<PAGE>   1

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q


(X)  Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange
     Act of 1934

               For The Quarterly Period Ended September 30, 1998

                                       or

( )  Transition Report pursuant to Section 13 or 15(d) of the Securities 
     Exchange Act of 1934

For the transition period from ____________ to ____________

Commission File Number 000-21786



                    RESOURCE BANCSHARES MORTGAGE GROUP, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



      STATE OF DELAWARE                                  57-0962375
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


   7909 Parklane Road,  Columbia, SC                           29223
--------------------------------------------------------------------------------
(Address of Principal Executive Office)                     (Zip Code)


Registrant's telephone number, including area code        (803) 741-3000 
                                                          --------------

Indicate by check mark whether the registrant has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for each shorter period that the registrant was
required to file reports) and has been subject to such filing requirements for
the past 90 days.

YES  X      NO   
    ---        ---

The number of shares of common stock of the Registrant outstanding as of 
October 31, 1998, was 23,540,145.

                                     Page 1
                          Exhibit Index on Pages A to E


<PAGE>   2


                    RESOURCE BANCSHARES MORTGAGE GROUP, INC.
               Form 10-Q for the quarter ended September 30, 1998

               TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT


                                                                          PAGE
PART I.     FINANCIAL INFORMATION                                         ----

Item 1.     Financial Statements - (Unaudited)

            Consolidated Balance Sheet                                      3


            Consolidated Statement of Income                                4


            Consolidated Statement of Changes in Stockholders' Equity       5


            Consolidated Statement of Cash Flows                            6


            Notes to Consolidated Financial Statements                      7


ITEM 2.     Management's Discussion and Analysis of                        12
            Financial Condition and Results of Operations


PART II.     OTHER INFORMATION                                             47


ITEM 6.     Exhibits and Reports on Form 8-K                               47


SIGNATURES                                                                 48


EXHIBIT INDEX                                                              A-E



                                       2
<PAGE>   3


                          Part I. Financial Information

Item 1.  Financial Statements

                    RESOURCE BANCSHARES MORTGAGE GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                ($ in thousands)



<TABLE>
<CAPTION>
                                                                          September 30,    December 31,
                                                                               1998            1997
                                                                         --------------    ------------
ASSETS                                                                     (Unaudited)

<S>                                                                      <C>               <C>        
Cash                                                                     $   103,620       $    13,546
Receivables                                                                  112,771            87,702
Trading securities:
     Mortgage-backed securities                                              462,653           334,598
     Residual interest in subprime securitizations                            33,393            19,684
Mortgage loans held-for-sale                                                 858,712           844,590
Lease receivables                                                             88,150            51,494
Servicing rights, net                                                        177,391           127,326
Premises and equipment, net                                                   34,725            27,723
Accrued interest receivable                                                    4,294             4,372
Goodwill and other intangibles                                                16,583            15,519
Other assets                                                                  79,659            30,375
                                                                         -----------       -----------

     Total assets                                                        $ 1,971,951       $ 1,556,929
                                                                         ===========       ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
     Short-term borrowings                                               $ 1,548,770       $ 1,224,489
     Long-term borrowings                                                      6,390             6,461
     Accrued expenses                                                         30,561            24,262
     Other liabilities                                                       134,626            86,578
                                                                         -----------       -----------

     Total liabilities                                                     1,720,347         1,341,790
                                                                         -----------       -----------

Stockholders' equity
     Common stock (31,637,244 and 31,120,383 shares outstanding
         at September 30, 1998 and December 31, 1997, respectively)              316               311
     Additional paid-in capital                                              305,266           299,516
     Retained earnings                                                        49,199            17,763
     Common stock held by subsidiary at cost (7,767,099 shares
         outstanding at September 30, 1998 and December 31, 1997)            (98,953)          (98,953)
     Unearned shares of employee stock ownership plan                         (4,224)           (3,498)
                                                                         -----------       -----------

     Total stockholders' equity                                              251,604           215,139
                                                                         -----------       -----------

     Total liabilities and stockholders' equity                          $ 1,971,951       $ 1,556,929
                                                                         ===========       ===========
</TABLE>




          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>   4



                    RESOURCE BANCSHARES MORTGAGE GROUP, INC.

                        CONSOLIDATED STATEMENT OF INCOME
                   ($ in thousands, except share information)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                  For the Nine Months Ended           For the Quarter Ended
                                                                        September 30,                     September 30,
                                                                -----------------------------     -----------------------------

                                                                    1998             1997              1998              1997
                                                                ------------     ------------     ------------     ------------
<S>                                                             <C>              <C>              <C>              <C>         
REVENUES
       Interest income                                          $     74,649     $     53,301     $     25,009     $     21,613
       Interest expense                                              (60,297)         (39,115)         (20,408)         (17,078)
                                                                ------------     ------------     ------------     ------------
       Net interest income                                            14,352           14,186            4,601            4,535
       Net gain on sale of mortgage loans                            129,226           71,578           45,597           29,328
       Gain on sale of mortgage servicing rights                       1,613            5,948              533            3,237
       Servicing fees                                                 31,134           23,049           11,419            7,711
       Gain on sale of retail production franchise                     1,490
       Other income                                                    1,894              572              487              146
                                                                ------------     ------------     ------------     ------------
            Total revenues                                           179,709          115,333           62,637           44,957
                                                                ------------     ------------     ------------     ------------
EXPENSES
       Salary and employee benefits                                   62,041           43,631           20,479           16,487
       Occupancy expense                                               8,058            5,328            2,627            1,886
       Amortization of mortgage servicing rights                      20,053           13,673            7,750            4,840
       General and administrative expenses                            31,055           29,580           10,395           17,837
                                                                ------------     ------------     ------------     ------------
            Total expenses                                           121,207           92,212           41,251           41,050
                                                                ------------     ------------     ------------     ------------

       Income before income taxes                                     58,502           23,121           21,386            3,907
       Income tax expense                                            (22,557)          (8,713)          (8,134)          (1,340)
                                                                ------------     ------------     ------------     ------------
       Net income                                               $     35,945     $     14,408     $     13,252     $      2,567
                                                                ============     ============     ============     ============

       Weighted average common shares outstanding -- Basic        23,189,299       20,281,774       23,394,524       20,573,846
                                                                ============     ============     ============     ============

       Net income per common share -- Basic                     $       1.55     $       0.71     $       0.57     $       0.12
                                                                ============     ============     ============     ============

       Weighted average common shares outstanding -- Diluted      23,569,021       20,702,851       23,831,297       21,049,549
                                                                ============     ============     ============     ============

       Net income per common share -- Diluted                   $       1.53     $       0.70     $       0.56     $       0.12
                                                                ============     ============     ============     ============
</TABLE>



          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>   5



                    RESOURCE BANCSHARES MORTGAGE GROUP, INC.

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                   ($ in thousands, except share information)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                Unearned
                                                                                Shares of
                                                                                Employee     Common
                                       Common Stock      Additional              Stock        Stock                    Total  
        Nine Months Ended           ------------------   Paid-in     Retained   Ownership    Held by     Treasury   Stockholders'
        September 30, 1997           Shares     Amount   Capital     Earnings     Plan      Subsidiary     Stock       Equity
--------------------------------    ----------  ------   ----------  --------- ----------   ----------   ---------  -------------
<S>                                 <C>         <C>      <C>         <C>        <C>         <C>          <C>        <C>
Balance, December 31, 1996          19,285,020  $ 193    $ 149,653   $ 12,007   $ (4,552)                             $ 157,301

Issuance of restricted stock            23,528      *          328                                                          328
Shares issued under Dividend
    Reinvestment and Stock
    Purchase Plan and Stock
    Investment Plan                      5,599      *           18        (78)                                              (60)
Cash dividends                                                         (1,739)                                           (1,739)
Exercise of stock options               62,000      1          379                                                          380
Acquisition of Meritage Mortgage
    Corporation                        673,197      6        7,162                                                        7,168
Shares committed to be
    released under ESOP                                        213                   584                                    797
Retroactive adjustment for the
    5% stock dividend declared
    on October 31, 1997              1,002,467     10       13,398    (13,408)
Net income                                                             14,408
Total comprehensive income                                                                                               14,408
                                    ----------  -----    ---------   --------   --------    ----------   ---------    ---------
Balance, September 30, 1997         21,051,811  $ 210    $ 171,151   $ 11,190   $ (3,968)                             $ 178,583
                                    ==========  =====    =========   ========   ========    ==========   =========    =========

<CAPTION>


                                                                                Unearned
                                                                                Shares of
                                                                                Employee     Common
                                       Common Stock      Additional              Stock        Stock                    Total  
        Nine Months Ended           ------------------   Paid-in     Retained   Ownership    Held by     Treasury   Stockholders'
        September 30, 1998           Shares     Amount   Capital     Earnings     Plan      Subsidiary     Stock       Equity
--------------------------------    ----------  ------   ----------  --------- ----------   ----------   ---------  -------------
<S>                                 <C>         <C>      <C>         <C>        <C>         <C>          <C>        <C>

Balance, December 31, 1997          31,120,383  $ 311    $ 299,516   $ 17,763  $ (3,498)    $ (98,953)                $ 215,139

Issuance of restricted stock            20,056      *          328                                                          328
Cash dividends                                                         (4,417)                                           (4,417)
Treasury stock purchased              (200,000)                                                            $(3,034)      (3,034)
Exercise of stock options              355,965      2          (26)                                          3,034        3,010
Shares committed to be
    released under ESOP                                        413                  774                                   1,187
Purchase of shares by Employee 
    Stock Ownership Plan                                                         (1,500)                                 (1,500)
Shares issued under Dividend
    Reinvestment and Stock
    Purchase Plan and Stock
    Investment Plan                    198,722      1        3,271        (92)                                            3,180
Acquisition of Meritage Mortgage
    Corporation                        142,118      2        1,764                                                        1,766
Net income                                                             35,945
Total comprehensive income                                                                                               35,945
                                    ----------  -----    ---------   --------   --------    ----------   ---------    ---------
Balance, September 30, 1998         31,637,244  $ 316    $ 305,266   $ 49,199  $ (4,224)    $ (98,953)                $ 251,604
                                    ==========  =====    =========   ========   ========    ==========   =========    =========
</TABLE>

* Amount less than $1

          See accompanying notes to consolidated financial statements.

                                        5

<PAGE>   6

                    RESOURCE BANCSHARES MORTGAGE GROUP, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                ($ in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                                            Nine Months Ended September 30,
                                                                                         1998                            1997
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                          <C>     
OPERATING ACTIVITIES:
        Net income                                                                       $ 35,945                     $ 14,408
        Adjustments to reconcile net
           income to cash used in operating activities:
           Depreciation and amortization                                                   23,998                       16,191
           Employee Stock Ownership Plan compensation                                       1,187                          797
           Provision for estimated foreclosure losses                                       6,452                        2,605
           Increase in receivables                                                        (25,069)                     (36,214)
           Acquisition of mortgage loans                                              (12,062,075)                  (7,799,804)
           Proceeds from sales of mortgage loans and mortgage-backed securities        12,042,649                    7,583,386
           Acquisition of mortgage servicing rights                                      (241,738)                    (175,232)
           Sales of mortgage servicing rights                                             174,601                      146,004
           Net gain on sales of mortgage loans and servicing rights                      (130,839)                     (77,526)
           Decrease in accrued interest on loans                                               78                          487
           Increase in lease receivables                                                  (36,656)
           Increase in other assets                                                       (50,559)                      (6,679)
           Increase in residual certificates                                              (13,709)                      (7,550)
           Increase in accrued expenses and other liabilities                              54,347                       24,648
---------------------------------------------------------------------------------------------------------------------------------
                  Net cash used in operating activities                                  (221,388)                    (314,479)
---------------------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
        Purchases of premises and equipment, net                                          (10,315)                      (5,500)
---------------------------------------------------------------------------------------------------------------------------------
                  Net cash used in investing activities                                   (10,315)                      (5,500)
---------------------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
        Proceeds from borrowings                                                       30,126,715                   20,666,472
        Repayment of borrowings                                                       (29,802,505)                 (20,336,652)
        Issuance of restricted stock                                                          328                          328
        Shares issued under Dividend Reinvestment and Stock Purchase Plan
          and Stock Investment Plan                                                         3,180                          (60)
        Acquisition of Meritage Mortgage Corporation                                                                    (1,750)
        Debt issuance costs                                                                                               (553)
        Cash dividends                                                                     (4,417)                      (1,739)
        Acquisition of treasury stock                                                      (3,034)
        Issuance of treasury stock                                                          1,674
        Exercise of stock options                                                           1,336                          380
        Purchase of shares by Employee Stock Ownership Plan                                (1,500)
-------------------------------------------------------------------------------------------------------------------------------
                  Net cash provided by financing activities                               321,777                      326,426
---------------------------------------------------------------------------------------------------------------------------------

Net increase in cash                                                                       90,074                        6,447
Cash, beginning of period                                                                  13,546                        2,492
---------------------------------------------------------------------------------------------------------------------------------
Cash, end of period                                                                     $ 103,620                      $ 8,939
=================================================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       6
<PAGE>   7


                    RESOURCE BANCSHARES MORTGAGE GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (All Amounts in Thousands Except Per Share Data)
                               September 30, 1998


Note 1 - Basis of Presentation:

               The financial information included herein should be read in
        conjunction with the consolidated financial statements and related notes
        of Resource Bancshares Mortgage Group, Inc. (the Company), included in
        the Company's December 31, 1997, Annual Report on Form 10-K. Certain
        financial information, which is normally included in financial
        statements prepared in accordance with generally accepted accounting
        principles, is not required for interim financial statements and has
        been omitted. The accompanying interim consolidated financial statements
        are unaudited. However, in the opinion of management of the Company, all
        adjustments, consisting of normal recurring items, necessary for a fair
        presentation of operating results for the periods shown have been made.
        Certain prior period amounts have been reclassified to conform to
        current period presentation.

                In February 1997, the Financial Accounting Standards Board
        issued Statement of Financial Accounting Standards No. 128, "Earnings
        per Share" (SFAS No. 128), which is effective for financial statements
        issued for periods ending after December 15, 1997. The Company adopted
        SFAS No. 128 in December 1997 and has retroactively restated to report
        its earnings per share on a comparable basis for all periods presented.

               In June 1997, the FASB issued SFAS No. 130, "Reporting
        Comprehensive Income", which requires that changes in the amounts of
        comprehensive income items, currently reported as separate components of
        equity, be shown in a financial statement, displayed as prominently as
        other financial statements. The most common components of other
        comprehensive income include foreign currency translation adjustments,
        minimum pension liability adjustments and/or unrealized gains and losses
        on available-for-sale securities. SFAS No. 130 does not require a
        specific format for the new statement, but does require that an amount
        representing total comprehensive income be reported. SFAS No. 130 is
        required to be adopted for fiscal years beginning after December 15,
        1997. The Company has adopted SFAS No. 130 in 1998.

               In June 1997, the FASB issued SFAS No. 131, "Disclosures about
        Segments of an Enterprise and Related Information", which establishes
        new standards for business segment reporting. Requirements of SFAS No.
        131 include reporting of (a) financial and descriptive information about
        reportable operating segments, (b) a measure of segment profit or loss,
        certain specific revenue and expense items and segment assets with
        reconciliations of such amounts to the Company's financial statements
        and (c) information regarding revenues derived from the Company's
        products and services, information about major customers and information
        related to geographic areas. SFAS No. 131 is effective for fiscal years
        beginning after December 15, 1997. The Company plans to adopt SFAS No.
        131 for the full-year 1998.

               In February 1998, the Financial Accounting Standards Board issued
        SFAS No. 132, "Employers' Disclosures about Pension and Other
        Postretirement Benefits" which revises employers' disclosures about
        pension and other postretirement benefit plans. It does not change the
        measurement or recognition of those plans. The statement is effective
        for fiscal years beginning after December 15, 1997. The Company plans to
        adopt SFAS No. 132 for the full-year 1998.



                                       7
<PAGE>   8

               In June 1998, the Financial Accounting Standards Board (FASB)
        issued Statement of Financial Accounting Standards No. 133, Accounting
        for Derivative Instruments and Hedging Activities (SFAS No. 133). SFAS
        No. 133 requires that all derivative instruments be recorded on the
        balance sheet at their fair value. Changes in the fair value of
        derivatives are recorded each period in current earnings or other
        comprehensive income, depending on whether a derivative is designed as
        part of a hedge transaction and , if it is, the type of hedge
        transaction. For fair-value hedge transactions in which the Company is
        hedging changes in an asset's, liability's or firm commitment's fair
        value, changes in the fair value of the derivative instrument will
        generally be offset in the income statement by changes in the hedged
        item's fair value. For cash-flow hedge transactions, in which the
        Company is hedging the variability of cash flows related to a
        variable-rate asset, liability or a forecasted transaction, changes in
        the fair value of the derivative instrument will be reported in other
        comprehensive income. The gains and losses on the derivative instrument
        that are reported in other comprehensive income will be reclassified as
        earnings in the periods in which earnings are impacted by the
        variability of the cash flows of the hedged item. The ineffective
        portion of all hedges will be recognized in current period earnings.
        SFAS No. 133 is effective for all fiscal quarters of all fiscal years
        beginning after June 15, 1999 (January 1, 2000 for the Company).
        However, early adoption is permitted. The Company has not yet determined
        either the impact that the adoption of SFAS 133 will have on its 
        earnings or statement of financial position or the period in which the 
        statement will be implemented.

        In October 1998, the FASB issued Statement of Financial Accounting
        Standards No. 134, Accounting for Mortgage-Backed Securities Retained
        After the Securitization of Mortgage Loans Held for Sale by a Mortgage
        Banking Enterprise (SFAS No. 134). SFAS No. 134 requires that after the
        securitization of a mortgage loan held for sale, an entity engaged in
        mortgage banking activities classify the resulting mortgage-backed
        securities or other retained interests based on its ability and intent
        to sell or hold those investments. This statement shall be effective for
        the first fiscal quarter beginning after December 15, 1998.

               Effective April 1, 1997, the Company completed a merger with
        Meritage Mortgage Corporation (Meritage), in which it exchanged
        approximately $1,750 thousand of cash and 537,846 (564,738 after
        retroactive adjustment for the 5% stock dividend declared on October 31,
        1997) noncontingent shares of RBMG common stock for all the outstanding
        stock of Meritage. This transaction was accounted for under the purchase
        method of accounting. In addition, 406,053 (426,355 after retroactive
        adjustment for the 5% stock dividend declared on October 31, 1997)
        shares of RBMG common stock were issued contingent upon Meritage
        achieving specified increasingly higher levels of subprime mortgage
        production during certain periods following closing. During 1997,
        270,702 (284,237 shares after retroactive adjustment for the 5% stock
        dividend declared on October 31, 1997) contingent shares of RBMG common
        stock were released. During the first nine months of 1998, 135,351
        (142,118 after retroactive adjustment for the 5% stock dividend declared
        on October 31, 1997) contingent shares of RBMG common stock were
        released. Therefore, all the contingent shares have now been released.
        The fair market value of contingent shares had been excluded from the
        purchase price for purposes of recording goodwill and from outstanding
        shares for purposes of earnings per share computations. As each
        specified increasingly higher subprime mortgage production level was
        achieved, the corresponding fair market value of the associated
        contingent shares released was recorded as additional goodwill and such
        shares were prospectively treated as outstanding for purposes of
        earnings per share computations. The purchase price for the Meritage
        merger has been allocated to tangible and identifiable assets and
        liabilities based upon management's estimate of their respective fair
        values with the excess of estimated cost over the fair value of the net
        assets acquired allocated to goodwill. Goodwill and other intangible
        assets are being amortized over a 20 year period using the straight line
        method. Amortization expense for the third quarter and nine month
        periods ended September 30, 1998, was approximately $149 and $415,
        respectively. The following is a schedule of the allocation of the
        purchase price:



                                       8
<PAGE>   9

<TABLE>
<CAPTION>
                                                                                    Subsequent
                                                                                   Release of
                                                         At Acquisition on          Contingent
                                                           April 1, 1997              Shares           September 30, 1998
                                                         -----------------         -----------         ------------------
<S>                                                      <C>                       <C>                 <C>
        Cash paid                                             $ 1,750                                        $ 1,750
        Estimated fair market value of shares of
           RBMG common stock issued or released                 4,748                $ 5,748                  10,496
        Deferred merger cost                                      463                                            463
                                                              -------                -------                --------
        Total purchase price                                    6,961                  5,748                  12,709
        Fair value of net assets acquired                       1,000                                          1,000
                                                              -------                -------                --------
        Goodwill and intangibles                              $ 5,961                $ 5,748                $ 11,709
                                                              =======                =======                ========
</TABLE>

               Effective May 1, 1998, the Company sold the retail production
        franchise of Intercounty Mortgage, Inc. to CFS Bank. Historically, the
        Company has focused on accumulation of loan production through
        third-party correspondent and wholesale broker channels because of the
        relatively lower fixed expenses and capital investments required, among
        other reasons. Management believes the sale of the retail operation will
        allow the Company to refocus on its core competency as a correspondent
        and wholesale mortgage lender. The following is a schedule of the gain
        recognized on the sale of the retail production franchise:

        Cash proceeds                                                  $ 5,503
        Investment banking, legal and other advisory fees                 (533)
        Severance and other transaction costs                           (1,980)
                                                                     ---------
        Net proceeds                                                     2,990
        Basis in assets sold                                            (1,500)
                                                                     ---------
        Net pre-tax gain on sale of retail production franchise        $ 1,490
                                                                     =========


               The following is a reconciliation of basic earnings per share to 
        diluted earnings per share as calculated under SFAS No. 128 for the 
        nine months ended September 30, 1998 and 1997, respectively:

<TABLE>
<CAPTION>
                                                                                                           Per 
                                                                     Income               Shares          Share
         For the Nine Months Ended September 30, 1998              (Numerator)        (Denominator)       Amount
         --------------------------------------------------        -----------      -----------------     ------
         <S>                                                       <C>              <C>                   <C>
         Net Income Per Common Share - Basic
         Income available to common
            stockholders                                           $ 35,945             23,189,299        $ 1.55
                                                                                                          ======
         Effect of dilutive securities
         stock options                                                                     379,722
                                                                   ---------        ---------------
         Net Income Per Common Share - Diluted
         Income available to common
           stockholders plus assumed
           conversions                                             $ 35,945             23,569,021        $ 1.53
                                                                   =========        ===============       ======
</TABLE>


                                       9
<PAGE>   10



                 The exercise prices of all options outstanding at September 30,
         1998 were less than the average market price of the common shares for
         the first nine months of 1998; therefore all options were included in
         the computation of diluted earnings per share.


<TABLE>
<CAPTION>
                                                                                                          Per 
                                                                    Income               Shares          Share
        For the Nine Months Ended September 30, 1997              (Numerator)        (Denominator)       Amount
        --------------------------------------------------        -----------      -----------------     ------
         <S>                                                       <C>              <C>                   <C>
        Net Income Per Common Share - Basic
        Income available to common
           stockholders                                           $ 14,408          20,281,774           $ 0.71
                                                                                                         ======
        Effect of dilutive securities
        stock options                                                                  421,077
                                                                  --------          ----------
        Net Income Per Common Share - Diluted
        Income available to common
          stockholders plus assumed
          conversions                                             $ 14,408          20,702,851           $ 0.70
                                                                  ========          ==========           ======
</TABLE>

                 Options to purchase 6,300 shares of common stock at $16.27 per
         share were outstanding during the first nine months of 1997 but were
         not included in the computation of diluted earnings per share because
         the options' exercise prices were greater than the average market price
         of the common shares. The options, which will expire on August 26, 2007
         were still outstanding at September 30, 1997.

                 The following is a reconciliation of basic earnings per share
         to diluted earnings per share as calculated under SFAS No. 128 for the
         quarters ended September 30, 1998 and 1997, respectively:


<TABLE>
<CAPTION>
                                                                                                      Per
                                                                 Income              Shares          Share
    For the Quarter Ended September 30, 1998                  (Numerator)        (Denominator)       Amount
    --------------------------------------------------        -----------      -----------------     ------
    <S>                                                       <C>              <C>                   <C>
    Net Income Per Common Share - Basic
    Income available to common
       stockholders                                           $ 13,252             23,394,524        $ 0.57
                                                                                                     ======
    Effect of dilutive securities
    stock options                                                                     436,773
                                                              --------            -----------
    Net Income Per Common Share - Diluted
    Income available to common
      stockholders plus assumed
      conversions                                             $ 13,252             23,831,297        $ 0.56
                                                              ========            ===========        ======
</TABLE>

                 The exercise prices of all options outstanding at September 30,
         1998 were less than the average market price of the common shares for
         the third quarter of 1998, therefore all options were included in the
         computation of diluted earnings per share.



                                       10
<PAGE>   11



<TABLE>
<CAPTION>
                                                                                                        Per
                                                                   Income             Shares           Share
      For the Quarter Ended September 30, 1997                  (Numerator)        (Denominator)       Amount
      --------------------------------------------------        -----------      -----------------     ------
      <S>                                                       <C>              <C>                   <C>
      Net Income Per Common Share - Basic
      Income available to common
          stockholders                                          $ 2,567            20,573,846          $ 0.12
                                                                                                       ======
      Effect of dilutive securities
      stock options                                                                   475,703
                                                                -------            ----------
      Net Income Per Common Share - Diluted
      Income available to common
        stockholders plus assumed
        conversions                                             $ 2,567            21,049,549          $ 0.12
                                                                =======            ==========          ======
</TABLE>

                 Options to purchase 6,300 shares of common stock at $16.27 per
         share were outstanding during the third quarter of 1997 but were not
         included in the computation of diluted earnings per share because the
         options' exercise price was greater than the average market price of
         the common shares. The options, which will expire on August 26, 2007
         were still outstanding at September 30, 1997.



                                       11
<PAGE>   12

                    RESOURCE BANCSHARES MORTGAGE GROUP, INC.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        The following discussion and analysis should be read in conjunction with
the Financial Information, the Consolidated Financial Statements of Resource
Bancshares Mortgage Group, Inc. (the Company) (and the notes thereto) and the
other information included or incorporated by reference into the Company's 1997
Annual Report on Form 10-K and the interim Consolidated Financial Statements
contained herein. Statements included in this discussion and analysis (or
elsewhere in this document) which are not statements of historical fact are
intended to be, and are hereby identified as, "forward looking statements" for
purposes of the safe harbor provided by Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve a number of risks and
uncertainties, and that actual results could differ materially from those
indicated by such forward-looking statements. Important factors that could cause
actual results to differ materially from those indicated by such forward-looking
statements include, but are not limited to, the following which are described in
the Company's Joint Proxy Statement/Prospectus dated December 2, 1997: (i)
interest rate risks; (ii) changes in economic conditions; (iii) competition;
(iv) changes in regulations and related matters; (v) litigation affecting the
mortgage banking business; (vi) delinquency and default risks; (vii) changes in
the market for servicing rights, mortgage loans and lease receivables; (viii)
environmental matters; (ix) changes in the demand for mortgage loans; and (x)
availability of funding sources and other risks and uncertainties, discussed
elsewhere herein, in the Company's Joint Proxy Statement/Prospectus dated
December 2, 1997 or from time to time in the Company's periodic reports filed
with the Securities and Exchange Commission. The Company disclaims any
obligation to update any forward-looking statements.

THE COMPANY

        The Company is a diversified financial services company engaged
primarily in the business of mortgage banking, through the purchase (through a
nationwide network of correspondents and brokers), sale and servicing of
agency-eligible and subprime residential, single-family first-mortgage loans and
the purchase and sale of servicing rights associated with such loans. In
addition, the Company originates, sells and services small ticket commercial
equipment leases and originates, sells, underwrites for investors and services
commercial mortgage loans.

PRODUCTION

        The Company purchases residential mortgage loans from its correspondents
and through its wholesale division and, until the sale of its retail production
platform in May 1998, originated mortgage loans through its retail division. The
Company also purchases and originates subprime mortgage loans through a separate
division. In addition, the Company originates commercial mortgage loans and
leases small ticket equipment items.


                                       12
<PAGE>   13


        A summary of production by source for the periods indicated is set forth
below:


<TABLE>
<CAPTION>
  ($ in thousands)                              For the Nine Months            For the Quarter
                                                Ended September 30,          Ended September 30,
                                            -------------------------    ------------------------
                                               1998          1997           1998         1997
                                            -----------    ----------    ----------    ----------
  <S>                                       <C>            <C>           <C>           <C>       
  Loan Production:
      Correspondent Division                $ 8,524,393    $5,690,799    $2,864,933    $2,136,619
      Wholesale Division                      2,202,280     1,349,408       718,791       501,239
      Retail Division                           264,059       509,528           N/A       195,655
                                            -----------    ----------    ----------    ----------
  Total Agency-Eligible Loan Production      10,990,732     7,549,735     3,583,724     2,833,513
      Subprime Division                         417,892       230,199       165,760        96,441
      Commercial Mortgage (for Investors
             and Conduits)                      653,451           N/A       290,829           N/A
      Leases                                     55,853           N/A        22,310           N/A
                                            -----------    ----------    ----------    ----------
  Total Production                          $12,117,928    $7,779,934    $4,062,623    $2,929,954
                                            ===========    ==========    ==========    ==========
</TABLE>

        Initially, the Company was exclusively focused on purchasing
agency-eligible mortgage loans through its correspondents. In order to diversify
its sources of loan volume, the Company started a wholesale operation in 1994, a
retail operation in 1995 and a subprime division in 1997. Management anticipates
that its higher margin wholesale and subprime production will continue to
account for an increasing percentage of total mortgage loan production as those
divisions are expanded more rapidly than correspondent operations. In general,
management has targeted as a near-term goal a residential mortgage production
mix of approximately 70% correspondent, 25% wholesale and 5% subprime. In order
to further diversify its sources of production and revenue, the Company acquired
Resource Bancshares Corporation (RBC) in December 1997. Through RBC, the Company
originates small ticket commercial equipment leases and commercial mortgage
loans. These two new sources of production accounted for 7.7% and 5.9% of the
Company's total third quarter and nine months ended September 30, 1998 
production, respectively.

        A summary of key information relevant to industry residential mortgage
loan production activity is set forth below:

<TABLE>
<CAPTION>
($ in thousands)                                          At or For the Quarter Ended September 30,
                                                          -----------------------------------------
                                                               1998                   1997
                                                          ---------------       --------------
<S>                                                       <C>                  <C>          
U. S. 1-4 Family Mortgage Originations Statistics (1):
      U. S. 1-4 Family Mortgage Originations               $ 375,000,000         $ 239,000,000
      Adjustable Rate Mortgage Market Share                       13.00%                20.00%
      Estimated Fixed Rate Mortgage Originations           $ 326,000,000         $ 191,000,000

Company Information:
      Agency-Eligible Loan Production                      $   3,583,724         $   2,833,513
      Estimated Company Market Share                               0.96%                 1.19%
</TABLE>

(1) Source:  Mortgage Bankers Association of America, Economics Department.

        The Company's total agency-eligible residential mortgage production
increased by 26% to $3.6 billion for the third quarter of 1998 from $2.8 billion
for the third quarter of 1997. The increase is a direct result of the nationwide
57% increase in 1-4 family mortgage originations for the third quarter of 



                                       13
<PAGE>   14

1998 as compared to the third quarter of 1997. The decrease in the Company's
estimated market share of U.S. mortgage originations from 1.19% for the third
quarter of 1997 to 0.96% for the third quarter of 1998 is primarily due to the
Company's focus on improved agency-eligible profitability and expansion of its
higher margin subprime, wholesale, commercial mortgage and leasing production.

Correspondent Loan Production

        The Company purchases closed mortgage loans through its network of
approved correspondent lenders. Correspondents are primarily mortgage lenders,
larger mortgage brokers and smaller savings and loan associations and commercial
banks, which have met the Company's approval requirements.

        The Company continues to emphasize correspondent loan production as its
basic business focus because of the lower fixed expenses and capital investment
required of the Company. That is, the Company has developed a cost structure
that is more directly variable with loan production because the correspondent
incurs most of the fixed costs of operating and maintaining branch offices and
of identifying and interacting directly with loan applicants.

        A summary of key information relevant to the Company's correspondent
residential loan production activities is set forth below:

<TABLE>
<CAPTION>
    ($ in thousands)                                          At or For the               At or For the
                                                               Nine Months                   Quarter
                                                           Ended September 30,         Ended September 30,
                                                        -------------------------   -------------------------
                                                           1998            1997         1998           1997
                                                        ----------    -----------   ----------    -----------
<S>                                                     <C>           <C>           <C>           <C>        
    Correspondent Loan Production                       $8,524,393    $ 5,690,799   $2,864,933    $ 2,136,619
    Estimated Correspondent Market Share  (1)                0.82%          0.89%        0.76%          0.89%
    Approved Correspondents                                    870            934          870            934
</TABLE>

(1) Source:  Mortgage Bankers Association of America, Economics Department.

        The 34% increase in the Company's correspondent loan production from
$2.1 billion for the third quarter of 1997 to $2.9 billion for the third quarter
of 1998 resulted primarily from the 57% increase in nationwide 1-4 family
mortgage loan production. The number of approved correspondent lenders at the
end of the third quarter of 1998 decreased slightly from that of the third
quarter of 1997 as the Company focused on maintenance of those correspondent
relationships most compatible with the Company's overall business strategies and
profitability goals while continuing a disciplined and measured expansion
through establishment of new correspondent relationships.

Wholesale Loan Production

        The wholesale division receives loan applications through brokers,
underwrites the loans, funds the loans at closing and prepares all closing
documentation. The wholesale branches also handle all shipping and follow-up
procedures on loans. Typically mortgage brokers are responsible for taking
applications and accumulating the information precedent to the Company's
processing of the loans. Although the establishment of wholesale branch offices
involves the incurrence of fixed expenses associated with maintaining those
offices, wholesale operations also provide for higher profit margins than
correspondent loan production. Additionally, each branch office can serve a
relatively sizable geographic area by establishing relationships with large
numbers of independent mortgage loan brokers who bear much of the cost of
identifying and interacting directly with loan applicants.



                                       14
<PAGE>   15

    A summary of key information relevant to the Company's wholesale production
activities is set forth below:

<TABLE>
<CAPTION>
($ in thousands)                                              At or For the               At or For the
                                                               Nine Months                   Quarter
                                                           Ended September 30,         Ended September 30,
                                                        -------------------------   -------------------------
                                                           1998            1997         1998           1997
                                                        ----------    -----------   ----------    -----------
<S>                                                     <C>           <C>           <C>           <C>        

Wholesale Loan Production                               $2,202,280    $ 1,349,408    $ 718,791      $ 501,239
Estimated Wholesale Market Share (1)                         0.21%          0.21%        0.19%          0.21%
Wholesale Division Operating Expenses                   $   11,650    $     8,029    $   3,910      $   3,065
Approved Brokers                                             3,232          2,956        3,232          2,956
Number of Branches                                              15             14           15             14
Number of Employees                                            155            126          155            126
</TABLE>

(1) Source:  Mortgage Bankers Association of America, Economics Department.

        The 43% ($218 million) increase in wholesale loan production, from
$501.2 million for the third quarter of 1997 to $718.8 million during the third
quarter of 1998, resulted primarily from the 57% nationwide increase in loan
production and the Company's addition of two new wholesale branches between the
third quarter of 1997 and the third quarter of 1998. The increase in operating
expenses for the wholesale division was primarily a result of the increased
production. Wholesale division operating expenses as a percentage of production
decreased 11% from 61 basis points in the third quarter of 1997 to 54 basis
points in the third quarter of 1998 primarily as a result of increased operating
efficiencies.

        Strategically, management anticipates focusing over the longer term on
continued expansion of its wholesale presence nationwide due to the relatively
higher margins attributable to this channel. Management anticipates that the
wholesale division will continue to account for an increasing percentage of the
Company's total loan production.

Retail Loan Production

        During late 1997, the Company began reviewing the compatibility of the
retail operation with its primary business focus. On March 11, 1998, the Company
signed a definitive agreement with CFS Bank under which the Company sold the
retail production franchise of Intercounty Mortgage, Inc. to CFS Bank effective
May 1, 1998. Historically, the Company has focused on accumulation of loan
production through third-party correspondent and wholesale broker channels
because of the relatively lower fixed expenses and capital investments required,
among other reasons. Management believes the sale of the retail operation will
allow the Company to refocus on its core competency as a correspondent and
wholesale mortgage lender.



                                       15
<PAGE>   16



    A summary of key information relevant to the Company's retail production
activities is set forth below:

<TABLE>
<CAPTION>
  ($ in thousands)                                            At or For the               At or For the
                                                               Nine Months                   Quarter
                                                           Ended September 30,         Ended September 30,
                                                        -------------------------   -------------------------
                                                           1998            1997         1998           1997
                                                        ----------    -----------   ----------    -----------
<S>                                                     <C>           <C>           <C>           <C>        

  Retail Loan Production                                  $ 264,059     $ 509,528      N/A          $ 195,655
  Retail Division Operating Expenses                      $   5,699     $  12,700      N/A          $   4,407
</TABLE>

(1) Source:  Mortgage Bankers Association of America, Economics Department.

        The primary cause of the variations observed above relate to the sale of
the retail production platform effective May 1, 1998.

Subprime Loan Production

        In 1997, the Company began its initial expansion into subprime lending
activities. In connection therewith, the Company acquired Meritage Mortgage
Corporation (Meritage), a wholesale producer of subprime mortgage loans, in
April 1997. The Company's subprime division produced $417.9 million during the
first nine months of 1998, 82% more than for the comparable prior year period.

        Management anticipates continuing near-term increases in subprime
production volumes as subprime branches recently opened or acquired in 1997 and
as subprime operations introduced and made available through the Company's
existing 15 branch agency-eligible wholesale network reach full year production
levels. In the future, the Company plans to offer select subprime loan products
through the existing nationwide correspondent production channel.

        A summary of key information relevant to the Company's subprime
production activities is set forth below:


<TABLE>
<CAPTION>
  ($ in thousands)                                            At or For the               At or For the
                                                               Nine Months                   Quarter
                                                           Ended September 30,         Ended September 30,
                                                        -------------------------   -------------------------
                                                           1998            1997         1998           1997
                                                        ----------    -----------   ----------    -----------
<S>                                                     <C>           <C>           <C>           <C>        
  Subprime Loan Production                               $ 417,892     $ 230,199     $ 165,760     $ 96,441
  Subprime Division Operating Expenses                   $  15,888     $   6,729     $   5,313     $  3,200
  Number of Brokers                                            835           661           835          661
  Number of Employees                                          243           116           243          116
</TABLE>

        Subprime loan production increased by 72% to $165.8 million for the
third quarter of 1998 as compared to $96.4 million during the third quarter of
1997 as the Company expanded its operations during 1998.


                                       16
<PAGE>   17

Commercial Mortgage Production

        In connection with its acquisition of RBC on December 31, 1997, the
Company acquired RBC's subsidiary, Laureate Realty Services, Inc. (Laureate
Realty). Laureate Realty originates commercial mortgage loans for various
insurance companies and other investors. Commercial mortgage loans are generally
originated in the name of the investor and, in most instances, Laureate Realty
retains the right to service the loans under a servicing agreement.

        A summary of key information relevant to the Company's commercial
mortgage production activities is set forth below:

<TABLE>
<CAPTION>
  ($ in thousands)                                            At or For the               At or For the
                                                               Nine Months                   Quarter
                                                           Ended September 30,         Ended September 30,
                                                        -------------------------   -------------------------
                                                           1998            1997         1998           1997
                                                        ----------    -----------   ----------    -----------
<S>                                                     <C>           <C>           <C>           <C>        
  Commercial Mortgage Production                         $ 653,451        N/A        $ 290,829         N/A
  Commercial Mortgage Division Operating                 $   7,763        N/A        $   2,957         N/A
        Expenses
  Number of Branches                                            11        N/A               11         N/A
  Number of Employees                                           77        N/A               77         N/A
</TABLE>

Lease Production

        Through RBC's leasing division, Republic Leasing, acquired on December
31, 1997, the Company originates and services small-ticket equipment leases.
Substantially all of Republic Leasing's lease receivables are acquired from
independent brokers who operate throughout the continental United States.

        A summary of key information relevant to the Company's lease production
activities is set forth below:


<TABLE>
<CAPTION>
  ($ in thousands)                                            At or For the               At or For the
                                                               Nine Months                   Quarter
                                                           Ended September 30,         Ended September 30,
                                                        -------------------------   -------------------------
                                                           1998            1997         1998           1997
                                                        ----------    -----------   ----------    -----------
<S>                                                     <C>           <C>           <C>           <C>        
  Lease Production                                        $ 55,853       N/A          $ 22,310          N/A
  Lease Division Operating Expenses                       $  3,635       N/A          $  1,175          N/A
  Number of Brokers                                            210       N/A               210          N/A
  Number of Employees                                           61       N/A                61          N/A
</TABLE>

AGENCY-ELIGIBLE MORTGAGE SERVICING

        Agency-eligible mortgage servicing includes collecting and remitting
mortgage loan payments, accounting for principal and interest, holding escrow
funds for payment of mortgage-related expenses such as taxes and insurance,
making advances to cover delinquent payments, making inspections as required of
the mortgaged premises, contacting delinquent mortgagors, supervising
foreclosures and property dispositions in the event of unremedied defaults and
generally administering mortgage loans.

        The Company is somewhat unique in that its strategy is to sell
substantially all of its produced agency-eligible mortgage servicing rights to
other approved servicers. In that regard, the Company 



                                       17
<PAGE>   18

believes it is the largest national supplier of agency-eligible servicing rights
to the still-consolidating mega-servicers. Typically, the Company sells its
agency-eligible mortgage servicing rights within 90 to 180 days of purchase or
origination. However, for strategic reasons, the Company also strives to
maintain a servicing portfolio whose size is determined by reference to the
Company's cash operating costs which, in turn, are largely determined by the
size of its loan production platform. By continuing to focus on the low-cost
correspondent and wholesale production channels, the Company is able to minimize
the cash operating costs of its loan production platform and thus the
strategically required size of its agency-eligible loan servicing operation.

        A summary of key information relevant to the Company's loan servicing
activities is set forth below:

<TABLE>
<CAPTION>
   ($ in thousands)                                       At or For the Nine Months            At or For the Quarter
                                                             Ended September 30,                Ended September 30,
                                                     -------------------------------       -------------------------------
                                                           1998            1997                1998               1997
                                                     ------------       ------------       ------------       ------------
<S>                                                  <C>                <C>                <C>                <C>         
   Underlying Unpaid Principal Balances:
      Beginning Balance *                            $  7,125,222       $  6,670,267       $  9,369,326       $  7,239,065
      Loan Production (net of servicing-
         released production)                          11,547,716          7,864,319          3,715,794          3,054,529
      Net Change in Work-in-Progress                     (151,839)          (379,131)           (84,229)          (142,736)
      Bulk Acquisitions                                   122,467            774,097                N/A                N/A
      Sales of Servicing                               (7,675,411)        (7,102,140)        (2,871,176)        (2,801,046)
      Paid-In-Full Loans                                 (989,514)          (486,965)          (338,623)          (201,385)
      Amortization, Curtailments and Other, net          (255,649)          (344,081)           (68,100)          (152,061)
                                                     ------------       ------------       ------------       ------------
      Ending Balance*                                $  9,722,992       $  6,996,366       $  9,722,992       $  6,996,366
      Subservicing Ending Balance                       3,206,581          3,066,256          3,206,581          3,066,256
                                                     ------------       ------------       ------------       ------------
   Total Underlying Unpaid Principal Balances        $ 12,929,573       $ 10,062,622       $ 12,929,573       $ 10,062,622
                                                     ============       ============       ============       ============
</TABLE>

* These numbers and statistics apply to the Company's owned agency-eligible
servicing portfolio and therefore exclude the subservicing portfolio.

        Of the $9.7 billion and $7.0 billion unpaid principal balance at
September 30, 1998 and 1997, approximately $5.6 billion and $4.2 billion,
respectively, are classified as available for sale, while $4.1 billion and $2.8
billion, respectively, are classified as held for sale.

<TABLE>
<CAPTION>
                                           At or For the Nine Months         At or For the Quarter
                                               Ended September 30,             Ended September 30,
                                           -------------------------        ------------------------
                                              1998            1997            1998            1997
                                           ---------        --------        --------        --------
<S>                                        <C>              <C>             <C>             <C>     
Total Company Servicing Fees               $  31,134        $ 23,049        $ 11,419        $  7,711
Net Interest Income from Owned Leases          3,198             N/A           1,216             N/A
                                           ---------        --------        --------        --------
                                              34,332          23,049          12,635           7,711
                                           ---------        --------        --------        --------
Total Company Operating Expenses             121,207          92,212          41,251          41,050
Total Company Amortization and
   Depreciation                              (23,998)        (16,191)         (9,112)         (5,738)
                                           ---------        --------        --------        --------
Total Company Cash Operating Expenses      $  97,209        $ 76,021        $ 32,139        $ 35,312
                                           ---------        --------        --------        --------
Coverage Ratio                                    35%             30%             39%             22%
                                           =========        ========        ========        ========
</TABLE>

        The Company's coverage ratio for the first nine months of 1998 at 35%
was lower than the Company's target level of between 50% and 80%.
Opportunistically and as market conditions permit, management would expect to
bring this ratio back in line with the stated objective. Effective May 1, 



                                       18
<PAGE>   19

1998, the Company sold its retail production franchise, which accounted for $5.6
million of the Company's cash operating expenses for the first nine months of
1998. Without retail division operating expenses for the first nine months of
1998, the Company's coverage ratio would have been 37%.

        A summary of agency-eligible servicing statistics follows:

<TABLE>
<CAPTION>
   ($ in thousands)                                      At or For the Nine Months           At or For the Quarter
                                                           Ended September 30,               Ended September 30,
                                                       -----------------------------     ---------------------------
                                                           1998             1997             1998            1997
                                                       ------------      -----------     -----------     -----------
<S>                                                     <C>              <C>             <C>             <C>        
   Average Underlying Unpaid Principal Balances
      (including subservicing)                          $11,394,262      $ 9,225,094     $12,428,469     $ 9,683,313
   Weighted Average Note Rate*                                7.36%            7.82%           7.36%           7.82%
   Weighted Average Servicing Fee*                            0.40%            0.41%           0.40%           0.41%
   Delinquency (30+ days) Including
      Bankruptcies and Foreclosures*                          1.81%            3.76%           1.81%           3.76%
   Number of Servicing Division Employees                       156              125             156             125
</TABLE>

* These numbers and statistics apply to the Company's owned agency-eligible
servicing portfolio and therefore exclude the subservicing portfolio.

        The $2.7 billion, or 28%, increase in the average underlying unpaid
principal balance of agency-eligible mortgage loans being serviced for the third
quarter of 1998 as compared to the third quarter of 1997 is primarily related to
the Company's decision to retain a larger percentage of the servicing rights
associated with its production during the first nine months of 1998.
Additionally, the Company's increased loan production volumes during the latter
part of 1997 and the first nine months of 1998 compared to the same periods of
the prior years contributed to the increase. Since the Company generally sells
servicing rights related to the agency-eligible loans it produces within 90 to
180 days of purchase or origination, increased production volumes generally
result in a higher volume of mortgage servicing rights held in inventory pending
sale.

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998, COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1997

Summary by Operating Division

        Following is a summary of the allocated revenues and expenses for each
of the Company's operating divisions for the nine months ended September 30,
1998 and 1997, respectively:



                                       19
<PAGE>   20

<TABLE>
<CAPTION>
                                                       Residential
                                             -------------------------------
($ in thousands)                             Mortgage Production
                                             -------------------   Agency -
For the Nine Months Ended                    Agency -              Eligible   Commercial
September 30, 1998*                          Eligible  Subprime    Servicing    Mortgage   Leasing   Other    Consolidated
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
<S>                                          <C>        <C>        <C>        <C>         <C>        <C>      <C>
Net interest income                          $  4,492   $  5,999                $    374  $  3,198   $  289       $ 14,352
Net gain on sale of mortgage loans            101,547     22,218                   5,461                           129,226
Gain on sale of mortgage servicing rights                          $  1,613                                          1,613
Servicing fees                                                       27,257        2,776       773      328         31,134
Other income                                    1,702        272        230          (13)      571      622          3,384
------------------------------------------   --------  ---------   --------   ----------  --------   ------   ------------
     Total revenues                           107,741     28,489     29,100        8,598     4,542    1,239        179,709
------------------------------------------   --------  ---------   --------   ----------  --------   ------   ------------

Salary and employee benefits                   41,339     11,270      2,491        4,924     1,561      456         62,041
Occupancy expense                               5,377      1,362        313          598       264      144          8,058
Amortization of mortgage servicing rights                            19,081          972                            20,053
General and administrative expenses            19,750      3,256      4,456        1,269     1,810      514         31,055
------------------------------------------   --------  ---------   --------   ----------  --------   ------   ------------
     Total expenses                            66,466     15,888     26,341        7,763     3,635    1,114        121,207
------------------------------------------   --------  ---------   --------   ----------  --------   ------   ------------

Income before income taxes                     41,275     12,601      2,759          835       907      125         58,502
Income tax expense                            (16,152)    (4,571)    (1,069)        (317)     (359)     (89)       (22,557)
------------------------------------------   --------  ---------   --------   ----------  --------   ------   ------------
Net income                                   $ 25,123   $  8,030   $  1,690      $   518    $  548   $   36       $ 35,945
                                             ========  =========   ========   ==========  ========   ======   ============

<CAPTION>
                                                       Residential
                                             -------------------------------
($ in thousands)                             Mortgage Production
                                             -------------------   Agency -
For the Nine Months Ended                    Agency -              Eligible   Commercial
September 30, 1997*                          Eligible  Subprime    Servicing    Mortgage   Leasing   Other    Consolidated
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
<S>                                          <C>        <C>        <C>        <C>         <C>        <C>      <C>
Net interest income                          $ 14,186                                                          $ 14,186
Net gain on sale of mortgage loans             62,079    $ 9,499                                                 71,578
Gain on sale of mortgage servicing rights                          $ 5,948                                        5,948
Servicing fees                                                      23,049                                       23,049
Other income                                      572                                                               572
------------------------------------------   --------    -------   -------    ----------  --------   -------   --------
     Total revenues                            76,837      9,499    28,997                                      115,333
------------------------------------------   --------    -------   -------    ----------  --------   -------   --------

Salary and employee benefits                   36,481      5,021     2,129                                       43,631
Occupancy expense                               4,662        435       231                                        5,328
Amortization of mortgage servicing rights                           13,673                                       13,673
General and administrative expenses            12,784      1,273     5,376                           $10,147     29,580
------------------------------------------   --------    -------   -------    ----------  --------   -------   --------
     Total expenses                            53,927      6,729    21,409                            10,147     92,212
------------------------------------------   --------    -------   -------    ----------  --------   -------   --------

Income before income taxes                     22,910      2,770     7,588                           (10,147)    23,121
Income tax expense                             (8,690)    (1,051)   (2,878)                            3,906     (8,713)
------------------------------------------   --------    -------   -------    ----------  --------   -------   --------
Net income                                   $ 14,220    $ 1,719   $ 4,710                           $(6,241)  $ 14,408
                                             ========    =======   =======    ==========  ========   =======   ========
</TABLE>

*Revenues and expenses have been recorded on a direct basis to the extent
possible. Other than direct charges, management believes that revenues and
expenses have been allocated to the respective divisions on a reasonable basis.


Agency-Eligible Mortgage Operations

        Following is a comparison of the revenues and expenses allocated to the
Company's agency-eligible mortgage production operations.



                                       20
<PAGE>   21

<TABLE>
<CAPTION>
                                                For the Nine Months Ended 
                                                      September 30,
                                               ---------------------------
($ in thousands)                                   1998            1997
                                               -----------      ----------
<S>                                            <C>              <C>       
Net interest income                            $     4,492      $   14,186
Net gain on sale of mortgage loans                 101,547          62,079
Other income                                         1,702             572
                                               -----------      ----------
     Total production revenue                      107,741          76,837
                                               -----------      ----------
Salary and employee benefits                        41,339          36,481
Occupancy expense                                    5,377           4,662
General and administrative expenses                 19,750          12,784
                                               -----------      ----------
     Total production expenses                      66,466          53,927
                                               -----------      ----------
     Net pre-tax production margin             $    41,275      $   22,910
                                               -----------      ----------

Production                                     $10,990,732      $7,549,735
Pool delivery                                   10,934,899       7,268,069

Total production revenue to pool delivery           99 bps         106 bps
Total production expenses to production             60 bps          71 bps
                                               -----------      ----------
     Net pre-tax production margin                  39 bps          35 bps
                                               ===========      ==========
</TABLE>

Summary

        The production revenue to pool delivery ratio declined seven basis
points, or 7%, for the first nine months of 1998 as compared to the first nine
months of 1997. Generally, net gain on sale of mortgage loans (93 basis points
for 1998 versus 85 basis points for 1997) improved due to better overall
execution into the secondary markets. However, net interest income declined and
offset this improvement due to the relatively flatter yield curve environment.
The production expenses to production ratio decreased 11 basis points, or 15%,
for the first nine months of 1998 as compared to the first nine months of 1997.
Generally, this relates to better leverage of fixed operating expenses in the
higher volume production environment for the first nine months of 1998 versus
the comparable period of 1997. As a consequence of the foregoing, the Company's
net agency-eligible pre-tax production margin improved 4 basis points, or 11%,
to 39 basis points while in absolute dollars it increased $18.4 million, or 80%.

Net Interest Income

        The following table analyzes net interest income allocated to the
Company's agency-eligible mortgage production activities in terms of rate and
volume variances of the interest spread (the difference between interest rates
earned on loans and mortgage-backed securities and interest rates paid on
interest-bearing sources of funds) for the nine months ended September 30, 1998
and 1997, respectively.



                                       21
<PAGE>   22

<TABLE>
<CAPTION>

($ in thousands)
                                                                                                                Variance
      Average Volume      Average Rate                                       Interest                        Attributable to
---------------------------------------                                -------------------               ---------------------
    1998         1997     1998     1997                                   1998      1997     Variance       Rate     Volume
---------------------------------------                                -------------------------------------------------------
<C>           <C>         <C>      <C>   <S>                            <C>       <C>         <C>         <C>          <C>    
                                         Interest Income
                                         --------------- 
                                         Mortgages Held for Sale and
 $1,155,602   $ 909,185   6.83%    7.82%    Mortgage-Backed Securities  $ 59,156  $ 53,301    $ 5,855    $ (8,591)     $14,446
---------------------------------------                                -------------------------------------------------------
                                         Interest Expense
                                         ----------------
 $  452,737   $ 436,248   4.63%    4.88% Warehouse Line                 $ 15,678  $ 15,916    $  (238)   $   (840)     $   602
    673,677     446,697   5.91%    5.59% Gestation Line                   29,755    18,680     11,075       1,583        9,492
     95,755               6.73%          Servicing Secured Line            4,820                4,820       4,820
     33,321      58,493   5.90%    6.44% Servicing Receivable Line         1,470     2,819     (1,349)       (136)      (1,213)
      7,918       4,213   8.09%    8.13% Other Borrowings                    479       256        223          (3)         226
                                         Facility Fees & Other Charges     2,462     1,444      1,018                    1,018
---------------------------------------                                -------------------------------------------------------
 $1,263,408   $ 945,651   5.78%    5.53% Total Interest Expense         $ 54,664  $ 39,115    $15,549    $  5,424      $10,125
---------------------------------------                                -------------------------------------------------------
                          1.05%    2.29% Net Interest Income            $  4,492  $ 14,186    $(9,694)   $(14,015)     $ 4,321
                        ===============                                =======================================================
</TABLE>

        Net interest income from agency-eligible production decreased 68% to 
$4.5 million for the first nine months of 1998 compared to $14.2 million for the
first nine months of 1997. The 124 basis point decrease in the interest-rate
spread was primarily the result of the narrower spreads between long and
short-term rates in the first nine months of 1998 compared to the first nine
months of 1997. The Company's mortgages and mortgage-backed securities are
generally sold and replaced within 30 to 35 days. Accordingly, the Company
generally borrows at rates based upon short-term indices, while its asset yields
are primarily based upon long-term mortgage rates.

Estimated Provision for Foreclosure Losses

        As a servicer of agency-eligible mortgage loans and small-ticket
equipment leases the Company will incur certain losses in the event it becomes
necessary to carry out foreclosure actions on these loans or leases serviced.
Generally, such agency-eligible mortgage loan losses relate to FHA or VA loans,
which are insured or guaranteed on a limited basis. The allowance for estimated
loan losses on foreclosure, which is part of the mortgage servicing rights
basis, is determined based on delinquency trends and management's evaluation of
the probability that foreclosure actions will be necessary. For the nine months
ended September 30, 1998 and for the nine months ended September 30, 1997 the
Company recorded provision for foreclosure expense of approximately $6.5 million
and $2.6 million, respectively. The Company acquired a small-ticket equipment
leasing operation effective December 31, 1997. Accordingly, $0.8 million of the
increase in provision expense is attributable to the acquisition of this
operation. The balance of the overall increase is attributable to the overall
growth of the Company's production and servicing operations.

Net Gain on Sale of Agency-eligible Mortgage Loans

        A reconciliation of gain on sale of agency-eligible mortgage loans for
the periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                 For the Nine Months Ended September 30,
                                                                 ---------------------------------------
                                                                        1998              1997
                                                                     -----------      ----------
<S>                                                                  <C>              <C>       
Gross proceeds on sales of mortgage loans                            $11,126,158      $7,426,512
Initial unadjusted acquisition cost of mortgage loans sold, net
     of hedge results                                                 11,124,898       7,422,340
                                                                     -----------      ----------
Unadjusted gain on sale of mortgage loans                                  1,260           4,172
Loan origination and correspondent program administrative fees            28,669          23,852
                                                                     -----------      ----------
Unadjusted aggregate margin                                               29,929          28,024
Acquisition basis allocated to mortgage servicing rights
     (SFAS No. 125)                                                       70,984          32,661
Net change in deferred administrative fees                                   634           1,394
                                                                     -----------      ----------

Net gain on sale of agency-eligible mortgage loans                   $   101,547      $   62,079
                                                                     ===========      ==========
</TABLE>

        The Company sold agency-eligible loans during the first nine months of
1998 with an aggregate unpaid principal balance of $11.1 billion compared to
sales of $7.4 billion for the first nine months of 1997. The amount of proceeds
received on sales of mortgage loans exceeded the initial unadjusted acquisition
cost of the loans sold by $1.3 million (1 basis point) for the first nine months
of 1998 as compared to $4.2 million (6 basis points) for the comparable period
of the prior year. The Company received loan origination and correspondent
program administrative fees of $28.7 million (26 basis points) on these loans
during the first nine months of 1998 and $23.9 million (32 basis points) during
the first nine months of 1997. The Company allocated $71.0 million (64 basis
points) to basis in mortgage 

                                       22
<PAGE>   23

servicing rights for loans sold in the first nine months of 1998 as compared to
$32.7 million (44 basis points) during the first nine months of 1997 in
accordance with Statement of Financial Accounting Standards (SFAS) No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities". Consequently, net gain on sale of agency-eligible mortgage
loans increased to $101.5 million for the first nine months of 1998 versus $62.1
million for the first nine months of 1997. Overall, the increase is attributed
to better execution into the secondary markets.

Subprime Mortgage Operations

        Following is an analysis of the revenues and expenses allocated to the
Company's subprime mortgage production operations.

<TABLE>
<CAPTION>
                                                                     For the Nine Months Ended 
                                                                          September 30,
                                                                      ----------------------
($ in thousands)                                                        1998          1997
                                                                      --------      --------
<S>                                                                   <C>           <C>     
Net interest income                                                   $  5,999           N/A
Net gain on sale of mortgage loans                                      22,218      $  9,499
Other income                                                               272           N/A
                                                                      --------      --------
     Total production revenue                                           28,489         9,499
                                                                      --------      --------
Salary and employee benefits                                            11,270         5,021
Occupancy expense                                                        1,362           435
General and administrative expenses                                      3,256         1,273
                                                                      --------      --------
     Total production expenses                                          15,888         6,729
                                                                      --------      --------
     Net pre-tax production margin                                    $ 12,601      $  2,770
                                                                      ========      ========


Production                                                            $417,892      $230,199
Whole loan sales and securitizations                                   365,946       228,153

Total production revenue to whole loan sales and securitizations       779 bps       416 bps
Total production expenses to production                                380 bps       292 bps
                                                                      --------      --------
     Net pre-tax production margin                                     399 bps       124 bps
                                                                      ========      ========
</TABLE>

Summary

        During the first nine months of 1998, the Company produced $417.9
million of subprime loans. The Company sold approximately $213.7 million (51%)
of its first nine months 1998 production in whole loan transactions and
delivered $152.3 million into the secondary markets through securitization
transactions. Overall, the Company operated during the first nine months of 1998
at a 3.99% pre-tax subprime production margin. At September 30, 1998, the
Company had unsold subprime mortgage loans of $90.5 million. During the first
nine months of 1997, the Company's subprime division was in its initial startup
phase and $46.8 million of the subprime mortgage loan production for that period
was purchased in bulk from Meritage prior to the Company's acquisition of
Meritage.


Net Interest Income

        The following table analyzes net interest income allocated to the
Company's subprime mortgage production activities in terms of rate and volume
variances of the interest spread (the difference between 



                                       23
<PAGE>   24

interest rates earned on loans and residual certificates and interest rates paid
on interest-bearing sources of funds) for the nine months ended September 30,
1998 and 1997, respectively.

<TABLE>
<CAPTION>

($ in thousands)

                                                                                                                Variance
      Average Volume      Average Rate                                       Interest                        Attributable to
---------------------------------------                                -------------------               ---------------------
    1998         1997     1998     1997                                   1998      1997     Variance       Rate     Volume
---------------------------------------                                -------------------------------------------------------
<C>           <C>         <C>      <C>   <S>                            <C>       <C>         <C>         <C>          <C>    
                                         Interest Income
                                         ---------------
                                         Mortgages Held for Sale and
  $ 129,822       N/A     9.89%    N/A      Residual Certificates      $ 9,630       N/A      $ 9,630     $ 9,630      N/A
                                                                      --------------------------------------------------------
-----------------------------------------
                                         Interest Expense
                                         ----------------
  $  87,261       N/A     5.56%    N/A   Total Interest Expense        $ 3,631       N/A      $ 3,631     $ 3,631      N/A
-----------------------------------------                             --------------------------------------------------------
                          4.33%    N/A   Net Interest Income           $ 5,999       N/A      $ 5,999     $ 5,999      N/A
                          ===============                             ========================================================
</TABLE>

        Net interest income on subprime loans and accretion income on residuals
was $6.0 million and the interest rate spread was 433 basis points for the first
nine months of 1998. This was primarily the result of the larger interest rate
spreads possible for subprime product.

Net Gain on Securitization and Sale of Subprime Mortgage Loans

        A reconciliation of the gain on securitization of subprime mortgage
loans for the periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                  For the Nine Months Ended 
                                                                       September 30,
                                                                  ------------------------
                                                                    1998             1997
                                                                  ---------        -------

<S>                                                               <C>             <C>     
Gross proceeds on securitization of subprime mortgage loans       $ 149,063       $ 90,831
Initial acquisition cost of subprime mortgage loans
     securitized, net of fees                                       152,286         94,914
                                                                  ---------       --------
Unadjusted loss on securitization of subprime mortgage loans         (3,223)        (4,083)
Initial capitalization of residual certificates                      11,227          7,550
                                                                  ---------       --------
Net gain on securitization of subprime mortgage loans             $   8,004       $  3,467
                                                                  =========       ========
</TABLE>

        Residual certificates arising from subprime securitizations are
classified as trading securities (as defined in SFAS No. 115), and changes in
the fair value of such certificates are recorded as adjustments to income in the
period of change. The Company has not yet assessed whether it will amend its
current policies upon the adoption of SFAS No. 134 (see Notes to the
Consolidated Financial Statements.) The Company assesses the fair value of the
residual certificates quarterly, based on an independent third party valuation.
This valuation is based on the discounted cash flows expected to be available to
the holder of the residual certificate. Significant assumptions used at
September 30, 1998 for all residual certificates held by the Company include a
discount rate of 13%, a constant default rate of 3% and a loss severity rate of
25%. Ramping periods are based on prepayment penalty periods and adjustable rate
mortgage first reset dates. Constant prepayment rate assumptions specific to the
individual certificates for purposes of the September 30, 1998 valuations are
set forth below:


                                       24
<PAGE>   25

<TABLE>
<CAPTION>
                                   1997-1         1997-2         1998-1         Other
                                 ----------    -----------    -----------     ----------
<S>                                <C>            <C>            <C>            <C>    
Prepayment Speeds
  Fixed rate mortgages             32% cpr        30% cpr        28% cpr        24% cpr
  Adjustable rate mortgages        32% cpr        30% cpr        28% cpr        32% cpr
</TABLE>


        The assumptions above are estimated based on current conditions for
similar instruments that are subject to prepayment and credit risks. Other
factors evaluated in the determination of fair value include credit and
collateral quality of the underlying loans, current economic conditions and
various fees and costs (such as prepayment penalties) associated with ownership
of the residual certificate. Although the Company believes that the fair values
of its residual certificates are reasonable given current market conditions, the
assumptions used are estimates and actual experience may vary from these
estimates. Differences in the actual prepayment speed and loss experience from
the assumptions used, could have a significant effect on the fair value of the
residual certificates.

        The Company also sold subprime mortgage loans on a whole loan basis
during the first nine months of 1998. Whole loans are generally sold without
recourse to third parties with the gain or loss being calculated based on the
difference between the carrying value of the loans sold and the gross proceeds
received from the purchaser. No interest in these loans is retained by the
Company.

        A reconciliation of the gain on subprime mortgage whole loan sales for
the periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                            For the Nine Months 
                                                                            Ended September 30,
                                                                           ----------------------
                                                                             1998          1997
                                                                           --------      --------
<S>                                                                        <C>           <C>     
Gross proceeds on whole loan sales of subprime mortgage loans              $227,874      $139,271
Initial acquisition cost of subprime mortgage loans sold, net of fees       213,660       133,239
                                                                           --------      --------
Net gain on whole loan sales of subprime mortgage loans                    $ 14,214      $  6,032
                                                                           ========      ========
</TABLE>

        As summarized in the following analysis, the recorded residual values
imply that the Company's securitizations are valued at 1.57 times the implied
excess yield at September 30, 1998, as compared to the 1.75 multiple implied at
June 30, 1998. The table below represents balances as of September 30, 1998,
unless otherwise noted.


                                       25
<PAGE>   26

<TABLE>
<CAPTION>

($ in thousands)                       Securitizations
                              ----------------------------------
                              1997-1        1997-2       1998-1       Subtotal       Other         Total
                              -------      -------      --------      --------      -------      --------
<S>                           <C>          <C>          <C>           <C>           <C>          <C>     
Residual Certificates         $ 8,003      $10,092      $ 10,455      $ 28,550      $ 4,843      $ 33,393
Bonds                         $60,612 *    $86,379 *    $121,636 *    $268,627      $47,399 *    $316,026
                              -------      -------      --------      --------      -------      --------
Subtotal                      $68,615      $96,471      $132,091      $297,177      $52,242      $349,419
Unpaid Principal Balance      $64,961 *    $90,726 *    $122,879 *    $278,566      $50,217 *    $328,783
                              -------      -------      --------      --------      -------      --------
Implied Price                  105.63       106.33        107.50        106.68       104.03        106.28
                              -------      -------      --------      --------      -------      --------
</TABLE>

* Amounts were based upon trustee statements dated October 25, 1998 that covered
the period ended September 30, 1998.

<TABLE>
<S>                             <C>         <C>         <C>        <C>        <C>         <C>  
Collateral Yield                10.39       10.00       9.72       9.97       10.85       10.10
Collateral Equivalent
   Securitization Costs         (0.73)      (0.64)     (0.60)     (0.64)      (0.03)      (0.55)
Collateral Equivalent
   Bond Rate                    (5.09)      (5.24)     (5.34)     (5.25)      (7.20)      (5.53)
                                -----       -----       ----       ----       -----       -----
Implied Collateral Equivalent 
   Excess Yield                  4.57        4.12       3.78       4.08        3.62        4.01
                                -----       -----       ----       ----       -----       -----

Implied Premium Above Par        5.63        6.33       7.50       6.68        4.03        6.28
Implied Collateral
   Equivalent Excess Yield       4.57        4.12       3.78       4.08        3.62        4.01
                                -----       -----       ----       ----       -----       -----

Multiple                         1.23 x      1.54 x     1.99 x     1.64 x      1.11 x      1.57 x
                                -----       -----       ----       ----       -----       -----
</TABLE>

Agency-Eligible Mortgage Servicing

        Following is a summary of the revenues and expenses allocated to the
Company's agency-eligible mortgage servicing operations for the nine months
ended September 30, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                 For the Nine Months Ended 
                                                                       September 30,
                                                                 --------------------------
($ in thousands)                                                    1998            1997
                                                                 ----------      ----------
<S>                                                              <C>             <C>       
Servicing fees                                                   $   27,257      $   23,049
Other income                                                            230             N/A
                                                                 ----------      ----------
      Servicing revenues                                             27,487          23,049
                                                                 ----------      ----------
Salary and employee benefits                                          2,491           2,129
Occupancy expense                                                       313             231
Amortization of mortgage servicing rights                            19,081          13,673
General and administrative expenses                                   4,456           5,376
                                                                 ----------      ----------
      Total loan servicing expenses                                  26,341          21,409
                                                                 ----------      ----------
      Net pre-tax servicing margin                                    1,146           1,640
Gain on sale of mortgage servicing rights                             1,613           5,948
                                                                 ----------      ----------
      Net pre-tax servicing contribution                         $    2,759      $    7,588
                                                                 ==========      ==========

Average owned servicing portfolio                                $9,024,339      $7,415,702
Servicing sold                                                    7,675,411       6,584,487

Net pre-tax servicing margin to average servicing portfolio           2 bps           3 bps
Gain on sale of servicing to servicing sold                           2 bps           9 bps
</TABLE>

                                       26
<PAGE>   27

Summary

        The ratio of net pre-tax servicing margin to the average servicing
portfolio declined one basis point primarily due to relative increases in
amortization and general and administrative expenses. The increased amortization
expense is attributable to generally higher levels of mortgage servicing rights
held for sale and the generally higher amortization expenses required in the
current higher prepay speed environment.

        Overall, the servicing division contributed $2.8 million to the first
nine months of 1998 pre-tax net income, a $4.8 million, or 64%, decrease from
the $7.6 million contribution for the first nine months of 1997.

        Loan servicing fees were $27.3 million for the first nine months of
1998, compared to $23.0 million for the first nine months of 1997, an increase
of 18%. This increase is primarily related to an increase in the average
aggregate underlying unpaid principal balance of mortgage loans serviced to $9.0
billion during the first nine months of 1998 from $7.4 billion during the first
nine months of 1997, an increase of 22%. Similarly, amortization of mortgage
servicing rights also increased to $19.1 million during the first nine months of
1998 from $13.7 million during the first nine months of 1997, an increase of
40%. The increase in amortization is primarily attributable to the growth in the
average balance of the mortgage loans serviced and the current generally higher
prepay speed environment.

        Given current market conditions, management continually assesses market 
prepay trends and adjusts amortization accordingly. Management believes that the
value of mortgage servicing rights are reasonable in light of current market
conditions. However, there can be no guarantee that market conditions will not
change such that mortgage servicing right valuations will require additional
amortization or impairment charges.

        Included in loan servicing fees for the first nine months of 1998 and
1997 are subservicing fees received by the Company of $581 thousand and $367
thousand, respectively. The subservicing fees are associated with temporary
subservicing agreements between the Company and purchasers of mortgage servicing
rights.

Gain on Sale of Mortgage Servicing Rights

        A reconciliation of the components of gain on sale of mortgage servicing
rights for the periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                        For the Nine Months Ended
                                                                             September 30,
                                                                      -----------------------------
                                                                         1998              1997
                                                                      -----------       -----------
<S>                                                                   <C>               <C>        
Underlying unpaid principal balances of mortgage loans
  on which servicing rights were sold during the period               $ 7,675,411       $ 6,584,487
                                                                      ===========       ===========

Gross proceeds from sales of mortgage servicing rights                $   174,601       $   146,004
Initial acquisition basis, net of amortization and hedge results          131,504           113,158
                                                                      -----------       -----------
Unadjusted gain on sale of mortgage servicing rights                       43,097            32,846
Acquisition basis allocated from mortgage loans, net of
  amortization (SFAS No. 125)                                             (41,484)          (26,898)
                                                                      -----------       -----------
Gain on sale of mortgage servicing rights                             $     1,613       $     5,948
                                                                      ===========       ===========
</TABLE>

        During the first nine months of 1998, the Company completed 19 sales of
mortgage servicing rights representing $7.7 billion of underlying unpaid
principal mortgage loan balances. This compares to 25 sales of mortgage
servicing rights representing $6.6 billion of underlying unpaid principal
mortgage loan balances in the first nine months of 1997. The unadjusted gain on
the sale of mortgage servicing rights was $43.1 million (56 basis points) for
the first nine months of 1998, up from $32.8 million (50 basis 


                                       27
<PAGE>   28

points) for the first nine months of 1997. The Company reduced this unadjusted
gain by $41.5 million in the first nine months of 1998, versus a $26.9 million
reduction during the first nine months of 1997, in accordance with SFAS No. 125.

Commercial Mortgage Operations

        Following is a summary of the revenues and expenses allocated to the
Company's commercial mortgage production operations.

<TABLE>
<CAPTION>
                                                                      For the Nine Months Ended 
                                                                            September 30,
                                                                       -----------------------
($ in thousands)                                                          1998          1997
                                                                       -----------     -------
<S>                                                                    <C>             <C>     
Net interest income                                                    $       374       N/A
Net gain on sale of mortgage loans                                           5,461       N/A
Other income                                                                   (13)      N/A
                                                                       -----------     -------
     Total production revenue                                                5,822       N/A
                                                                       -----------     -------
Salary and employee benefits                                                 4,924       N/A
Occupancy expense                                                              598       N/A
General and administrative expenses                                          1,269       N/A
                                                                       -----------     -------
     Total production expenses                                               6,791       N/A
                                                                       -----------     -------
     Net pre-tax production margin                                            (969)      N/A
                                                                       -----------     -------

Servicing fees                                                               2,776       N/A
Amortization of mortgage servicing rights                                     (972)      N/A
                                                                       -----------     -------
     Net pre-tax servicing margin                                            1,804       N/A
                                                                       -----------     -------
     Pre-tax income                                                    $       835       N/A
                                                                       -----------     -------

Production                                                             $   653,451       N/A
Whole loan sales                                                           653,451       N/A
Average commercial mortgage servicing portfolio                        $ 2,939,070       N/A

Total production revenue to whole loan sales                                89 bps       N/A
Total production expenses to production                                    104 bps       N/A
                                                                       -----------       ---
      Net pre-tax production margin                                       (15) bps       N/A
                                                                       -----------       ---

Servicing fees to average commercial mortgage servicing portfolio           13 bps       N/A
Amortization of mortgage servicing rights to average commercial
            mortgage servicing portfolio                                     4 bps       N/A
                                                                       -----------       ---
Net pre-tax servicing margin                                                 9 bps       N/A
                                                                       -----------       ---
</TABLE>


        Laureate Realty originates commercial mortgage loans for various
insurance companies and other investors, primarily in Alabama, Florida, Indiana,
North Carolina, South Carolina, Tennessee and Virginia. Substantially all loans
originated by Laureate Realty have been originated in the name of the investor,
and in most cases, Laureate Realty has retained the right to service the loans
under a servicing agreement with the investor. Most commercial mortgage loan
servicing agreements are short-term, and retention of the servicing contract is
dependent on maintaining the investor relationship.


                                       28
<PAGE>   29

Net Gain on Sale of Commercial Mortgage Loans

        A reconciliation of gain on sale of commercial mortgage loans for the
periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                          For the Nine Months Ended 
                                                                               September 30,
                                                                           --------------------
                                                                             1998        1997
                                                                           --------     -------
<S>                                                                        <C>          <C>    
Gross proceeds on sales of commercial mortgage loans                       $653,451      N/A
Initial unadjusted acquisition cost of commercial mortgage 
   loans sold                                                               653,451      N/A
                                                                           --------     -----
Unadjusted gain on sale of commercial mortgage loans
Commercial mortgage and origination fees                                      4,816      N/A
                                                                           --------     -----
Unadjusted aggregate margin                                                   4,816      N/A
Initial acquisition cost allocated to basis in commercial
   Mortgage servicing rights (SFAS No. 125)                                     645      N/A
                                                                           --------     -----

Net gain on sale of commercial mortgage loans                              $  5,461      N/A
                                                                           ========     =====
</TABLE>

        During the first nine months of 1998, the commercial mortgage division
originated and sold approximately $653 million in commercial mortgage loans.
Commercial mortgage fees on these loans were $4.8 million or 74 basis points.
Origination fees are generally between 50 and 100 basis points on the loan
amount. In addition the commercial mortgage division allocated $645 thousand, or
10 basis points, to basis in servicing rights retained on commercial mortgage
loans produced during the period.

Leasing Operations

        Following is a summary of the revenues and expenses allocated to the
Company's small ticket equipment leasing operations for the periods indicated:

<TABLE>
<CAPTION>
                                                          For the Nine Months Ended
                                                              September 30,
                                                           -------------------
($ in thousands)                                             1998       1997
                                                           --------    -------
<S>                                                        <C>         <C>    
Net interest income                                        $  3,198      N/A
Other income                                                    571      N/A
                                                           --------    -------
      Leasing production revenue                              3,769      N/A
                                                           --------    -------
Salary and employee benefits                                  1,561      N/A
Occupancy expense                                               264      N/A
General and administrative expenses                           1,810      N/A
                                                           --------    -------
      Total lease operating expenses                          3,635      N/A
                                                           --------    -------
      Net pre-tax leasing production margin                     134      N/A
                                                           --------    -------

Servicing fees                                                  773      N/A
                                                           --------    -------
      Net pre-tax leasing margin                           $    907      N/A
                                                           --------    -------

Average owned leasing portfolio                            $ 66,332      N/A
Average serviced leasing portfolio                           57,909      N/A
                                                           --------    -------
Average leasing portfolio                                  $124,241      N/A
                                                           ========    =======
</TABLE>



                                       29
<PAGE>   30

<TABLE>
<S>                                                         <C>        <C>   
Leasing production revenue to average owned portfolio       758 bps      N/A
Leasing operating expenses to average owned portfolio       731 bps      N/A
                                                           --------    -------
Net pre-tax leasing production margin                        27 bps      N/A
                                                           ========    =======

Servicing fees to average serviced leasing portfolio        178 bps      N/A
</TABLE>

        Substantially all of the Company's lease receivables are acquired from
independent brokers who operate throughout the continental United States and
referrals from independent banks. At September 30, 1998 the Company's managed
lease servicing portfolio was $131.5 million. Of this managed lease portfolio,
$85.7 million was owned and $45.8 million was serviced for investors.

Net Interest Income

         Net interest income for the first nine months of 1998 was $3.2 million.
This is an annualized net interest margin of 3.39% based upon average lease
receivables owned of $66.3 million and average debt outstanding of $42.5
million.

Non-recurring and Special Charges

         During the nine months ended September 30, 1998, the Company 
recognized a $1.5 million gain on sale of the retail production platform.

        During the nine months ended September 30, 1997, the Company recorded 
as a component of other operating expenses a $2.3 million ($1.4 million
after-tax) charge related to joint termination of a merger agreement and a
special charge of $7.9 million ($4.8 million after-tax) related to certain
non-recoverable operating receivables.


RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1998, COMPARED TO QUARTER
ENDED SEPTEMBER 30, 1997

Summary by Operating Division

        Following is a summary of the allocated revenues and expenses for each
of the Company's operating divisions for the quarters ended September 30, 1998
and 1997, respectively:


                                       30
<PAGE>   31
<TABLE>
<CAPTION>
                                                       Residential
                                             -------------------------------
($ in thousands)                             Mortgage Production
                                             -------------------   Agency -
For the Quarter Ended                        Agency -              Eligible   Commercial
September 30, 1998*                          Eligible  Subprime    Servicing    Mortgage   Leasing   Other    Consolidated
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
<S>                                          <C>        <C>        <C>        <C>         <C>        <C>      <C>
Net interest income                          $   623   $  2,586                 $   114    $ 1,216   $  62     $ 4,601
Net gain on sale of mortgage loans            34,782      8,836                   1,979                         45,597
Gain on sale of mortgage servicing rights                          $   533                                         533
Servicing fees                                                      10,027          964        264     164      11,419
Other income                                       7        135         89          (11)       146     121         487
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
     Total revenues                           35,412     11,557     10,649        3,046      1,626     347      62,637
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------

Salary and employee benefits                  13,308      3,681        843        2,004        531     112      20,479
Occupancy expense                              1,685        491         95          209         98      49       2,627
Amortization of mortgage servicing rights                            7,432          318                          7,750
General and administrative expenses            6,805      1,141      1,339          426        546     138      10,395
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
     Total expenses                           21,798      5,313      9,709        2,957      1,175     299      41,251
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------

Income before income taxes                    13,614      6,244        940           89        451      48      21,386
Income tax expense                            (5,212)    (2,322)      (359)         (35)      (171)    (35)     (8,134)
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
Net income                                   $ 8,402   $  3,922    $   581      $    54    $   280   $  13     $13,252
                                             ========  =========   =========  ==========  ========   ======   ============
<CAPTION>

                                                       Residential
                                             -------------------------------
($ in thousands)                             Mortgage Production
                                             -------------------   Agency -
For the Quarter Ended                        Agency -              Eligible   Commercial
September 30, 1997*                          Eligible  Subprime    Servicing    Mortgage   Leasing   Other    Consolidated
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
<S>                                          <C>        <C>        <C>        <C>         <C>        <C>      <C>
Net interest income                          $ 4,535                                                             $  4,535
Net gain on sale of mortgage loans            24,611     $4,717                                                    29,328
Gain on sale of mortgage servicing rights                           $ 3,237                                         3,237
Servicing fees                                                        7,711                                         7,711
Other income                                     146                                                                  146
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
     Total revenues                           29,292      4,717      10,948                                        44,957
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------

Salary and employee benefits                  13,307      2,434         746                                        16,487
Occupancy expense                              1,612        199          75                                         1,886
Amortization of mortgage servicing rights                             4,840                                         4,840
General and administrative expenses            4,510        567       2,613                          $10,147       17,837
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
     Total expenses                           19,429      3,200       8,274                           10,147       41,050
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------

Income before income taxes                     9,863      1,517       2,674                          (10,147)       3,907
Income tax expense                            (3,682)      (566)       (998)                           3,906       (1,340)
------------------------------------------   --------  ---------   ---------  ----------  --------   ------   ------------
Net income                                   $ 6,181     $  951     $ 1,676                          $(6,241)    $  2,567
                                             ========  =========   =========  ==========  ========   ======   ============
</TABLE>

*Revenues and expenses have been recorded on a direct basis to the extent
possible. Other than direct charges, management believes that revenues and
expenses have been allocated to the respective divisions on a reasonable basis.


                                       31
<PAGE>   32

Agency-Eligible Mortgage Operations

        Following is a comparison of the revenues and expenses allocated to the
Company's agency-eligible mortgage production operations.

<TABLE>
<CAPTION>
                                                  For the Quarter Ended 
                                                      September 30,
                                               --------------------------
($ in thousands)                                  1998            1997
                                               ----------      ----------
<S>                                            <C>             <C>       
Net interest income                            $      623      $    4,535
Net gain on sale of mortgage loans                 34,782          24,611
Other income                                            7             146
                                               ----------      ----------
     Total production revenue                      35,412          29,292
                                               ----------      ----------
Salary and employee benefits                       13,308          13,307
Occupancy expense                                   1,685           1,612
General and administrative expenses                 6,805           4,510
                                               ----------      ----------
     Total production expenses                     21,798          19,429
                                               ----------      ----------
     Net pre-tax production margin             $   13,614      $    9,863
                                               ----------      ----------

Production                                     $3,583,724      $2,833,513
Pool delivery                                   3,763,526       2,768,506

Total production revenue to pool delivery          94 bps         106 bps
Total production expenses to production            61 bps          69 bps
                                               ----------      ----------
     Net pre-tax production margin                 33 bps          37 bps
                                               ==========      ==========
</TABLE>

Summary

        The production revenue to pool delivery ratio declined 12 basis points,
or 11%, for the third quarter of 1998 as compared to the third quarter of 1997.
Generally, net gain on sale of mortgage loans (92 basis points for 1998 versus
89 basis points for 1997) improved due to better overall execution into the
secondary markets. However, net interest income declined significantly and
offset this improvement due to the relatively flatter yield curve environment.
The production expenses to production ratio decreased 8 basis points, or 12%,
for the third quarter of 1998 as compared to the third quarter of 1997.
Generally, this relates to better leverage of fixed operating expenses in the
higher volume production environment for the third quarter of 1998 versus the
comparable period of 1997. As a consequence of the foregoing, the Company's net
agency-eligible pre-tax production margin declined 4 basis points, or 11%, to 33
basis points while in absolute dollars it increased $3.8 million, or 38%.

Net Interest Income

        The following table analyzes net interest income allocated to the
Company's agency-eligible mortgage production activities in terms of rate and
volume variances of the interest spread (the difference between interest rates
earned on loans and mortgage-backed securities and interest rates paid on
interest-bearing sources of funds).


                                       32
<PAGE>   33

<TABLE>
<CAPTION>

($ in thousands)

                                                                                                                Variance
      Average Volume      Average Rate                                       Interest                        Attributable to
---------------------------------------                                -------------------               ---------------------
    1998         1997     1998     1997                                   1998      1997     Variance       Rate     Volume
---------------------------------------                                -------------------------------------------------------
<C>          <C>          <C>     <C>   <S>                            <C>       <C>         <C>         <C>          <C>    
                                        Interest Income
                                        ---------------
                                        Mortgages Held for Sale and
$1,111,581   $1,102,862   6.68%   7.84%    Mortgage-Backed Securities  $18,564   $21,613     $(3,049)    $(3,220)     $  171
----------------------------------------                               -------------------------------------------------------
                                        Interest Expense
                                        ----------------
$  429,658   $  504,375   4.65%   5.03% Warehouse Line                 $ 5,035   $ 6,391     $(1,356)    $  (409)     $ (947)
   658,379      576,109   5.96%   5.88% Gestation Line                   9,886     8,539       1,347         128       1,219
    98,819                6.61%         Servicing Secured Line           1,646                 1,646       1,646
    33,822       87,553   5.91%   6.56% Servicing Receivable Line          504     1,447        (943)        (55)       (888)
    10,270        6,580   8.34%   7.93% Other Borrowings                   216       132          84          11          73
                                        Facility Fees & Other Charges      654       569          85                      85
----------------------------------------                               -------------------------------------------------------
$1,230,948   $1,174,617   5.78%   5.77% Total Interest Expense         $17,941   $17,078     $   863     $ 1,321      $ (458)
----------------------------------------                               -------------------------------------------------------
                          0.90%   2.07% Net Interest Income            $   623   $ 4,535     $(3,912)    $(4,541)     $  629
                        ================                               =======================================================
</TABLE>

        Net interest income from agency-eligible product decreased 86% to $0.6
million for the third quarter of 1998 compared to $4.5 million for the third
quarter of 1997. The 117 basis point decrease in the interest-rate spread was
primarily the result of the narrower spreads between long and short-term rates
in the third quarter of 1998 compared to the third quarter of 1997. The
Company's mortgages and mortgage-backed securities are generally sold and
replaced within 30 to 35 days. Accordingly, the Company generally borrows at
rates based upon short-term indices, while its asset yields are primarily based
upon long-term mortgage rates.

Net Gain on Sale of Agency-eligible Mortgage Loans

        A reconciliation of gain on sale of agency-eligible mortgage loans for
the periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                         For the Quarter Ended 
                                                                             September 30,
                                                                     ----------------------------
                                                                        1998               1997
                                                                     -----------       ----------
<S>                                                                  <C>               <C>       
Gross proceeds on sales of mortgage loans                            $ 3,886,406       $2,837,133
Initial unadjusted acquisition cost of mortgage loans sold, net
  of hedge results                                                     3,887,623        2,837,111
                                                                     -----------       ----------
Unadjusted gain on sale of mortgage loans                                 (1,217)              22
Loan origination and correspondent program administrative fees             8,833            9,716
                                                                     -----------       ----------
Unadjusted aggregate margin                                                7,616            9,738
Acquisition basis allocated to mortgage servicing rights
  (SFAS No. 125)                                                          27,128           14,541
Net change in deferred administrative fees                                    38              332
                                                                     -----------       ----------

Net gain on sale of agency-eligible mortgage loans                   $    34,782       $   24,611
                                                                     ===========       ==========
</TABLE>

        The Company sold agency-eligible loans during the third quarter of 1998
with an aggregate unpaid principal balance of $3.9 billion compared to sales of
$2.8 billion for the third quarter of 1997. The amount of proceeds received on
sales of mortgage loans was less than the initial unadjusted acquisition cost of
the loans sold by $1.2 million (3 basis points) for the third quarter of 1998 as
compared to $22 thousand (0 basis points) for the comparable period of the prior
year. The Company received loan origination and correspondent program
administrative fees of $8.8 million (23 basis points) on these loans during the
third quarter of 1998 and $9.7 million (34 basis points) during the third
quarter of 1997. The Company allocated $27.1 million (70 basis points) to basis
in mortgage servicing rights for loans 



                                       33
<PAGE>   34

sold in the third quarter of 1998 as compared to $14.5 million (51 basis points)
during the third quarter of 1997 in accordance with Statement of Financial
Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities". Consequently, net gain on
sale of agency-eligible mortgage loans increased to $34.8 million for the third
quarter of 1998 versus $24.6 million for the third quarter of 1997. The increase
is primarily attributed to better execution into the secondary markets.

Subprime Mortgage Operations

        Following is an analysis of the revenues and expenses allocated to the
Company's subprime mortgage production operations.

<TABLE>
<CAPTION>
                                                                       For the Quarter Ended 
                                                                           September 30,
                                                                      ---------------------
($ in thousands)                                                        1998          1997
                                                                      --------      -------
<S>                                                                   <C>           <C>
Net interest income                                                   $  2,586
Net gain on sale of mortgage loans                                       8,836      $ 4,717
Other income                                                               135          N/A
                                                                      --------      -------
     Total production revenue                                           11,557        4,717
                                                                      --------      -------
Salary and employee benefits                                             3,681        2,434
Occupancy expense                                                          491          199
General and administrative expenses                                      1,141          567
                                                                      --------      -------
     Total production expenses                                           5,313        3,200
                                                                      --------      -------
     Net pre-tax production margin                                    $  6,244      $ 1,517
                                                                      --------      -------

Production                                                            $165,760      $96,411
Whole loan sales and securitizations                                   149,252       79,217

Total production revenue to whole loan sales and securitizations       774 bps      595 bps
Total production expenses to production                                321 bps      332 bps
                                                                      --------      -------
      Net pre-tax production margin                                    453 bps      263 bps
                                                                      ========      =======
</TABLE>

Summary

        During the third quarter of 1998, the Company produced $165.8 million of
subprime loans. The Company sold approximately $123.9 million (75%) of its third
quarter 1998 subprime production in whole loan transactions and delivered $25.3
million into the secondary markets through securitization transactions. Overall,
the Company operated during the third quarter of 1998 at a 4.53% pre-tax
subprime production margin. This compares to a 2.63% pre-tax subprime production
margin for the third quarter of 1997.

Net Interest Income

        The following table analyzes net interest income allocated to the
Company's subprime mortgage production activities in terms of rate and volume
variances of the interest spread (the difference between interest rates earned
on loans and residual certificates and interest rates paid on interest-bearing
sources of funds) for the quarter ended September 30, 1998 and 1997,
respectively.


                                       34
<PAGE>   35

<TABLE>
<CAPTION>

($ in thousands)

                                                                                                                Variance
      Average Volume      Average Rate                                       Interest                        Attributable to
---------------------------------------                                -------------------               ---------------------
    1998         1997     1998     1997                                   1998      1997     Variance       Rate     Volume
---------------------------------------                                -------------------------------------------------------
<C>          <C>          <C>     <C>   <S>                             <C>       <C>         <C>         <C>          <C>    
                                        Interest Income
                                        ---------------
                                        Mortgages Held for Sale and
$165,487         N/A      10.13%   N/A     Residual Certificates        $ 4,191      N/A      $ 4,191     $ 4,191      N/A
---------------------------------------                                 ------------------------------------------------------
                                        Interest Expense
                                        ----------------
$122,353         N/A       5.20%   N/A  Total Interest Expense          $ 1,605      N/A      $ 1,605     $ 1,605      N/A
---------------------------------------                                 ------------------------------------------------------
                           4.93%   N/A  Net Interest Income             $ 2,586      N/A      $ 2,586     $ 2,586      N/A
                         ==============                                 ======================================================
</TABLE>

         Net interest income on subprime loans and accretion income on residuals
was $2.6 million, and the interest rate spread was 493 basis points, for the
third quarter of 1998. This was primarily the result of the larger interest rate
spreads possible for subprime product.

Net Gain on Securitization and Sale of Subprime Mortgage Loans

        A reconciliation of the gain on securitization of subprime mortgage
loans for the periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                   For the Quarter Ended 
                                                                       September 30,
                                                                  -----------------------
                                                                    1998           1997
                                                                  --------       --------
<S>                                                               <C>            <C>     
Gross proceeds on securitization of subprime mortgage loans       $ 24,826       $ 90,831
Initial acquisition cost of subprime mortgage loans
  securitized, net of fees                                          25,311         94,914
                                                                  --------       --------
Unadjusted loss on securitization of subprime mortgage loans          (485)        (4,083)
Initial capitalization of residual certificates                      1,965          7,550
                                                                  --------       --------
Net gain on securitization of subprime mortgage loans             $  1,480       $  3,467
                                                                  ========       ========
</TABLE>

        The Company also sold subprime mortgage loans on a whole loan basis
during the third quarter of 1998. Whole loans are generally sold without
recourse to third parties with the gain or loss being calculated based on the
difference between the carrying value of the loans sold and the gross proceeds
received from the purchaser. No interest in these loans is retained by the
Company.

        A reconciliation of the gain on subprime mortgage whole loan sales for
the periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                            For the Quarter Ended 
                                                                                September 30,
                                                                           ---------------------
                                                                             1998          1997
                                                                           --------      -------
<S>                                                                        <C>           <C>    
Gross proceeds on whole loan sales of subprime mortgage loans              $131,297      $20,062
Initial acquisition cost of subprime mortgage loans sold, net of fees       123,941       18,812
                                                                           --------      -------
Net gain on whole loan sales of subprime mortgage loans                    $  7,356      $ 1,250
                                                                           ========      =======
</TABLE>

Agency-Eligible Mortgage Servicing

        Following is a summary of the revenues and expenses allocated to the
Company's agency-eligible mortgage servicing operations for the quarters ended
September 30, 1998 and 1997:

                                       35
<PAGE>   36

<TABLE>
<CAPTION>
                                                                     For the Quarter Ended 
                                                                          September 30,
                                                                 ---------------------------
($ in thousands)                                                    1998            1997
                                                                 ----------      -----------
<S>                                                              <C>             <C>        
Servicing fees                                                   $   10,027      $     7,711
Other income                                                             89
                                                                 ----------      -----------
      Servicing revenues                                             10,116            7,711
                                                                 ----------      -----------
Salary and employee benefits                                            843              746
Occupancy expense                                                        95               75
Amortization of mortgage servicing rights                             7,432            4,840
General and administrative expenses                                   1,339            2,613
                                                                 ----------      -----------
      Total loan servicing expenses                                   9,709            8,274
                                                                 ----------      -----------
      Net pre-tax servicing margin                                      407             (563)
Gain on sale of mortgage servicing rights                               533            3,237
                                                                 ----------      -----------
      Net pre-tax servicing contribution                         $      940      $     2,674
                                                                 ==========      ===========

Average owned servicing portfolio                                $9,994,019      $ 7,561,606
Servicing sold                                                    2,871,176        2,800,277

Net pre-tax servicing margin to average servicing portfolio           2 bps          (3) bps
Gain on sale of servicing to servicing sold                           2 bps           12 bps
</TABLE>

Summary

        The ratio of net pre-tax servicing margin to the average servicing
portfolio increased five basis points as incremental revenues from the larger
servicing portfolio more than offset related increases in amortization and
general and administrative expenses. The increased amortization expense is
attributable to generally higher levels of mortgage servicing rights held for
sale which are carried at a higher basis than older available-for-sale mortgage
servicing rights and thus require a relatively higher periodic amortization
charge.

        Overall, the servicing division contributed $0.9 million to third
quarter 1998 pre-tax net income, a $1.8 million, or 65%, decrease from the $2.7
million contribution for the third quarter of 1997. Loan servicing fees were
$10.0 million for the third quarter of 1998, compared to $7.7 million for the
third quarter of 1997, an increase of 30%. This increase is primarily related to
an increase in the average aggregate underlying unpaid principal balance of
mortgage loans serviced to $10.0 billion during the third quarter of 1998 from
$7.6 billion during the third quarter of 1997, an increase of 32%. Similarly,
amortization of mortgage servicing rights also increased to $7.4 million during
the third quarter of 1998 from $4.8 million during the third quarter of 1997, an
increase of 54%. The increase in amortization is primarily attributable to the
growth in the average balance of the mortgage loans serviced and the higher
basis in the servicing rights.

        Included in loan servicing fees for the third quarters of 1998 and 1997
are subservicing fees received by the Company of $158 thousand and $140
thousand, respectively. The subservicing fees are associated with temporary
subservicing agreements between the Company and purchasers of mortgage servicing
rights.


                                       36
<PAGE>   37



Gain on Sale of Mortgage Servicing Rights

        A reconciliation of the components of gain on sale of mortgage servicing
rights for the periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                          For the Quarter Ended September 30,
                                                          -----------------------------------
                                                                  1998             1997
                                                              -----------       -----------
<S>                                                           <C>               <C>        
Underlying unpaid principal balances of mortgage 
     loans on which servicing rights were sold during 
     the period                                               $ 2,871,176       $ 2,800,277
                                                              ===========       ===========

Gross proceeds from sales of mortgage servicing rights        $    63,940       $    61,927
Initial acquisition basis, net of amortization and hedge
     results                                                       45,564            47,213
                                                              -----------       -----------
Unadjusted gain on sale of mortgage servicing rights               18,376            14,714
Acquisition basis allocated from mortgage loans, net of
     amortization (SFAS No. 125)                                  (17,843)          (11,477)
                                                              -----------       -----------
Gain on sale of mortgage servicing rights                     $       533       $     3,237
                                                              ===========       ===========
</TABLE>

        During the third quarter of 1998, the Company completed six sales of
mortgage servicing rights representing $2.9 billion of underlying unpaid
principal mortgage loan balances. This compares to seven sales of mortgage
servicing rights representing $2.8 billion of underlying unpaid principal
mortgage loan balances in the third quarter of 1997. The unadjusted gain on the
sale of mortgage servicing rights was $18.4 million (64 basis points) for the
third quarter of 1998, compared to $14.7 million (53 basis points) for the third
quarter of 1997. The Company reduced this unadjusted gain by $17.8 million in
the third quarter of 1998, versus a $11.5 million reduction during the third
quarter of 1997, in accordance with SFAS No. 125.

Commercial Mortgage Operations

        Following is a summary of the revenues and expenses allocated to the
Company's commercial mortgage production operations.


                                       37
<PAGE>   38

<TABLE>
<CAPTION>
                                                                        For the Quarter Ended 
                                                                            September 30,
                                                                       -----------------------
($ in thousands)                                                           1998          1997
                                                                       -----------     -------
<S>                                                                    <C>             <C>     
Net interest income                                                    $       114       N/A
Net gain on sale of mortgage loans                                           1,979       N/A
Other income                                                                   (11)      N/A
                                                                       -----------     -------
     Total production revenue                                                2,082       N/A
                                                                       -----------     -------
Salary and employee benefits                                                 2,004       N/A
Occupancy expense                                                              209       N/A
General and administrative expenses                                            426       N/A
                                                                       -----------     -------
     Total production expenses                                               2,639       N/A
                                                                       -----------     -------
     Net pre-tax production margin                                     $      (557)      N/A
                                                                       ===========     =======


Servicing fees                                                         $       964       N/A
Amortization of mortgage servicing rights                                      318       N/A
                                                                       -----------     -------
     Net pre-tax servicing margin                                              646       N/A
                                                                       -----------     -------
     Pre-tax income                                                    $        89       N/A
                                                                       ===========     =======

Production                                                             $   290,829       N/A
Whole loan sales                                                           290,829       N/A
Average commercial mortgage servicing portfolio                        $ 3,079,683       N/A

Total production revenue to whole loan sales                               716 bps       N/A
Total production expenses to production                                    907 bps       N/A
                                                                       -----------     -------
      Net pre-tax production margin                                      (191) bps       N/A
                                                                       ===========     =======

Servicing fees to average commercial mortgage servicing portfolio           13 bps       N/A
Amortization of mortgage servicing rights to average commercial
            mortgage servicing portfolio                                     4 bps       N/A
                                                                       -----------     -------
Net pre-tax servicing margin                                                 9 bps       N/A
                                                                       ===========     =======
</TABLE>


        Laureate Realty originates commercial mortgage loans for various
insurance companies and other investors, primarily in Alabama, Florida, Indiana,
North Carolina, South Carolina, Tennessee and Virginia. Substantially all loans
originated by Laureate Realty have been originated in the name of the investor,
and in most cases, Laureate Realty has retained the right to service the loans
under a servicing agreement with the investor. Most commercial mortgage loan
servicing agreements are short-term, and retention of the servicing contract is
dependent on maintaining the investor relationship.


                                       38
<PAGE>   39

Net Gain on Sale of Commercial Mortgage Loans

        A reconciliation of gain on sale of commercial mortgage loans for the
periods indicated follows:

<TABLE>
<CAPTION>
($ in thousands)                                                For the Quarter Ended 
                                                                    September 30,
                                                                 ------------------
                                                                  1998        1997
                                                                 -------    -------
<S>                                                             <C>         <C>     
Gross proceeds on sales of commercial mortgage loans            $290,829      N/A
Initial unadjusted acquisition cost of commercial mortgage
     loans sold
                                                                 290,829      N/A
                                                                --------    -------
Unadjusted gain on sale of commercial mortgage loans
Commercial mortgage and transaction processing fees                1,835      N/A
                                                                --------    -------
Unadjusted aggregate margin                                        1,835      N/A
Initial acquisition cost allocated to basis in commercial
     mortgage servicing rights (SFAS No. 125)                        144      N/A
                                                                --------    -------

Net gain on sale of commercial mortgage loans                   $  1,979      N/A
                                                                ========    =======
</TABLE>

        During the third quarter of 1998, the commercial mortgage division
originated and sold $291 million in commercial loans. Commercial mortgage fees
on these loans were $1.8 million, or 63 basis points. Origination fees on
commercial mortgages are generally between 50 and 100 basis points on the loan
amount. In addition the commercial mortgage division allocated $144 thousand, or
5 basis points, to basis in servicing rights retained on commercial mortgage
loans produced during the period.

Leasing Operations

        Following is a summary of the revenues and expenses allocated to the
Company's small ticket equipment leasing operations for the periods indicated:
<TABLE>
<CAPTION>
                                                          For the Quarter Ended 
                                                              September 30,
                                                           -------------------
($ in thousands)                                           1998         1997
                                                           --------    -------
<S>                                                        <C>         <C>     
Net interest income                                        $  1,216      N/A
Other income                                                    146      N/A
                                                           --------    -------
      Leasing production revenue                              1,362      N/A
                                                           --------    -------
Salary and employee benefits                                    531      N/A
Occupancy expense                                                98      N/A
General and administrative expenses                             546      N/A
                                                           --------    -------
      Total lease operating expenses                          1,175      N/A
                                                           --------    -------
      Net pre-tax leasing production margin                     187      N/A
                                                           --------    -------

Servicing fees                                                  264      N/A
                                                           --------    -------
      Net pre-tax leasing margin                           $    451      N/A
                                                           --------    -------

Average owned leasing portfolio                            $ 78,197      N/A
Average serviced leasing portfolio                           50,009      N/A
                                                           --------    -------
Average leasing portfolio                                  $128,206      N/A
                                                           ========    =======
</TABLE>


                                       39
<PAGE>   40

<TABLE>
<S>                                                         <C>        <C>     
Leasing production revenue to average owned portfolio       697 bps      N/A
Lease operating expenses to average owned portfolio         601 bps      N/A
                                                           --------    -------
Net pre-tax leasing production margin                        96 bps      N/A
                                                           ========    =======

Servicing fees to average serviced portfolio                211 bps      N/A
</TABLE>

        Substantially all of the Company's lease receivables are acquired from
independent brokers who operate throughout the continental United States and
referrals from independent banks. At September 30, 1998 the Company's managed
lease servicing portfolio was $131.5 million. Of this managed lease portfolio,
$85.7 million was owned and $45.8 million was serviced for investors.

Net Interest Income

        Net interest income for the third quarter of 1998 was $1.2 million.
This is an annualized net interest margin of 3.40% based upon average lease
receivables owned of $78.2 million and average debt outstanding of $58.4
million.



                                       40
<PAGE>   41

FINANCIAL CONDITION

      During the third quarter of 1998, the Company experienced a 5% increase in
total production originated and acquired compared to the second quarter of 1998,
from $3.9 billion during the second quarter of 1998 to $4.1 billion during the
third quarter of 1998. The September 30, 1998, locked mortgage application
pipeline (mortgage loans not yet closed but for which the interest rate has been
locked) was approximately $1.8 billion and the application pipeline (mortgage
loans for which the interest rate has not yet been locked) was approximately
$0.5 billion.

      Mortgage loans held for sale and mortgage-backed securities totaled $1.3
billion at September 30, 1998, versus $1.2 billion at December 31, 1997, an
increase of 8%. The Company's servicing portfolio (exclusive of loans under
subservicing agreements) increased to $9.7 billion at September 30, 1998, from
$7.1 billion at December 31, 1997, an increase of 37%.

      Short-term borrowings, which are the Company's primary source of funds,
totaled $1.6 billion at September 30, 1998, compared to $1.2 billion at December
31, 1997, an increase of 33%. The increase in the balance outstanding at
September 30, 1998, resulted from increased funding requirements related to the
increase in the balance of mortgage loans held for sale and mortgage-backed
securities. There were $6.4 million in long-term borrowings at September 30,
1998, compared to $6.5 million at December 31, 1997, a decrease of 2%.

      Other liabilities totaled $134.6 million as of September 30, 1998,
compared to the December 31, 1997, balance of $86.6 million, an increase of
$48.0 million, or 55%. The increase in other liabilities resulted primarily from
an increase in the volume of loans acquired through certain correspondent
funding programs of the Company.

      The Company continues to face the same challenges as other companies
within the mortgage banking industry and as such is not immune from significant
volume declines precipitated by a rise in interest rates or mortgage servicing
rights and residual certificate valuation declines resulting from changes in
interest rates that can lead to changing prepayment speeds or other factors
beyond the Company's control. Management of the Company recognizes these
challenges and intends to continue to manage the Company accordingly.

LIQUIDITY AND CAPITAL RESOURCES

      The Company's primary cash-flow requirement involves the funding of loan
production, which is met primarily through external borrowings. The Company has
entered into a 364-day, $670 million warehouse line of credit provided by a
syndicate of unaffiliated banks that expires in July 1999. The credit agreement
includes covenants requiring the Company to maintain (i) a minimum net worth of
$185 million, plus net income subsequent to June 30, 1998, and capital
contributions and minus permitted dividends, (ii) a ratio of total liabilities
to net worth of not more than 8.0 to 1.0, excluding debt incurred pursuant to
gestation and repurchase financing agreements, (iii) its eligibility as a
servicer of Ginnie Mae, FHA, VA, Fannie Mae and Freddie Mac mortgage loans and
(iv) a mortgage servicing rights portfolio with an underlying unpaid 



                                       41
<PAGE>   42

principal balance of at least $4 billion. The provisions of the agreement also
restrict the Company's ability (i) to pay dividends in any fiscal quarter which
exceed 50% of the Company's net income for the quarter or (ii) to engage
significantly in any type of business unrelated to the mortgage banking
business, the servicing of mortgage loans or equipment leasing.

      Additionally, the Company entered into a $200 million, 364-day term
revolving credit facility with a syndicate of unaffiliated banks. An $80 million
portion of the revolver facility converts in July 1999, into a four-year term
loan. The facility is secured by the Company's servicing portfolio designated as
"available-for-sale". A $70 million portion of the revolver facility matures in
July 1999, and is secured by the Company's servicing portfolio designated as
"held-for-sale". A $50 million portion of the revolver facility matures in July
1999, and is secured by a first-priority security interest in receivables on
servicing rights sold. The facility includes covenants identical to those
described above with respect to the warehouse line of credit.

      The Company has also entered into a $200 million, 364-day term subprime
revolving credit facility, which expires in July 1999. The facility includes
covenants identical to those described above with respect to the warehouse line
of credit.

      The Company was in compliance with the above-mentioned debt covenants at
September 30, 1998. Although management anticipates continued compliance, there
can be no assurance that the Company will be able to comply with the debt
covenants specified for each of these financing agreements. Failure to comply
could result in the loss of the related financing.

      RBMG Asset Management Company, Inc. (Asset Management Co.), a
wholly-owned subsidiary of RBMG, Inc., and a bank entered into a master
repurchase agreement dated as of December 11, 1997, pursuant to the terms of
which Asset Management Co. is entitled from time to time to deliver eligible
subprime mortgage loans in an aggregate principal amount of up to $150 million
to a bank. The term of this repurchase agreement is 364 days. As of September
30, 1998 no loans have been sold under this agreement.

      The Company has also entered into an uncommitted gestation financing
arrangement. The interest rate on funds borrowed pursuant to the gestation line
is based on a spread over the Federal Funds rate. The gestation line has a
funding limit of $1.2 billion.

      The Company entered into a $6.6 million note agreement in May 1997. This
debt is secured by the Company's corporate headquarters. The terms of the
agreement require the Company to make 120 equal monthly principal and interest
payments based upon a fixed interest rate of 8.07%. The note contains covenants
similar to those described above.

      RBC has a 364-day $150 million revolving credit facility to provide
financing for its leasing portfolio. The warehouse credit agreement matures in
July 1999, and contains various covenants regarding characteristics of the
collateral and the performance of the leases originated and serviced by RBC and
which restrict RBC's ability to incur debt, encumber assets, other than as
collateral for the facility, sell assets, merge, declare or pay any dividends or
change its corporate by-laws or articles of incorporation.

YEAR 2000

      The Company recognizes the need to ensure that its operations will not be
materially adversely impacted by Year 2000 problems. These problems extend to 



                                       42
<PAGE>   43

business systems and equipment, facilities, infrastructure and services,
non-information technology and the readiness of the Company's business partners.

      Failures due to processing errors potentially arising from calculations
and date routines and from non-information technology systems relating to the
Year 2000 date are a known risk. Some of the risks involved with Year 2000
problems are discussed later in this section. The Company is addressing these
risk with special attention being paid to the availability and integrity of its
mortgage production systems, financial systems and related interfaces.

State of Readiness

      The Company has reviewed all of its mission critical information
technology and non-information technology systems and the following steps have
already been taken to help ensure that the Company's operations will continue
substantially unaffected by Year 2000 issues. They are:

--      Replacement of most production computer hardware, including servers,
        desktop PCs and network infrastructure components with Year 2000
        compliant systems. This effort is approximately 90% complete as of
        September 30, 1998 and is scheduled to be finished during the first
        quarter of 1999.

--      Implementation of Cybertek's LoanXchange Mortgage Processing System. 
        This software is designed to replace fourteen non-compliant applications
        with an integrated system customized to support the Company's business.
        The new system has been certified as Year 2000 compliant and
        installation of the primary components is scheduled for the first
        quarter of 1999.

--      Implementation of a standardized "Gold Desktop" that delivers Year 2000
        compliant desktop software to each PC in the Company and offers
        significant enhancements, particularly in the areas of reliability and
        serviceability. Installation has begun and is scheduled to be
        completed during the first quarter of 1999.

--      Replacement of PCDOCS, Cogent, General Ledger, Accounts Payable and the
        Human Resources systems with Year 2000 compliant systems. Installation
        has been completed.

      The Company's growth required that it replace or upgrade many of the
Company's systems. This has been ongoing for the past eighteen months. The
Company's management believes that the new systems should resolve a very large
percentage of the Company's Year 2000 issues while providing the added benefit 
of enhanced functionality, performance and reliability. The replacement of
existing systems with upgraded systems was not accelerated because of Year 2000
issues.


                                       43
<PAGE>   44

Internal Proprietary Programs

      The Company currently uses 20 applications that were developed
internally. Fourteen of these should be eliminated with the installation of
LoanXchange and the remaining six are anticipated to be modified for Year 2000
compliance. The Company does not view this as a significant task as all 20
applications combined represent only 175,000 lines of code with 43,000 contained
in the six programs that are scheduled to be modified. It is anticipated that
this work will be completed during the first quarter of 1999.

Laureate Realty

      Laureate Realty, the Company's commercial mortgage company, has replaced
most of its hardware and infrastructure components with Year 2000 compliant
hardware. Additionally an upgrade from Version 7 to Version 8 of the McCracken
commercial mortgage servicing system is scheduled to occur in the first quarter
of 1999.

Republic Leasing

      Republic Leasing, the Company's small ticket leasing company, uses only
two mission critical systems. One of the systems is Year 2000 compliant and an
upgrade of the other system to a Year 2000 compliant level is scheduled to be
completed during the fourth quarter of 1998.

Meritage Mortgage

      Meritage Mortgage, the Company's sub-prime lender, plans to convert to the
LoanXchange system during 1999. Meritage's primary system is Contour, and an
upgrade to Contour's Year 2000 compliant system is also available. Existing
Meritage accounting systems are being eliminated and the functions moved to the
Company's already compliant accounting software.

Third Party Suppliers

      The Company currently uses three non-compliant mission critical systems 
provided by third parties. Alltel provides the Company's primary loan servicing
system and is the largest vendor of loan servicing systems in the United States.
This system is not Year 2000 compliant but Alltel has an active Year 2000
program underway. Fannie Mae and Freddie Mac also supply software to the Company
for the transmittal of loan information to them. Both entities have Year 2000
projects underway and have expressed high levels of confidence that they will be
completed during the first quarter of 1999. Alltel, Fannie Mae and Freddie Mac
are participating in a testing program run by the Mortgage Banker's Association
of America. The Company is monitoring their progress through this testing
vehicle.

Trading Partners

      Connectivity with trading partners is a major issue for many companies,
but of lesser impact for the Company. The Company has only a handful of these
relationships, and in almost every instance its trading partner has provided the
tools, and remains responsible for the Year 2000 issues. Fannie Mae and Freddie
Mac provide most of this software, and as noted above, the Company has a high
confidence level in their Year 2000 programming and testing plans.



                                       44
<PAGE>   45

Most loan registration and locking activity between the Company and its
correspondents and brokers is initiated by telephone and fax. Less than 15% is
electronic, and the Company provides that interface through the Internet.

      The Company's residential mortgage business is obtained from over 4,000
correspondents and brokers and is not concentrated within a small universe of
these companies. Therefore, the Company is not undertaking a readiness review of
its customers. The Company is, however, enhancing its ability to provide
tracking reports to its customers over the Internet and by mail so it can assist
them in meeting their obligation to provide additional documentation on loans
already purchased by the Company. The Company does not believe that Year 2000
issues should have a material impact on its correspondent and broker
relationships. The Company is also communicating with suppliers, dealers,
financial institutions and others with which it does business to coordinate Year
2000 conversion. The Company does not foresee a material impact to the Company
surrounding the Year 2000 compliance of these external entities. 

Ongoing Strategy

      The Company is at a stage in its compliance efforts where it has extended
the scope of its compliance activities to include the entire enterprise and the
systems not addressed by the major projects already underway. To this end the
Company has engaged an outside consulting firm to assist in developing a plan
for addressing Year 2000 that should encompass the entire enterprise from both a
business and an information technology perspective. 

      The Company's approach utilizes an inventory strategy that captures
relevant data about each item with Year 2000 implications. Once the data is
collected, the Company will prioritize the information. By focusing on the most
critical systems first, the Company expects to report significant progress on
the major systems substantially in advance of January 1, 2000.

Financial Impact

      Direct costs associated exclusively with achieving Year 2000 compliance 
are expected to be between $0.5 and $1 million dollars and will be paid out of
cash flow. Direct costs associated with the first phase (the assessment phase)
of the Year 2000 effort were approximately $135 thousand through September 30,
1998. The Year 2000 effort is expected to use approximately 5% of information
technology's 1999 budget.

Risks

      The costs of the project and the date on which the Company believes it
will complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel 



                                       45
<PAGE>   46

trained in this area, the ability to locate and correct all relevant computer
codes and unforeseen circumstances causing the Company to allocate its resources
elsewhere.

Contingency Planning

      As management believes that the LoanXchange conversion will solve most of 
the Company's Year 2000 issues, a significant risk is the inability to install
this software, currently scheduled for February, 1999, timely. To prepare for
this contingency the following alternative remedial actions have been developed:

--       To eliminate the non-compliant wholesale branch system the Company has
         created an Internet transaction system that the Company intends to
         begin using in the fourth quarter of 1998 to register and lock loans. A
         back up third party system for generating closing documents is already
         available in all offices. The combination of these two actions should
         allow the Company to function without its current branch system or
         LoanXchange.

--       Plans to install the Year 2000 compliant Contour system at Meritage
         have been formulated and should be implemented as an interim step prior
         to LoanXchange. This will provide a Year 2000 compliant system should
         LoanXchange be delayed for Meritage.

--       The 14 internal programs being eliminated by LoanXchange represent only
         132,000 lines of code. The Company has tested the applications and
         identified the Year 2000 issues with each of the applications. Analysis
         indicates that the applications could be made Year 2000 complaint with
         minimal effort. Should LoanXchange installation be delayed materially
         beyond the planned February 1999 installations, the Company intends to
         undertake that action as necessary.

      The Company is in the process of assessing what is its most likely worst
case scenario. Failure by either the Company or third parties to achieve Year
2000 compliance could cause short-term operational inconveniences and
inefficiencies for the Company. This may temporarily divert management's time
and attention from ordinary business activities. To the extent reasonably
achievable, the Company will seek to prevent or mitigate the efforts of such
possible failures through its contingency planning efforts. With the delivery
and testing of LoanXchange scheduled for the fourth quarter of 1998, the Company
feels sufficient time exists to execute the contingency plan. 

      Significant work has been accomplished to date on Year 2000 compliance as 
part of the Company's aggressive growth and planned implementation of technology
to support the growth. The Company will continue its compliance efforts in both
the information systems area as well in the peripheral areas and non-information
technology that have potential impact on the Company's continuing operation.


                                       46
<PAGE>   47

                           Part II. OTHER INFORMATION


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

        -  (a)   A list of exhibits filed with this Form 10-Q, along with the 
                 exhibit index can be found on pages A to E following the
                 signature page.

        -  (b)   none


                                       47
<PAGE>   48


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                     RESOURCE BANCSHARES MORTGAGE GROUP, INC.
                                                   (Registrant)


                                     /s/ Steven F. Herbert
                                     -------------------------------------------
                                     Steven F. Herbert
                                     Senior Executive Vice President and
                                     Chief Financial Officer

                                     (signing in the capacity of (i) duly 
                                     authorized officer of the registrant and 
                                     (ii) principal financial officer of the 
                                     registrant)




DATED:         November 15, 1998


                                       48
<PAGE>   49

                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit No.                  Description                                                                               Page
-----------                  -----------                                                                               ----
<C>            <S>                                                                                                     <C> 
  3.1          Restated Certificate of Incorporation of the Registrant incorporated by reference to                      *
               Exhibit 3.3 of the Registrant's Registration No. 33-53980

  3.2          Certificate of Amendment of Certificate of Incorporation of the Registrant                                *
               incorporated by reference to Exhibit 3.2 of the Registrant's Annual Report
               on Form 10-K for the year ended December 31, 1997

  3.3          Certificate of Designation of the Preferred Stock of the Registrant                                       *
               incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-A
               filed on February 8, 1998

  3.4          Amended and Restated Bylaws of the Registrant incorporated by reference to                                *
               Exhibit 3.4 of the Registrant's Registration No. 33-53980

  4.1          Specimen Certificate of Registrant's Common Stock incorporated by                                         * 
               reference to Exhibit 4.1 of the Registrant's Registration No. 33-53980

  4.2          Rights Agreement dated as of February 6, 1998 between the Registrant and First Chicago                    *
               Trust Company of New York incorporated by reference to Exhibit 4.1 of the Registrant's
               Form 8-A filed on February 8, 1998

  4.3          Third Amended and Restated Secured Revolving/Term Credit Agreement dated as of July                     ___
               28, 1998, between the Registrant and the Banks Listed on the Signature Pages Thereof,
               Bank One, Texas, National Association, First Bank National Association, NationsBank of
               Texas, N.A. and Texas Commerce  Bank, National Association, as Co-agents and the
               Bank of New York as Agent and Collateral Agent

  4.4          Second Amended and Restated Revolving/Term Security and Collateral Agency Agreement                       *
               dated as of July 31, 1996, between the Registrant and The Bank of New York as Collateral
               Agent and Secured Party incorporated by reference to Exhibit 4.3 of the Registrant's Form
               10-Q for the period ended September 30, 1996

  4.5          Amendment No. 1 dated as of July 28, 1998 to Second Amended and Restated                                 ___
               Revolving/Term Security and Collateral Agency Agreement dated as of
               July 31, 1996, among the Registrant, the Banks and Co-Agents named therein
               and The Bank of New York as Collateral Agent

 10.1          Employment Agreement dated June 3, 1993, between  the Registrant and                                      *
               David W. Johnson, Jr. as amended by amendment dated October 22, 1993
               incorporated by reference to Exhibit 10.1 of the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1993

 10.2          Office Building Lease dated March 8, 1991, as amended by Modification of Office                           *
               Lease dated October 1, 1991, incorporated by reference to Exhibit 10.5 of the Registrant's
               Registration No. 33-53980

 10.3          Assignment and Assumption of Office Lease incorporated by reference to Exhibit 10.6                       *
               of the Registrant's Registration No. 33-53980
</TABLE>

                                        A


<PAGE>   50

<TABLE>
<CAPTION>
Exhibit No.                  Description                                                                               Page
-----------                  -----------                                                                               ----
<C>            <S>                                                                                                     <C> 
 10.4          (A) Stock Option Agreement between the Registrant and David W. Johnson, Jr.                               *
               incorporated by reference to Exhibit 10.8 (A) of the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1993

               (B) Stock Option Agreement between the Registrant and Lee E. Shelton                                      *
               incorporated by reference to Exhibit 10.8 (B) of the Registrant's Annual
               Report on Form 10-K for the year ended December 31, 1993

 10.5          Termination Agreement dated June 3, 1993, between the Registrant and                                      *
               David W. Johnson, Jr. incorporated by reference to Exhibit 10.9 (A) of the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1993

 10.6          (A) Deferred Compensation Agreement dated June 3, 1993, between the Registrant and                        *
               David W. Johnson, Jr. incorporated by reference to Exhibit 10.10 (A) of the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1993

               (B) Deferred Compensation Rabbi Trust, for David W. Johnson, dated January                                * 
               19, 1994, between RBC and First Union National Bank of North Carolina
               incorporated by reference to Exhibit 10.10 (C) of the Registrant's Annual
               Report on Form 10-K for the year ended December 31, 1993

 10.7          Flexible Benefits Plan incorporated by reference to Exhibit 10.16 of the Registrant's                     *
               Annual Report on Form 10-K for the year ended December 31, 1993

 10.8          Section 125 Plan incorporated by reference to Exhibit 10.17 of the Registrant's Annual                    *
               Report on Form 10-K for the year ended December 31, 1993

 10.9          Pension Plan incorporated by reference to Exhibit 10.18 of the Registrant's Annual                        *
               Report on Form 10-K for the year ended December 31, 1993

 10.10         Governmental Real Estate Sub-Lease-Office, between Resource Bancshares Mortgage                           *
               Group, Inc. and the South Carolina Department of Labor, Licensing and Regulation
               incorporated by reference to Exhibit 10.19 of the Registrant's Quarterly Report on
               Form 10-Q for the period ended March 31, 1994

 10.11         First Sub-Lease Amendment to Governmental Real Estate Sub-Lease-Office,                                   *
               between Resource Bancshares Mortgage Group, Inc. and the South Carolina Department
               of Labor, Licensing and Regulation incorporated by reference to Exhibit 10.20 of the
               Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1994

 10.12         Amendment I to Pension Plan incorporated by reference to Exhibit 10.21 of the Registrant's                *
               Annual Report on Form 10-K for the year ended December 31, 1994

 10.13         Amendment II to Pension Plan incorporated by reference to Exhibit 10.22 of the Registrant's               *
               Annual Report on Form 10-K for the year ended December 31, 1994

 10.14         Resource Bancshares Mortgage Group, Inc. Supplemental Executive Retirement Plan                           *
               incorporated by reference to Exhibit 10.14 of the Registrant's Quarterly Report
               on Form 10-Q for the period ended June 30, 1998.
</TABLE>

                                        B


<PAGE>   51

<TABLE>
<CAPTION>
Exhibit No.                  Description                                                                               Page
-----------                  -----------                                                                               ----
<C>            <S>                                                                                                     <C> 
 10.15         Pension Restoration Plan incorporated by reference to Exhibit 10.25 of the Registrant's                   *
               Annual Report on Form 10-K for the year ended December 31, 1994

 10.16         Stock Investment Plan incorporated by reference to Exhibit 4.1 of the Registrant's                        *
               Registration No. 33-87536

 10.17         Amendment I to Stock Investment Plan incorporated by reference to Exhibit                                 *
               10.27 of the Registrant's Annual Report on Form 10-K for the year ended
               December 31, 1994

 10.18         Employee Stock Ownership Plan incorporated by reference to Exhibit 10.29                                  *
               of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994

 10.19         Amended Resource Bancshares Mortgage Group, Inc. Successor Employee Stock                                 *
               Ownership Trust Agreement dated December 1, 1994, between the Registrant and
               Marine Midland Bank incorporated by reference to Exhibit 10.30 of the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1994

 10.20         ESOP Loan and Security Agreement dated January 12, 1995, between the Registrant                           *
               and The Resource Bancshares Mortgage Group, Inc. Employee Stock Ownership Trust
               incorporated by reference to Exhibit 10.31 of the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1994

 10.21         Employment Agreement dated June 30, 1995, between the Registrant and Steven F. Herbert                    *
               incorporated by reference to Exhibit 10.34 of the Registrant's Quarterly Report
               on Form 10-Q for the period ended September 30, 1995

 10.22         Formula Stock Option Plan incorporated by reference to Exhibit 10.36 of                                   * 
               the Registrant's Quarterly Report on Form 10-Q for the period ended
               September 30, 1995

 10.23         Amended and Restated Omnibus Stock Award Plan incorporated by reference to Exhibit 99.10                  *
               of the Registrant's Registration No. 333-29245 filed on December 1, 1997

 10.24         Employment Agreement dated September 25, 1995, between the Registrant and                                 *
               Richard M. Duncan incorporated by reference to Exhibit 10.38 of the Registrant's Quarterly
               Report on Form 10-Q for the period ended September 30, 1995

 10.25         Request for Extension of Governmental Real Estate Sub-Lease-Office, between the Registrant                *
               and the South Carolina Department of Labor, Licensing and Regulation dated
               December 12, 1995 incorporated by reference to Exhibit 10.39 of the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1995

 10.26         First Amendment to Employee Stock Ownership Plan dated October 31, 1995                                   *
               incorporated by reference to Exhibit 10.41 of the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1995

 10.27         Amendment to Pension Plan effective January 1, 1995 incorporated by reference                             *
               to Exhibit 10.42 of the Registrant's Annual Report on Form 10-K for the year
               ended December 31, 1995
</TABLE>

                                        C


<PAGE>   52

<TABLE>
<CAPTION>
Exhibit No.                  Description                                                                               Page
-----------                  -----------                                                                               ----
<C>            <S>                                                                                                     <C> 
 10.28         Second Amendment to Employee Stock Ownership Plan dated August 12, 1996                                   *
               incorporated by reference to Exhibit 10.45 of the Registrant's Quarterly Report on Form
               10-Q for the period ended September 30, 1996

 10.29         Resource Bancshares Mortgage Group, Inc. Non-Qualified Stock Option Plan                                  *
               dated September 1, 1996 incorporated by reference to Exhibit 10.33 of the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1996

 10.30         Amended and Restated Retirement Savings Plan dated  April 1, 1996                                         *
               incorporated by reference to Exhibit 10.34 of the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1996

 10.31         First Amendment to Amended  and Restated Retirement Savings Plan dated as of                              *
               November 8, 1996 incorporated by reference to Exhibit 10.35 of the Registrant's
               Annual Report on Form 10-K for the year ended December 31, 1996

 10.32         ESOP Loan and Security Agreement dated May 3, 1996, between the Registrant and                            *
               The Resource Bancshares Mortgage Group, Inc. Employee Stock Ownership Trust
               incorporated by reference to Exhibit 10.36 of the Registrant's Annual Report on Form
               10-K for the year ended December 31, 1996

 10.33         Second Amendment to Amended and Restated Retirement Savings Plan dated                                    *
               January 1997, incorporated by reference to Exhibit 10.38 of the Registrant's
               Quarterly Report on Form 10-Q for the period ended March 31, 1997

 10.34         Form of Incentive Stock Option Agreement (Omnibus Stock Award Plan)                                       *
               incorporated by reference to Exhibit 10.40 of the Registrant's
               Quarterly Report on Form 10-Q for the period ended March 31, 1997

 10.35         Form of Non-Qualified Stock Option Agreement (Non-Qualified Stock Option Plan),                           *
               incorporated by reference to Exhibit 10.41 of the Registrant's Quarterly Report
               on Form 10-Q for the period ended March 31, 1997

 10.36         First Amendment to the Formula Stock Option Plan incorporated by reference to                             *
               Exhibit 99.8 of the Registrant's Registration No. 333-29245 as filed on December 1, 1997

 10.37         (A)  Agreement of Merger dated April 18, 1997 between  Resource Bancshares                                *
               Mortgage Group, Inc., RBC Merger Sub, Inc. and Resource Bancshares Corporation
               incorporated by reference to Annex A of the Registrant's Registration No.333-29245

               (B) First Amendment to Agreement of Merger dated April 18, 1997 between                                   * 
               Resource Bancshares Mortgage Group, Inc., RBC Merger Sub, Inc. and
               Resource Bancshares Corporation incorporated by reference to Exhibit 10.42
               of the Registrant's Quarterly Report on Form 10-Q for the period ended
               September 30, 1997

               (C) Second Amendment to Agreement of Merger dated April 18, 1997 between                                  *
               Resource Bancshares Mortgage Group, Inc., RBC Merger Sub, Inc. and
               Resource Bancshares Corporation incorporated by reference to Annex A of
               the Registrant's Registration No. 333-29245
</TABLE>


                                        D


<PAGE>   53

<TABLE>
<CAPTION>
Exhibit No.                  Description                                                                               Page
-----------                  -----------                                                                               ----
<C>            <S>                                                                                                     <C> 
 10.38         (A)  Mutual Release and Settlement Agreement between the Registrant, Lee E. Shelton                       *
               and Constance P. Shelton dated January 31, 1997 incorporated by reference to Exhibit
               10.44 of the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1997

               (B) Amendment to Mutual Release and Settlement Agreement between the                                      *
               Registrant, Lee E. Shelton and Constance P. Shelton dated January 31,
               1997 incorporated by reference to Exhibit 10.44 of the Registrant's
               Quarterly Report on Form 10-Q for the period ended September 30, 1997

 10.39         Note Agreement between the Registrant and UNUM Life Insurance Company of                                  *
               America dated May 16, 1997 incorporated by reference to Exhibit 10.45 of the
               Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1997

 10.40         Amendment to Resource Bancshares Mortgage Group, Inc. Omnibus Stock Award Plan,                           *
               Formula Stock Option Plan and Non-Qualified Stock Option Plan as incorporated by 
               reference to Exhibit 10.42 of the Registrant's Quarterly Report on Form 10-Q 
               for the period ended March 31, 1997

 10.41         Second Amendment to the Non-Qualified Stock Option Agreement dated February 6, 1998                       *
               incorporated by reference to Exhibit 10.40 of the Registrant's Quarterly Report on Form 10-Q
               for the period ended March 31, 1998

 10.42         Agreement and Release Form of Non-Qualified Stock Option Agreement incorporated by                        *
               reference to Exhibit 10.41 of the Registrant's Quarterly Report on Form 10-Q for the period
               ended March 31, 1998

 10.43         Preferred Provider Organization Plan for Retired Executives                                             _____

 10.44         First Amendment to Omnibus Stock Award Plan and Form of Incentive Stock Option                          _____
               Agreement and Release to the Omnibus Stock Award Plan

 11.1          Statement re:  Computation of Net Income per Share                                                      _____

 27.1          Financial Data Schedule                                                                                 _____
</TABLE>

----------------------------------

* Incorporated by reference


                                        E