<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20552
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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 (IRS Employer Identification No.)
incorporation 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 October 24, 2000: 224,776
<PAGE> 2
CARNEGIE FINANCIAL CORP
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet
(Unaudited) as of September 30,
2000 and December 31, 1999 3
Consolidated Statement of Income
(Unaudited) for the Nine Months
ended September 30, 2000 and 1999 4
Consolidated Statement of Income
(Unaudited) for the Three Months
ended September 30, 2000 and 1999 5
Consolidated Statement of
Changes in Stockholders' Equity
(Unaudited) as of September 30, 2000 6
Consolidated Statement of Cash
Flows (Unaudited) for the Nine
Months ended September 30, 2000 and 1999 7
Notes to Unaudited Consolidated
Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 9 - 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Default Upon Senior Securities 17
Item 4. Submissions of Matters to a
Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8 - K 18
SIGNATURES 19
<PAGE> 3
CARNEGIE FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
Sept 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
ASSETS
Cash and Cash Equivalents
Cash and amounts due from banks $ 274,555 $ 504,005
Interest - bearing deposits with other institutions 379,941 286,780
------------ ------------
Total cash and cash equivalents 654,496 790,785
Certificates of deposit with other banks 100,000 100,000
Investment securities available for sale 1,183,832 3,323,894
Investment securities held to maturity
(fair value of $144,870) -- 145,000
Mortgage - backed securities available for sale 634,771 690,164
Mortgage - backed securities held to maturity
(fair value of $653,323 and $750,369) 648,821 743,385
Loans receivable, (net of allowance for loan losses
of $190,344 and $203,648) 22,345,530 22,518,456
Office properties and equipment, net 224,143 225,827
Federal Home Loan Bank Stock, at cost 302,500 564,900
Accrued interest receivable 140,869 180,797
Other assets 238,325 205,393
------------ ------------
Total assets $ 26,473,287 $ 29,488,601
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 17,026,948 $ 16,551,544
Borrowed funds 6,050,000 9,537,500
Advances from borrowers for taxes and insurance 121,115 275,758
Accrued interest payable 288,265 150,202
Other liabilities 248,413 280,989
------------ ------------
Total liabilities 23,734,741 26,795,993
STOCKHOLDERS' EQUITY
Preferred Stock, no par value; 2,000,000 shares authorized;
none outstanding -- --
Common Stock, $.10 par value; 4,000,000 shares authorized
and 238,050 outstanding 23,805 23,805
Treasury Stock, at cost (13,274 shares) (129,506) (129,506)
Additional paid - in capital 2,058,962 2,062,493
Retained Earnings - substantially restricted 1,081,562 1,203,806
Unearned Restricted Stock Plan (RSP) (52,609) (64,750)
Unearned Employee Stock Ownership Plan shares (ESOP) (147,591) (161,874)
Accumulated other comprehensive income (loss) (96,077) (241,366)
------------ ------------
Total stockholders' equity 2,738,546 2,692,608
------------ ------------
Total liabilities and stockholders' equity $ 26,473,287 $29,488,601
============ ============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
3
<PAGE> 4
CARNEGIE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $426,890 $389,207
Investment securities
Taxable 23,828 64,416
Exempt from federal income tax -- 1,663
Interest - bearing deposits with other institutions 5,178 3,246
Mortgage - backed securities 22,909 24,429
Dividends on Federal Home Loan Bank Stock 5,466 7,943
-------- --------
Total interest and dividend income 484,271 490,904
-------- --------
INTEREST EXPENSE
Deposits 191,791 152,912
Short-term borrowings 96,046 107,627
-------- --------
Total interest expense 287,837 260,539
-------- --------
NET INTEREST INCOME 196,434 230,365
Provision for loan losses 5,000 --
-------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 191,434 230,365
-------- --------
NONINTEREST INCOME
Service charges on deposit accounts 26,622 20,833
Gain (loss) on sale of investment securities 16,625 --
Other income 4,353 7,228
-------- --------
Total noninterest income 47,600 28,061
-------- --------
NONINTEREST EXPENSE
Compensation and employee benefits 80,961 84,204
Occupancy and equipment 11,530 10,322
Data processing charges 17,204 19,828
Other expenses 95,883 65,511
-------- --------
Total noninterest expense 205,578 179,865
-------- --------
Income before income taxes 33,456 78,561
Income tax expense 9,737 28,584
-------- --------
NET INCOME $ 23,719 $ 49,977
======== ========
Basic earnings per share: $ .12 $ 0.24
======== ========
Diluted earnings per share: $ .12 $ 0.24
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE> 5
CARNEGIE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
------------ ------------
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans $ 1,292,990 $ 1,042,671
Investment securities
Taxable 131,050 154,727
Exempt from federal income tax 2,781 10,415
Interest - bearing deposits with other institutions 14,872 35,606
Mortgage - backed securities 68,586 85,788
Dividends on Federal Home Loan Bank Stock 22,869 17,190
------------ ------------
Total interest and dividend income 1,533,148 1,346,397
------------ ------------
INTEREST EXPENSE
Deposits 550,680 480,268
Short-term borrowings 349,115 236,774
------------ ------------
Total interest expense 899,795 717,042
------------ ------------
NET INTEREST INCOME 633,353 629,355
Provision for loan losses 57,414 38,448
------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 575,939 590,907
NONINTEREST INCOME
Service charges on deposit accounts 76,480 62,513
Gain (loss) on sale of investment securities (266,963) (27,739)
Other income 6,394 43,864
------------ ------------
Total noninterest income (184,089) 78,638
------------ ------------
NONINTEREST EXPENSE
Compensation and employee benefits 249,564 254,687
Occupancy and equipment 33,803 31,778
Data processing charges 50,545 58,180
Other expenses 251,565 205,036
------------ ------------
Total noninterest expense 585,477 549,681
------------ ------------
Income before income taxes (193,627) 119,864
Income tax expense (71,383) 41,166
------------ ------------
NET INCOME (LOSS) $ (122,244) $ 78,698
=========== ===========
Basic earnings per share: $ (0.60) $ 0.37
=========== ===========
Diluted earnings per share: $ (0.60) $ 0.37
=========== ===========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE> 6
CARNEGIE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Additional Unearned Unearned Other Total
Common Treasury Paid-in Retained ESOP RSP Comprehensive Stockholders' Comprehensive
Stock Stock Capital Earnings Shares Shares Income (Loss) Equity Income
----- ----- ------- -------- ------ ------ ------------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 $ 23,805 $(129,506) $2,062,493 $1,203,806 $(161,874) $(64,750) $(241,366) $2,692,608
Net loss (122,244) (122,244) $(122,244)
Other
comprehensive
income:
Unrealized
gain on
available
for sale
securities,
net of
taxes
of $49,398 145,289 145,289 145,289
---------
Comprehensive
income $ 23,045
=========
Release of earned
ESOP shares (3,531) 14,283 10,752
Release of earned
RSP shares 12,141 12,141
--------- ---------- ---------- ---------- --------- -------- ---------- ---------
Balance,
Sept 30, 2000 $ 23,805 $ (129,506) $2,058,962 $1,081,562 $(147,591) $ (52,609) (96,077) $2,738,546
========= ========== ========== ========== ========= ========= ========== ==========
Components of
comprehensive
income:
Change in net
unrealized gain
on investment
securities held
for sale $ (30,907)
Realized losses
included in net
income, net of tax
benefit of $90,767 176,196
---------
Total $ 145,289
=========
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
6
<PAGE> 7
CARNEGIE FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) (122,244) 78,698
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion, net (22,135) 10,461
Provision for loan losses 57,414 38,448
Loss on sale of securities 266,963 27,739
Decrease (increase) in accrued interest receivable 39,928 (39,430)
Increase in accrued interest payable 138,063 269,559
Amortization of ESOP unearned compensation 14,283 --
Amortization of RSP unearned compensation 12,141 --
Increase in prepaid income taxes 20,847 --
Other, net (164,776) 24,357
----------- -----------
Net cash provided by operating activities 240,484 409,832
----------- -----------
INVESTING ACTIVITIES
Investment securities available for sale:
Purchases (491,688) (2,746,119)
Proceeds from sales 2,627,770 792,344
Maturities and repayments 141,882 --
Mortgage-backed securities available for sale:
Purchases -- (111,463)
Maturities and repayments 59,586 294,317
Mortgage-backed securities held to maturity:
Maturities and repayments 94,475 285,797
Net increase in loans 115,447 (6,797,958)
Purchases of Federal Home Loan Bank stock 262,400 (412,000)
Purchases of office properties and equipment (19,906) (4,420)
----------- -----------
Net cash provided by (used for)investing activities 2,789,966 (8,699,502)
----------- -----------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 475,404 28,659
Proceeds from short-term borrowings -- 3,750,000
Proceeds from long-term borrowings -- 4,075,000
Payments of borrowings (3,487,500) 0
Purchase of treasury stock -- (118,530)
Purchase of stock for RSP -- (88,079)
Net change in advances for taxes and insurance (154,643) (46,992)
----------- -----------
Net cash provided by (used for) financing activities (3,166,739) 7,600,058
----------- -----------
Decrease in cash and cash equivalents (136,289) (689,612)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 790,785 1,064,488
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR 654,496 374,876
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on deposits and borrowings $ 318,333 $ 447,483
Income taxes 65,500 5,000
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.
7
<PAGE> 8
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 period. The weighted number of shares outstanding for the
nine-month period ended September 30, 2000 and 1999 was 202,551 and 213,521,
respectively. The weighted number of shares outstanding for the three- month
period ended September 30, 2000 and 1999 was 202,860 and 208,364, respectively.
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 September 30, 2000 and 1999 there were no dilutive effects on the
computation.
8
<PAGE> 9
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, 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").
Overview
In conjunction with a routine regulatory examination of Carnegie Savings
Bank (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. On June 28,
2000, the Bank submitted to the OTS among other things, a revised business plan
and on August 1, 2000 the interest rate risk policy was submitted. The Bank is
currently working with the OTS to resolve such matters. 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 that is comprised of the
board 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 strategies
considered include 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 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.
On May 25, 2000, the Board adopted a revised interest rate risk policy and
also took certain actions to implement this policy. Accordingly, the Company
sold $2.7 million of its available for sale securities and incurred a pre-tax
loss of approximately $272,000. With the proceeds of such securities sales and
the extension of borrowings of $2 million, the Company paid down $4.3 million of
its short-term borrowings. In addition, the bank sold $288,000 of U.S.
Government Agency equity securities resulting in gains of $17,000 to provide
further liquidity and to partially offset the negative trend in earnings.
Although this strategy is expected to reduce the Bank's interest rate risk in
the short term, there is no assurance that any additional restructurings in
compliance with the Agreement will not further adversely affect the Company's
current income. 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.
9
<PAGE> 10
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 September 30, 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 3.48% (721) bp
+ 200 5.91 (478) bp
+ 100 8.35 (233) bp
0 10.89 --
- 100 12.56 187 bp
- 200 13.13 245 bp
- 300 13.02 233 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 that 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 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.
10
<PAGE> 11
Results of Operations
For the current nine month and three month periods, net income decreased
$201,000 and $27,000, respectively to a net loss of $122,000 and net income of
$24,000, respectively, from net income of $79,000 and $50,000 for the same
periods ended 1999. In response to the Agreement, management and the board of
directors sought to reduce the exposure to interest rate fluctuations by
divesting of certain U.S. Government Agency and municipal securities totaling
$2,645,000 during the second quarter. Although this resulted in a loss on the
sale of such securities totaling $272,000 for the quarter, the Company was able
to repay certain short-term borrowings and improved its interest rate risk
position in the current term. Net income rebounded during the current quarter
with the sale of $288,000 of U.S. Government Agency equity securities resulting
in gains of $17,000. For details of the Company's results of operations for the
current nine month and three month periods, see "Average Balance Sheets".
Average Balance Sheets
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
short-term liabilities, which consists of FHLB advances, has adversely affected
the interest rate spread for the current nine months and three month periods and
will continue to do so in future periods.
11
<PAGE> 12
CARNEGIE FINANCIAL CORPORATION
AVERAGE BALANCE SHEETS AND INTEREST ANALYSIS
NINE MONTHS ENDED 9/30/00 AND 9/30/99
The following tables set forth certain information relating to our 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 are derived by dividing income or expenses by the average
balance of assets or liabilities, respectively, for the periods presented.
Average balances are derived from daily average balances.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------------------------------------------------
2000 1999
-------------------------------------- -----------------------------------
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) $22,562 $ 1,293 7.64% $17,848 $1,043 7.79%
Investment securities 2,310 134 7.72% 3,046 165 7.23%
Mortgage - backed securities 1,378 69 6.64% 1,858 86 6.16%
Other interest-earning assets (2) 972 38 5.18% 1,410 53 4.99%
------- ------- ------ ------- ------ ------
Total interest - earning assets 27,221 1,533 7.51% 24,162 1,346 7.43%
------- ------ =====
Non-interest - earning assets 973 658
------- -------
Total assets $28,194 $24,820
======= =======
Interest - bearing liabilities:
Interest - bearing demand deposits 1,467 22 2.01% 1,492 22 1.97%
Certificates of Deposit 10,646 443 5.55% 9,561 391 5.45%
Savings deposits 4,047 85 2.81% 3,681 67 2.43%
Short-term borrowings 7,672 349 6.07% 6,215 237 5.08%
------- ------- ------ ------- ------ ------
Total interest - bearing liabilities $23,831 $ 900 5.03% $20,949 $ 717 4.56%
------- ------- ------- ------ =====
Noninterest - bearing liabilities 1,650 995
------- -------
Total Liabilities 25,481 21,944
======= =======
Retained Earnings 2,713 2,876
------- -------
Total liabilities and
retained earnings 28,194 24,820
======= =======
Net interest income $ 633 $ 629
======= ======
Interest rate spread(3) 2.48% 2.87%
Net yield on interest - earning
assets(4) 3.10% 3.47%
Ratio of average interest - earning
assets to average interest - bearing
liabilities earning assets (4) 114.23% 115.34%
</TABLE>
---------------------------
(1) Average balances include non-accrual loans.
(2) Includes interest - bearing deposits in other financial institutions and
FHLB stock.
(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.
12
<PAGE> 13
CARNEGIE FINANCIAL CORPORATION
AVERAGE BALANCE SHEETS AND INTEREST ANALYSIS
THREE MONTHS ENDED 9/30/00 and 9/30/99
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------------------------------
2000 1999
-------------------------------------- -----------------------------------
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) $22,423 $ 427 7.62% $20,189 $389 7.71%
Investment securities 1,173 24 8.12% 3,280 66 8.06%
Mortgage - backed securities 1,316 23 6.97% 1,704 24 5.73%
Other interest-earning assets (2) 871 11 4.89% 852 11 5.25%
------- ------- ------ ------- ---- ------
Total interest - earning assets 25,783 484 7.51% 26,025 491 7.55%
------- ----
Non-interest - earning assets 1,009 965
------- -------
Total assets $26,793 $26,990
======= =======
Interest - bearing liabilities:
Interest - bearing demand deposits 1,522 8 2.10% 1,646 8 1.94%
Certificates of Deposit 10,570 150 5.68% 9,186 122 5.31%
Savings deposits 4,213 34 3.23% 3,687 23 2.50%
Short-term borrowings 5,974 96 6.43% 8,095 108 5.34%
------- ------- ------ ------- ---- ------
Total interest - bearing liabilities $22,279 $ 288 5.17% $22,613 $261 4.62%
------- ------- ------- ----
Noninterest - bearing liabilities 1,803 1,593
------- -------
Total Liabilities 24,081 24,206
======= =======
Retained Earnings 2,711 2,784
------- -------
Total liabilities and
retained earnings 26,793 26,990
======= =======
Net interest income $ 196 $230
====== ====
Interest rate spread(3) 2.34% 2.93%
Net yield on interest - earning
assets(4) 3.04% 3.53%
Ratio of average interest - earning
assets to average interest -
bearing liabilities 115.73% 115.09%
</TABLE>
----------------------
(1) Average balances include non-accrual loans
(2) Includes interest - bearing deposits in other financial institutions and
FHLB stock.
(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.
13
<PAGE> 14
Rate/Volume Table
The following tables set 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>
For the Nine-Months Ended September 30, 2000
--------------------------------------------
Volume Rate Total
------ ---- -----
(In Thousands)
<S> <C> <C> <C>
Interest income:
Loans receivable $ 275 $ (25) $ 251
Mortgage-backed securities (40) 8 (32)
Investment securities (23) 5 (17)
Other interest-earning assets (17) 2 (15)
----- ----- -----
Total interest-earning assets $ 197 $ (10) $ 187
===== ===== =====
NOW accounts $ -- $ 1 $ 1
Savings deposits 7 11 18
Certificates of deposit 44 8 52
Other interest-bearing liabilities 56 56 112
----- ----- -----
Total interest-bearing liabilities $ 107 $ 76 $ 183
===== ===== =====
Change in net interest income $ 90 $ (86) $ 4
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
For the Three-Months Ended September 30, 2000
---------------------------------------------
Volume Rate Total
------ ---- -----
(In Thousands)
<S> <C> <C> <C>
Interest income:
Loans receivable $ 44 $ (6) $ 38
Mortgage-backed securities (42) -- (42)
Investment securities (6) 4 (2)
Other interest-earning assets -- (1) (1)
---- ---- ----
Total interest-earning assets $ (4) $ (3) $ (7)
==== ==== ====
NOW accounts $ (1) $ 1 $ --
Savings deposits 19 10 29
Certificates of deposit 3 8 11
Other interest-bearing liabilities (28) 16 (12)
---- ---- ----
Total interest-bearing liabilities $ (7) $ 35 $ 28
==== ==== ====
Change in net interest income $ 3 $(38) $(35)
==== ==== ====
</TABLE>
14
<PAGE> 15
The provision for loan losses for the nine-month and three-month periods
ended September 30, 2000 totaled $57,000 and $5,000, respectively, as compared
to $38,000 and $0, respectively for the same period ended in 1999. During the
first half of 2000, the Company incurred loan charge-offs approximating $72,000.
Such charge-offs primarily consisted of three installment loans related to the
same borrowing relationship. 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 and losses on sales of securities, and other income decreased
$263,000 for the nine-month and increased $20,000 for the three-month period
ended September 30, 2000 as compared to the same periods ended in 1999. As noted
above, management's efforts to reduce interest rate exposure through the sales
of certain investment securities primarily accounted for this fluctuation.
However, also contributing to this decline was a decrease in loan originations
for the current nine month and three month periods that resulted in a decline in
fee income of $8,000 and $3,000, respectively. Due to the Agreement, the Company
growth is restricted.
Noninterest expense, which is comprised of compensation and employee
benefits, occupancy and equipment, data processing, and other expenses
increased $36,000 for the nine-months ended September 30, 2000 and increased
$26,000 for the three-months ended September 30, 2000 as compared to the same
periods ended in 1999. To comply with certain aspects of the Agreement,
management engaged outside parties to provide professional and legal services
contributing to the increased noninterest expenses.
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 September 30, 2000, both the Company
and the Bank exceeded the minimum risk-based and leverage capital ratios
requirements. At September 30, 2000, the Company's and Bank's total risk-based,
Tier I risk-based and Tier I leverage ratios were 20.73%, 19.48%, 10.55%, and
20.22%,18.97%, 10.21%, respectively. The capital ratios for the Company and the
Bank could be adversely affected due to the Agreement.
15
<PAGE> 16
Risk Elements
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.
September 30, December 31,
2000 1999
--------- -----------
(Dollars in thousands)
Loans on nonaccrual basis $ 25 $ 50
Loans past due 90 days or more and still accruing -- --
------- -------
Total nonperforming loans 25 50
------- -------
Real estate owned -- --
------- -------
Total nonperforming assets 25 50
------- -------
Nonperforming loans as a percent of total loans 0.11% 0.22%
======= =======
Nonperforming assets as a percent of total assets 0.09% 0.17%
======= =======
Allowance for loan losses to nonperforming loans 761.38% 407.30%
======= =======
Management monitors impaired loans on a continual basis. As of September 30,
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 September 30,
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.
16
<PAGE> 17
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.
<PAGE> 18
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: November 27, 2000 By: /s/Shirley C. Chiesa
-------------------------------------
Shirley C. Chiesa
President and Chief Executive Officer
Date: November 27, 2000 By: /s/Joseph Pigoni
-------------------------------------
Joseph Pigoni
Vice President and CFO
