Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number: 000-24561
RESOURCE BANKSHARES CORPORATION
(Exact name of Registrant as specified in its charter)
Virginia 54-1904386
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3720 Virginia Beach Blvd., Virginia Beach, Virginia 23452
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code: 757-463-2265
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $1.50 par value
Indicate by check mark whether the registrant (1) 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 (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant based on the closing sale price of the registrant's common stock on
March 1, 1999 as reported in The Wall Street Journal, was $40,755,000.
The number of shares outstanding of the registrant's common stock as of March
1,1999:2,474,158.
TABLE OF CONTENTS
Part I .......................................................................................................... 3
Item 1. Business ...................................................................................... 3
Item 2. Properties .................................................................................... 16
Item 3. Legal Proceedings ............................................................................. 16
Item 4. Submission of Matters to a Vote of Security Holders ........................................... 16
Part II ......................................................................................................... 16
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters .......................... 16
Item 6. Selected Consolidated Financial Data .......................................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ......... 19
Item 7a. Quantitative and Qualitative Disclosures about Market Risk .................................... 25
Item 8. Financial Statements and Supplementary Data ................................................... 26
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .......... 26
Part III ........................................................................................................ 26
Item 10. Directors and Executive Officers of the Registrant ............................................ 26
Item 11. Executive Compensation ........................................................................ 26
Item 12. Security Ownership of Certain Beneficial Owners and Management ................................ 26
Item 13. Certain Relationships and Related Transactions ................................................ 26
Part IV ......................................................................................................... 26
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ............................... 26
Consolidated Financial Statements ...................................................................... 26
2
Part I
In addition to historical information, the following discussion
contains forward looking statements that are subject to risks and uncertainties
that could cause the Company's actual results to differ materially from those
anticipated. These forward looking statements include, but are not limited to,
statements regarding the Company's management of credit risk, credit policies
generally, allowances for loan losses, and the affect of increasing interest
rates on the Company's profitability. Several factors, including the local and
national economy, the demand for residential mortgage loans, and the adequacy of
the Company's Year 2000 readiness could have a material affect on the Company's
anticipated results. Readers are cautioned not to place undue reliance on these
forward looking statements, which reflect management's analysis only as of the
date of this Form 10-K.
Item 1.Business
Resource Bankshares Corporation (the "Company" or "Resource
Bankshares"), a Virginia corporation, was established in 1998 and is
headquartered in Virginia Beach, Virginia. The Company was capitalized as the
result of a two for one share exchange with Resource Bank (the "Bank"), a
Virginia state chartered bank. In a share exchange that became effective July 1,
1998, the shareholders of Resource Bank exchanged each of their shares of the
Bank's common stock for two shares of the Company's common stock, and the Bank
thereby became a wholly owned subsidiary of the Company. The Company conducts
virtually all of its business through the Bank. In this Form 10-K, the term
"Company" refers to Resource Bankshares Corporation and Resource Bank
collectively, unless the context otherwise requires.
The Bank opened for business September 1, 1988. After four years of
initial losses the Bank was recapitalized, and a new management team and new
Board of Directors took control January 1, 1993. Headquartered in Virginia
Beach, the Bank operates three full service banking offices - one each in
Virginia Beach, Herndon and Reston, Virginia. The Herndon and Reston branches
were acquired in December 1997 when Eastern American Bank, FSB (Eastern
American) merged into the Bank. Prior to that time the Bank operated only one
banking office in Virginia Beach. All bank branches now operate under the name
Resource Bank. A fourth branch location in Chesapeake, Virginia, is expected to
open during the second quarter of 1999.
The Bank serves customers throughout Virginia, providing banking
services primarily to individuals and businesses located in south Hampton Roads
in southeast Virginia, and Fairfax County in northern Virginia. The Bank markets
its services to consumers, small to medium sized businesses and professional
people and emphasizes personal relationship banking. A full range of services is
offered including checking and savings accounts, certificates of deposit and
charge cards, as well as services typically associated with larger banks, such
as sweep account capacity, automatic reconcilement, and corporate credit cards.
The Bank is a Preferred Lender under the Small Business Administration (SBA)
program in both the Richmond, Virginia and Washington, DC SBA districts and
ranked number 4 in loan volume (27 loans totaling $7.31 million) in the Richmond
district in fiscal year 1998.
The Bank's mortgage division originates residential one to four family
unit mortgage loans and sells them to investors in the national secondary
market. During 1998, the Bank originated and sold mortgage loans in excess of
$600 million. The mortgage division originates loans from the three bank
3
locations as well as from its two mortgage offices in Richmond, and one office
each in Chesapeake, Reston, and Bowie, MD. An additional mortgage loan
origination office is scheduled to open in Virginia Beach in April 1999. During
1998 the mortgage division also operated mortgage branch offices in Colonial
Heights, Virginia, Hilton Head, SC, and several locations throughout the
northern Virginia region, but has since discontinued those operations.
Additionally, the Bank originates loans throughout the southwestern United
States through its wholesale operations, as well as through its participation in
a limited liability company specializing in relocation services. Mortgage
closing and shipping operations are conducted at the Bank's shipping office in
Virginia Beach, Virginia.
4
AVERAGE BALANCES, INTEREST INCOME AND EXPENSES, AND AVERAGE YIELDS AND RATES
The following table sets forth average balances of total interest earning assets
and total interest bearing liabilities for the periods indicated, showing the
average distribution of assets, liabilities, stockholders' equity and the
related income, expense and corresponding weighted-average yields and costs.
Year ended December 31
----------------------
1998 1997 1996
-------------------------- -------------------------- --------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance(1) Expense Rate(2) Balance(1) Expense Rate(2) Balance(1) Expense Rate(2)
--------- ------- ------- --------- ------- ------ ---------- ------- -------
(Dollars in thousands)
ASSETS
Interest Earning Assets:
Securities $12,386 $712 5.75% $15,935 $1,009 6.33% $16,885 $1,185 7.02%
Loans(3) 168,271 15,352 9.12% 93,839 8,316 8.86% 69,488 6,268 9.02%
Interest bearing deposits
in other banks 11,870 623 5.25% 4,127 232 5.62% 4,411 137 3.11%
Other earning assets (4) 39,934 3,059 7.66% 13,153 1,380 10.49% 6,688 705 10.54%
------ ----- ----- ------ ----- ------ ----- --- -------
Total interest earning
assets 232,461 19,746 8.49% 127,054 10,937 8.61% 97,472 8,295 8.51%
Noninterest earning assets:
Cash and due from banks 3,027 1,700 1,760
Premises and equipment 3,286 965 614
Other assets 4,669 1,480 2,027
Less: Allowance for loan
losses (2,775) (1,252) (993)
------- ------- -----
Total noninterest earning
assets 8,207 2,893 3,408
----- ----- -----
Total Assets $240,668 $129,947 $100,880
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest Bearing Liabilities:
Interest bearing deposits:
Demand/MMDA accounts $11,437 384 3.36% $8,543 285 3.34% 7,787 261 3.35
Savings 19,334 916 4.74% 2,289 93 4.06% 779 23 2.95%
Certificates of deposit 158,740 9,016 5.68% 96,370 5,318 5.52% 76,932 4,317 5.61%
------- ----- ----- ------ ----- ----- ------ ----- -----
Total interest bearing
deposits 189,511 10,316 5.44% 107,202 5,696 5.31% 85,498 4,601 5.38%
FHLB advances and other
borrowings 17,806 1,020 5.73% 4,959 287 5.79% 1,617 89 5.50%
Total interest bearing
liabilities 207,317 11,336 5.47% 112,161 5,983 5.33% 87,115 4,690 5.38%
Noninterest bearing liabilities:
Demand deposits 13,595 6,898 5,800
Other liabilities 3,007 1,090 799
----- ----- ---
Total liabilities 16,602 7,988 6,599
Stockholders' equity 16,749 9,798 7,166
Total liabilities and
stockholders' equity $240,668 $129,947 $100,880
======== ======== ========
Interest spread (5) 3.02% 3.28% 3.13%
Net interest income/net
interest margin (6) $8,410 3.62% $4,954 3.90% $3,605 3.70%
====== ====== ======
(1) Average balances are computed on monthly balances and Management believes
such balances are representative of the operations of the Corporation.
(2) Yield and rate percentages are all computed through the annualization of
interest income and expenses versus the average balances of their respective
accounts.
(3) Non-accrual loans are included in the average loan balances, and income on
such loans is recognized on a cash basis.
5
(4) Consists of funds advanced in settlement of loans.
(5) Interest spread is the average yield earned on earning assets, less the
average rate incurred on interest bearing liabilities.
(6) Net interest margin is net interest income, expressed as a percentage of
average earning assets.
As the largest component of the Company's income, net interest income
represents the amount that interest and fees earned on loans and investments
exceeds the interest costs of funds used to support these earning assets. Net
interest income is determined by the relative levels, rates and mix of earning
assets and interest-bearing liabilities.
For the year ended December 31, 1998, net interest income was $8.4
million, an increase of approximately $3.5 million, or 69.8%, over the $4.95
million for the same period in 1997. Average interest earning assets increased
$105.4 million from 1997 to 1998 while average interest-bearing liabilities
increased $95.1 million. The yield on average interest-earning assets for the
year ended December 31, 1998 was 8.49% compared with 8.61% for the comparable
1997 period. The 1998 yield on loans was 9.12%, compared to 8.86% in 1997. The
cost on average interest-bearing liabilities increased 13 basis points during
1998 to 5.44%, compared to 5.31% during 1997.
Net interest income for the year-ended December 31, 1997 increased
37.5%, or approximately $1.35 million over 1996. Average interest earning assets
increased $29.6 million from 1996 to 1997 while average interest-bearing
liabilities increased $25.0 million. The yield on average interest-earning
assets for the year ended December 31, 1997 was 8.61% compared with 8.51% for
the comparable 1996 period. The 1997 yield on loans was 8.86%, compared to 9.02%
in 1996. The cost on average interest-bearing liabilities decreased seven basis
points during 1997 to 5.31%, compared to 5.38% during 1996.
The Company's net interest margin is sensitive to the volume of
mortgage banking division loan originations. All loans originated by the
mortgage banking division are sold, servicing released, in the secondary
mortgage market. Each mortgage loan originated is sold when the borrower
locks-in the interest rate on the loan. When the volume of mortgage loan
originations increases, typically in a declining interest rate environment,
"funds advanced in settlement of mortgage loans" increases. This balance sheet
item represents funds advanced to close mortgage loans, pending delivery of the
loans to the loan purchaser. Until a mortgage loan is transferred to the
purchaser, the Company receives interest on the loan at the note rate. Funds
advanced in settlement of mortgage loans are financed to a large extent with
short term Federal Home Loan Bank borrowings. While such funds advanced
contribute to net interest income, the interest rate spread on this item is not
as great as the spread on the loan portfolio, which normally carries a higher
interest yield and is financed with lower cost deposits. Thus, as funds advanced
in settlement of mortgage loans increase, the interest spread and the net
interest margin decrease. The average balance of funds advanced in settlement of
mortgage loans was $39.9 million for the year ended December 31, 1998, compared
to $13.2 million in the year ended December 31, 1997.
Net interest income is affected by changes in both average interest
rates and average volumes of interest earning assets and interest bearing
liabilities. The following table sets forth the amounts of the total change in
interest income that can be attributed to changes in the volume of
interest-bearing assets and liabilities and the amount of the change that can be
attributed to changes in interest rates. The amount of the change not solely due
to rate or volume changes was allocated between the change due to rate and the
change due to volume based on the relative size of the rate and volume changes.
6
Year Ended December 31
1998 compared to 1997 1997 compared to 1996
Increase (Decrease) Increase (Decrease)
Due to Changes In: Due to Changes In:
--------------------------------------- ---------------------------------------
Volume Rate Net Volume Rate Net
Interest Income:
Securities $(211) $(86) (297) $(64) $(112) $(176)
Loans (1) 8,721 (6) 8,715 2,792 (69) 2,723
Interest bearing
deposits in other banks 405 (14) 391 (8) 103 95
--- ---- --- --- --- --
Total $8,915 $(106) $8,809 $2,720 $(78) $2,642
------ ------ ------ ------ ----- ------
Interest Expense:
Interest bearing deposits $4,478 $142 $4,620 $1,152 $(57) $1,095
FHLB advances and
other borrowings 736 (3) 733 193 5 198
--- --- --- --- - ---
Total $5,214 $139 $5,353 $1,345 $(52) $1,293
------ ---- ------ ------ ----- ------
Increase(decrease) in net
interest income $3,701 ($245) $3,456 $1,375 ($26) $1,349
====== ====== ====== ====== ===== ======
(1) Loans include funds advanced in settlement of loans.
INTEREST RATE SENSITIVITY ANALYSIS
Management evaluates interest sensitivity through the use of an
asset/liability management reporting gap model on a quarterly basis and then
formulates strategies regarding asset generation and pricing, funding sources
and pricing, and off-balance sheet commitments in order to decrease sensitivity
risk. These strategies are based on management's outlook regarding interest rate
movements, the state of the regional and national economies and other financial
and business risk factors. In addition, the Company establishes prices for
deposits and loans based on local market conditions and manages its securities
portfolio under policies that take interest risk into account.
7
The following table presents the amounts of the Company's interest
sensitive assets and liabilities that mature or reprice in the periods
indicated.
December 31, 1998
Maturing
--------------------------------------------------------------------------
Within 4-12 1-5 Over
3 Months Months Years 5 Years Total
-------- ------ ----- ------- -----
(Dollars in thousands)
Interest-Earning Assets:
Investment securities $7,452 $775 $1,073 $543 $9,843
Loans 108,051 16,907 41,892 21,672 188,522
Other interest-earning assets 25,208 - - - 25,208
------ ------ ----- ----- ------
Total interest-earning assets 140,711 17,682 42,965 22,215 223,573
------- ------ ------ ------ -------
Interest-Bearing Liabilities:
Deposits
Demand and savings - - 33,453 - 33,453
Time deposits, $100,000 and over 3,191 6,011 516 - 9,718
Other time deposits 40,086 102,500 4,679 - 147,265
Other interest-bearing liabilities - 2,000 5,300 - 7,300
------ ----- ----- ----- -----
Total interest-bearing liabilities 43,277 110,511 43,948 - 197,736
------ ------- ------ ----- -------
Period Gap $97,434 $(92,829) $(983) $22,215 $25,837
------- --------- ------ ------- -------
Cumulative Gap $97,434 $4,605 $3,622 $25,837
------- ------ ------ -------
Ratio cumulative gap to total
interest-earning assets 43.58% 2.06% 1.62% 11.56%
------ ----- ----- ------
The December 31, 1998 results of the rate sensitivity analysis show
that the Company had $97.4 million more in assets than liabilities subject to
repricing within three months or less and was, therefore, in an asset sensitive
position.
The cumulative gap at the end of one year was a positive $4.6 million,
an asset-sensitive position. Approximately $125.0 million, or 66.3% of the total
loan portfolio, matures or reprices within one year or less. An asset-sensitive
institution's net interest margin and net interest income generally will be
impacted favorably by rising interest rates, while that of a liability sensitive
institution generally will be impacted favorably by declining rates.
Increases and decreases in the Company's mortgage banking income
(which consists primarily of gains on sales of mortgage loans) tend to offset
decreases and increases in the net interest margin. In a climate of lower or
declining interest rates, the Company's net interest margin will tend to
decrease as the yield on interest earning assets decreases faster than the cost
of interest bearing liabilities. Mortgage banking income, in contrast, tends to
increase in times of lower or declining interest rates, as refinancing activity
leads to an increase in mortgage loan originations. In a climate of rising or
higher interest rates, the net interest margin will tend to increase, while a
decrease in mortgage loan originations leads to a decrease in mortgage banking
income.
8
INVESTMENT PORTFOLIO
The following tables present certain information on the Company's
investment securities portfolio:
Securities Available for Sale (1)
1998 1997 1996
---- ---- ----
U.S. Government Agencies $6,868 $9,802 $15,799
Federal Reserve Bank Stock 434 297 246
Federal Home Loan Bank Stock 1,162 2,233 747
Other 155 100 100
--- --- ---
$8,619 $12,432 $16,892
====== ======= =======
(1) Carried at fair value
Securities Held to Maturity (2)
1998 1997 1996
---- ---- ----
U.S. Government Agencies $478 $1,996 -
State and Municipal 746 746 -
--- --- ---
$1,224 $2,742 -
(2) Carried at cost, adjusted for amortization of premium or accretion of
discount using the interest method.
Gross unrealized losses on securities available for sale were $2,000
at December 31, 1998 and there were no unrealized losses at December 31, 1997.
Gross unrealized gains were $95,000 and $449,000 at December 31, 1998 and 1997,
respectively. At December 31, 1996 gross unrealized gains and losses on
securities available for sale were $90,000 and $125,000, respectively.
At December 31, 1998 and December 31, 1997 gross unrealized gains on
securities held to maturity were $30,000 and $11,000 respectively. At December
31, 1998 and 1997, gross unrealized losses on securities held to maturity were
$1,000 and $37,000, respectively.
The following table presents information on the maturities of the
Company's investment securities at December 31, 1998.
Held to Maturity Available for Sale
Amortized Cost Fair Value Amortized Cost Fair Value
-------------- ------------ -------------- ------------
Due in:
One year or less $111 $111 $ - $ -
One to five years 570 576 500 503
Five to ten years 483 504 - -
After ten years 60 61 6,274 6,365
Federal Reserve Bank Stock - - 434 434
Federal Home Loan Bank Stock - - 1,162 1,162
Other - - 155 155
------ ------ ------ ------
$1,224 $1,252 $8,525 $8,619
====== ====== ====== ======
9
In 1998 the average yield on investment securities was 5.75%, compared
to 6.33% in 1997. At December 31,1998 and December 31, 1997, all securities with
a maturity of over 10 years carried variable interest rates. The maturity
characteristics of the Company's investment securities portfolio did not change
materially from December 31, 1997 to December 31, 1998.
LOAN PORTFOLIO
The table below classifies loans, net of unearned income, by major
category and percentage distribution at the dates indicated:
December 31,
1998 1997 1996 1995 1994
Description Amount Percentage Amount Percentage Amount Percentage Amount Percentage Amount Percentage
------ ---------- ------ ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
Commercial $68,569 $ 36.37% $50,713 33.68% $34,021 41.50% $25,005 42.77% $3,444 8.39%
Real Estate 115,790 61.42 96,058 63,79 43,195 52.69 28,214 48.26 21,730 52.96
Consumer 4,163 2.21 3,819 2,53 4,759 5.81 5,245 8.97 15,860 38.65
----- ----- ----- ---- ----- ----- ----- ---- ------ -----
Total $188,522 100.00% $150,590 100.00% $81,975 100.00% $58,464 100.00% $41,034 100.00%
======== ======= ======== ======= ======= ======= ======= ======= ======= =======
MATURITY SCHEDULE OF LOANS
The table below presents information regarding the maturity of loans at
December 31, 1998:
December 31, 1998
Over one
One Year through Five Years
or less Five Years or more
Commercial $38,578 $22,780 $7,211
Real estate - construction 44,606
Commercial real estate 6,267 25,069 11,147
Residential real estate - 3,439 25,263
Installment and consumer loans 364 3,798 -
--- ----- -------
$89,815 $55,086 $43,621
NONPERFORMING ASSETS
Unless well secured and in the process of collection, the Company
places loans on non-accrual status after being delinquent greater than ninety
days, or earlier in situations in which the loans have developed inherent
problems that indicate payment of principal and interest may not be made in
full. Whenever the accrual of interest is stopped, previously accrued but
uncollected income is reversed. Thereafter, interest is recognized only as cash
is received. The loan is reinstated to an accrual basis after it has been
brought current as to principal and interest under the contractual terms of the
loan. As of December 31, 1998, 1997, and 1996, non-accrual loans amounted to
$533,000, $3,059,000 and $50,000, respectively.
December 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands)
Nonaccrual loans $533 $3,059 $50 $ 57 $52
Loans contractually past due 90 days or
more and still accruing 412 1,339 371 13 10
Troubled debt restructuring - - - - -
--- --- --- --- ---
Total nonperforming loans 945 4,398 421 70 62
Other real estate owned 647 684 50 71 91
--- --- -- -- --
Total nonperforming assets $1,592 $5,082 $471 $141 $153
====== ====== ==== ==== ====
Nonperforming assets to period-end total
loans and other real estate .84% 3.36% 0.57% 0.24% 0.37%
10
SUMMARY OF LOAN LOSS EXPERIENCE
The allowance for loan losses is increased by the provision for loan
losses and reduced by loans charged off net of recoveries. The allowance for
loan losses is established and maintained at a level judged by management to be
adequate to cover any anticipated loan losses to be incurred in the collection
of outstanding loans. In determining the adequate level of the allowance for
loan losses, management considers the following factors: (a) loan loss
experience; (b) problem loans, including loans judged to exhibit potential
charge-off characteristics, loans on which interest is no longer being accrued,
loans which are past due and loans which have been classified in the most recent
regulatory examination; and (c) anticipated economic conditions and the
potential impact these conditions may have on individual classifications of
borrowers.
11
The following table presents the Company's loan loss experience for the
periods indicated:
Year Ended December 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in thousands)
Allowance for loan losses at
beginning of period $2,573 $1,040 $854 $492 $512
Loans charged off:
Commercial 126 2 5 21 124
Real Estate 141 56 109 148 11
Consumer 20 7 6 17 63
-- - - -- --
Total 287 65 120 186 198
Recoveries of loans previously charged off:
Commercial 1 34 6 23 116
Real Estate 40 - - - -
Consumer 23 9 10 13 12
-- - -- -- --
Total 64 43 16 36 128
-- -- -- -- ---
Net loans charged off 223 22 104 150 70
Provision for loan losses 150 155 290 512 50
--- --- --- --- --
Allowance acquired through business
combination - 1,400 - - -
- ----- ----- ---- -----
Allowance for loan losses end of period $2,500 $2,573 $1,040 $854 $492
===== ------ ====== ==== ====
Average total loans (net of unearned
income) $168,271 $93,839 $69,488 $48,465 $35,714
Total loans (net of unearned income) at
period-end $188,522 $150,590 $81,975 $58,464 $41,034
Ratio of net charge-offs to average loans 0.13% 0.02% 0.15% 0.31% 0.20%
Ratio of provision for loan losses to
average loans 0.09% 0.17% 0.42% 1.06% 0.14%
Ratio of provision for loan losses to net
charge-offs 67.26% 704.55% 278.85% 341.33% 71.43%
Allowance for loan losses to period-end
loans 1.33% 1.71% 1.27% 1.46% 1.20%
In establishing the allowance for loan losses, in addition to the
factors described above, management considers the following risk elements in the
loan portfolio.
12
Construction lending often involves larger loan balances with single
borrowers. Construction loans involve risks attributable to the fact that loan
funds are advanced upon the security of the home under construction, which is of
uncertain value prior to the completion of construction. If there is a default,
the Company may be required to complete and sell the home.
Commercial real estate loans typically involve larger loan balances
concentrated with single borrowers or groups of related borrowers. Additionally,
the payment experience on loans secured by income producing properties is
typically dependent on the successful operation of a business or a real estate
project and thus may be subject to a greater extent, to adverse conditions in
the real estate market or in the economy generally.
Consumer loans entail risks, particularly in the case of consumer loans
which are unsecured, such as lines of credit, or secured by rapidly depreciable
assets such as automobiles. In such cases, any repossessed collateral for a
defaulted consumer loan may not provide an adequate source of repayment of the
outstanding loan balance as a result of the greater likelihood of damage, loss
or depreciation. The remaining deficiency often does not warrant further
substantial collection efforts against the borrower. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, thus
are more likely to be adversely affected by job loss, divorce, illness or
personal bankruptcy. Furthermore, the application of various federal and state
laws, including federal and state bankruptcy and involved laws, may limit the
amount which can be recovered on such loans. Such loans may also give rise to
claims and defenses by a consumer loan borrower against an assignee of such
loan, and a borrower may be able to assert against such assignee claims and
defenses which it has against the seller of the underlying collateral.
Commercial business loans typically are made on the basis of the
borrower's ability to make repayment from cash flow from its business and are
secured by business assets, such as commercial real estate, accounts receivable,
equipment and inventory. As a result, the availability of funds for the
repayment of commercial business loans may be substantially dependent on the
success of the business itself. Further, the collateral for commercial business
loans may depreciate over time and cannot be appraised with as much precision as
residential real estate.
DEPOSITS
The table below presents average deposits and average rates paid, by
major category, at the dates indicated:
1998 1997 1996
---- ----- ----
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
------- ------- ------- ------- ------- -------
Interest-bearing deposits
Demand/MMDA accounts $11,437 3.36% $8,543 3.34% $7,787 3.35%
Savings 19,334 4.74% 2,289 4.06% 779 5.95%
Certificates of deposit 158,740 5.68% 96,370 5.52% 76,932 5.61%
------- ------ ------
Total interest bearing deposits 189,511 5.44% 107,202 5.31% 85,498 5.38%
Non interest bearing deposits 13,595 - 6,898 - 5,800 -
Total average deposits $203,106 5.08% $114,100 4.99% $91,298 5.04%
======== ======== =======
13
The following table is a summary of time deposits of $100,000 or more
by remaining maturities at December 31, 1998:
Amount Percent
Three months or less $3,191 32.84%
Three to twelve months 6,011 61.85%
Over twelve 516 5.31%
--- -----
Total $9,718 100.00%
====== =======
SHORT TERM BORROWING
The following table sets forth the consolidated short term borrowing.
Borrowings represent advances to the Bank by the Federal Home Loan Bank of
Atlanta and are secured by Federal Home Loan Bank stock, investment securities
and first mortgage loans. During 1998, the Bank purchased federal funds on an
unsecured basis for three consecutive days from a correspondent bank.
YEARS ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
Balance at period end $2,000 $13,650 $7,237
Average balance during period $17,806 $4,959 $1,617
Average rate 5.65% 5.79% 5.50%
Maximum outstanding during period $46,420 $13,650 $7,237
RETURN ON EQUITY AND ASSETS
The following table sets forth ratios for Resource Bankshares and
its subsidiaries considered to be significant indicators of Resource Bankshares'
profitability and financial condition during the periods indicated:
RETURN ON EQUITY AND ASSETS
1998 1997 1996
---- ---- ----
Return on average assets 1.27% 1.40% 1.45%
Return on average equity 18.19% 18.59% 20.46%
Dividend payout ratio 21.24% 15.06% 6.58%
Average equity to average asset ratio 6.95% 7.54% 7.10%
Competition
The Company operates in highly competitive environments, competing for
deposits and loans with major regional and national banks, as well as other
financial institutions, many of which have greater financial resources than the
Company. Most maintain numerous banking locations and many perform services,
such as trust services, which the Company does not offer. Many of these
competitors have higher lending limits than the Company.
14
Regulation and Supervision of Resource Bank
The Bank operates as a state chartered bank and is subject to
supervision and regulation by the Bureau of Financial Institutions ("BFI") of
the State Corporation Commission. As a member of the Federal Reserve System
("FRB"), the Bank is also supervised and regularly examined by the FRB. The
state and federal banking laws and regulations govern virtually all areas of the
Bank's operations including maintenance of cash reserves, loans, mortgages,
maintenance of minimum capital, mergers, payment of dividends, establishment of
branches and other aspects of operations.
The deposits of the Bank are insured by the Federal Deposit Insurance
Corporation ("FDIC") which insures that member banks pay depositors to the
extent provided by law in the event an insured bank is closed without adequately
providing for the claims of depositors. The majority of the Bank's deposits are
subject to the deposit assessments of the Bank Insurance Fund ("BIF") of the
FDIC. A portion of the deposits of the Bank (those acquired as a result of the
merger with Eastern American) are subject to assessments imposed by the Savings
Association Insurance Funds ("SAIF") of the FDIC.
The earnings and growth of the banking industry are affected by the
general conditions of the economy and by the fiscal and monetary policies of the
Federal Government and its agencies, including the FRB Bank. The Board of
Governors regulates money and credit conditions and, as a result, has a strong
influence on interest rates and on general economic conditions. The effect of
such policies in the future on the business and earnings of the Bank cannot be
predicted with certainty.
Regulation and Supervision of Resource Bankshares
As a bank holding company, Resource Bankshares is subject to state and
federal banking and bank holding company laws and regulations which impose
specific requirements or restrictions and provide for general regulatory
oversight with respect to virtually all aspects of its operations.
The Company is registered under the Bank Holding Company Act ("BHCA")
and is subject to regulation by the Federal Reserve. The Federal Reserve has
jurisdiction under the BHCA to approve any bank or non-bank acquisition, merger
or consolidation proposed by a bank holding company. The Company is required to
file with the FRB periodic and annual reports and other information concerning
its own business operations and those of its subsidiaries. In addition, the BHCA
requires a bank holding company to obtain FRB approval before it acquires,
directly or indirectly, ownership or control of any voting shares of a second or
subsequent bank if, after such acquisition, it would own or control more than 5%
of such shares, unless it already owns or controls a majority of such voting
shares. FRB approval must also be obtained before a bank holding company
acquires all or substantially all of the assets of another bank or merges or
consolidates with another bank holding company.
A bank holding company may not, without providing prior notice to the
FRB, purchase or redeem its own stock if the gross consideration to be paid,
when added to the net consideration paid by the company for all purchases or
redemptions by the company of its equity securities within the preceding 12
months, will equal 10% or more of the company's consolidated net worth unless it
meets the requirements of a well-capitalized and well-managed organization.
The Company is subject to various federal securities laws and is
required to make certain periodic filings with the Securities and Exchange
Commission ("SEC") as well as file certain reports on the occurrence of certain
material events. The Company files quarterly, annual and current reports with
the SEC. In addition, directors, officers and certain shareholders and senior
management are subject to further reporting requirements including obligations
to submit to the SEC reports of beneficial ownership of the Company's
securities.
15
Employees
At December 31, 1998, the Bank had 149 full time and 13 part time
employees, in its banking and mortgage operations. None of its employees is
represented by any collective bargaining unit, and the Company believes
relations with its employees are good.
Item 2. Properties
The Company leases all of its banking and mortgage origination offices.
Leases covering banking operations are long term with renewal provisions
designed to assure the Company that it will continue to operate in the
facilities for the foreseeable future. Details of the Company's leases may be
reviewed in Note 12 of the Notes to Consolidated Financial Statements included
as Exhibit 99.1 of this Form 10-K. The Company purchased a four acre lot in
Herndon, Virginia in December 1997 for future construction of a Northern
Virginia regional office which management anticipates will accommodate the
Company's administration and branch offices that are currently located in
Herndon. The project is currently in the design phase with completion of the
facility expected in 2000.
Item 3. Legal Proceedings
In the ordinary course of business, the Company may, from time to time,
be party to various legal proceedings. The Company does not believe the outcome
of these proceedings, individually or in the aggregate, will have a material
adverse effect on the Company's business, financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the Company's shareholders for a vote
during the fourth quarter of 1998.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The Company's common stock is listed on the American Stock Exchange
("Amex") under the symbol "RBV". Prior to July 23, 1998, the Company's Common
Stock was listed on the Nasdaq National Market System ("Nasdaq/NM") under the
symbol "RBKV". The high and low closing sales prices of the Company's common
stock during 1998 and 1997, as well as information on cash dividends, are set
forth in the following table. All per share figures have been adjusted to
reflect a two-for-one stock split on July 1, 1998.
At the time the current management assumed control of the Bank's day to
day operations in 1993, the Bank had accumulated a significant deficit. The Bank
was prohibited from paying dividends under Virginia banking law until it had
restored any deficits in its capital funds as originally paid in. Additionally,
Federal Reserve Board regulations limit the payment of dividends to net profits,
as defined, of the current year, plus retained net profits of the previous two
years. Consequently, until 1996, these regulations precluded the Bank from
paying dividends.
In each of January 1996 and April 1997, the Bank's Board of Directors
approved a one-time dividend of $0.05 and $0.125 per share, respectively,
contingent upon approval of the Board of Governors of the Federal Reserve System
and the Virginia Bureau of Financial Institutions. Subsequently, the dividends
were approved by the relevant regulatory authorities, subject to certain
provisions of Regulation H of the Federal Reserve System. These provisions
16
required the Bank to obtain approval of at least two-thirds of the holders of
its Common Stock. Accordingly, the shareholders approved the $0.05 dividend at
the 1996 Annual Meeting of Shareholders and the $0.125 dividend at the 1997
Annual Meeting of Shareholders. As a result of the Company's improved financial
position, such approvals are no longer required as long as the Company continues
to achieve satisfactory earnings.
AMEX 1998 HIGH LOW CASH DIVIDEND PAID
Fourth Quarter $21.00 $16.50 $0.06
Third Quarter (July 23 -
September 30) 24.50 16.88 0.06
NASDAQ/NM 1998
Third Quarter (July
1-July 22) 24.00 22.50
Second Quarter 25.00 20.00 0.06
First Quarter 23.00 18.00 0.06
1997
Fourth Quarter 22.50 13.75 ----
Third Quarter 14.50 11.75 0.125
Second Quarter 13.00 9.25 ----
First Quarter 10.25 9.00 ----
The Company's 2,476,824 common shares outstanding were held by approximately
872 shareholders of record at March 25, 1999.
17
Item 6.Selected Consolidated Financial Data
The following consolidated summary sets forth selected financial data
for the Company and its subsidiaries for the periods and at the dates indicated.
The following summary is qualified in its entirety by the Company's financial
statements included as part of this Form 10-K.
Years Ended December 31
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
INCOME STATEMENT DATA: (Dollars in thousands, except per share data)
Gross interest income .................... $19,746 $10,937 $8,295 $6,046 $3,988
Gross interest expense ................... 11,336 5,983 4,690 3,500 1,905
Net interest income ...................... 8,410 4,954 3,605 2,546 2,083
Provision for possible loan losses ....... 150 155 290 512 50
Net interest income after provision for
loan losses ............................ 8,260 4,799 3,315 2,034 2,033
Non-interest income ...................... 7,943 4,520 2,755 2,012 1,341
Non-interest expense ..................... 11,565 6,533 4,451 3,285 2,904
Income before income taxes ............... 4,638 2,786 1,619 761 471
Income taxes (benefit) ................... 1,591 965 153 (144) (180)
Net income ............................... 3,047 1,821 1,466 905 651
PER SHARE DATA (1):
Net income (2) ........................... $1.24 $ 0.92 $ 0.79 $ 0.54 $ 0.39
Cash dividends ........................... .24 0.125 0.05 - -
Book value at period end ................. 7.18 6.36 4.47 3.44 2.68
Tangible book value at period end ........ 7.18 6.36 4.47 3.44 2.68
PERIOD-END BALANCE SHEET DATA:
Total assets ............................. $233,460 $209,330 $115,836 $87,352 $63,735
Total loans (net of unearned income) ..... 188,522 150,590 81,975 58,464 41,034
Total deposits ........................... 206,219 169,508 99,179 80,905 54,918
Long-term debt ........................... 5,300 7,300 - - -
Shareholders' equity ..................... 17,789 15,602 8,655 5,810 4,525
PERFORMANCE RATIOS
Return on average assets ................. 1.27% 1.40% 1.45% 1.24% 1.18%
Return on average shareholders' equity ... 18.19% 18.59% 20.46% 17.93% 14.38%
Average shareholders' equity to average
total assets ........................... 6.96% 7.54% 7.10% 6.90% 8.16%
Net interest margin (3) .................. 3.62% 3.90% 3.70% 3.62% 4.00%
Earnings to fixed charges
Excluding interest on deposits ......... 5.55x 10.32x 17.52x 4.16x 5.57x
Including interest on deposits ......... 1.41x 1.46x 1.34x 1.30x 1.25x
ASSET QUALITY RATIOS
Net charge-offs to average loans ......... .13% 0.02% 0.15% 0.31% 0.20%
Allowance to period-end loans ............ 1.33% 1.71% 1.27% 1.46% 1.20%
Allowance to nonperforming loans ......... 264.55% 58.50% 247.03% 1220.00% 793.55%
Nonaccrual loans to loans ................ 0.28% 2.03% 0.06% .10% 0.13%
Nonperforming assets to loans and
foreclosed properties .................. .84% 3.36% 0.57% 0.24% 0.37%
Risk-based capital ratios
Tier 1 capital ......................... 9.23% 9.69% 10.22% 9.61% 10.23%
Total capital .......................... 10.48% 10.93% 11.45% 10.86% 11.28%
Leverage capital ratio ................... 7.52% 9.67% 7.04% 6.25% 7.22%
Total equity to total assets ............. 7.62% 7.45% 7.47% 6.65% 7.10%
18
- ------------------
(1) All per share figures have been adjusted to reflect a two-for-one stock
split on July 1, 1998.
(2) Net income per share is computed using the weighted average outstanding
shares.
(3) Net interest margin is calculated as tax-equivalent net interest income
divided by average earning assets and represents the Corporation's net yield
on its earning assets.
Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
In addition to historical information, the following discussion
contains forward looking statements that are subject to risks and uncertainties
that could cause the Company's actual results to differ materially from those
anticipated. These forward looking statements include, but are not limited to,
statements regarding the Company's management of credit risk, credit policies
generally, allowances for loan losses, and the affect of increasing interest
rates on the Company's profitability. Several factors, including the Virginia
and national economy, the demand for residential mortgage loans, and the
adequacy of the Company's Year 2000 readiness could have a material affect on
the Company's anticipated results. Readers are cautioned not to place undue
reliance on these forward looking statements, which reflect management's
analysis only as of the date of this Form 10-K.
On December 1, 1997, the Bank acquired Eastern American Bank, FSB, in
a business combination accounted for under the purchase method of accounting,
whereby the purchase price was allocated to the underlying assets acquired and
liabilities assumed based on their respective fair values at the time of
acquisition. In exchange for issuing shares of the Bank's common stock to
Eastern American Bank's shareholders, the Bank acquired $66,514,000 in assets
(including cash of $12,539,000), $48,082,200 in net loans, and assumed
$52,844,000 in deposit liabilities. Accordingly, these acquired assets and
liabilities contributed to the growth in total assets and liabilities of the
Bank for the year ended December 31, 1997 (See Note 18 to the consolidated
financial statements). The Company's 1997 results include results by operations
from the former Eastern American Bank for the month of December 1997.
The following discussion should be read in conjunction with the
Company's Financial Statements and Notes thereto included as Exhibit 99.1 of
this Form 10-K.
Results of Operations and Financial Condition
The Company had net income of $3,046,800, $1,821,200 and $1,466,200
for 1998, 1997 and 1996, respectively. This constituted net basic earnings per
common share of $1.24 for 1998, $0.92 for 1997, and $0.79 for 1996. With the
diluted effect of common stock equivalents, earnings per common share increased
by 36.1% to $1.13 for 1998, from $0.83 in 1997 and $0.76 in 1996. The expanded
levels of earning assets increased net interest income during 1998 significantly
over 1997 and 1996. This factor, along with managed expense control and
expansion of the business loan portfolio, provided the basis for increased
earnings.
At December 31, 1998, 66.3% of total loans were due in one year or
less. Floating rate loans with maturities of one year or less represented 58.2%
of total loans, and the remainder of such loans had fixed rates.
Average loans, net of unearned income, to average deposits were 82.8%,
82.2% and 76.1% in 1998, 1997 and 1996, respectively.
19
Net Interest Income
Net interest income, before provision for loan losses, increased by
69.8% in 1998 over 1997 to $8,409,983. Net interest income increased by 37.4% in
1997 over 1996 to $4,954,100. The increases in net interest income in 1998 and
1997 were closely proportionate with the increase in average earning assets and
interest bearing liabilities during 1998 and 1997, respectively. During 1998,
due to the Eastern American Bank merger that closed in December 1997 and the
continued expansion of commercial lending activities, average loans increased
79.3% to $168,271,463. Average loans increased 35% in 1997 to $93,839,500. Due
to the merger transaction and the competitive pricing of the Company's deposit
products, average total deposits increased 78.0% to $203,105,754 in 1998.
Average total deposits increased 25.0% to $114,100,000 in 1997. Average funds
borrowed from the Federal Home Loan Bank increased by 259.0% to $17,794,425 in
1998 and by 206.7% in 1997. As part of its mortgage banking operations, funds
were advanced on behalf of investor banks in settlement of mortgage loans.
Average funds advanced in settlement of such loans increased 203.6% to
$39,934,270 in 1998. Average funds advanced in settlement of mortgage loans
increased by 96.7% in 1997 to $13,153,300. Average securities decreased 22.3% to
$12,386,419 in 1998, and decreased by 5.6% to $15,934,900 in 1997. Average
certificates of deposit invested at other banks declined slightly, down 6.2%
from 1997 to 1998, to $937,808. Average certificates of deposit invested at
other banks were $1,000,000 in 1997 and 1996.
Allowance for Loan Losses
The ratio of net loans charged off to average loans outstanding was
0.13%, 0.02% and 0.15% in 1998, 1997 and 1996, respectively. The allowance for
loan losses as a percentage of loans at year end was 1.33%, 1.71% and 1.27% at
December 31, 1998, 1997 and 1996, respectively. The level of non-performing
loans at year end was $945,000, $4,398,000 and $421,000 in 1998, 1997 and 1996,
or 0.50%, 2.92% and 0.51% of total loans, respectively. Management made a
provision for loan losses of $150,000 in 1998, $155,000 in 1997 and $290,000 in
1996.
The majority of non-accrual loans emanated from Eastern American Bank
at the time of the merger in December 1997. The Company executed a plan to
substantially reduce the level of non-accruing loans in its Northern Virginia
portfolio during 1998. As the result of significant reductions in problem assets
and the addition of several experienced commercial lending officers, management
believes that asset quality within the Northern Virginia loan portfolio at
December 31, 1998, was comparable to the rest of the Bank.
In establishing the allowance for loan losses, management considers a
number of factors, including loan asset quality, related collateral and economic
conditions prevailing during the loan's repayment. In its loan policies,
management emphasizes the borrower's ability to service the debt, the borrower's
general creditworthiness and the quality of collateral. While management
believes that the allowance is sufficient for the existing loan portfolio, there
can be no assurances that an additional allowance for losses on existing loans
may not be necessary in the future, particularly if economic conditions within
the Company's market areas were to deteriorate.
Potential Problem Loans
At December 31, 1998, the Company had $533,000 in non-accrual loans, a
reduction of 82.6% from December 31, 1997. The Company had $412,000 in loans
past due 90 days or more that were still accruing at December 31, 1998. In
addition to loans on either non-accrual status or loans past due 90 days or more
and still accruing, management had identified $1,220,000 of loans that have been
internally classified. These loans require more than normal attention and are
potentially problem loans.
20
At December 31, 1997, the Bank had $3,059,000 in non-accrual loans and
$1,339,000 of loans past due 90 days or more that were still accruing. In
addition to loans on either non-accrual status or loans past due 90 days or more
and still accruing, the Bank had identified $1,842,800 of loans that were
internally classified.
Noninterest Income and Noninterest Expenses
Noninterest income was $7,943,413 in 1998, an increase of 75.7% over
1997. This increase was due to the merger transaction with Eastern American Bank
and income derived from mortgage banking operations. Noninterest income was
$4,520,000 in 1997 a 64.1% increase over 1996, derived primarily from mortgage
banking operations. The general decline in market interest rates, which began in
1995 and continued into 1998, was a factor in the increase of mortgage banking
income of 71.7% in 1998 to $7,062,445. Mortgage banking income increased by
69.4% in 1997 over 1996 to $4,111,000. Because of the uncertainty of future loan
origination volume and the future level of interest rates, there can be no
assurance that the Company will realize the same level of mortgage banking
income in future periods. Other noninterest income from fees and service charges
in 1998, increased by 115.2% to $880,968, mainly from the increased volume of
deposit account activity after the merger transaction.
Total noninterest expense was $11,565,616 in 1998, a 77.0% increase
over 1997. All areas of noninterest expenses were affected by the increased
volume in the mortgage banking operations and the merger transaction. As the
result of the merger with Eastern American Bank, approximately 30 full-time
employees and 3 office locations were integrated into the Bank's operations.
Total noninterest expense was $6,533,000 in 1997, an increase of 46.8% over
1996. The largest component of noninterest expense, salaries and employee
benefits, increased 65.7% in 1998 over 1997 to $6,686,381. Salaries and employee
benefits increased 52.0% in 1997 to $4,035,900. This category comprised 57.8% of
the total noninterest expense in 1998, 61.8% in 1997 and 59.7% in 1996.
Occupancy expense increased 90.7% in 1998 over 1997 to $1,089,447. Occupancy
expense increased 46.2% in 1997 over 1996. Depreciation and equipment
maintenance expense increased 65.7% in 1998 over 1997 to $759,330. Depreciation
and equipment maintenance expense increased 29.9% in 1997 over 1996. Outside
computer service expense increased 125.5% to $547,160 in 1998. Outside computer
service expense increased 87.4% in 1997 to $242,900. Federal Deposit Insurance
Corporation ("FDIC") premiums increased 321% to $52,580 in 1998 over 1997.
FDIC premiums increased 522.6% to $12,500 in 1997 from $2,000 in 1996.
As the result of the merger with Eastern American Bank, FDIC insurance
premiums are assessed on the Bank's deposit base on a pro rata basis whereby
approximately 68 percent of the Bank's deposits are subject to Bank Insurance
Fund ("BIF") rates, and approximately 32 percent of deposits are subject to
Savings Association Insurance Fund ("SAIF") rates. This ratio of BIF and SAIF
assessment rates was established at the time of merger, based on the relative
sizes of the Bank and Eastern American Bank deposit bases at December 1, 1997.
See "Part I. Item 1. Business - Regulation and Supervision of Resource Bank."
Income Taxes
Applicable income taxes on 1998 earnings amounted to $1,590,933,
resulting in an effective tax rate of 34.3% compared to 34.6% in 1997 and 9.5%
in 1996.
The effective rate differed from statutory rates for the year ended
December 31, 1996, due to the Bank's utilization of net operating loss
carryforwards for financial statement purposes during 1996. As a result, the
Bank recorded a deferred tax asset and related income tax benefit of $448,127
for the realization of these loss carryforwards in 1996. All net operating loss
carryforwards were fully utilized in the year ended December 31, 1997 for
financial statement and income tax return purposes.
21
Liquidity
The Company's funding requirements are supplied from a range of
traditional sources, including various types of demand deposits, money market
accounts, certificates of deposit and short-term borrowings. Large certificates
of deposit accounted for 4.71%, 2.2% and 0.10% of total deposits at December 31,
1998, 1997 and 1996, respectively. Federal Home Loan Bank of Atlanta ("FHLB")
advances were also utilized as funding sources, with $7,300,000 and $20,950,000
in such advances outstanding at December 31, 1998 and December 31, 1997,
respectively. Pursuant to the terms of a variable rate line of credit with the
FHLB, the Bank may borrow up to $30,000,000. This FHLB credit facility has no
expiration date, but is re-evaluated periodically to determine the Bank's
creditworthiness, and can be prepaid at anytime. Additionally, the Bank has a
warehouse line of credit collateralized by first mortgage loans, amounting to
$50,000,000 which expires December 2, 1999. As of December 31, 1998, there was
no balance drawn from this line of credit. Management has no reason to believe
these arrangements will not be renewed.
Management seeks to ensure adequate liquidity to fund loans and meet
the Company's financial requirements and opportunities. To provide liquidity for
current, ongoing and unanticipated needs, the Company maintains short-term
interest bearing certificates of deposits, federal funds sold, and a portfolio
of debt securities. The Company also structures and monitors the flow of funds
from debt securities and from maturing loans. As securities are generally
purchased to provide a source of liquidity, most are classified as securities
available-for-sale when purchased. Unrealized holding gains and losses for
available-for-sale securities are excluded from earnings and reported as a net
amount in a separate component of stockholders' equity until realized.
Securities are composed primarily of governmental or quasi-governmental
agencies. Net unrealized appreciation, net of tax effect, on securities
available-for-sale was $60,929 and $296,400 at December 31, 1998 and 1997,
respectively. The Company from time to time also maintains short-term interest
bearing certificates of deposit with other financial institutions. These
certificates of deposit amounted to $0 and $1,000,000 at December 31, 1998 and
1997, respectively. Federal funds sold to correspondent institutions were
$800,000 and $1,920,000 at year end 1998 and 1997, respectively.
The Company raised approximately $9,200,000 of additional capital in
the first quarter of 1999 by issuing 368,000 Trust Preferred Securities at a
price of $25.00 per Security. The Trust Preferred Securities feature a 9.25%
coupon. The Company has, in turn, purchased $5,000,000 of non-cumulative 9.25%
Preferred Stock issued by the Bank. This Preferred Stock will qualify as Tier 1
capital for the Bank for regulatory purposes. Management believes that this
additional Tier 1 capital will provide the Bank with an increased loans to one
borrower limitation, and the ability to continue to grow its balance sheet while
maintaining its well capitalized status. The Preferred Stock 9.25% coupon will
match the coupon of the Trust Preferred Securities.
The remainder of funds generated by the Trust Preferred Securities
offering, estimated at $3,900,000 after offering expenses, will be invested in
marketable securities and used by the Company in its stock repurchase program.
The marketable securities will be held as available-for-sale to meet liquidity
needs. The Company's stock repurchase program will be used to offset the
otherwise dilutive effects of stock options granted to the Company's management
as employment recruitment and retention perquisites.
Impact of Accounting Pronouncements
Financial Accounting Standards Board Statement No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was issued in June 1998. This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for 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. This Statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Management will assess the impact, if any,
on the Company's financial statements.
22
The American Institute of Certified Public Accountants issued Statement
of Position (SOP) 98-1, ACCOUNTING FOR COSTS OF COMPUTER SOFTWARE DEVELOPED OR
OBTAINED FOR INTERNAL USE. This SOP is effective for financial statements for
fiscal years beginning after December 31, 1998. The SOP requires entities to
capitalize certain internal-use software costs once certain criteria are met.
Generally, internal costs with respect to software configuration and interface,
coding, installation to hardware, testing (including parallel processing), and
data conversion costs allowing access of old data by new systems should be
capitalized. All other data conversion costs, training, application maintenance,
and ongoing support activities should be expensed. The Company will adopt this
SOP in 1999 and does not expect it to have a material effect on the Company's
consolidated financial condition or consolidated results of operations.
The American Institute of Certified Public Accountants issued Statement
of Position (SOP) 98-5, REPORTING ON THE COSTS OF STARTUP ACTIVITIES, in April
1998. The SOP requires such costs to be expensed as incurred instead of being
capitalized and amortized. It applies to startup activities and costs of
organization of both development state and established operating activities, and
it changes existing practice for some industries. The SOP broadly defines
startup activities as those one-time activities that relate to the opening of a
new facility, introduction of a new product or service, doing business in a new
territory, initiating a new process in an existing facility, doing business with
a new class of customer or beneficiary, or commencing some new operation. The
SOP is effective for financial statements for fiscal years beginning after
December 15, 1998. Consistent with banking industry practice it is the
Company's policy to expense such costs. Therefore, this SOP is not expected to
materially affect the Company's financial position or results of operations.
Capital Resources and Adequacy
The Federal Reserve Board, the FDIC and the Office of the Comptroller of
the Currency have issued substantially similar risk-based and leverage capital
guidelines applicable to banking organizations they supervise. Due to the Bank's
capitalization, the Company is classified as "well capitalized".
The Company's year-end capital-to-asset ratio was 7.62% at December
31, 1998 as compared to 7.45% at December 31, 1997.
The capital adequacy standards are based on an established minimum for
Risk-Based Capital, Tier 1 Risk-Based Capital and the Tier 1 Leverage Ratio.
The following table summarizes the Company's regulatory capital ratios
at December 31, 1998.
Required Ratio Actual Ratio
-------------- ------------
Tier 1 risk-based 4.00% 9.23%
Total risk-based 8.00% 10.48%
Tier 1 leverage 4.00 to 5.00% 7.52%
The Company is in full compliance with all relevant regulatory capital
requirements.
Year 2000 Compliance
The ability of the Company's computers, software and other equipment
utilizing microprocessors to recognize and properly process data fields
containing a 2-digit year after 1999 is commonly referred to as the "Year 2000"
issue. The Year 2000 issue is the result of computer programs and equipment
which are dependent on "embedded chip technology" using two digits rather than
23
four to define the applicable year. Any of the Company's computer programs or
equipment that are date dependent may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, or a temporary inability to
process transactions, or otherwise engage in similar normal business activities.
The Company adopted a five phase plan of action developed by the Federal
Financial Institutions Examination Council ("FFIEC") to address Year 2000
issues. During phase one, "awareness," the Company developed an overall strategy
and timetable for the completion of all Year 2000 requirements. Phase two,
"assessment," involved analyzing, prioritizing and putting all internal systems,
both information technology (IT) and non-IT systems, on track for Year 2000
compliance according to the timetable established in the awareness phase. The
Company has no proprietary or in-house developed systems or software, so non-IT
systems are limited to infrastructure and communications. During the third
phase, "renovation," necessary upgrades were ordered for hardware and software.
In addition, each of the Company's vendors was contacted regarding their Year
2000 progress. Phases one through three have been completed.
The Company changed data processors in late 1997 and is processed by a
Service Bureau which houses and maintains all hardware, software and backups
applicable to updating and maintaining the Company's customer and financial
records. Because this is the area of greatest risk to the Company with regard to
Year 2000 issues, this arrangement means the Company must carefully oversee the
efforts of the vendor to ensure Year 2000 compliance is complete and timely. The
data processor has renovated and tested its systems and has supplied a series of
reports of their progress. The final stages of its live data testing was
scheduled during the first quarter of 1999 and to date all applications have
tested Year 2000 ready.
As the Company proceeds with the fourth phase, "validation," it will
continue to monitor the validation of all its vendors' systems, as well as
continue validation of its internal systems through ongoing actual real life
testing of all the new upgrades and components. The Company will continue
testing and validation throughout the remainder of 1999 to ensure the continuing
reliability of its systems.
The final phase, "implementation," will occur at the turn of the
century with the readiness to execute contingency plans if necessary.
Contingency plans include alternatives for each critical system, which should
allow business to continue with little or no interruption past the turn of the
century. These alternatives are being subjected to the same process as the
Company's primary service providers. Additionally, the contingency plans include
performing tasks manually if necessary, until the appropriate applications are
operational.
In addition to verifying its internal and vendor supplied systems, the
Company has provided compliance certification questionnaires to its customers in
order to determine their ability to be Year 2000 compliant. If a customer does
not respond to the questionnaire or if its response does not provide the Company
with adequate assurance that such customer's failure to be Year 2000 compliant
would not have a material adverse effect on the Company, the Company is entitled
to take steps to terminate its relationship with the customer before December
31, 1999.
Costs to date directly attributable to the Year 2000 project have not
been substantial due to the fact that the change in data processors and the
acquisition of a bank in late 1997 required a complete upgrade of all desktop
computer systems and servers. Year 2000 compliance was an important part of all
purchases and management believes that any known issues were corrected. The Year
2000 progress of all data processing companies is being monitored by outside
auditors and regulators and the Company receives regular reports regarding the
progress. Costs to date total $35,000; however, testing by outside vendors may
exceed $100 thousand based on best estimates available to date. Management
anticipates that these funds will be financed internally.
Because the Company had a detailed Business Continuation Plan before
the Year 2000 plan began, various potential business interruptions and
alternatives were already documented which would permit a short term continuance
as long as the data processor preserves the ability to update records. Loss of
24
the data processor is the greatest risk to the Company. The Year 2000 progress
of all data processing companies is being monitored by outside auditors and
regulators and the Company receives regular reports regarding the progress.
While a change of data processors would be time consuming, the Company's
contingency plans include alternatives for each critical system, as well as
plans to perform tasks manually if necessary, until appropriate applications are
operational.
The Company's Year 2000 readiness is subject to supervision by the
Federal Reserve System through examination for compliance with the guidance
issued by the FFIEC. Should the Company's readiness be found deficient , it
could be subject to informal enforcement actions such as written notification of
deficiencies to be remediated, to formal enforcement actions such as civil
penalties, temporary cease and desist orders requiring immediate corrective
actions, and the possible public release of any such cease and desist order.
If the Company and its customers, suppliers and vendors were not Year
2000 compliant by January 1, 2000, the most reasonably likely worst case
scenario would be a temporary shutdown of operations. Any such shutdown could
have a material adverse effect on the Company's results of operations, liquidity
and financial position.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Management's methodology to measure interest rate sensitivity includes
an analysis of the potential gain or loss in future fair values of interest rate
sensitive instruments. The Company's analysis assumes a hypothetical 200 basis
point instantaneous and parallel shift in the yield curve in interest rates. A
present value computation is used in determining the effect of the hypothetical
interest rate changes on the fair value of its interest rate sensitive
instruments as of December 31, 1998. Computations of prospective effects of
hypothetical interest rate changes are based on many assumptions, including
relative levels of market interest rates, loan prepayments and deposit decay.
They should not be relied upon as indicative of actual results. Further, the
computations do not contemplate certain actions management could undertake in
response to changes in interest rates. Certain shortcomings are inherent in this
method of analysis. If market conditions vary from assumptions used in the
calculation of present value, actual values may differ from amounts disclosed.
However, if a hypothetical, parallel and instantaneous 200 basis point increase
and decrease were experienced, net fair values of interest sensitive instruments
would be decreased by $957,000 and increased by $621,000, respectively.
This fair value analysis, performed for the Company by a third party
vendor, tends to overstate interest rate risk within the Company's balance
sheet. The analysis assigns the contractual long term maturity to mortgage loans
within the funds advanced for settlement account. Such loans are generally held
by the Company for less than 60 days, being pre-sold to third party purchasers
when the individual borrowers lock in their interest rates. This extension of
loan terms within this category of the Company's balance sheet increases
interest rate risk sensitivity calculated by the analysis.
The analysis also does not include a forecast of loan and deposit volume
changes due to the hypothetical 200 basis point interest rate change. In
addition, anticipated increased volume in the Company's mortgage banking
operation from a 200 basis point decrease in rates is not included in the
analysis. This expected volume increase in mortgage lending as the result of a
decline in interest rates would positively impact the Company's earnings.
The standard algebraic formula for calculating present value is
utilized. The calculation discounts the future cash flows of the Company's
portfolio of interest rate sensitive instruments to present value utilizing
techniques designed to approximate current market rates for securities, current
offering rates for loans, and the cost of alternative funding for the given
maturity of deposits, and then assumes a 200 basis point instantaneous and
parallel shift in these rates. The difference between these numbers represents
the resulting hypothetical change in the fair value of interest rate sensitive
instruments.
Other significant assumptions used in the calculation include: (1) no
growth in volume (i.e., replacement of maturities in like instruments, with no
change in balance sheet mix); (2) constant market interest rates reflecting the
average rate from the last month of the given quarter; and (3) pricing spreads
to market rates derived from an historical analysis, or from assumptions by
instrument type.
25
The Company is not engaged in investment strategies involving
derivative financial instruments. Asset and liability management is conducted
without the use of forward-based contracts, options, swap agreements, or other
synthetic financial instruments.
Item 8. Financial Statements and Supplementary Data
The following financial statements are included in Exhibit 99.1 of this
Form 10-K.
Balance sheets - December 31, 1998 and 1997
Statements of income - Years ended December 31, 1998 and 1997
Statements of stockholders' equity - Years ended December 31, 1998 and 1997
Statements of cash flows - Years ended December 31, 1998 and 1997
Notes to financial statements - December 31, 1998 and 1997
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
In accordance with General Instruction G(3) of Form 10-K, the
information called for in Part III is incorporated by reference from the
Company's Proxy Statement to be filed no later than April 30, 1999 in connection
with the Company's 1999 Annual Meeting of Shareholders.
Part IV
Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. The following consolidated financial statements of the Company as of
December 31, 1998 and 1997 and for the years then ended, and the auditors'
report thereon are included in this Form 10-K as Exhibit 99.1:
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets - December 31, 1998 and 1997
Consolidated Statements of Income - Years Ended December 31, 1998 and 1997
Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1998 and 1997
Consolidated Statements of Cash Flows - Years Ended December 31, 1998 and 1997
Notes to Consolidated Financial Statements Report of Independent Auditors
26
2. Financial Statement Schedules - None.
3. The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as part of this Form 10-K and such Exhibit Index is
incorporated herein by reference.
(b) Reports on Form 8-K in quarter ended December 31, 1998: None
(c) The exhibits on the accompanying Exhibit Index are filed or
incorporated by reference as part of this Form 10-K and such Exhibit
Index is incorporated herein by reference.
(d) Financial Statements excluded from Annual Report pursuant to Rule
14a-3(b)- Not applicable.
27
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the under-signed, thereunto duly
authorized.
RESOURCE BANKSHARES CORPORATION
/s/ Lawrence N. Smith
---------------------
President and Chief Executive Officer
Date: 3/29/1999
/s/ Eleanor J. Whitehurst
-------------------------
Senior Vice President and Chief Financial Officer
Date: 3/29/1999
28
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Lawrence N. Smith and John B. Bernhardt and each
of them individually, as his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place,
and stead, in any and all capacities, to sign any and all amendments to this
report, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ John B. Bernhardt Chairman of the Board Date: 3/29/1999
- --------------------- Director
John B. Bernhardt
/s/ Lawrence N. Smith President Date: 3/29/1999
- --------------------- Chief Executive Officer
Lawrence N. Smith (Principal Executive Officer)
Director
/s/ Eleanor J. Whitehurst Senior Vice President Date: 3/29/1999
- ------------------------- Chief Financial Officer
Eleanor J. Whitehurst (Principal Financial and
Accounting Officer)
/s/ Alfred E. Abiouness Director Date: 3/29/1999
- -----------------------
Alfred E. Abiouness
/s/ Thomas W. Hunt Director Date: 3/29/1999
- ------------------
Thomas W. Hunt
/s/ Louis Ray Jones Director Date: 3/29/1999
- -------------------
Louis Ray Jones
/s/ Arthur Russell Kirk Director Date: 3/29/1999
- -----------------------
Arthur Russell Kirk
/s/ Elizabeth A. Twohy Director Date: 3/29/1999
- ----------------------
Elizabeth A. Twohy
29
EXHIBIT INDEX
RESOURCE BANKSHARES CORPORATION
EXHIBIT
NO. DESCRIPTION
2.1 Amended and Restated Agreement and Plan of Merger, dated as of April 8, 1997 *
between Resource Bank and Eastern American Bank FSB. (Incorporated by
reference to Resource Bank's Proxy Statement previously filed with the
Federal Reserve on June 24, 1997.)
3.1 Amended and Restated Articles of Incorporation of Resource Bankshares *
Corporation. (Incorporated by reference to Registrant's Form 8-K previously
filed with the Commission on July 1, 1998.)
3.2 Bylaws of Resource Bankshares Corporation. (Incorporated by reference to *
Registrant's Form 8-K previously filed with the Commission on July 1, 1998.)
4.1 Certificate of Trust of Resource Capital Trust I. (Incorporated by reference *
to the Registrant's Registration Statement on Form S-2, Commission File No.
333-70361, previously filed with the Commission on January 8, 1999.)
4.2 Trust Agreement dated December 23, 1998 between Resource Bankshares *
Corporation and Wilmington Trust Company. (Incorporated by reference to the
Registrant's Registration Statement on Form S-2, Commission File No.
333-70361, previously filed with the Commission on January 8, 1999.)
4.3 Form of Amended and Restated Declaration of Trust for Resource Capital Trust *
I. (Incorporated by reference to the Registrant's Registration Statement on
Form S-2, Commission File No. 333-70361, previously filed with the Commission
on January 8, 1999.)
4.4 Form of Junior Subordinated Indenture between Resource Bankshares Corporation *
and Wilmington Trust Company, as Trustee. (Incorporated by reference to the
Registrant's Registration Statement on Form S-2, Commission File No.
333-70361, previously filed with the Commission on January 8, 1999.)
4.5 Form of Capital Security (included in Exhibit 4.3 above). (Incorporated by *
reference to the Registrant's Registration Statement on Form S-2, Commission
File No. 333-70361, previously filed with the Commission on January 8, 1999.)
4.6 Form of Junior Subordinated Debt Security (included in Exhibit 4.4 above). *
(Incorporated by reference to the Registrant's Registration Statement on Form
S-2, Commission File No. 333-70361, previously filed with the Commission on
January 8, 1999.)
30
4.7 Form of Guarantee Agreement with respect to Trust Securities issued by *
Resource Capital Trust I. (Incorporated by reference to the Registrant's
Registration Statement on Form S-2, Commission File No. 333-70361, previously
filed with the Commission on January 8, 1999.)
4.8 Form of Escrow Agreement among McKinnon & Company, Inc., Resource Capital *
Trust I, Resource Bankshares Corporation and Wilmington Trust Company.
(Incorporated by reference to the Registrant's Registration Statement on Form
S-2, Commission File No. 333-70361, previously filed with the Commission on
January 8, 1999.)
10.1 Director's Stock Option Agreement dated June 15, 1989. (Incorporated by *
reference to Registrant's Form 10-KSB previously filed with the Federal
Reserve on April 28, 1993.)
10.2 Non-Employee Director Incentive Stock Option Plan dated June 15, 1989. *
(Incorporated by reference to Registrant's Form 10-KSB previously filed with
the Federal Reserve on April 28, 1993.)
10.3 Lease Agreement dated November 1, 1990 by and between Birchwood Mall *
Associates and Resource Bank and letter dated November 12, 1992 from Resource
Bank to Fleder, Caplan, Jaffee Associates to amend the lease. (Incorporated
by reference to Registrant's Form 10-KSB previously filed with the Federal
Reserve on April 28, 1993.)
10.4 Resource Bank 1993 Long-Term Incentive Plan. (Incorporated by reference to *
Registrant's Form 10-KSB previously filed with the Federal Reserve on March
22, 1994.)
10.5 Resource Bank 1993 Long-Term Incentive Plan, First Amendment. (Incorporated *
by reference to Registrant's Form 10-KSB previously filed with the Federal
Reserve on March 30, 1995.)
10.6 Lease Agreement dated September 22, 1994 by and between Resource Mortgage and *
A.R. Marketing, Inc. (Incorporated by reference to Registrant's Form 10-KSB
previously filed with the Federal Reserve on March 30, 1995.)
10.7 Assignment of Lease dated February 28, 1994 with Resource Mortgage to *
Contract Publishing, Inc. (Incorporated by reference to Registrant's Form
10-KSB previously filed with the Federal Reserve on March 30, 1995.)
10.8 Resource Bank 1994 Long-Term Incentive Plan. (Incorporated by reference to
Registrant's Form 10-KSB previously filed with the Federal Reserve on March
30, 1995.)
31
10.9 Lease Agreement and Addendum to Lease both dated April 20, 1995, and First *
Lease Amendment dated December 13, 1995 to Lease by and between Glen Forst
Professional Center Associates and Resource Bank. (Incorporated by reference
to Registrant's Form 10-KSB previously filed with the Federal Reserve on
March 20, 1996.)
10.10 Lease Agreement dated April 1, 1994 by and between Whooping Crane Limited *
Partnership and Southern Mortgage Financial Company. (Incorporated by
reference to Registrant's Form 10-KSB previously filed with the Federal
Reserve on March 20, 1996.)
10.11 Resource Bank Retirement Savings Plan. (Incorporated by reference to *
Registrant's Form 10-KSB previously filed with the Federal Reserve on March
20, 1996.)
10.12 Resource Bank 1993 Long-Term Incentive Plan, Second Amendment. (Incorporated *
by reference to Registrant's Form 10-KSB previously filed with the Federal
Reserve on March 31, 1997.)
10.13 Lease Agreement and Addendum to Lease both dated May 1, 1996 by and between *
Birchwood Mall Associates and Resource Bank. (Incorporated by reference to
Registrant's Form 10-KSB previously filed with the Federal Reserve on March
31, 1997.)
10.14 Resource Bank 1994 Long-Term Incentive Plan, First Amendment. (Incorporated *
by reference to Registrant's Form 10-KSB previously filed with the Federal
Reserve on March 31, 1997.)
10.15 Resource Bank 1996 Long-Term Incentive Plan, Amended and Restated.
(Incorporated by reference to Registrant's Form 10-KSB previously filed with
the Federal Reserve on March 31, 1998.)
10.16 Lease Agreement dated July 22, 1997 by and between Washington Real Estate *
Investment Trust and Resource Bank. (Incorporated by reference to
Registrant's Form 10-KSB previously filed with the Federal Reserve on March
31, 1998.)
10.17 Lease Agreement dated July 19, 1993 by and between Reston North Point Village *
Limited Partnership and Eastern American Bank, FSB. (Incorporated by
reference to Registrant's Form 10-KSB previously filed with the Federal
Reserve on March 31, 1998.)
10.18 Lease Agreement dated July 18, 1995 by and between The Richmond Corporation *
and Eastern American Bank, FSB. (Incorporated by reference to Registrant's
Form 10-KSB previously filed with the Federal Reserve on March 31, 1998.)
10.19 Lease Agreement dated October 31, 1995 by and between Elden Investments, *
L.L.C. and Eastern American Bank, FSB. (Incorporated by reference to
Registrant's Form 10-KSB previously filed with the Federal Reserve on March
31, 1998)
32
10.20 Lease Agreement dated October 24, 1994 by and between Greenbrier Point *
Partners, L.P. and CitizensBanc Mortgage Company and Assignment, Assumption
and Release Agreement dated January 7, 1997 among Citizens Mortgage Company,
Resource Bank and Greenbrier Point Partners, L.P. (Incorporated by reference
to Registrant's Form 10-KSB previously filed with the Federal Reserve on
March 31, 1998.)
10.21 Lease Agreement dated December 5, 1996 and Amendment dated August 5, 1997 by *
and between The Bon Air Green Company and Resource Bank. (Incorporated by
reference to Registrant's Form 10-KSB previously filed with the Federal
Reserve on March 31, 1998.)
**10.22 Employment Agreement dated January 1 , 1999 by and between Resource Bank and
T. A. Grell, Jr.
**21.1 Subsidiaries of Registrant.
**23.1 Consent of Goodman & Company, L.L.P.
**24.1 Powers of Attorney (included on signature page)
**27.1 Financial Data Schedule
**99.1 Consolidated Financial Statements
- ------------------------------------
* Not filed herewith; incorporated by reference.
** Filed herewith.