the quarter the Company repurchased 1,540,400 shares of its common
 stock at an average cost of $6.46 per share and reissued 636,790 shares out of
 treasury at an average initial acquisition cost of $11.14 per share.  Since
 inception of the Company's stock repurchase program, the Company has
 repurchased 4,824,953 shares of its common stock at an average cost of $10.76
 per share and reissued 1,207,357 shares at an average initial acquisition cost
 of $12.46 per share.  At September 30, 1999, 3,617,596 shares at an average
 cost of $10.20 per share were held in treasury and $3.1 million of repurchase
 authority remained unused.
     Resource Bancshares Mortgage Group, Inc. is a diversified 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 first-mortgage loans and the purchase and
 sale of servicing rights associated with agency-eligible loans.  In addition,
 two of the Company's wholly-owned subsidiaries originate, sell and service
 small ticket commercial equipment leases and originate, sell, underwrite for
 investors and service commercial mortgage loans.  According to the
 July 23, 1999 issue of Inside Mortgage Finance, the Company was the twenty-
 fifth largest nationwide mortgage originator for the six months ended
 June 30, 1999.  As of September 30, 1999, the Company and its subsidiaries
 employed approximately 1,448 people.
     Statements made herein that are forward-looking in nature within the
 meaning of the Private Securities Litigation Reform Act of 1995 are subject to
 risks and uncertainties that could cause actual results to differ materially.
 Such risks and uncertainties include, but are not limited to, those related to
 overall business conditions in the mortgage markets in which the Company
 operates, fiscal and monetary policy, competitive products and pricing, credit
 risk management, changes in regulations affecting financial institutions and
 other risks and uncertainties discussed from time to time in the Company's SEC
 filings including its 1998 Form 10-K.  The Company disclaims any obligation to
 publicly announce future events or developments which affect the forward-
 looking statements herein.
 
     (1) Operating cash flow aggregating $6.2 million equals the net loss of
 ($1.7) million adjusted to exclude noncash charges associated with
 amortization and provision for impairment of mortgage servicing rights of
 $6.3 million and depreciation and goodwill amortization of $1.6 million.
 
     (2) Net stock repurchase activities aggregating $5.5 million equals the
 excess of net cash outflow of $9.3 million for repurchased shares of the
 Company's common stock over $3.8 million of cash inflow from Company common
 stock reissued out of treasury.
 
 
     RE

SOURCE BANCSHARES MORTGAGE GROUP, INC. BALANCE SHEET ($ in thousands) September 30, December 31, 1999 1998 ASSETS (Unaudited) Cash $9,815 $18,124 Receivables 54,566 80,248 Trading securities: Mortgage-backed securities 114,165 385,055 Residual interests in subprime securitizations 50,924 45,782 Mortgage loans held for sale 462,556 1,056,403 Lease receivables 144,887 102,029 Servicing rights, net 177,417 191,022 Premises and equipment, net 37,955 35,338 Accrued interest receivable 1,853 3,642 Goodwill and other intangibles 15,700 16,363 Other assets 38,511 35,629 Total assets $1,108,349 $1,969,635 LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings $742,028 $1,566,287 Long-term borrowings 6,286 6,364 Accrued expenses 12,682 30,098 Other liabilities 119,160 114,728 Total liabilities 880,156 1,717,477 Preferred stock - par value $0.01 - 5,000,000 shares authorized; no shares issued or outstanding -- -- Common stock - par value $0.01 - 50,000,000 shares authorized; 31,637,331 shares issued and outstanding at September 30, 1999 and December 31, 1998 316 316 Additional paid-in capital 303,618 307,114 Retained earnings 65,549 59,599 Common stock held by subsidiary at cost - 7,767,099 shares at September 30, 1999 and December 31, 1998 (98,953) (98,953) Treasury stock - 3,617,596 and 869,378 shares at September 30, 1999 and December 31, 1998, respectively (36,881) (11,499) Unearned shares of employee stock ownership plan - 441,270 and 353,641 unallocated shares at September 30, 1999 and December 31, 1998, respectively (5,456) (4,419) Total stockholders' equity 228,193 252,158 Total liabilities and stockholders' equity $1,108,349 $1,969,635 RE

SOURCE BANCSHARES MORTGAGE GROUP, INC. INCOME STATEMENT ($ IN THOUSANDS EXCEPT SHARE AMOUNTS) (UNAUDITED) For the Nine Months Ended For the Quarter Ended September 30, September 30, 1999 1998 1999 1998 REVENUES Interest income $68,218 $74,649 $19,587 $25,009 Interest expense (46,860) (60,297) (13,126) (20,408) Net interest income 21,358 14,352 6,461 4,601 Net gain on sale of mortgage loans 80,300 129,226 16,823 45,597 Gain on sale of servicing rights 6,317 1,613 1,494 533 Servicing fees 35,893 31,134 10,898 11,419 Gain on sale of retail production franchise - 1,490 - - Other income 305 1,894 488 487 Total revenues 144,173 179,709 36,164 62,637 EXPENSES Salary and employee benefits 56,722 62,041 19,511 20,479 Occupancy expense 10,700 8,058 4,062 2,627 Amortization and provision for impairment of mortgage servicing rights 24,582 20,053 6,280 7,750 General and administrative expenses 32,653 31,055 9,470 10,395 Total expenses 124,657 121,207 39,323 41,251 (Loss) income before income taxes 19,516 58,502 (3,159) 21,386 Income tax benefit (expense) (6,694) (22,557) 1,484 (8,134) Net (loss) income $12,822 $35,945 ($1,675) $13,252 Weighted average common shares outstanding -- Basic 21,158,547 23,189,299 20,310,289 23,394,524 Net income (loss) per common share -- Basic $0.61 $1.55 ($0.08) $0.57 Weighted average common shares outstanding -- Diluted 21,351,034 23,569,021 20,382,814 23,831,297 Net income (loss) per common share -- Diluted $0.60 $1.53 ($0.08) $0.56 RE

SOURCE BANCSHARES MORTGAGE GROUP, INC. SELECTED FINANCIAL DATA ($ IN THOUSANDS) (UNAUDITED) For the Nine Months Ended For the Quarter Ended September 30, September 30, 1999 1998 1999 1998 PRODUCTION ACTIVITY: Correspondent $5,259,196 $8,524,393 $1,138,671 $2,864,933 Wholesale 1,447,891 2,202,280 292,161 718,791 Retail - 264,059 - - Total agency- eligible 6,707,087 10,990,732 1,430,832 3,583,724 Subprime 552,142 417,892 182,287 165,760 Commercial mortgage (for investors and conduits) 572,565 653,451 264,463 290,829 Leases 75,181 55,853 30,316 22,310 Total $7,906,975 $12,117,928 $1,907,898 $4,062,623 SALES ACTIVITY: Agency-eligible pooled production $7,278,856 $10,934,899 $1,568,512 $3,763,526 Subprime whole loan sales 375,457 201,333 178,590 123,941 Subprime loans securitized 125,051 150,247 - 24,995 Commercial mortgage whole loan sales 596,365 653,451 275,738 290,829 RESIDENTIAL MORTGAGE ACCOUNT RELATIONSHIPS: Approved correspondents 886 870 Approved brokers 6,373 4,067 SERVICING PORTFOLIOS: RESIDENTIAL * Owned servicing portfolio $7,947,670 $9,722,992 Number of loans 77,950 90,957 Weighted average note rate 7.45% 7.36% Weighted average service fee 0.43% 0.40% Delinquency percentage (30+ days)** 1.89% 1.37% Bankruptcy & foreclosure 0.66% 0.44% COMMERCIAL Commercial mortgage loan servicing portfolio $4,018,649 $3,133,185 Weighted average note rate - commercial mortgage loans 8.00% 8.18% Delinquencies (30+ days) - commercial mortgage loans 0.29% 0.49% LEASING Managed lease servicing portfolio*** $160,304 $131,465 Weighted average net yield for managed lease servicing portfolio 10.66% 10.76% Delinquencies (30+ days) - managed lease servicing portfolio 1.95% 1.96% OTHER: Return on average assets 1.19% 2.77% (0.80%) 2.98% Return on average equity 7.11% 22.73% (2.87%) 25.12% Equity to assets 20.59% 12.76% 20.59% 12.76% Net interest margin 2.60% 1.57% 2.75% 1.63% Book value per share $11.27 $10.54 $11.27 $10.54 * Includes $242,296 and $0 of subprime loans as of September 30, 1999 and 1998, respectively, being temporarily serviced until these loans are sold. ** Percentages do not include bankruptcy and foreclosure loans. *** Managed lease servicing portfolio consists of $141,509 and $85,685 of leases owned by the Company and $18,795 and $45,780 of leases serviced for investors as of September 30, 1999 and 1998, respectively. Agency-Eligible Production Servicing Reinsurance Subprime Commercial Mortgage For the nine months ended September 30, 1999* (UNAUDITED) Net interest income $ 7,949 $ (3,287) $ -- $ 11,552 $285 Net gain on sale of mortgage loans 58,717 -- -- 15,225 6,358 Gain on sale of mortgage servicing rights -- 6,317 -- -- -- Servicing fees -- 31,993 -- 3,400 Other income 204 495 1,018 (2,742) 49 Total revenues 66,870 35,518 1,018 24,035 10,092 Salary and employee benefits 32,133 2,609 21 11,981 5,682 Occupancy expense 7,019 317 -- 1,862 830 Amortization and provision for impairment of mortgage servicing rights -- 22,985 -- -- 1,597 General and administrative expenses 16,631 4,542 303 7,306 1,361 Total expenses 55,783 30,453 324 21,149 9,470 Income before income taxes 11,087 5,065 694 2,886 622 Income tax expense (3,707) (1,693) (245) (928) (298) Net income $ 7,380 $ 3,372 $ 449 $ 1,958 $ 324 *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. Agency-Eligible Production Servicing Reinsurance Subprime Commercial Mortgage For the quarter ended September 30, 1999* (UNAUDITED) Net interest income $ 1,438 $ (904) $ -- $ 4,096 $ 71 Net gain on sale of mortgage loans 8,639 -- -- 4,851 3,333 Gain on sale of mortgage servicing rights -- 1,494 -- -- -- Servicing fees -- 9,458 -- -- 1,267 Other income 187 151 577 (1,183) 18 Total revenues 10,264 10,199 577 7,764 4,689 Salary and employee benefits 9,781 804 21 5,197 2,434 Occupancy expense 2,942 110 -- 610 289 Amortization and provision for impairment of mortgage servicing rights -- 5,665 -- -- 615 General and administrative expenses 3,938 1,201 99 2,845 428 Total expenses 16,661 7,780 120 8,652 3,766 Income before income taxes (6,397) 2,419 457 (888) 923 Income tax expense 2,570 (901) (161) 483 (389) Net income $ (3,827) $ 1,518 $ 296 $ (405) $ 534 *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. Leasing Total Segments Other Eliminations Consolidated For the nine months ended September 30, 1999* (UNAUDITED) Net interest income $ 5,299 $ 21,798 $ (440) $21,358 Net gain on sale of mortgage loans -- 80,300 -- 80,300 Gain on sale of mortgage servicing rights -- 6,317 -- 6,317 Servicing fees 500 35,893 -- 35,893 Other income 958 (18) 509 (186) 305 Total revenues 6,757 144,290 69 (186) 144,173 Salary and employee benefits 2,028 54,454 2,268 56,722 Occupancy expense 330 10,358 559 (217) 10,700 Amortization and provision for impairment of mortgage servicing rights -- 24,582 -- 24,582 General and administrative expenses 2,236 32,379 401 (127) 32,653 Total expenses 4,594 121,773 3,228 (344) 124,657 Income before income taxes 2,163 22,517 (3,159) 158 19,516 Income tax expense (879) (7,750) 1,056 (6,694) Net income $ 1,284 $ 14,767 $(2,103) $ 158 $ 12,822 *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. Leasing Total Segments Other Eliminations Consolidated For the quarter ended September 30, 1999* (UNAUDITED) Net interest income $ 1,910 $ 6,611 $ (150) $ 6,461 Net gain on sale of mortgage loans -- 16,823 -- 16,823 Gain on sale of mortgage servicing rights -- 1,494 -- 1,494 Servicing fees 173 10,898 -- 10,898 Other income 424 174 500 (186) 488 Total revenues 2,507 36,000 350 (186) 36,164 Salary and employee benefits 675 18,912 599 19,511 Occupancy expense 116 4,067 212 (217) 4,062 Amortization and provision for impairment of mortgage servicing rights -- 6,280 -- 6,280 General and administrative expenses 880 9,391 206 (127) 9,470 Total expenses 1,671 38,650 1,017 (344) 39,323 Income before income taxes 836 (2,650) (667) 158 (3,159) Income tax expense (336) 1,266 218 1,484 Net income $ 500 $ (1,384) (449) $ 158 $ (1,675) *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.

SOURCE Resource Bancshares Mortgage Group, Inc.

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