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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)

OF THE SECURITIES EXCHANGE ACT OF 1934



FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003



Commission File Number: 001-14319



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RESOURCE BANKSHARES CORPORATION

(Exact name of Registrant as specified in its charter)



|Virginia                                                       |  | 54-1904386                           
|-------------------------------------------------------------- |  | -------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | ( I.R.S. Employer Identification No.)



|3720 Virginia Beach Blvd., Virginia Beach, VA |  | 23452     
|--------------------------------------------- |  | ----------
|(Address of principal executive offices)      |  | (Zip Code)



(757) 463-2265

(Registrants telephone number, including area code)



---



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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
whether the registrant is an accelerated file (as defined in Rule 12b-2 of the Exchange Act)

Yes ̈No  x



At June 30, 2003, 3,979,167 shares of Resource Bankshares Corporations common stock, $1.50 par value, were outstanding.



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##### Table of Contents

RESOURCE BANKSHARES CORPORATION

FORM 10-Q

JUNE 30, 2003



INDEX



|PART I. FINANCIAL INFORMATION |  |                                                                                      
|----------------------------- |  | -------------------------------------------------------------------------------------
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                 
|                              |  |                                                                                      
|                              |  | Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002                
|                              |  |                                                                                      
|                              |  | Consolidated Statements of Income for the periods ended June 30, 2003 and 2002       
|                              |  |                                                                                      
|                              |  | Consolidated Statements of Stockholders Equity for the period ended June 30, 2003   
|                              |  |                                                                                      
|                              |  | Consolidated Statements of Cash Flows for the periods ended June 30, 2003 and 2002   
|                              |  |                                                                                      
|                              |  | Notes to Consolidated Financial Statements                                           
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risks                          
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                              
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                    
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                  
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                     



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PART I - FINANCIAL INFORMATION



Item 1. Financial Statements



RESOURCE BANKSHARES CORPORATION

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                    |  | June 30 2003           |         |   | December 312002 |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | --------------- | -
|                                                                                                                                    |  | (Unaudited)            |         |   |                 |  
|                                                                                                                                    |  | (Dollars in thousands) |         |   |                 |  
|ASSETS                                                                                                                              |  |                        |         |   |                 |  
|Cash and due from banks                                                                                                             |  | $                      | 17,867  |   |                 | $
|Interest bearing deposits                                                                                                           |  |                        | 374     |   |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|                                                                                                                                    |  |                        | 18,241  |   |                 |  
|                                                                                                                                    |  |                       
|Funds advanced in settlement of mortgage loans                                                                                      |  |                        | 123,340 |   |                 |  
|Securities available for sale (amortized cost of $12,933 and $21,213, respectively)                                                 |  |                        | 12,938  |   |                 |  
|Securities held to maturity (fair value of $137,057 and $111,999, respectively)                                                     |  |                        | 132,775 |   |                 |  
|                                                                                                                                    |  |                       
|Loans, net                                                                                                                          |  |                        |         |   |                 |  
|Commercial                                                                                                                          |  |                        | 113,994 |   |                 |  
|Real estate  construction                                                                                                          |  |                        | 149,754 |   |                 |  
|Commercial real estate                                                                                                              |  |                        | 171,984 |   |                 |  
|Residential real estate                                                                                                             |  |                        | 62,196  |   |                 |  
|Installment and consumer loans                                                                                                      |  |                        | 5,402   |   |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|TOTAL LOANS                                                                                                                         |  |                        | 503,330 |   |                 |  
|Allowance for loan losses                                                                                                           |  |                        | (5,100  | ) |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|NET LOANS                                                                                                                           |  |                        | 498,230 |   |                 |  
|                                                                                                                                    |  |                       
|Other real estate owned                                                                                                             |  |                        | 76      |   |                 |  
|Premises and equipment, net                                                                                                         |  |                        | 10,139  |   |                 |  
|Cash surrender value of life insurance                                                                                              |  |                        | 13,152  |   |                 |  
|Other assets                                                                                                                        |  |                        | 11,926  |   |                 |  
|Accrued interest                                                                                                                    |  |                        | 3,848   |   |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|                                                                                                                                    |  | $                      | 824,665 |   |                 | $
|                                                                                                                                    |  |                        |         |   |                 |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                |  |                        |         |   |                 |  
|Deposits:                                                                                                                           |  |                        |         |   |                 |  
|Non-interest bearing                                                                                                                |  | $                      | 25,662  |   |                 | $
|Interest bearing                                                                                                                    |  |                        | 581,761 |   |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|TOTAL DEPOSITS                                                                                                                      |  |                        | 607,423 |   |                 |  
|                                                                                                                                    |  |                       
|Federal funds purchased and securities sold under agreements to repurchase                                                          |  |                        | 18,000  |   |                 |  
|                                                                                                                                    |  |                       
|FHLB advances                                                                                                                       |  |                        | 111,000 |   |                 |  
|Other liabilities                                                                                                                   |  |                        | 14,424  |   |                 |  
|Accrued interest                                                                                                                    |  |                        | 3,463   |   |                 |  
|Capital debt securities                                                                                                             |  |                        | 16,200  |   |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|TOTAL LIABILITIES                                                                                                                   |  |                        | 770,510 |   |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|STOCKHOLDERS EQUITY                                                                                                                |  |                        |         |   |                 |  
|Preferred stock, par value $10 per share, Shares authorized: 500,000; none issued and outstanding                                   |  |                        |        |   |                 |  
|Common stock, par value $1.50 a share Shares authorized: 6,666,666 Shares issued and outstanding: 2003  3,979,167; 2002
-3,027,461 |  |                        | 5,969   |   |                 |  
|Additional paid-in capital                                                                                                          |  |                        | 31,033  |   |                 |  
|Retained earnings                                                                                                                   |  |                        | 16,970  |   |                 |  
|Accumulated other comprehensive income                                                                                              |  |                        | 183     |   |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|                                                                                                                                    |  |                        | 54,155  |   |                 |  
|                                                                                                                                    |  |                        |         |   |                 |  
|                                                                                                                                    |  | $                      | 824,665 |   |                 | $
|                                                                                                                                    |  |                        |         |   |                 |  



See notes to consolidated financial
statements.



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RESOURCE BANKSHARES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                           |  | Three months ended June 30 |        | Six months ended June 30
|---------------------------------------------------------- |  | -------------------------- | ------ | ------------------------
|                                                           |  | 2003                       |        |                         
|                                                           |  | (Dollars in thousands)     |        | (Dollars in thousands)  
|Interest and dividend income                               |  |                            |        |                         
|Interest and fees on loans                                 |  | $                          | 6,481  |                         
|                                                           |  |                            |        |                         
|Interest on investment securities:                         |  |                            |        |                         
|Taxable                                                    |  |                            | 2,059  |                         
|Tax exempt                                                 |  |                            | 196    |                         
|                                                           |  |                            |        |                         
|                                                           |  |                            | 2,255  |                         
|                                                           |  |                            |        |                         
|Interest on funds advanced in settlement of mortgage loans |  |                            | 1,637  |                         
|                                                           |  |                            |        |                         
|Total interest income                                      |  |                            | 10,373 |                         
|                                                           |  |                            |        |                         
|Interest expense                                           |  |                            |        |                         
|Interest on deposits                                       |  |                            | 2,959  |                         
|Interest on borrowings                                     |  |                            | 1,182  |                         
|Interest on capital debt securities                        |  |                            | 290    |                         
|                                                           |  |                            |        |                         
|Total interest expense                                     |  |                            | 4,431  |                         
|                                                           |  |                            |        |                         
|Net interest income                                        |  |                            | 5,942  |                         
|                                                           |  |                            |        |                         
|Provision for loan losses                                  |  |                            |       |                         
|                                                           |  |                            |        |                         
|Net interest income after provision for loan losses        |  |                            | 5,942  |                         
|                                                           |  |                            |        |                         
|Noninterest income                                         |  |                            |        |                         
|Mortgage banking income                                    |  |                            | 8,510  |                         
|Service charges                                            |  |                            | 128    |                         
|Gain(loss) on sale of assets                               |  |                            | (15    | )                       
|Gain on sale of securities                                 |  |                            | 21     |                         
|Other                                                      |  |                            | 573    |                         
|                                                           |  |                            |        |                         
|                                                           |  |                            | 9,217  |                         
|                                                           |  |                            |        |                         
|Noninterest expense                                        |  |                            |        |                         
|Salaries and employee benefits                             |  |                            | 7,534  |                         
|Occupancy expenses                                         |  |                            | 584    |                         
|Depreciation and equipment maintenance                     |  |                            | 700    |                         
|Stationery and supplies                                    |  |                            | 238    |                         
|Marketing and business development                         |  |                            | 321    |                         
|Professional fees                                          |  |                            | 136    |                         
|Outside computer services                                  |  |                            | 240    |                         
|FDIC insurance                                             |  |                            | 21     |                         
|Other                                                      |  |                            | 742    |                         
|                                                           |  |                            |        |                         
|                                                           |  |                            | 10,516 |                         
|                                                           |  |                            |        |                         
|Income before income tax                                   |  |                            | 4,643  |                         
|Income tax expense                                         |  |                            | 1,437  |                         
|                                                           |  |                            |        |                         
|Net income                                                 |  | $                          | 3,206  |                         
|                                                           |  |                            |        |                         
|Cash dividends declared per common share                   |  | $                          | 0.17   |                         
|                                                           |  |                            |        |                         
|Basic earnings per common share                            |  | $                          | 0.81   |                         
|                                                           |  |                            |        |                         
|Diluted earnings per common share                          |  | $                          | 0.76   |                         
|                                                           |  |                            |        |                         



See notes to consolidated financial
statements.



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RESOURCE BANKSHARES CORPORATION

STATEMENT OF STOCKHOLDERS EQUITY

(UNAUDITED)



|                                                                                                                                      |  | (Dollars in thousands) | 
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | 
|                                                                                                                                      |  | Common Stock           | 
|Six Months Ended June 30, 2003                                                                                                        |  | Shares                 | 
|Balance, December 31, 2002                                                                                                            |  | 3,027,461              | 
|                                                                                                                                      |  |                        | 
|Comprehensive income:                                                                                                                 |  |                        | 
|Net income                                                                                                                            |  |                        | 
|Changes in unrealized appreciation (depreciation) on securities available for sale, net of reclassification adjustment and tax
effect |  |                       | 
|Change in fair value of hedging derivative                                                                                            |  |                        | 
|                                                                                                                                      |  |                        | 
|Total comprehensive income                                                                                                            |  |                        | 
|                                                                                                                                      |  |                        | 
|Proceeds from common stock issued-net of issuance costs                                                                               |  | 918,373                | 
|                                                                                                                                      |  |                        | 
|Proceeds from exercise of stock options                                                                                               |  | 33,333                 | 
|                                                                                                                                      |  |                        | 
|Cash dividends declared - $.17 per share                                                                                              |  |                       | 
|                                                                                                                                      |  |                        | 
|Balance, June 30, 2003                                                                                                                |  | 3,979,167              | 
|                                                                                                                                      |  |                        | 



See notes to consolidated financial
statements.



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RESOURCE BANKSHARES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



|                                                                       |  | Six months ended       |         
|---------------------------------------------------------------------- |  | ---------------------- | --------
|                                                                       |  | June 30, 2003          |         
|                                                                       |  | (Dollars in thousands) |         
|Operating activities                                                   |  |                        |         
|Net income                                                             |  | $                      | 5,409   
|Adjustments to reconcile to net cash used by operating activities:     |  |                        |         
|Provision for losses on loans and other real estate owned              |  |                        | 150     
|Provision for losses on funds advanced in settlement of mortgage loans |  |                        | 55      
|Depreciation and amortization                                          |  |                        | 723     
|Amortization of investment securities premiums, net of discounts       |  |                        | (805    
|(Gain)loss on sale of loans or other real estate owned                 |  |                        | 15      
|Gain on sale of securities                                             |  |                        | (83     
|Increase in cash surrender value of life insurance                     |  |                        | (381    
|Deferred loan origination fees, net of costs                           |  |                        | 86      
|Funds advanced in settlement of mortgage loans originated              |  |                        | (594,242
|Sales proceeds from funds advanced in settlement of mortgage loans     |  |                        | 581,960 
|Changes in:                                                            |  |                        |         
|Interest receivable                                                    |  |                        | 7       
|Interest payable                                                       |  |                        | 145     
|Other assets                                                           |  |                        | (5,712  
|Other liabilities                                                      |  |                        | 4,733   
|                                                                       |  |                        |         
|Net cash provided(used) by operating activities                        |  |                        | (7,940  
|Investing activities:                                                  |  |                        |         
|Proceeds from sales and maturities of available-for-sale securities    |  |                        | 9,942   
|Proceeds from maturities of held-to-maturity securities                |  |                        | 34,333  
|Purchases of held-to-maturity securities                               |  |                        | (57,666 
|Purchases of available-for-sale securities                             |  |                        | (1,596  
|Proceeds from sale of other real estate owned                          |  |                        |        
|Proceeds from sale of loans                                            |  |                        |        
|Loan originations, net of principal repayments                         |  |                        | (70,807 
|Purchases of premises, equipment and other assets                      |  |                        | (623    
|                                                                       |  |                        |         
|Net cash used by investing activities                                  |  |                        | (86,417 
|Financing activities:                                                  |  |                        |         
|Proceeds from exercise of stock options and warrants                   |  |                        | 100     
|Payments to reacquire common stock                                     |  |                        |        
|Proceeds from sale of common stock, net of issuance costs              |  |                        | 18,131  
|Cash dividends paid                                                    |  |                        | (1,197  
|Repayment of federal funds purchased                                   |  |                        | (14,347 
|Net proceeds in FHLB advances                                          |  |                        | 6,000   
|Net decrease in demand deposits, NOW accounts and savings accounts     |  |                        | (347    
|Net increase in certificates of deposits                               |  |                        | 90,859  
|                                                                       |  |                        |         
|Net cash provided by financing activities                              |  |                        | 99,199  



continued



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RESOURCE BANKSHARES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED), continued



|                                                                      |  | Six months ended       |       
|--------------------------------------------------------------------- |  | ---------------------- | ------
|                                                                      |  | June 30, 2003          |       
|                                                                      |  | (Dollars in thousands) |       
|Increase(decrease) in cash and cash equivalents                       |  |                        | 4,842 
|Cash and cash equivalents at beginning of period                      |  |                        | 13,399
|                                                                      |  |                        |       
|Cash and cash equivalents at end of period                            |  | $                      | 18,241
|                                                                      |  |                        |       
|Supplemental schedules and disclosures of cash flow information:      |  |                        |       
|                                                                      |  |                       
|Cash paid for:                                                        |  |                        |       
|Interest on deposits and other borrowings                             |  | $                      | 8,795 
|                                                                      |  |                        |       
|Supplemental schedule of non cash investing and financing activities: |  |                        |       
|Transfer from loans to real estate acquired through foreclosure       |  | $                      | 76    
|                                                                      |  |                        |       



See notes to consolidated financial
statements.



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RESOURCE BANKSHARES CORPORATION



Notes
to Consolidated Financial Statements

June 30, 2003

(UNAUDITED)

(Dollars in thousands, except per share data)



Organization and Summary of Significant Accounting Policies



|(1) |  | GENERAL
|--- |  | -------



Resource Bankshares Corporation, a Virginia Corporation (the Company), was incorporated under the laws of the Commonwealth of Virginia on February 4, 1998, primarily to serve as a holding company for
Resource Bank (the Bank).



The consolidated
financial statements of the Company include the accounts of its wholly owned subsidiaries, Resource Bank and Virginia Financial Services, LLC; and the Banks wholly owned subsidiaries, CW and Company of Virginia and Resource Service
Corporation. All significant inter-company balances and transactions have been eliminated in consolidation.



The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q, and therefore, do not include all of
the disclosures and notes required by generally accepted accounting principles. In the opinion of management, all adjustments of a normal recurring nature which are necessary for a fair presentation of the financial statements included herein have
been reflected in the financial statements. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.



|(2) |  | CASH AND CASH EQUIVALENTS
|--- |  | -------------------------



For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits with banks, and federal funds
sold.



|(3) |  | ALLOWANCE FOR LOAN LOSSES
|--- |  | -------------------------



|Changes in the allowance for loan losses are as follows: |  |   |       |  
|-------------------------------------------------------- |  | - | ----- | -
|                                                         | 
|Balance as of January 1, 2003                            |  | $ | 5,009 |  
|Provision for loan losses                                |  |   | 150   |  
|Loans charged off                                        |  |   | (59   | )
|Recoveries                                               |  |   |      |  
|                                                         |  |   |       |  
|Balance at June 30, 2003                                 |  | $ | 5,100 |  
|                                                         |  |   |       |  



|(4) |  | NET INCOME PER SHARE
|--- |  | --------------------



Basic EPS excludes dilution and is computed by dividing income available to common



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shareholders by the weighted-average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised, converted into common stock or resulted in the issuance of common stock that then shares in the earnings of the entity. The weighted average number of basic shares outstanding for the three
and six months ended June 30, 2003 were 3,979,167 and 3,693,665, respectively, and for the three and six months ended June 30, 2002 were 3,104,983 and 3,104,003, respectively. The diluted weighted average number of shares outstanding for the three
and six months ended June 30, 2003 were 4,218,362 and 3,909,557, respectively, and for the three and six months ended June 30, 2002 were 3,287,689 and 3,289,645, respectively.



|(5) |  | COMPREHENSIVE INCOME
|--- |  | --------------------



The components of other comprehensive income and related tax effects for the three months ended June 30, 2003 and 2002 are as follows:



|                                                                                            |  | Six months ended |     
|------------------------------------------------------------------------------------------- |  | ---------------- | ----
|                                                                                            |  | June 30, 2003    |     
|Unrealized holding gains(losses) arising during the period on available-for-sale securities |  | $                | 81  
|Reclassification adjustment for gains realized in income                                    |  |                  | (68 
|                                                                                            |  |                  |     
|Net unrealized gains(losses)                                                                |  |                  | 13  
|Tax effect                                                                                  |  |                  | 4   
|                                                                                            |  |                  |     
|Net-of-tax amount                                                                           |  | $                | 9   
|                                                                                            |  |                  |     
|Change in fair value of hedging derivatives                                                 |  | $                | (464
|                                                                                            |  |                  |     



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|(6) |  | STOCK BASED COMPENSATION
|--- |  | ------------------------



Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock Based Compensation  Transition and Disclosure  an
amendment of SFAS 123, Accounting for Stock-Based Compensation, was issued by the FASB in December 2002. SFAS 148 provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based
employee compensation. SFAS 148 also amends the disclosure requirements of SFAS 123, to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect
of the method used on reported results. Management adopted the disclosure provisions of this Standard in 2002 but is still assessing the recognition provisions of this Standard.



In accordance with SFAS 148, the Bank provides disclosures as if the fair value-based method of measuring all outstanding
employee stock options was already adopted and recognized in 2003 and 2002. The following table presents the effect on net income and on basic and diluted net income per share as if the fair value based method had been applied to all outstanding and
unvested awards as June 30, 2003 and 2002.



|                                                                                                                                    |  | Three MonthsEnded June 30, |       |   | Six MonthsEnded June 30, |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----- | - | ------------------------ | -
|                                                                                                                                    |  | 2003                       |       |   | 2002                     |  
|Net Income, as reported                                                                                                             |  | $                          | 3,206 |   |                          | $
|Deduct:                                                                                                                             |  |                            |       |   |                          |  
|Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                            | (42   | ) |                          |  
|                                                                                                                                    |  |                            |       |   |                          |  
|Proforma net income                                                                                                                 |  | $                          | 3,164 |   |                          | $
|                                                                                                                                    |  |                            |       |   |                          |  
|Earnings per share:                                                                                                                 |  |                            |       |   |                          |  
|Basic - as reported                                                                                                                 |  | $                          | 0.81  |   |                          | $
|Basic - proforma                                                                                                                    |  |                            | 0.80  |   |                          |  
|                                                                                                                                    |  |                            |       |  
|Diluted - as reported                                                                                                               |  | $                          | 0.76  |   |                          | $
|Diluted - proforma                                                                                                                  |  |                            | 0.75  |   |                          |  



|(7) |  | DERIVATIVE FINANCIAL INSTRUMENTS
|--- |  | --------------------------------



Derivative financial instruments are components of the Companys risk management profile. The Company monitors its sensitivity to changes in interest
rates and may use derivative instruments to hedge this risk. In accordance with SFAS No. 133 all derivatives are recorded in the financial statements at fair value. The Company has entered into a series of interest rate swaps to hedge certificate of
deposit liabilities. The total notional value at June 30, 2003 was $200 million. These transactions are designated and qualify for fair value hedge accounting. Both the interest rate swap (included in other assets in the consolidated balance sheets)
and the certificates of deposit are



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recorded at fair value, with changes in fair value included in the statements of income as interest expense. No ineffectiveness was recognized during the
three and six months ended June 30, 2003 as the hedge relationship is considered to be 100% effective.



|(8) |  | SEGMENT REPORTING
|--- |  | -----------------



The Company has two reportable segments, its mortgage banking operations and its commercial banking and other banking operations. The mortgage banking
segment originates residential loans and subsequently sells them to investors. The commercial banking and other banking operations provide a broad range of lending and deposit services to individual and commercial customers, including such products
as commercial and construction loans, as well as other business financing arrangements. The Company does not have other reportable operating segments.



The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The chief operating decision
maker of the Company evaluates performance based on profit or loss from operations before income taxes.



The Companys mortgage banking segment is a strategic business unit that offers different products and services. It is managed separately because the
segment appeals to different markets and, accordingly, requires different technology and marketing strategies.



The mortgage banking segments most significant revenue and expense are non-interest income and non-interest expense, respectively. The
Companys segments are reported below for the periods ended June 30, 2003 and June 30, 2002.



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Selected Financial Information



|                                                    |  | Commercial andOther Operations |        |   | Mortgage BankingOperations |   |         | Total | 
|--------------------------------------------------- |  | ------------------------------ | ------ | - | -------------------------- | - | ------- | ----- | 
|Six Months Ended June 30, 2003:                     |  |                                |        |   |                            |   |         |       | 
|                                                    |  |                                |       
|Net interest income after provision for loan losses |  | $                              | 10,917 |   |                            | $ |        |       | 
|Noninterest income                                  |  |                                | 1,365  |   |                            |   | 15,066  |       | 
|Noninterest expense                                 |  |                                | (7,164 | ) |                            |   | (12,416 | )     | 
|                                                    |  |                                |        |   |                            |   |         |       | 
|Net income before income taxes                      |  | $                              | 5,118  |   |                            | $ | 2,650   |       | 
|                                                    |  |                                |        |   |                            |   |         |       | 
|Six Months Ended June 30, 2002:                     |  |                                |        |   |                            |   |         |       | 
|                                                    |  |                                |       
|Net interest income after provision for loan losses |  | $                              | 6,527  |   |                            | $ |        |       | 
|Noninterest income                                  |  |                                | 1,953  |   |                            |   | 9,044   |       | 
|Noninterest expense                                 |  |                                | (5,421 | ) |                            |   | (8,301  | )     | 
|                                                    |  |                                |        |   |                            |   |         |       | 
|Net income before income taxes                      |  | $                              | 3,059  |   |                            | $ | 743     |       | 
|                                                    |  |                                |        |   |                            |   |         |       | 



Segment Assets



|              |  | Commercial andOther Operations |         | Mortgage BankingOperations |   | Total
|------------- |  | ------------------------------ | ------- | -------------------------- | - | -----
|June 30, 2003 |  | $                              | 821,085 |                            | $ | 3,580
|              |  |                                |         |                            |   |      
|June 30, 2002 |  | $                              | 606,854 |                            | $ | 1,950
|              |  |                                |         |                            |   |      



|(9) |  | STOCK TRANSACTIONS
|--- |  | ------------------



In February 2003, the Company raised net proceeds of approximately $18.1 million through the sale of 918,373 shares of common stock in a public offering,
at a price of $21.50 per share before underwriting discounts.



|(10) |  | SUBSEQUENT EVENTS
|---- |  | -----------------



In July 2003, the Board of Directors of the Company declared a $0.17 per common share dividend to shareholders of record as of July 15, 2003. The dividend
was paid on July 29, 2003.



Effective July 18, 2003, the
Companys Articles of Incorporation were amended increasing the number of authorized shares of common stock the Company may issue from 6,666,666 to 15 million.



12



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##### Table of Contents

On August 4, the Company announced a three-for-two stock split to be effected in the form of a 50% stock
dividend, to be paid on September 5, 2003, to shareholders of record on August 15, 2003. The stock dividend will increase the total common shares outstanding from 3,979,167 to approximately 5,969,000.Proforma disclosures of earnings per
share are provided below to reflect the effect of the stock split retroactively to historical earnings per share amounts.



|                           |  | Three months endedJune 30 |  | Six months endedJune 30
|-------------------------- |  | ------------------------- |  | -----------------------
|                           |  | 2003                      |  | 2002                   
|Basic earnings per share   |  |                           |  |                        
|As reported                |  | 0.81                      |  | 0.46                   
|Proforma                   |  | 0.54                      |  | 0.30                   
|                           |  |                           |  |                        
|Diluted earnings per share |  |                           |  |                        
|As reported                |  | 0.76                      |  | 0.43                   
|Proforma                   |  | 0.51                      |  | 0.29                   



13



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##### Table of Contents

|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- |  | -------------------------------------------------------------------------------------

| |  | (Dollars in thousands, except per share data)
| |  | ---------------------------------------------



Resource Bankshares Corporation, a Virginia Corporation (the Company), was incorporated under the laws of the Commonwealth of Virginia on
February 4, 1998, primarily to serve as a holding company for Resource Bank (the Bank).



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, the effect of increasing interest rates on the Companys profitability and the adequacy of
the Companys allowance for future loan losses. Several factors, including the local and national economy and the demand for residential mortgage loans may adversely affect the Companys ability to achieve the expected 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 report.



Total assets at June 30, 2003 were $824,665, up 15.3% from $715,167 at December 31, 2002, reflecting growth in securities and loans. The Companys
investment portfolio increased by $15,872 during the first six months of 2003, net loans increased by $70,495, and funds advanced in settlement of mortgage loans increased by $12,227 during the same period. The principal components of the
Companys assets at the end of the period were $145,713 in securities, $18,241 in cash and cash equivalents, $123,340 in funds advanced in settlement of mortgage loans and $498,230 in net loans. The Companys lending activities are a
principal source of income.



Total liabilities at June 30, 2003
were $770,510, up from $683,000 at December 31, 2002, with the increase represented by $90,974 (17.6%) growth in deposits offset by a decrease of $8,347 (6.1%) in borrowed funds. Non-interest bearing demand deposits increased $1,272 or 5.2%, and
interest bearing deposits increased by $89,702 or 18.2%. The Companys deposits are provided by individuals and businesses located within the communities served as well as the national market.



Total stockholders equity at June 30, 2003 was $54,155, compared to
$32,167 at December 31, 2002. This increase was primarily attributable to net proceeds of approximately $18.1 million received by the Company as a result of a public offering and sale of common stock in the first quarter of 2003. Additionally, the
Company had net income of $5,409 for the six months ended June 30, 2003 compared with net income of $2,695 for the comparable period in 2002, an increase of 100.7%. This increase is attributable to the growth in interest bearing assets, increases in
mortgage banking income, and a significant decrease in the Companys cost of funds.



Profitability as measured by the Companys return on average assets (ROA) was 1.43% and .93% for the six months ended June 30, 2003, and 2002, respectively. A key indicator of performance, the return on average
equity (ROE) was 23.88% and 18.87% for the six months ended June 30, 2003 and 2002, respectively.



Net interest income represents a principal source of earnings for the Company. The first component is the loan portfolio. Making sound loans that will
increase the Companys net interest margin is the first priority of management. The second component is gathering core deposits to match and fund the loan production. The Company also utilizes national markets to generate deposits and Federal
Home Loan Bank (FHLB) advances to fund loan growth either for asset and liability management purposes or for a less expensive source of funds.



Net interest income on a tax equivalent basis, before provision for loan losses, increased to $11,289 for the six months ended June 30, 2003 versus $7,424
for the same period in 2002, an increase of 52.1%. Average interest earning assets increased $159,903 from June 30, 2002 to the current period while average interest bearing liabilities increased $139,657 during the same comparative period. The
yield on average interest earning assets decreased 50 basis points to 5.8% at June 30, 2003 as compared to 6.3% at June 30, 2002. The rate on interest bearing liabilities decreased 110 basis points to 2.7% at June 30, 2003 as compared to 3.8% at
June 30, 2002.



14



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##### Table of Contents

Average Balances, Income and Expenses, Yields and Rates



The following table sets forth average balances or total interest earning
assets and total interest bearing liabilities for the period indicated, showing the average distribution of assets, liabilities, stockholders equity and the related income, expense and corresponding weighted yields and costs.



|                                            |  | Three Months Ended June 30, |         |   | Six Months Ended June 30, |  
|------------------------------------------- |  | --------------------------- | ------- | - | ------------------------- | -
|                                            |  | 2003                        |         |   | 2002                      |  
|                                            |  | AverageBalance(1)           |         |   | Interest                  |  
|Assets                                      |  |                             |         |   |                           |  
|Interest-earning assets:                    |  |                             |         |   |                           |  
|Securities (3)                              |  | $                           | 151,293 |   |                           | $
|Loans (4)                                   |  |                             | 491,168 |   |                           |  
|Interest-earning deposits                   |  |                             | 4,222   |   |                           |  
|Other interest-earning assets (5)           |  |                             | 100,747 |   |                           |  
|                                            |  |                             |         |   |                           |  
|Total interest-earning assets               |  |                             | 747,430 |   |                           |  
|Noninterest earning assets:                 |  |                             |         |   |                           |  
|Cash and due from banks                     |  |                             | 20,028  |   |                           |  
|Premises and equipment                      |  |                             | 10,265  |   |                           |  
|Other assets                                |  |                             | 24,436  |   |                           |  
|Less: Allowance for loan losses             |  |                             | (5,159  | ) |                           |  
|                                            |  |                             |         |   |                           |  
|Total noninterest earning assets            |  |                             | 49,570  |   |                           |  
|                                            |  |                             |         |   |                           |  
|Total assets                                |  | $                           | 797,000 |   |                           |  
|                                            |  |                             |         |   |                           |  
|Liabilities and Stockholders Equity        |  |                             |         |   |                           |  
|Interest-bearing liabilities:               |  |                             |         |   |                           |  
|Interest-bearing deposits:                  |  |                             |         |   |                           |  
|Demand/Money Market Accounts                |  |                             | 60,370  |   |                           |  
|Savings                                     |  |                             | 3,879   |   |                           |  
|Certificates of deposit                     |  |                             | 480,920 |   |                           |  
|                                            |  |                             |         |   |                           |  
|Total interest-bearing deposits             |  |                             | 545,169 |   |                           |  
|FHLB advances and other borrowings          |  |                             | 134,285 |   |                           |  
|Capital debt securities                     |  |                             | 16,200  |   |                           |  
|                                            |  |                             |         |   |                           |  
|Total interest-bearing liabilities          |  |                             | 695,654 |   |                           |  
|Noninterest-bearing liabilities:            |  |                             |         |   |                           |  
|Demand deposits                             |  |                             | 39,319  |   |                           |  
|Other liabilities                           |  |                             | 10,278  |   |                           |  
|                                            |  |                             |         |   |                           |  
|Total noninterest-bearing liabilities       |  |                             | 49,597  |   |                           |  
|                                            |  |                             |         |   |                           |  
|Stockholders equity                        |  |                             | 51,749  |   |                           |  
|                                            |  |                             |         |   |                           |  
|Total liabilities and stockholders equity  |  | $                           | 797,000 |   |                           |  
|                                            |  |                             |         |   |                           |  
|Interest spread (6)                         |  |                             |         |   |                           |  
|                                            |  |                             |         |   |                           |  
|Net interest income/net interest margin (7) |  |                             |         |   |                           | $

---

|(1) |  | Average balances are computed on daily balances and Management believes such balances are representative of the operations of the Company.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|(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) |  | Tax equivalent basis. The tax equivalent adjustment to net interest income was $222 thousand and $192 thousand for the six months ended June 30, 2003 and 2002, respectively.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Non-accrual loans are included in the average loan balances, and income on such loans is recognized on a cash basis.
|--- |  | --------------------------------------------------------------------------------------------------------------------

|(5) |  | Consists of funds advanced in settlement of loans.
|--- |  | --------------------------------------------------

|(6) |  | Interest spread is the average yield earned on earning assets, less the average rate incurred on interest bearing liabilities.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Net interest margin is net interest income expressed as a percentage of average earning assets.
|--- |  | -----------------------------------------------------------------------------------------------



15



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##### Table of Contents

Non-interest income increased from $10,997 for the six months ended June 30, 2002 to $16,431 for the same
period in 2003. This increase was primarily attributable to increased activity in the Companys mortgage banking operations. For the six months ended June 30, 2003, mortgage banking income increased by 66.6% or $6,022 to $15,066 versus the same
period of 2002. Mortgage banking made a significant contribution to the Companys results in the first six months of 2003. 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. The decrease in the gain on sale of assets of $726 was due to less loan sales during the six months ended June 30, 2003. The gain on sale of
securities decreased by $153, while other non-interest income increased by $291.



For the six months ended June 30, 2003, the Companys non-interest expense totaled $19,580 or 42.7% higher than the same period in 2002. This increase was primarily attributable to increased activity in the
mortgage banking operations. The largest component of non-interest expense, salaries and employee benefits, which represents 69.8% of total non-interest expense, increased 49.9% to $13,665 for the six months ended June 30, 2003 over the same period
in 2002, and was primarily attributed to the aforementioned mortgage banking activities. Occupancy expense increased by 30.5% to $1,107, depreciation and equipment maintenance increased by 20.4% to $1,244, marketing and business development
increased 56.5% to $557, and all other non-interest expenses increased by 26.9% for the six months ended 30, 2003 over the same period in 2002.



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. Loans are generally
placed in nonaccrual status when the collection of principal and interest is 90 days or more past due, unless the obligation is both well-secured and in the process of collection.



While the Company believes it has sufficient allowance for its existing portfolio, there can be no assurances that an
additional allowance for losses on existing loans may not be necessary in the future, particularly if the economy worsens. The allowance for loan losses as a percentage of period-end loans was 1.0% and 1.1% at June 30, 2003 and 2002, respectively.
The provisions for loan losses were $150 and $705 for the six months ended June 30, 2003 and 2002, respectively.



16



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##### Table of Contents

Non Performing Assets



The following table presents the Companys nonperforming assets for the periods set forth below.



|                                                           |  | June 30 2003           |         |   | December 31 2002 |  
|---------------------------------------------------------- |  | ---------------------- | ------- | - | ---------------- | -
|                                                           |  | (Dollars in thousands) |        
|Non accrual loans                                          |  | $                      | 626     |   |                  | $
|Other real estate                                          |  |                        | 76      |   |                  |  
|Loans 90 days or more past due and still accruing interest |  |                        | 345     |   |                  |  
|                                                           |  |                        |         |   |                  |  
|Total non performing assets                                |  | $                      | 1,047   |   |                  | $
|                                                           |  |                        |         |   |                  |  
|Total assets                                               |  | $                      | 824,665 |   |                  | $
|                                                           |  |                        |         |   |                  |  
|Total non performing assets to total assets                |  |                        | 0.13    | % |                  |  
|                                                           |  |                        |         |   |                  |  



17



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##### Table of Contents

Summary of Loan Loss Experience



The following table presents the Companys loan loss experience and selected loan loss ratios for the six months ended June 30, 2003
and 2002.



|                                                                            |  | Six months ended June 30 |        
|--------------------------------------------------------------------------- |  | ------------------------ | -------
|                                                                            |  | 2003                     |        
|                                                                            |  | (Dollars in thousands)   |        
|Balance of allowance for loan losses at beginning of year                   |  | $                        | 5,009  
|                                                                            |  |                         
|Loans charged-off:                                                          |  |                          |        
|Commercial                                                                  |  |                          | (53    
|Installment                                                                 |  |                          |       
|Real Estate                                                                 |  |                          |       
|Credit Cards and Other Consumer                                             |  |                          | (6     
|                                                                            |  |                          |        
|Total loans charged-off                                                     |  |                          | (59    
|                                                                            |  |                          |        
|Recoveries of loans previously charged off:                                 |  |                          |        
|Commercial                                                                  |  |                          |       
|Installment                                                                 |  |                          |       
|Real Estate                                                                 |  |                          |       
|Credit Cards and Other Consumer                                             |  |                          |       
|                                                                            |  |                          |        
|Total recoveries                                                            |  |                          |       
|                                                                            |  |                          |        
|Net loan (charge-offs) recoveries                                           |  |                          | (59    
|Additions to allowance charged to expense                                   |  |                          | 150    
|                                                                            |  |                          |        
|Balance at end of period                                                    |  | $                        | 5,100  
|                                                                            |  |                          |        
|Average loans                                                               |  | $                        | 467,872
|                                                                            |  |                         
|Loans at end of period                                                      |  | $                        | 503,330
|Selected Loan Loss Ratios:                                                  |  |                          |        
|Net charge-offs (recoveries) during the period to average loans             |  |                          | 0.01   
|Provision for loan losses to average loans                                  |  |                          | 0.03   
|Provision for loan losses to net charge-offs (recoveries) during the period |  |                          | 254    
|                                                                            |  |                         
|Allowance for loan losses to loans at end of period                         |  |                          | 1.01   
|                                                                            |  |                         
|Non-performing assets at end of period                                      |  | $                        | 1,047  
|                                                                            |  |                         
|Non-performing assets to total loans at end of period                       |  |                          | 0.21   
|                                                                            |  |                         
|Allowance for loan losses to non-performing assets at end of period         |  |                          | 488    



18



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##### Table of Contents

Interest Rate Sensitivity and Liquidity



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 and national market conditions and
manages its securities portfolio under policies that take interest risk into account.



Liquidity represents the institutions ability to meet present and future financial obligations. Liquid assets include cash, interest bearing deposits with banks, federal funds sold, investments and loans
maturing within one year. 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. Federal Home
Loan Bank (FHLB) advances are utilized as funding sources by the Company. At June 30, 2003, there was $111,000 in FHLB advances outstanding. The Company has a warehouse line of credit collateralized by first mortgage loans amounting to
$75,000, which expires April 17, 2004. The Company has no reason to believe this arrangement will not be renewed. The Bank had no outstanding warehouse advances at June 30, 2003 and 2002, respectively.



The Company had purchased no Federal Funds from correspondent institutions at
June 30, 2003 and 2002, respectively. The Company has lines of credit with various correspondent banks totaling $50,800.



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. Securities are generally purchased to provide a source of liquidity. 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 of governmental or quasi-governmental agencies, municipal bonds, preferred stocks and bonds of corporations with investment grade ratings.



The Companys financial position at June 30, 2003 reflects liquidity and
capital levels that management believes are currently adequate to fund anticipated future business expansion. Capital ratios are in excess of required regulatory minimums for a well capitalized institution. The assessment of capital adequacy depends
on a number of factors such as asset quality, liquidity, earnings performance, and changing competitive conditions and economic forces. The adequacy of the Companys capital is reviewed by management on an ongoing basis. Management seeks to
maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses.



19



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##### Table of Contents

The following table presents the amounts of the Companys interest sensitive assets and liabilities
that mature or reprice in the periods indicated.



|                                                      |  | June 30,2003 Maturing or Repricing
|----------------------------------------------------- |  | ----------------------------------
|                                                      |  | Within 3 months                   
|                                                      |  | (Dollars in thousands)            
|Interest-Earning Assets:                              |  |                                   
|Investment securities                                 |  | $                                 
|Loans                                                 |  |                                   
|Interest bearing deposits                             |  |                                   
|Other interest-earning assets                         |  |                                   
|                                                      |  |                                   
|Total interest-earning assets                         |  |                                   
|                                                      |  |                                   
|Interest-Bearing Liabilities:                         |  |                                   
|Deposits                                              |  |                                   
|Demand and savings (1)                                |  |                                   
|Time deposits, $100,000 and over                      |  |                                   
|Other time deposits                                   |  |                                   
|Other interest-bearing liabilities                    |  |                                   
|Capital debt securities                               |  |                                   
|                                                      |  |                                   
|Total interest-earning liabilities                    |  |                                   
|                                                      |  |                                   
|Period Gap                                            |  | $                                 
|                                                      |  |                                   
|Cumulative Gap                                        |  | $                                 
|                                                      |  |                                   
|Ratio cumulative gap to total interest-earning assets |  |                                   
|                                                      |  |                                   

---

|(1) |  | Management has determined that interest checking, money market (except those generated by e banking) and savings accounts are not sensitive to changes in related market rates and,
therefore, have been placed in the 1-5 years category.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The capital adequacy standards are based on an established minimum for Tier 1 Risk-Based Capital, Risk-Based Capital and the Tier 1 Leverage Ratio. The following table summarizes regulatory capital ratios for the Company and Resource Bank
at June 30, 2003.



|                  |  | Required Ratio |   |  | Resource Bankshares |   |  | Resource Bank |  
|----------------- |  | -------------- | - |  | ------------------- | - |  | ------------- | -
|Tier 1 risk-based |  | 4.00           | % |  | 12.32               | % |  | 10.27         | %
|Total risk-based  |  | 8.00           | % |  | 13.22               | % |  | 11.18         | %
|Tier 1 leverage   |  | 4.00 to 5.00   | % |  | 8.72                | % |  | 7.37          | %



The Company and the
Bank are in full compliance with all relevant regulatory capital requirements and are categorized by regulatory authorities as well capitalized.



20



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##### Table of Contents

The effect of changing prices on financial institutions is typically different from other industries as
the Companys assets and liabilities are monetary in nature. Interest rates are significantly impacted by inflation, but neither the timing nor the magnitude of the changes are directly related to price level indices. Impacts of inflation on
interest rates, loan demand and deposits are reflected in the Companys financial statements. Management believes that the mortgage banking operations provide somewhat of a natural interest rate hedge. The Company is in an asset sensitive
position in the short term. When interest rates decline, the Companys earnings will be negatively impacted but the mortgage operations volume should increase. The reverse should occur in rising interest rate markets.



Recent Accounting and Regulatory Pronouncements



In April 2003, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (SFAS 149), which amends and clarifies the accounting and reporting requirements for
derivative instruments and hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The requirements of this Statement are effective for contracts entered into or modified after June 30,
2003. Further, the requirements of the Statement are to be applied prospectively. The adoption of this standard is currently not expected to have a material impact on the Companys consolidated results of operations or financial position.



In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (SFAS 150), in May 2003. SFAS 150 initiates standards for how an issuer categorizes and evaluates certain financial
instruments that display characteristics similar to liabilities and equity in its statement of financial position. The Statement is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. As a result, SFAS 150 will be effective for the Companys third quarter starting July 1, 2003. The adoption of this standard is not expected to have a material impact on the
consolidated financial statements.



In January 2003, the FASB
issued FASB Interpretation 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51 (FIN 46). FIN 46 provides a new framework for identifying variable interest entities (VIEs) and determining
when a company should include the assets, liabilities, noncontrolling interests and results of activities of a VIE in its consolidated financial statements. FIN 46 is effective immediately for VIEs created after January 31, 2003, and is effective
beginning in the third quarter of 2003 for VIEs created prior to the issuance of the interpretation. Management does not currently expect this pronouncement to have a material impact on the Companys results of operations or financial position.



Critical Accounting Policies



The accounting principles followed by the Company and the methods of
applying these principles conform with generally accepted accounting principles and to general practices within the banking industry. The most critical accounting policies require managements judgment to ascertain the valuation of assets,
liabilities, commitments and contingencies. These policies require the use of subjective and complex estimates, assumptions and judgments, which are based on information available as of the date of the financial statements, that are important to the
portrayal of the Companys financial condition and results. Accordingly, as this information changes, the financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on
the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.



The allowance for loan losses is established and maintained at levels deemed adequate by management to cover losses inherent
in the loan portfolio, based upon evaluation of the risks in the portfolio and changes in the nature and volume of loan activity. Estimates for loan losses are determined by analyzing historical loan losses, current trends in delinquencies and
charge-offs, the opinions of regulators, changes in the size and composition of



21



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##### Table of Contents

the loan portfolio. The Company also considers the impact of economic events, the outcome of which are uncertain. While management uses the best information
available in establishing the allowance, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in making valuations, or if required by regulators based upon information available to them at the
time of their examinations. Although management believes that the allowance for loan losses is adequate and properly recorded in the financial statements, differing economic conditions or alternate methods of estimation could result in materially
different amounts of loan losses.



As part of the
Companys funding strategy, derivative financial instruments are used to reduce exposure to changes in interest rates and market prices for financial instruments. All of these derivative financial instruments are interest rate swaps, which are
designated as hedges for financial reporting purposes. The application of the hedge accounting policy requires judgment in the assessment of hedge effectiveness, and measurement of changes in the fair value of hedged items. Management believes that
the techniques for addressing these judgmental areas are in accordance with generally accepted accounting principles and in line with industry practices in assessing hedge effectiveness. However, if in the future the derivative financial instruments
in use no longer qualify for hedge accounting treatment and, consequently, the change in fair value of hedged items could not be recognized in earnings, the impact on consolidated results of operations and reported earnings could be significant.
Management believes hedge effectiveness is evaluated properly in preparation of the Companys financial statements. All of the derivative financial instruments used have active markets and indications of fair value can be readily obtained.



The estimation of fair value is significant to a number of
assets, including funds advanced in settlement of mortgage loans, available for sale investment securities, and other real estate owned, as well as assets and liabilities associated with derivative financial instruments. These are all recorded at
either fair value or at the lower of cost or fair value. Fair values can be volatile and may be influenced by a number of factors, including market interest rates, prepayment speeds, discount rates and market conditions, among others. Since these
factors can change significantly and rapidly, fair values are difficult to predict and are subject to material changes, which could impact the Companys financial condition.



Availability of Budgets and Related Financial Information



On an ongoing basis, the Companys management prepares and updates one year and five year forward looking budgets and
financial plans. This information is prepared by management for the purpose of assessing current business, economic and monetary conditions and the likely impact of those conditions on the Companys future business, results of operations and
financial condition. These budgets and financial plans are used by management to assist with decisions related to, among other matters, asset and liability management, capital resource allocation and loan loss projections. Upon prior request, this
budgetary and financial information is available for review by any current or potential shareholder.



Any current or potential shareholder that obtains this information from the Company should be aware that the budgetary and financial data necessarily
includes certain projections with respect to the potential future financial performance of the Company. The assumptions and estimates underlying the projections are inherently uncertain and, though considered reasonable by the Company, are subject
to significant business, economic and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of the Company. Accordingly, there can be no assurance that the projected results will
be realized. The Companys actual results in the future will vary from the projected results, and those variations may be material. In addition, management is not under any obligation to update its budgets and financial plans, even in the event
the assumptions or estimates underlying the information are shown to be in error.



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|Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk
|------- |  | ----------------------------------------------------------



Market Risk Management



The Companys primary market risk exposure is interest rate risk. Fluctuations in interest rates will impact both the level of interest income and
interest expense and the market value of the Companys interest earning assets and interest bearing liabilities. There were no known material changes in the Companys reported information and market risk management strategy, as stated in
the Companys 2002 annual report, during the first six months of 2003.



|Item 4. |  | Controls and Procedures
|------- |  | -----------------------



(a) Within the 90-day period prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Rule 13a-15(e) of the
Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Companys Exchange Act filings.



(b) There have been no significant changes in the Companys internal controls or in other factors which could significantly affect its
internal controls subsequent to the date the Company carried out its evaluation.



PART II OTHER INFORMATION



|Item 1. |  | Legal Proceedings
|------- |  | -----------------



Information regarding a lawsuit filed against Resource Bank in March 2002 under the Telephone Consumer Protection Act is contained in the Companys
10-K/A for the fiscal year ended December 31, 2002.



|Item 4. |  | Submission of Matters to a Vote of Security Holders
|------- |  | ---------------------------------------------------



Resource Bankshares Corporation held its 2003 Annual Meeting of Shareholders on May 22, 2003. At the Annual Meeting, the following matters were acted upon
by shareholders.



|1. |  | Election of three Class C Directors to hold office for a term of three years:
|-- |  | -----------------------------------------------------------------------------



|DIRECTOR          |  | FOR       |  | WITHHELD
|----------------- |  | --------- |  | --------
|T.A. Grell, Jr.   |  | 3,512,696 |  | 99,473  
|Thomas W. Hunt    |  | 3,512,396 |  | 99,473  
|Lawrence N. Smith |  | 3,512,396 |  | 99,473  



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|2. |  | Adoption of an amendment to the Companys Articles of Incorporation increasing the number of authorized shares of common stock the Company may issue from 6,666,666 to 15
million.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|FOR       |  | AGAINST |  | ABSTAIN
|--------- |  | ------- |  | -------
|3,560,826 |  | 49,044  |  | 2,298  



|3. |  | Adoption of an amendment to the Companys Articles of Incorporation clarifying that the Companys obligation to indemnify its directors and officers is subject to
limitations imposed by federal banking law and regulations.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|FOR       |  | AGAINST |  | ABSTAIN
|--------- |  | ------- |  | -------
|3,592,420 |  | 17,581  |  | 2,116  



|4. |  | Ratification of the appointment of Goodman & Company, L.L.P. as the Companys independent auditors for the year ending December 31, 2003.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------



|FOR       |  | AGAINST |  | ABSTAIN
|--------- |  | ------- |  | -------
|3,510,628 |  | 99,371  |  | 2,170  



|Item 6. |  | Exhibits and Reports on Form 8-K
|------- |  | --------------------------------



|     | 
|---- | 
|3.1  | 
|     | 
|31.1 | 
|     | 
|31.2 | 
|     | 
|32.1 | 
|     | 
|32.2 | 



The Company filed a
Form 8-K on April 22, 2003 to file a news release announcing financial results for the first quarter of 2003.



The Company filed a Form 8-K on May 19, 2003 to file a news release announcing the webcast of a financial presentation.



The Company filed a Form 8-K on July 23, 2003 to file a news release
announcing financial results for the second quarter of 2003.



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SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



|RESOURCE BANKSHARES CORPORATION                
|-----------------------------------------------
|                                               
|/s/ Lawrence N. Smith                          
|Lawrence N. Smith                              
|Chief Executive Officer                        
|Date: August 11, 2003                          
|                                               
|/s/ Eleanor J. Whitehurst                      
|Eleanor J. Whitehurst                          
|Senior Vice President & Chief Financial Officer
|Date: August 11, 2003                          



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