<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------
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 0-17753
REGENT BANCSHARES CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
New Jersey 23-2440805
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1430 Walnut Street, Philadelphia, PA 19102
------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(215) 546-6500
(Registrant's telephone number, including area code)
N/A
(Former name and address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of common shares outstanding at September 30, 1995 was
979,274.
<PAGE>
PART I. FINANCIAL INFORMATION
REGENT BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
ASSETS September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Cash and due from banks $ 4,929,325 $ 2,802,177
Investment securities available for sale 31,273,732 35,056,688
Mortgage-backed securities held to maturity 111,537,750 121,482,427
Investment securities -- 124,672
Mortgage loans held for sale 4,071,033 5,387,517
Loans, net of unearned interest and loan costs 103,129,694 75,859,639
Less: Allowance for loan losses (1,913,920) (1,713,372)
-------------- --------------
Net loans 101,215,774 74,146,267
Premises and equipment, net 665,981 656,501
Accrued interest receivable 1,694,470 1,951,244
Prepaid expenses and other assets 1,195,037 1,842,984
-------------- --------------
Total Assets $ 256,583,102 $ 243,450,477
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 15,611,907 $ 13,641,796
Interest bearing:
NOW and money market 10,860,561 13,796,458
Savings 48,117,623 83,335,372
Certificates of deposit 118,353,183 50,287,846
-------------- --------------
Total Deposits 192,943,274 161,061,472
Advances from Federal Home Loan Bank of Pittsburgh 38,140,585 63,037,382
Subordinated debentures 2,750,000 2,750,000
Accrued interest payable 4,301,902 2,240,068
Other liabilities 4,918,986 2,155,987
-------------- --------------
Total Liabilities 243,054,747 231,244,909
-------------- --------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.10 par value, 5,000,000 shares authorized Series A, 487,532
and 515,678 shares issued and
outstanding; entitled to $4,875,320 in involuntary
liquidation 48,753 51,568
Series B, 4,270 and 4,650 shares issued and outstanding;
entitled to $42,700 in involuntary liquidation 427 465
Series C, 3,515 and 4,036 shares issued and
outstanding; entitled to $35,150 in involuntary
liquidation 351 404
Series D, 4,775 and 4886 shares issued and outstanding;
entitled to $47,750 in involuntary liquidation 478 488
Series E, 99,273 and 73,365 shares issued and
outstanding; entitled to $992,730 in involuntary
liquidation 9,927 7,337
Common stock, $.10 par value, 10,000,000 shares
authorized, 979,274 and 924,409 shares issued and
outstanding 97,927 92,441
Capital surplus 13,300,872 12,997,321
Retained earnings 546,308 478,544
Net unrealized loss on securities available for sale (476,688) (1,423,000)
-------------- --------------
Total Shareholders' Equity 13,528,355 12,205,568
-------------- --------------
Total Liabilities & Shareholders' Equity $ 256,583,102 $ 243,450,477
============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGENT BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Interest Income:
Loans, including fees $3,116,643 $1,647,901
Investment securities 2,288,464 2,779,298
Federal funds sold -- --
--------- ---------
Total interest income 5,405,107 4,427,199
--------- ---------
Interest Expense:
Deposits 2,578,237 2,284,983
Short-term borrowings 530,626 499,106
Long-term debt 57,730 101,445
--------- ---------
Total interest expense 3,166,593 2,885,534
--------- ---------
Net interest income 2,238,514 1,541,665
Provision for loan losses 125,000 --
--------- ---------
Net interest income after
provision for loan losses 2,113,514 1,541,665
--------- ---------
Other Income:
Service charges on deposit accounts 18,550 43,038
Other 5,257 14,237
--------- ---------
Total other income 23,807 57,275
--------- ---------
Other Expenses:
Salaries and employee benefits 432,519 355,874
Professional services 425,901 146,267
Rent 43,464 43,463
Other occupancy expense 41,140 27,071
Depreciation and amortization 46,050 37,200
Insurance 16,612 130,408
Other 1,150,311 307,349
--------- ---------
Total other expenses 2,155,997 1,047,632
--------- ---------
Income (loss) before income taxes ( 18,676) 551,308
Provision for income taxes ( 5,400) 187,300
--------- ---------
NET INCOME (LOSS) ( 13,276) 364,008
Preferred stock dividends ( 229,073) 65,904
--------- ---------
Earnings (loss) for common stock $( 242,349) $ 298,104
======== =========
Earnings (loss) per common share:
Primary $( .22) $ .29
Fully diluted - $ .24
Weighted average number of shares outstanding 1,085,590 1,011,405
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGENT BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Interest Income:
Loans, including fees $ 7,482,226 $ 4,611,396
Investment securities 7,581,244 8,149,617
Federal funds sold - 9,562
---------- -----------
Total interest income 15,063,470 12,770,575
---------- -----------
Interest Expense:
Deposits 6,785,615 6,906,112
Short-term borrowings 2,179,974 1,149,306
Long-term debt 167,697 422,622
---------- -----------
Total interest expense 9,133,286 8,478,040
---------- -----------
Net interest income 5,930,184 4,292,535
Provision for loan losses 320,000 35,000
---------- -----------
Net interest income after
provision for loan losses 5,610,184 4,257,535
---------- -----------
Other Income:
Service charges on deposit accounts 56,160 91,365
Other 17,900 81,957
---------- -----------
Total other income 74,060 173,322
---------- -----------
Other Expenses:
Salaries and employee benefits 1,278,726 1,121,069
Professional services 833,988 325,524
Rent 130,391 131,708
Other occupancy expense 123,464 87,863
Depreciation and amortization 133,750 106,001
Insurance 238,921 372,360
Other 2,376,729 732,008
---------- -----------
Total other expenses 5,115,969 2,876,533
---------- -----------
Income before income taxes 568,275 1,554,324
Provision for income taxes 191,800 526,900
---------- -----------
NET INCOME 376,475 1,027,424
Preferred stock dividends 360,147 236,610
---------- -----------
Earnings for common stock $ 16,328 $ 790,814
========== ===========
Earnings per common share:
Primary $ .02 $ .80
Fully diluted - $ .69
Weighted average number of shares 1,048,059 982,490
========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGENT BANCSHARES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 376,475 $ 1,027,424
Adjustments to reconcile net income to net
cash provided by operating activities -
Provision for loan losses 320,000 35,000
Depreciation and amortization 133,750 106,001
Net amortization of premiums and
discounts on investment securities
and investment securities available for sale 468,635 1,087,132
Decrease in net deferred loan costs 1,139,122 157,345
(Increase) decrease in accrued interest receivable 256,774 (174,106)
Decrease in other assets 647,947 290,595
Increase in accrued interest payable 2,061,834 742,706
Increase in other liabilities 2,762,999 425,041
---------- ---------
Total adjustments 7,791,061 2,669,714
---------- ---------
Net cash provided by operating activities 8,167,536 3,697,138
---------- ---------
Cash Flows From Investing Activities:
Net increase in loans (28,528,629) (10,372,934)
Net decrease in mortgage loans held for sale 1,316,484 1,130,533
Purchases of mortgage-backed and investment securities - (46,483,957)
Principal collected on investment and
mortgage-backed securities 14,205,310 39,915,104
Net decrease in U.S. Treasury bills 124,672 99,860
Net decrease in federal funds sold - 6,000,000
Purchases of premises and equipment (143,230) (168,701)
---------- ---------
Net cash used in investing activities (13,025,393) (9,880,095)
---------- ---------
Cash Flows From Financing Activities:
Net (decrease) increase in total deposits 31,881,802 (3,512,558)
Net (decrease) increase in advances from
Federal Home Loan Bank of Pittsburgh (24,896,797) 9,865,996
Proceeds from issuance of subordinated debentures - 200,000
---------- ----------
Net cash provided by financing activities 6,985,005 6,553,438
---------- ----------
Net increase (decrease) in cash & cash equivalents 2,127,148 370,481
Cash & cash equivalents, beginning of year 2,802,177 6,719,903
---------- ----------
Cash & cash equivalents, end of period $ 4,929,325 $ 7,090,384
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 7,071,452 $ 7,735,334
Income taxes 100,000 310,000
Supplemental Schedule of Non-Cash Investing and
Financial Activity:
Issuance and declaration of preferred stock
as dividends $ 308,712 $ 395,829
Conversion of preferred stock to common stock 5,486 4,297
</TABLE>
See notes to consolidated financial statements.
<PAGE>
REGENT BANCSHARES CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. In the opinion of Regent Bancshares Corp. ("Regent"), the accompanying
unaudited financial statements contain all adjustments (including
normal recurring accruals) necessary to present fairly the financial
position of Regent as of September 30, 1995 and December 31, 1994,and
its results of operations for the three and nine months ended September
30, 1995 and 1994 and its cash flows for the nine months ended
September 30, 1995 and 1994.
2. Results of operations for the nine months ended September 30, 1995 are
not necessarily indicative of the results to be expected for the
full year.
3. Earnings per common share for all periods presented is based on the
weighted average number of common shares outstanding and common stock
equivalents, after consideration of preferred stock dividends. Common
stock equivalents include the Series B, Series C, Series D and Series E
Convertible Preferred Stock. For the nine months ended September 30,
1995 and 1994, the weighted average number of common shares included
114,056 and 94,989 shares, respectively, attributable to common stock
equivalents. The earnings per common share does not assume the exercise
of stock options or warrants as common stock equivalents since such
exercise would be anti-dilutive.
Fully diluted earnings per share assumes the conversion of preferred
stock. However, for the three and nine months ended September 30, 1995,
the resulting calculation is anti-dilutive and is therefore not
presented herein. For the three and nine months ended September 30,
1994, 1,528,783 and 1,499,868 shares, respectively, were used in the
calculation.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Regent Bancshares Corp. ("Regent"), the holding company for Regent National Bank
(the "Bank"), recorded net income of $376,475, or $.02 per share, for the first
nine months of 1995 compared to $1,027,424, or $.80 per share for the nine
months ended September 30, 1994. The decline in nine months net income in 1995
compared to 1994 was due principally to an increase in the provision for loan
losses of $285,000 and an increase in other expenses of $2,239,436 which more
than offset a $1,637,649 increase in net interest income.
For the three months ended September 30, 1995 a net loss of $13,276 was recorded
compared to net income of $364,008 in the same period in 1994. On a per share
basis, a loss of $.22 was incurred in the 1995 third quarter versus net income
of $.29 per share in the third quarter of 1994. The loss per share for the third
quarter of 1995 reflects a charge for the preferred dividend of $229,073
compared to a charge for the third quarter of 1994 of $65,904. The higher 1995
charge resulted from the increased market value of the stock that would be paid
as a dividend. The decrease in 1995 third quarter net income compared to 1994
was due to increases in the provision for loan losses of $125,000 and other
expenses of $1,108,365 which more than offset an increase in net interest income
of $696,849.
The higher provision for loan losses and a portion of the increase in other
expenses for both the quarter and nine months ended September 30, 1995 were
attributable to irregularities in residential mortgage loans purchased in 1994
from two mortgage banking companies, both of which filed for bankruptcy
protection. The 1995 third quarter was adversely affected by the associated
professional fees and settlement costs incurred in resolving legal matters
relating to the assignment of the residential mortgages to Regent. Expenses of
$188,000 were also incurred in the third quarter of 1995 for professional
services in connection with Regent's recently announced plans to merge with
Carnegie Bancorp of Princeton, NJ. Salaries and employee benefits and costs
incurred for the expansion and servicing of a new consumer loan program also
increased other expenses for the three and nine months ended September 30, 1995.
The increases in other expenses were partially offset by a refund of premiums
previously paid to the FDIC totaling $107,000. The increases in net interest
income were attributable to an improvement in the net interest margin as a
result of increased lending volume. The net interest margin increased to 3.31%
for the first nine months of 1995 from 2.31% for the first nine months of 1994.
<PAGE>
On August 30, 1995 Regent and Regent's wholly owned subsidiary, the Bank,
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Carnegie Bancorp ("Carnegie") and Carnegie Bank, N.A. ("CBN") pursuant to which
Regent will merge (the "Merger") with and into Carnegie with Carnegie as the
surviving corporation and the Bank will merge (the "Bank Merger") with and into
CBN with CBN as the surviving bank under the name "Carnegie Regent Bank, N.A.".
The Merger and the Bank Merger are subject to approval by the stockholders of
Carnegie and Regent as well as various regulatory approvals, including approval
by the Office of the Comptroller of the Currency and by the Board of Governors
of the Federal Reserve System.
The Merger Agreement provides that, upon consummation of the Merger, the then
outstanding securities of Regent will be converted into the right to receive
Common Stock of Carnegie, Preferred Stock of Carnegie or options to purchase
Common Stock of Carnegie as follows:
(i) each share of Regent's Common Stock will be converted into 0.75
shares of Carnegie Common Stock;
(ii) each share of Regent's Series A Convertible Preferred Stock will be
converted into one share of Carnegie Series A Convertible Preferred
Stock which will be convertible into 0.75 shares of Carnegie Common
Stock;
(iii) each share of Regent's Series B, Series C and Series D Convertible
Preferred Stock will be called for redemption in accordance with its
terms at $10.00 per share not later than 30 days prior to the
anticipated effective date of the Merger, unless theretofore converted
in accordance with its terms into 1.177 shares of Regent's Common Stock
each of which would be converted in the Merger into 0.75 shares of
Carnegie Common Stock;
(iv) each share of Regent's Series E Convertible Preferred Stock will be
called for redemption in accordance with its terms at $10.00 per share
not later than 30 days prior to the anticipated effective date of the
Merger, unless theretofore converted in accordance with its terms into
one share of Regent's Common Stock which would be converted in the
Merger into 0.75 shares of Carnegie Common Stock;
(v) outstanding options to purchase Regent's Common Stock held by the
organizers of Regent to purchase an aggregate of 274,241 shares of
Regent's Common Stock will be converted into options to purchase an
aggregate of 174,750 shares of Carnegie Common Stock;
(vi) outstanding warrants to purchase an aggregate of 50,022 shares of
Regent's Common Stock held by the organizers of Regent will be
converted into an aggregate of 12,168 shares of Carnegie Common Stock;
<PAGE>
(vii) outstanding options held by the underwriter of Regent's initial public
offering to purchase an aggregate of 147,124 shares of Regent's Common
Stock will be converted into an aggregate of 7,489 shares of Carnegie
Common Stock; and
(viii) all other outstanding options and warrants to purchase Regent's Common
Stock will be converted into Carnegie Common Stock at the rate of one
share of Carnegie Common Stock for options and warrants representing in
the aggregate the right to purchase 7 1/2 shares of Regent's Common
Stock.
FINANCIAL CONDITION
Capital Adequacy
Capital adequacy standards adopted by federal banking regulators make capital
more sensitive to differences in risk profiles among banking organizations and
consider off-balance-sheet exposures in determining capital adequacy. Various
levels of risk are assigned to different categories of assets and
off-balance-sheet activities.
These standards define capital as Tier I and Tier II capital. All banks are
required to have Tier I capital of at least 4% of risk-weighted assets and total
capital of 8% of risk-weighted assets. Tier I (Core) capital consists of common
shareholders' equity, non-cumulative preferred stock, and retained earnings.
Tier II or total capital includes Tier I capital, cumulative preferred stock,
qualifying subordinated debt, and the allowance for loan losses up to a maximum
1.25% of total risk-weighted assets. The following table presents the components
of the Regent's assets and Tier I and II capital ratios at September 30, 1995
and December 31, 1994:
<PAGE>
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Tier I Capital $14,005,043 $13,628,568
Allowance for possible loan losses 1,706,324 1,387,754
Qualifying subordinated debt 1,650,000 1,650,000
----------- -----------
Total Tier II Capital $17,361,367 $16,666,322
========== ==========
Total Risk Adjusted Assets $136,505,936 $111,020,356
=========== ===========
Tier I Ratio 10.26% 12.28%
===== =====
Tier II Ratio 12.72% 15.01%
===== =====
</TABLE>
In addition to the risk-based requirements, regulations have been adopted that
establish a minimum leverage capital ratio of 3% of Tier I capital to total
assets. The 3% level applies to only those banks that are given the highest
composite rating under the regulators' rating system while all other banks are
expected to have 3% plus an additional cushion of at least 100 to 200 basis
points. At September 30, 1995, and December 31, 1994, Regent's leverage ratio
was 5.5% and 5.6%, respectively.
<PAGE>
The Regent's objective is to maintain its strong capital base as well as
exceeding the requirements for the Bank to be classified as "well capitalized,"
as defined by the Federal Deposit Insurance Corporation. Management believes
that Regent's capital ratios are in excess of regulatory requirements, are
adequate to support current and near term growth, and that the Bank's ratios can
be maintained above the level needed to be considered "well capitalized."
Asset and Liability Management
Asset and liability management is the process of maximizing net interest income
within the constraints of maintaining acceptable levels of liquidity, interest
rate risk and capital. To achieve this objective, policies and procedures have
been implemented that utilize a combination of selected investments and funding
sources with various maturity structures.
Liquidity: Liquidity represents the ability to generate funds at reasonable
rates to meet potential cash outflows from deposit customers who need to
withdraw funds or borrowers who need available credit. The primary source of the
Bank's liquidity has been the Bank's ability to generate deposits.
Supplementing the deposit base, liquidity is available from the investment
portfolio, which consists primarily of mortgage-backed securities issued by U.S.
Government agencies and corporations. These securities enhance liquidity not
only by their marketability, but they also provide monthly principal and
interest payments.
The liquidity position is also strengthened by the establishment of credit
facilities with other banks and the Federal Home Loan Bank of Pittsburgh
("FHLB"). Investment securities are required to be pledged as collateral for
transactions executed under these facilities and provide for an availability of
funds on an overnight basis. The FHLB also provides for borrowings on a fixed or
floating rate basis with specified maturities up to 20 years at costs that would
be less expensive than through the Bank's deposit generation process.
Investment Portfolio: The investment portfolio, consisting principally of
mortgage-backed securities, is coordinated with the liquidity and interest rate
sensitivity position of the Bank. With an emphasis on minimizing credit, capital
and market risk, the investment portfolio is considered an extension of loans
with the objectives of enhancing liquidity and earning a fair return. The
investments in mortgage-backed securities consist of a combination of adjustable
and fixed rate securities with an emphasis on investments with relatively short
weighted average lives. Of the total mortgage-backed portfolio with an amortized
cost of $140,943,502 at September 30, 1995, $22,122,231 were adjustable rate and
$118,821,271 were fixed rate. The estimated weighted average life for the
mortgage-backed securities portfolio at September 30, 1995 approximated 5.4
years.
<PAGE>
Interest Rate Sensitivity: Interest rate sensitivity is closely related to
liquidity since each is directly affected by the maturity of assets and
liabilities. Interest rate sensitivity also deals with exposure to fluctuations
in interest rates and its effect on net interest income. It is management's
objective to maintain stability in the growth of net interest income by
appropriately mixing interest sensitive assets and liabilities. One tool used by
management to gauge interest rate sensitivity is a "gap" analysis which
categorizes assets and liabilities on the basis of maturity date, the date of
next repricing, and the applicable amortization schedule. This analysis
summarizes the matching or mismatching of rate sensitive assets versus rate
sensitive liabilities according to specified time periods. In conjunction with
the "gap" analysis, computer simulations are used to evaluate net interest
income volatility under varying rate and volume projections over selected future
timeframes.
The blending of fixed and floating rate loans and investments to match the
repricing and maturity characteristics of the various funding sources is a
continuous process in an attempt to minimize fluctuations in net interest
income. An effective tool used by the Bank in this process has been the
availability and flexibility of the various FHLB advance programs, which enable
the Bank to lock in spreads when appropriate and provide an effective method of
matching fixed rate assets with a fixed rate funding source.
The Bank's objective is to structure its balance sheet, as outlined in the
following Interest Sensitivity table, to minimize any significant fluctuation in
net interest income. The distribution in the table is based on a combination of
maturities, repricing frequencies and prepayment patterns. Floating rate assets
and liabilities are distributed based on the repricing frequency of the
instrument while fixed rate instruments are based on maturities. Mortgage-backed
securities are distributed in accordance with their repricing frequency and
estimated prepayment speeds. Deposit liabilities are distributed according to
repricing opportunities for NOW and money market accounts, maturities for
certificates of deposit and expected retention rates and interest sensitivity
for savings deposits.
<PAGE>
<TABLE>
<CAPTION>
0 to 3 4 to 12 1 to 3 3 to 5 After
(Dollars in thousands) Months Months Years Years 5 Years Total
- ---------------------- ------ ------ ----- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities $ 7,578 $23,342 $52,883 $52,364 $ 4,054 $140,221
Other securities 2,195 - - - 395 2,590
Mortgage loans held for sale 4,071 - - - - 4,071
Loans 45,307 22,380 6,016 8,969 21,812 104,484
------ ------ ----- ----- ------ -------
Total Earning Assets $59,151 $45,722 $58,899 $61,333 $26,261 $251,366
====== ====== ====== ====== ====== =======
NOW and money market $10,861 $ - $ - $ - $ - $ 10,861
Savings - - 24,059 24,059 - 48,118
Certificates of Deposit 13,647 58,379 22,336 23,939 52 118,353
FHLB advances 37,928 - - - 213 38,141
Subordinated debt - - 2,750 - - 2,750
Net non-interest bearing
source of funds - - - - 33,143 33,143
------- ------ ------ ------ ------ -------
Total Sources of Funds $62,436 $58,379 $49,145 $47,998 $33,408 $251,366
====== ====== ====== ====== ====== =======
Period Gap ( 3,285) (12,657) 9,754 13,335 ( 7,147)
====== ====== ====== ====== =======
Cumulative Gap ( 3,285) (15,942) ( 6,188) 7,147 -
====== ====== ====== ====== ======
Cumulative Gap as % of
total assets (1.3%) (6.2%) (2.4%) 2.8%
==== ==== ==== ====
</TABLE>
INVESTMENT PORTFOLIO
The investment portfolio of Regent includes investments classified as
held-to-maturity and available-for-sale and consists of mortgage-backed
securities and non-marketable equity securities. The mortgage-backed securities
portfolio is comprised principally of securities issued by U.S. Government
agencies and corporations which represented 86% of the total mortgage-backed
portfolio at September 30, 1995. The remaining 14% consisted of collateralized
mortgage obligations of private issuers. The table below summarizes by major
category the amortized cost and market values of investment securities
classified as held-to-maturity and available-for-sale at September 30, 1995:
<TABLE>
<CAPTION>
Held-to-Maturity Available-for-Sale
----------------------------- ----------------------------
Amortized Market Amortized Market
Cost Value Cost Value
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
GNMA $13,096,578 $12,663,480 $ - $ -
FHLMC 45,209,954 44,526,145 11,447,000 11,095,255
FNMA 34,225,820 33,379,852 17,958,752 17,588,669
Collateralized mortgage
obligations 19,005,398 19,005,482 - -
Non-marketable equity
securities - - 2,589,808 2,589,808
----------- ---------- ---------- ----------
$111,537,750 $109,574,959 $31,995,560 $31,273,732
=========== =========== ========== ==========
</TABLE>
<PAGE>
LENDING
Total loans, consisting of loans held for the portfolio and mortgage loans held
for sale, amounted to $108,554,550 at September 30, 1995 compared to $81,461,857
at December 31, 1994. The increase of $27,092,693 primarily reflected higher
commercial loan activity and consumer loans which represented the expansion of a
specialized installment loan program that finances automobile insurance
premiums. The following table details the types of loans outstanding by category
as of September 30, 1995 and December 31, 1994:
<PAGE>
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
--------------------- -------------------
Amount % Amount %
---------- -- ---------- --
<S> <C> <C> <C> <C>
Commercial & industrial $42,607,801 41% $27,406,523 36%
Real estate:
Construction 3,910,321 4% 1,455,110 2%
Mortgages-residential 27,336,353 26% 29,252,959 38%
Mortgages-commercial 13,970,415 13% 13,550,216 18%
Consumer 16,658,627 16% 4,409,532 6%
----------- --- ---------- ---
Total Loans 104,483,517 100% 76,074,340 100%
=== ===
Less:
Unearned interest and fees ( 1,353,823) ( 214,701)
------------ ----------
$103,129,694 $75,859,639
============ ===========
Mortgage loans held for sale $ 4,071,033 $ 5,387,517
============ ===========
</TABLE>
To meet its asset/liability objectives and to control its interest rate
sensitivity exposure, the Bank's strategy is to originate loans with floating
rates and with maturities less than five years. The following table presents the
scheduled maturities of loans that are outstanding as of September 30, 1995:
<TABLE>
<CAPTION>
After 1
Within But Within After
1 Year 5 Years 5 Years Total
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Predetermined interest
rates $23,294,114 $13,628,774 $21,811,169 $58,734,057
Floating rate 24,829,188 16,868,983 4,051,289 45,749,460
---------- ---------- ---------- ----------
$48,123,302 $30,497,757 $25,862,458 $104,483,517
========== ========== ========== ===========
</TABLE>
RISK ELEMENTS
The level of non-performing assets, consisting of non-accrual loans, loans past
due ninety days or more, and other real estate owned amounted to $3,429,703 or
1.34% of total assets at September 30, 1995 compared to $4,079,485 or 1.68% of
total assets at December 31, 1994. The reduction of $649,782 in non-performing
assets resulted primarily from lower non-accrual loans as several large
non-accruing loans were fully repaid in the 1995 second quarter. The following
table details the non-performing assets as of September 30, 1995 and December
31, 1994:
<PAGE>
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Non-accrual loans $2,884,193 $3,685,804
Accruing loans 90 days or more past due 545,510 393,681
Restructured loans - -
---------- ----------
Total non-performing loans 3,429,703 4,079,485
Other real estate owned - -
---------- ----------
Total non-performing assets $3,429,703 $4,079,485
========== ==========
Non-performing loans to period end loans
and loans held for sale 3.16% 5.01%
Non-performing assets to total assets 1.34% 1.68%
Non-performing assets to loans, loans held
for sale and other real estate owned 3.16% 5.01%
</TABLE>
Accrual of interest is discontinued on loans when management believes, after
considering economic and business conditions and collection efforts, that the
borrowers' financial condition is such that collection of interest and principal
is doubtful. The non-accrual loans are primarily secured by various types of
real estate. Interest income not recognized due to non-accrual status was
$248,600 for the nine months ended September 30, 1995. No interest income was
included in operating income attributable to non-accrual loans in the same
nine-month period.
Other real estate owned represents property acquired by foreclosure or deed in
lieu of foreclosure. These assets are initially reported at the lower of the
related loan balance or the fair value of the property.
As part of the quarterly review of the risk elements of the portfolio, an
evaluation is also made of the adequacy of the allowance for loan losses. In
making an assessment of the quality of the loan portfolio and the adequacy of
the allowance for loan losses, management takes into consideration such elements
as general economic conditions, industry trends, the volume of delinquencies,
specific credit review, the value of underlying collateral, and other pertinent
information. Based on this evaluation, the allowance for loan losses is adjusted
by the provision which is charged against income. The following table summarizes
the activity for the nine months ended September 30, 1995 and 1994:
<PAGE>
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
----------------- ------------------
<S> <C> <C>
Balance, beginning of period $1,713,372 $1,321,225
Charge-offs:
Commercial & industrial 340 15,909
Real estate - construction - 22,492
Real estate - residential 127,679 -
--------- ---------
128,019 38,401
--------- ---------
Recoveries:
Commercial & industrial 567 81,602
Consumer 8,000 -
---------- ----------
Total recoveries 8,567 81,602
---------- ----------
Net (charge-offs) recoveries (119,452) 43,201
---------- ----------
Provision charged to operations 320,000 35,000
---------- ----------
Balance, end of period $1,913,920 $1,399,426
========== ==========
Allowance for loan losses as a % of year-end
loans and loans held for sale 1.76% 1.73%
</TABLE>
DEPOSITS
Total deposits at September 30, 1995 aggregated $192,943,274 which was
$31,881,802 higher than the December 31, 1994 balance of $161,061,472. This
increase was attributable to higher certificate of deposit balances of
$68,065,337 which offset the decline in statement savings balances of
$35,217,749. As illustrated in the table below, the mix of deposits has shifted
to a greater reliance on certificates of deposit as a funding source.
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
-------------------- ----------------------
Balance % Balance %
------------ --- ------------ ---
<S> <C> <C> <C> <C>
Demand $ 15,611,907 8% $ 13,641,796 8%
NOW 3,618,720 2% 4,201,594 3%
Savings 48,117,623 25% 83,335,372 52%
Money Market 7,241,841 4% 9,594,864 6%
Certificates of deposit 118,353,183 61% 50,287,846 31%
----------- -- ---------- --
$192,943,274 100% $161,061,472 100%
=========== === =========== ===
</TABLE>
SHORT-TERM BORROWINGS
Short-term borrowings are used to supplement the deposit base of the Bank, to
support asset growth, to fund specific loan programs, and as a tool in the
Bank's asset/liability management process. During 1995 and 1994, the Bank has
utilized its credit facilities with its correspondent banks and with the FHLB.
The borrowings from the FHLB are secured by the Bank's investments in
mortgage-backed securities.
<PAGE>
The following table summarizes the Bank's short-term borrowing activity for the
nine months ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
Balance Average Amount
Outstanding Outstanding Average
September 30 During the Period Rate Paid
----------- ----------------- ---------
<S> <C> <C> <C>
1995: FHLB borrowings $37,926,981 $46,341,779 6.25%
Federal funds purchased -- 280,952 5.92%
----------- -----------
$37,926,981 $46,622,731 6.25%
========== ==========
1994: FHLB borrowings $43,970,817 $34,696,515 4.42%
Federal funds purchased -- 128,276 3.46%
----------- -----------
$43,970,817 $34,824,791 4.41%
========== ===========
</TABLE>
RESULTS OF OPERATIONS
Net income for the nine months ended September 30, 1995 amounted to $376,475 or
$.02 per share compared to the $1,027,424 or $.80 per share earned in the first
nine months of 1994. For the quarter ended September 30, 1995, a net loss of
$13,276 was recorded compared to the net income of $364,008 earned in the same
period in 1994. On a per share basis, a loss of $.22 was incurred in the 1995
third quarter versus earnings of $.29 per share in the third quarter of 1994.
The loss per share in 1995 reflects a charge for the preferred dividend of
$229,073 compared to a charge in 1994 of $65,904. The higher 1995 charge
resulted from the increased market value of the stock that would be paid as a
dividend.
The lower 1995 quarterly and year-to-date results were attributable to increases
in the provision for loan losses and other expenses. The three and nine month
net income total, however, benefited from higher net interest income.
NET INTEREST INCOME
Net interest income for the nine months ended September 30, 1995 totaled
$5,930,184 which was $1,637,649 or 38% higher than net interest income in the
comparable 1994 period of $4,292,535. For the third quarter ended September 30,
1995, net interest income was $2,238,514, an increase of $696,849 or 45% over
net interest income for the three months ended September 30, 1994 of $1,541,665.
The quarterly and year-to-date increases were attributable to an improved net
interest margin which reflected the yields on earning assets rising faster than
the cost of interest bearing liabilities. The net interest margin rose from
2.31% for the first nine months of 1994 to 3.31% for the same nine-month period
in 1995. The yields on earning assets were higher as a result of lower
amortization of securities portfolio premiums and the higher prime lending rate
which has prevailed in 1995. Additionally, a greater percentage of interest
income was derived from higher yielding loan activity. For the nine months ended
September 30, 1995, interest and fees on loans represented 50% of total interest
income versus 36% in the same 1994 period. Offsetting the benefits of the
improved net interest margin, however, was a reduction of $10,023,000 in the
amount of average earning assets. The following is a rate/yield analysis for the
nine months ended September 30, 1995 and 1994:
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands) 1995 1994
--------------------------- ---------------------------
Average Income/ Rate/ Average Income/ Rate/
Balance Expense Yield Balance Expense Yield
------- ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Federal funds sold $ - $ - -% $ 379 $ 10 3.37%
Securities 151,650 7,581 6.66% 170,097 8,150 6.39%
Loans 86,881 7,482 11.36% 78,078 4,611 7.79%
-------- ------- -------- -------
Total $238,531 $15,063 8.42% $248,554 $12,771 6.85%
======== ======= ======== =======
Interest Bearing Liabilities:
NOW accounts $ 4,185 $ 78 2.49% $ 3,200 $ 60 2.50%
Statement savings 55,014 2,000 4.86% 102,943 4,129 5.36%
Money market 9,008 258 3.83% 8,011 175 2.93%
Time deposits 96,228 4,450 6.18% 66,904 2,542 5.08%
Short-term borrowings 46,622 2,180 6.25% 34,825 1,149 4.41%
Long-term advances 93 3 6.51% 7,129 261 4.88%
Subordinated debt 2,750 164 7.98% 2,701 162 8.03%
-------- ------- -------- ------
Total 213,900 9,133 5.71% 225,713 8,478 5.02%
-------- ------- -------- ------
Non-Interest bearing
sources of funds 24,631 22,841
-------- --------
$238,531 $248,554
======== ========
Net Interest Income/Spread $ 5,930 2.71% $ 4,293 1.83%
======= ==== ======= ====
Net Interest Margin 3.31% 2.31%
==== ====
</TABLE>
<PAGE>
PROVISION FOR LOAN LOSSES
A provision for loan losses of $320,000 was recorded for the nine months ended
September 30, 1995 compared to $35,000 in the same period in 1994. The increase
in the provision was primarily due to the non-accrual loans that occurred as a
result of collectibility concerns for certain residential mortgage loans
purchased from two mortgage banking companies, as well as a commercial loan
extended to one of these companies. For the three months ended September 30,
1995, the provision for loan losses was $125,000 while no provision was made in
the three month period ended September 30, 1994. This increase is a result of an
additional provision on the loan to the mortgage banking company which
management believes is necessary given developments in the bankruptcy
proceedings of this entity, the overall growth of the portfolio, management's
ongoing monitoring of specific loans and underlying collateral and general
economic conditions impacting the Bank's portfolio.
<PAGE>
OTHER EXPENSES
Total other expenses for the nine months ended September 30, 1995 were
$5,115,969 or 78% over the comparable 1994 period total of $2,876,533. For the
third quarter, other expenses were higher in 1995 over 1994 by $1,108,365. The
primary factors that increased other expenses for the three- and nine-month
periods ended September 30, 1995 were higher salaries and employee benefit
costs, professional fees, processing and operating costs for the premium finance
lending program, costs incurred in connection with resolving legal matters
relating to the assignment of residential mortgage loans to the Bank, and merger
related expenses. Salaries and employee benefit expenses increased by $76,645
for the third quarter and by $157,657 for the first three quarters and were
attributable to higher staffing levels and benefit costs and to salary
increases. Professional services increased by $279,634 and $508,464 for the
three and nine months ended September 30, 1995, respectively, principally due to
legal expenses incurred in connection with the workout of the irregularities
involving residential mortgage loans. In addition, legal, accounting and
advisory expenses of $188,000 were incurred in the third quarter relating to
Regent's merger with Carnegie. Expenses of $637,068 were recorded in the quarter
ended September 30, 1995 and $1,293,389 for the nine months ended September 30,
1995 which did not occur in the comparable 1994 periods for the processing and
operating of the installment loan program for automobile insurance premium
financing. An expense of $175,000 was also recorded in the third quarter of 1995
for the settlement of legal matters in connection with the assignment of certain
residential mortgage loans to Regent. The carrying value of an asset received in
satisfaction of a borrower's debt was reduced by $20,000 in the third quarter
and $50,000 on a year-to-date basis. Offsetting these increases in other
expenses was a refund of $107,000 received in the third quarter from the FDIC
applicable to insurance premiums previously paid.
PROVISION FOR INCOME TAXES
Income taxes for the 1995 third quarter reflects a benefit of $5,400 compared to
the 1994 third quarter provision of $187,300. For the nine months ended
September 30, 1995, income tax expense was $191,800 versus $526,900 for the same
period in 1994. The lower provision in 1995 reflects the decrease in pre-tax
profits as the effective tax rate for all periods was 34%.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
REGENT BANCSHARES CORP.
----------------------------------
HARVEY PORTER
President & CEO
---------------------------------
STEPHEN J. CARROLL
Treasurer
Dated: November , 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,929,325
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 31,273,732
<INVESTMENTS-CARRYING> 111,537,750
<INVESTMENTS-MARKET> 109,574,959
<LOANS> 103,129,694
<ALLOWANCE> 1,913,920
<TOTAL-ASSETS> 256,583,102
<DEPOSITS> 192,943,274
<SHORT-TERM> 38,140,585
<LIABILITIES-OTHER> 9,220,888
<LONG-TERM> 2,750,000
<COMMON> 97,927
0
59,936
<OTHER-SE> 13,370,492
<TOTAL-LIABILITIES-AND-EQUITY> 256,583,012
<INTEREST-LOAN> 7,482,226
<INTEREST-INVEST> 7,581,244
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 15,063,470
<INTEREST-DEPOSIT> 6,785,615
<INTEREST-EXPENSE> 9,133,286
<INTEREST-INCOME-NET> 5,930,184
<LOAN-LOSSES> 320,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,115,969
<INCOME-PRETAX> 568,275
<INCOME-PRE-EXTRAORDINARY> 568,275
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 376,475
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0
<YIELD-ACTUAL> 3.31
<LOANS-NON> 2,884,193
<LOANS-PAST> 545,510
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,713,372
<CHARGE-OFFS> 128,019
<RECOVERIES> 8,567
<ALLOWANCE-CLOSE> 1,913,920
<ALLOWANCE-DOMESTIC> 1,913,920
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,313,920
</TABLE>
