UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20552
FORM 10 - QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from to
--------------- ---------------
Commission File Number 0-23765
------------------------------
Carnegie Financial Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania 23 -1806857
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
17 West Mall Plaza, Carnegie, Pennsylvania, 15106
(Address of principal executive offices)
(412) 276 - 1266
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
Class: Common Stock, par value $.10 per share
Outstanding at May 3, 2000: 224,776
<PAGE>
CARNEGIE FINANCIAL CORP
INDEX
Page
Number
---------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet
(Unaudited) as of March 31,
2000 and December 31, 1999 3
Consolidated Statement of Income
(Unaudited) for the Three Months
ended March 31, 2000 and 1999 4
Consolidated Statement of
Changes in Stockholders' Equity
(Unaudited) as of March 31, 2000 5
Consolidated Statement of Cash
Flows (Unaudited) for the Three
Months ended March 31, 2000 and 1999 6
Notes to Unaudited Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 8 - 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default Upon Senior Securities 15
Item 4. Submissions of Matters to a
Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8 - K 15
SIGNATURES 16
<PAGE>
CARNEGIE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 200,568 $ 504,005
Interest - bearing overnight
deposits with other institutions 389,853 286,780
------------ ------------
Cash and cash equivalents 590,421 790,785
Certificates of deposit 100,000 100,000
Investment securities available
for sale 3,499,721 3,323,894
Investment securities held to
maturity (fair value of
$144,122 and $144,870) 145,000 145,000
Mortgage - backed securities
available for sale 667,260 690,164
Mortgage - backed securities
held to maturity (fair value
of $725,716 and $750,369) 717,987 743,385
Loans receivable, (net of
allowance for loan losses
of $181,320 and $203,648) 22,770,237 22,518,456
Premises and equipment 235,093 225,827
Federal Home Loan Bank Stock 564,900 564,900
Accrued interest receivable 151,882 180,797
Other assets 259,625 205,393
------------ ------------
TOTAL ASSETS $ 29,702,126 $ 29,488,601
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits $ 17,244,345 $ 16,551,544
Borrowed funds 9,000,000 9,537,500
Advances from borrowers for taxes
and insurance 297,766 275,758
Accrued interest payable and
other liabilities 422,787 431,191
------------ ------------
TOTAL LIABILITIES 26,964,898 26,795,993
STOCKHOLDERS' EQUITY
Preferred Stock, no par value;
2,000,000 shares authorized;
none issued - -
Common Stock, $.10 par value;
4,000,000 shares authorized
and 238,050 outstanding 23,805 23,805
Additional paid - in capital 2,061,611 2,062,493
Retained Earnings - substantially
restricted 1,232,438 1,203,806
Unearned Employee Stock Ownership
Plan shares (ESOP) (157,113) (161,874)
Unearned Restricted Stock Plan shares (RSP) (60,703) (64,750)
Accumulated other comprehensive loss (233,304) (241,366)
Treasury Stock (13,274 shares, at cost) (129,506) (129,506)
------------ ------------
Total stockholders' equity 2,737,228 2,692,608
------------ ------------
Total liabilities and
stockholder's equity $ 29,702,126 $ 29,488,601
============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE>
CARNEGIE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------- -----------
2000 1999
----------- -----------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans receivable $ 430,854 $ 301,791
Investment securities
Taxable 63,978 35,743
Exempt from federal
income tax 1,658 5,899
Interest - bearing deposits
in other banks 4,491 23,559
Mortgage - backed securities 22,713 33,273
Dividends on Federal Home
Loan Bank Stock 9,481 3,466
----------- -----------
Total interest and
dividend income 533,175 403,731
----------- -----------
INTEREST EXPENSE
Deposits 177,371 167,870
Borrowings 132,646 48,750
----------- -----------
Total interest expense 310,017 216,620
----------- -----------
NET INTEREST INCOME 223,158 187,111
Provision for loan losses 19,964 24,021
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 203,194 163,090
----------- -----------
NONINTEREST INCOME
Service fees 20,981 19,379
Gain on sale of investment
securities 5,635 1,167
Other income 355 14,101
----------- -----------
Total noninterest income 26,971 34,647
----------- -----------
NONINTEREST EXPENSE
Compensation and employee benefits 85,271 85,797
Occupancy and equipment 11,200 10,706
Data processing charges 16,644 18,286
Other expense 71,419 69,991
----------- -----------
Total noninterest expense 184,534 184,780
----------- -----------
Income before income taxes 45,631 12,957
Income taxes 16,999 666
----------- -----------
NET INCOME $ 28,632 $ 12,291
=========== ===========
Basic earnings per share earnings $ 0.14 $ 0.06
=========== ===========
Dilutive earnings per share $ 0.14 $ 0.06
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE>
CARNEGIE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Additional Unearned Unearned Other Total
Common Paid-in Retained ESOP RSP Comprehensive Treasury Stockholders' Comprehensive
Stock Capital Earnings Shares Shares Income (loss) Stock Equity Income
----- ------- -------- ------ ------ ------------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December
31, 1999 $23,805 $2,062,493 $1,203,806 $(161,874) $(64,750) $(241,366) $(129,506) $2,692,608
Net income 28,632 28,632 $28,632
Other
comprehensive
income:
Unrealized
gain on
available
for sale
securities,
net of
taxes
of $4,153 8,062 8,062 8,062
------
Comprehensive
income $36,694
=======
RSP Shares
earned 4,047 4,047
ESOP Shares
earned (882) 4,761 3,879
------- ---------- ---------- --------- -------- --------- --------- ----------
Balance,
March
31, 2000 $23,805 $2,061,611 $1,232,438 $(157,113) $(60,703) $(233,304) $(129,506) $2,737,228
======= ========== ========== ========= ======== ========= ========= ==========
Components of comprehensive
income: Change in net
unrealized loss on investment
securities held for sale $ 11,781
Realized gains included in
net income, net of taxes of $1,916 (3,719)
---------
Total $ 8,062
=========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE>
CARNEGIE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
2000 1999
----------- ---------
OPERATING ACTIVITIES
Net income 28,632 12,291
Adjustments to reconcile net income to net
cash provided by (used for)operating activities:
Depreciation, amortization and
accretion, net (7,624) (2,002)
Provision for loan losses 19,964 24,021
Amortization of unearned ESOP and RSP 8,808 8,808
Gain on sale of securities (5,635) (1,167)
Decrease (increase) in accrued
interest receivable 28,915 (25,336)
Increase (decrease) in accrued interest payable (11,382) 102,771
Other, net (56,289) (120,441)
-------- --------
Net cash provided by (used for)
operating activities 5,389 (1,055)
-------- --------
INVESTING ACTIVITIES
Investment securities available for sale:
Purchases (203,813) (2,501,119)
Proceeds from sales 63,823 209,940
Mortgage-backed securities available for sale:
Purchases - (111,463)
Maturities and repayments 19,251 162,045
Mortgage-backed securities held to maturity:
Maturities and repayments 25,422 99,503
Net increase in loans (271,745) (2,488,792)
Purchases of Federal Home Loan Bank stock - (197,100)
Purchases of office properties and equipment (16,000) (2,583)
---------- ----------
Net cash used for investing activities (383,062) (4,829,569)
---------- ----------
FINANCING ACTIVITIES
Net increase in deposits 692,801 356,367
Proceeds from borrowed funds - 4,800,000
Payments of borrowed funds (537,500) -
Purchase of treasury stock - (38,730)
Purchase stock for RSP - (88,078)
Net change in advances for taxes and insurance 22,008 34,969
---------- ----------
Net cash provided by
financing activities 177,309 5,064,528
---------- ----------
Increase (decrease) in cash and cash equivalents (200,364) 233,904
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 790,785 965,488
---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD 590,421 1,199,392
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 321,399 $ 113,849
Income taxes 40,500 1,200
See accompanying notes to the unaudited consolidated financial statements.
6
<PAGE>
CARNEGIE FINANCIAL CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements of Carnegie Financial Corporation (the
"Company") includes its wholly- owned subsidiary Carnegie Savings Bank (the
"Bank"). All significant intercompany items have been eliminated.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and, therefore, do not
necessarily include all information that would be included in audited financial
statements. The information furnished reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results of
operations.
All such adjustments are of a normal recurring nature. The results of operations
for the interim periods are not necessarily indicative of the results to be
expected for the full year or any other interim period.
Note 2 - EARNINGS PER SHARE
Earnings per share computations are based upon the weighted number of shares
outstanding for the three months ended March 31, 2000. The weighted number of
shares outstanding for the period was 200,861. Net income used in the earnings
per share calculation was $28,632.
The Company provides dual presentation of Basic and Diluted earnings per share.
Basic earnings per share utilizes net income as reported as the numerator and
the actual average shares outstanding as the denominator. Diluted earnings per
share includes any dilutive effects of options, warrants, and convertible
securities. At March 31, 2000 and 1999 there were no dilutive effects on the
computation.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Private Securities Litigation Act of 1995 contains safe harbor provisions
regarding forward-looking statements. When used in this discussion, the words
"believes," "anticipates," "contemplates," "expects," and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those projected. Those risks and uncertainties include changes
in interest rates, the ability to control costs and expenses, year 2000 issues,
general economic conditions, government policies and actions of regulatory
authorities. The Company undertakes no obligation to publicly release the
results of any revisions to those forward looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Carnegie Financial Corporation is a savings and loan holding company
headquartered in Carnegie, Pennsylvania, which provides a broad range of
deposits and loan products through its wholly owned subsidiary, Carnegie Savings
Bank (collectively, the "Company").
Subsequent Events
In conjunction with a routine regulatory examination of the "Bank by
the Office of Thrift Supervision (the "OTS"), the OTS requested the Bank to
enter into a Supervisory Agreement (the "Agreement"). The Agreement was signed
on April 14, 2000, (the "Effective Date") and will, among other things, place
restrictions on the Bank's growth. Under the Agreement, the Bank may not
increase its assets in an amount exceeding net interest credited on deposit
liabilities (or earnings credited on share accounts) during any calendar
quarter, without prior written approval of the regional director of the OTS (the
"Regional Director"). Additionally, the Agreement requires the Bank or its Board
of Directors to revise various policies including 1) interest rate risk
management, 2) strategic planning to improve earnings, 3) loan documentation and
underwriting policies, and 4) internal loan and asset classifications policies.
The restrictions on the Bank's operations are immediately effective and the
revision of certain of the Bank's policies must be completed within 90 days of
the Effective Date, unless extended by the OTS. The Agreement will remain in
place until terminated by the OTS and could adversely affect the financial
conditions, liquidity, and operations of the Company.
Asset/Liability Management
The Company's net interest income is sensitive to changes in interest
rates, as the rates paid on interest-bearing liabilities generally change faster
than the rates earned on interest-earning assets. As a result, net interest
income will frequently decline in periods of rising interest rates and increase
in periods of decreasing interest rates.
The board of directors attempts to manage the interest rate sensitivity
of the Company through its asset and liability committee which is comprised of
the board of of directors. The board of directors meets quarterly with
management to monitor the impact of interest rate risk and develops strategies
to manage its liquidity, shorten the effective maturities of certain interest
earning assets and increase the effective maturities of certain liabilities, to
reduce the exposure to interest rate fluctuations. The Agreement with the OTS
identifies the Bank's interest rate levels as unacceptably high and requires the
Bank to develop and pursue strategies to reduce interest-rate risk. The Bank is
currently working on a revised interest-rate policy. The board of directors
expects to consider methods to extend the terms of the Company's borrowings and
shorten the terms of the Company's assets. Although this is expected to reduce
the
8
<PAGE>
Bank's interest rate risk in the short term, it may also affect the
Company's current income. However, in implementing these strategies the board of
directors will attempt to balance the need to improve its interest rate risk
against the impact such restructurings will have on profitability.
Net Portfolio Value
The OTS computes amounts by which the net present value of cash flow
from assets, liabilities and off balance sheet items ("net portfolio value" or
"NPV") would change in the event of a range of assumed changes in market
interest rates. The Interest Rate Sensitivity of Net Portfolio Value Report
shows the degree to which balance sheet line items and net portfolio value are
potentially affected by a 100 to 300 basis point (1/100th of a percentage point)
upward and downward parallel shift (shock) in the Treasury yield curve.
The following table presents the Company's NPV at March 31, 2000. The
NPV was calculated by the OTS based upon information provided by the Company.
Percentage Change in Net Portfolio Value
----------------------------------------
Changes
in Market Change in NPV
Interest Rates NPV Ratio(1) Ratio(2)
-------------- ------------ -------------
(basis points)
+ 300 .68% (857) bp
+ 200 3.60 (565) bp
+ 100 6.55 (269) bp
0 9.24 --
- 100 12.01 277 bp
- 200 13.69 445 bp
- 300 14.88 563 bp
- ------------------
(1) Calculated as the estimated NPV divided by present value of total assets.
(2) Calculated as the excess (deficiency) of the NPV ratio assuming the
indicated change in interest rates over the estimated NPV ratio
assuming no change in interest rates.
The calculations in the above table indicate that the Company's NPV
would be significantly adversely affected by increases in interest rates and
favorably affected by decreases in interest rates. Computations of prospective
effects of hypothetical interest rate changes are based on numerous assumptions,
including relative levels of market interest rates, prepayments and deposit
run-offs and should not be relied upon as indicative of actual results. Certain
shortcomings are inherent in such computations. Although certain assets and
liabilities may have similar maturity or periods of repricing they may react at
different times and in different degrees to changes in the market interest
rates. The interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while rates on other
types of assets and liabilities may lag behind changes in market interest rates.
Certain assets, such as adjustable rate mortgages, generally have features which
restrict changes in interest rates on a short term basis and over the life of
the asset. In the event of a change in interest rates, prepayments and early
withdrawal levels could deviate significantly from those assumed in making
9
<PAGE>
calculations set forth above. Additionally, an increased credit risk may result
as the ability of many borrowers to service their debt may decrease in the event
of an interest rate increase.
Results of Operations
Net income increased $16,300 to $29,000 for the three months ended
March 31, 2000 from $12,000 for the same period ended 1999. This increase was
primarily due to an increase in net interest income of $36,000 partially offset
by a decline in noninterest income and increased income taxes.
Net interest income before the provision for loan losses increased
$36,000 to $223,000 for the current three month period ended March 31, 2000 from
$187,000 for the same period in 1999. The increase in net interest income was
primarily related to increases in total average loans of $7,300,000 and average
investment securities of $646,000, which was offset by a 23 basis point decline
in average interest rate earned on average loans receivable and a 100 basis
point increase in average cost of other liabilities. The increases in average
total loans receivable and investment securities were primarily funded by the
average increase in other liabilities of $5,106,000. For the current three month
period, average cost of funds for total interest-bearing liabilities increased
39 basis points to 4.93 % from 4.53 % for the same period in 1999.
10
<PAGE>
Average Balance Sheet
The following table sets forth certain information relating to the
Company's average balance sheet and reflects the average yield on assets and
average cost of liabilities for the periods indicated and the average yields
earned and rates paid. Such yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the
periods presented. Average balances are derived from daily balances. The table
illustrates that the increase in the amount and cost of funds of average other
liabilities, which consists of FHLB advances, has adversely affected the
interest rate spread for the current three month period.
<TABLE>
<CAPTION>
Three Months ended March 31,
------------------------------------------------------------------------
2000 1999
---------------------------------- ----------------------------------
(Dollars in thousands)
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1)......................... $22,810 $ 431 2.56% $15,510 $ 302 7.79%
Mortgage-backed securities.................. 1,450 23 6.34% 2,005 33 6.58%
Investment securities....................... 3,335 66 7.92% 2,689 42 6.25%
Other interest-earning assets(2)............ 1,014 14 5.52% 2,174 27 4.97%
------- ----- ------- ----
Total interest-earning assets.............. 28,609 534 7.47% 22,378 404 7.22%
Non-interest-earning assets.................. 986 271
------- -------
Total assets............................... $29,595 $22,649
======= =======
Interest-bearing liabilities:
NOW accounts................................ $ 1,452 7 1.93% $1,463 6 1.64%
Savings accounts............................ 3,848 24 2.49% 3,705 23 2.48%
Certificates of deposit..................... 10,700 146 5.46% 9,800 138 5.63%
Other liabilities........................... 9,195 133 5.79% 4,089 49 4.79%
------- ----- ------- ----
Total interest-bearing liabilities........ 25,195 310 4.93% 19,057 216 4.53%
------- ----- ----- ------- ---- -----
Non-interest bearing liabilities:............
Other liabilities........................... 1,685 624
------ -------
Total liabilities........................... 26,880 19,681
------ -------
Stockholders' equity......................... 2,715 2,968
------ -------
Total liabilities and stockholders' equity.. $29,595 $22,649
====== =======
Net interest income.......................... $ 224 $188
===== ====
Interest rate spread(3)...................... 2.54% 2.69%
==== =====
Net yield on interest-earning assets(4)...... 3.13% 3.36%
==== =====
Ratio of average interest-earning assets to
average interest-bearing liabilities....... 113.55% 117.43%
====== =======
</TABLE>
- ---------------------------------
(1) Average balances include non-accrual loans.
(2) Includes investment-bearing deposits in other financial institutions.
(3) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost of interest-
bearing liabilities.
(4) Net yield on interest-earning assets represents net interest income
as a percentage of average interest-earning assets.
11
<PAGE>
Rate/Volume Table
The following table sets forth certain information regarding changes in our
interest income and interest expense for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in average volume multiplied by old rate); (ii) changes in rates
(changes in rate multiplied by old average volume). Increases and decreases due
to both rate and volume have been allocated proportionally to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>
Three Months ended March 31,
----------------------------
2000 vs. 1999
Increase (Decrease)
Due to
------
Volume Rate Total
------ ---- -----
(In Thousands)
Interest income:
<S> <C> <C> <C>
Loans receivable......................... $ 142 $ (13) $ 129
Mortgage-backed securities............... (9) (1) (10)
Investment securities.................... 10 14 24
Other interest-earning assets............ (15) 2 (13)
---- ------- -----
Total interest-earning assets.......... $128 $ 2 $ 130
==== ======= =====
Interest expense:
NOW accounts............................ $ - $ 1 $ 1
Savings deposits........................ 1 - 1
Certificates of deposit................. 13 (5) 8
Other interest-bearing liabilities...... 61 23 84
---- ------- -----
Total interest-bearing liabilities..... $ 75 $ 19 $ 94
==== ======= =====
Change in net interest income.......... . $ 53 $ (17) $ 36
==== ======= =====
</TABLE>
The provision for loan losses for the three month period ended March 31,
2000 totaled $20,000 as compared to $24,000 for the same period in 1999.
Management continually evaluates the adequacy of the allowance for loan losses,
which encompasses the overall risk characteristics of the various portfolio
segments, past experience with losses, the impact of economic conditions on
borrowers and other relevant factors which may come to the attention of
management. Although the Company maintains its allowance for loan losses at a
level that it considers to be adequate to provide for the inherent risk of loss
in its loan portfolio, there can be no assurance that future losses will not
exceed estimated amounts or that additional provisions for loan losses will not
be required in future periods. See "Risk Elements".
Noninterest income, which is comprised of service charges on deposit
accounts, gains on sales of securities, and other income decreased $8,000 to
$27,000 for the three month period ended March 31, 2000 from $35,000 for the
same period in 1999. Decreased loan originations at March 31, 2000 resulted in a
decline in fee income for the current three month period.
12
<PAGE>
Income tax expense increased $16,000 to $17,000 for the three month period
ended March 31, 2000 from $1,000 for the same period ended 1999. Income tax
expense for the prior three month period was reduced due to the availability of
the use of tax loss carryforwards which was not available for the current three
month period.
Liquidity And Capital Resources
Liquidity may be adversely affected by unexpected deposit outflows,
excessive interest rates paid by competitors, adverse publicity relating to the
savings and loan industry and similar matters. Management monitors projected
liquidity needs and determines the level desirable based in part on the
Company's commitments to make loans and management's assessment of the Company's
ability to generate funds.
Management monitors both the Company's and the Bank's total risk-based Tier
I risk-based and Tier I leverage capital ratios in order to assess compliance
with regulatory guidelines. At March 31, 2000, both the Company and the Bank
exceeded the minimum risk-based and leverage capital ratios requirements. At
March 31, 2000, the Company's and Bank's total risk-based, Tier I risk-based and
Tier I leverage ratios were 20.4%, 19.5%, 19.2%, 18.4%, 9.9%, and 9.4%,
respectively. The capital ratios for the Company and the Bank could be adversely
affected due to the Agreement.
13
<PAGE>
Risk Element
The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other real
estate loans, and repossessed assets. A loan is classified as nonaccrual when,
in the opinion of management, there are serious doubts about collectibility of
interest and principal. At the time the accrual of interest is discontinued,
future income is recognized only when cash is received. Renegotiated loans are
those loans which terms have been renegotiated to provide a reduction or
deferral of principal or interest as a result of the deterioration of the
borrower.
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Loans on nonaccrual basis $ 83 $ 50
Loans past due 90 days or more and still accruing - -
------ ------
Total nonperforming loans 83 50
------ ------
Real estate owned - -
------ ------
Total nonperforming assets 83 50
------ ------
Nonperforming loans as a percent of total loans 0.36% 0.22%
====== ======
Nonperforming assets as a percent of total assets 0.28% 0.17%
====== ======
Allowance for loan losses to nonperforming loans 218.46% 407.30%
====== ======
</TABLE>
Management monitors impaired loans on a continual basis. As of March 31, 2000,
impaired loans had no material effect on the Company's financial position or
results of operations.
Management believes the level of the allowance for loan losses at March 31, 2000
is sufficient; however, there can be no assurance that the current allowance for
loan losses will be adequate to absorb all future loan losses. The relationship
between the allowance for loan losses and outstanding loans is a function of the
credit quality and known risk attributed to the loan portfolio. The on-going
loan review program and credit approval process is used to determine the
adequacy of the allowance for loan losses.
14
<PAGE>
CARNEGIE FINANCIAL CORPORATION
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
None
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are incorporated as part of this report
3(i) Articles of Incorporation of Carnegie Financial
Corporation *
3(ii) Bylaws of Carnegie Financial Corporation *
4 Specimen Stock Certificate *
10.1 Employment Agreement between the Bank and Shirley
Chiesa *
10.2 Supplemental Executive Retirement Plan *
10.3 Form of Directors Consultation and Retirement Plan
between the Bank and each of the directors *
10.4 Carnegie Financial Corporation 1999 Stock Plan **
10.5 Carnegie Savings Bank Restricted Stock Plan **
27 Financial Data Schedule (electronic filing only)
99 Review Report of S.R. Snodgrass, A.C.
- ---------------------
* Incorporated by reference to the identically numbered exhibit to the
registration statement on Form SB-2 (File No. 333-24579) declared
effective by the SEC on May 14, 1998.
** Incorporated by reference to the Proxy Statement for the Special
Meeting on January 11, 1999 and filed with the SEC on
December 10, 1999.
(b) Reports on Form 8-K
On April 14, 2000, the Company filed an Item 5 Form 8-K which
disclosed that the Bank entered into a Supervisory Agreement with the Office of
Thrift Supervision.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Carnegie Financial Corporation
Date: May 15, 2000 By:/s/Shirley C. Chiesa
-----------------------------------
Shirley C. Chiesa
President and Chief Executive Officer
Date: May 15, 2000 By:/s/Joseph Pigoni
--------------------------------------
Joseph Pigoni
Vice President and CFO
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 201
<INT-BEARING-DEPOSITS> 490
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,167
<INVESTMENTS-CARRYING> 863
<INVESTMENTS-MARKET> 870
<LOANS> 22,952
<ALLOWANCE> 181
<TOTAL-ASSETS> 29,702
<DEPOSITS> 17,244
<SHORT-TERM> 0
<LIABILITIES-OTHER> 721
<LONG-TERM> 9,000
0
0
<COMMON> 24
<OTHER-SE> 2,713
<TOTAL-LIABILITIES-AND-EQUITY> 29,702
<INTEREST-LOAN> 431
<INTEREST-INVEST> 89
<INTEREST-OTHER> 13
<INTEREST-TOTAL> 533
<INTEREST-DEPOSIT> 177
<INTEREST-EXPENSE> 310
<INTEREST-INCOME-NET> 223
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 185
<INCOME-PRETAX> 46
<INCOME-PRE-EXTRAORDINARY> 46
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29
<EPS-BASIC> .14
<EPS-DILUTED> .14
<YIELD-ACTUAL> 3.13
<LOANS-NON> 83
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 204
<CHARGE-OFFS> 42
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 181
<ALLOWANCE-DOMESTIC> 181
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
INDEPENDENT ACCOUNTANT'S REPORT
Board of Directors
Carnegie Financial Corporation
We have reviewed the accompanying consolidated balance sheet of Carnegie
Financial Corporation and subsidiary as of March 31, 2000, and the related
consolidated statements of income and cash flows for the three-month period
ended March 31, 2000 and 1999, and the consolidated statement of changes in
stockholders' equity for the three-month period ended March 31, 2000. These
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the year then ended (not presented herein); and in our report
dated February 25, 2000 we expressed an unqualified opinion on those
consolidated financial statements.
/s/S.R. Snodgrass, A.C.
Wexford, PA
April 25, 2000
