As filed with the Securities and Exchange Commission on July 25, 1997.
Registration No. 333-28781
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
PREEFFECTIVE AMENDMENT
NO. 2
TO
FORM S-2
----------
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CARNEGIE BANCORP
----------------
(Exact Name of Registrant and Specified in Its Charter)
NEW JERSEY
----------
(State or Other Jurisdiction of Incorporation or Organization)
22-3257100
----------
(I.R.S. Employer Identification Number)
619 ALEXANDER ROAD
PRINCETON, NEW JERSEY 08540
(609) 520-0601
(Address, including zip code, and telephone number, including
area code, of agent for service)
THOMAS L. GRAY, JR.
619 ALEXANDER ROAD
PRINCETON, NEW JERSEY 08540
(609) 520-0601
(Name, address, including zip code and telephone number,
including area codes, of agent for service)
WITH A COPY TO
ROBERT A. SCHWARTZ, ESQ.
McCARTER & ENGLISH
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102
Approximate date of commencement of proposed sale to the public: as soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
================================================================================
<PAGE>
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
[ ] ____________________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
[ ]____________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
[ ]___________________________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
CARNEGIE BANCORP
COMMON STOCK
----------
This Prospectus relates to the sale of a maximum of 587,801 shares of
common stock, no par value (the "Common Stock") of Carnegie Bancorp (the
"Company") to be issued upon exercise of certain Common Stock Purchase Warrants
(the "Warrants") previously issued by the Company. The Warrants, which were
originally issued by the Company as part of its August, 1994 initial Public
Offering, expire at 5:00 P.M., Eastern Daylight Time, on August 18, 1997, (the
"Warrant Expiration Date") and permit the holder of each Warrant to purchase
1.157 shares of Common Stock for an exercise price of $15.09 (an effective per
share price of $13.04). The shares of Common Stock offered hereby are being sold
by Janney Montgomery Scott Inc. and First Colonial Securities Group, Inc. (the
"Warrant Conversion Agents") pursuant to the terms of the Warrant Conversion
Agency Agreement between the Company and the Warrant Conversion Agents (the
"Warrant Conversion Agreement"). The Warrant Conversion Agreement provides that
the Warrant Conversion Agents will purchase Warrants in the open market,
exercise the Warrants and sell the Common Stock purchased to the general public
at prices based upon the then current market prices. See "Plan of Distribution
by Warrant Conversion Agents."
The Company will not receive any proceeds from the sale of the Common Stock
by the Warrant Conversion Agents. The Company will, however, receive proceeds
from the exercise of Warrants. See "Use of Proceeds."
The Common Stock and Warrants are included for quotation on the Nasdaq
National Market under the symbol "CBNJ" and "CBNJW," respectively. On ________
___, 1997, the last quoted sale prices for the Common Stock and the Warrants
were $_________ per share and $________ per Warrant.
----------
SEE "RISK FACTORS" ON PAGE 10 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
----------
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK ARE NOT BANK DEPOSITS,
ARE NOT OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK,
ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY,
AND INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
JANNEY MONTGOMERY SCOTT INC. FIRST COLONIAL SECURITIES GROUP, INC.
The date of this Prospectus is __________, 1997.
-2-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Commission's
public reference room located at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and its regional offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, 15th Floor, New York, New York 10048. Copies of such
material may also be obtained at prescribed rates by writing the Securities and
Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and its public reference facilities in Chicago, Illinois
and New York, New York. The Commission also maintains a Web site that contains
copies of such materials and the address of the Web site is
(http://www.sec.gov).
The Company has filed with the Commission a Registration Statement on Form
S-2 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), for the registration under the Securities Act of the
shares of Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement for further information
with respect to the Company and the Common Stock offered hereby. Statements
contained herein concerning the provisions of documents filed as exhibits to the
Registration Statement are necessarily summaries of such documents, and each
such statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
INFORMATION INCORPORATED BY REFERENCE
AND ACCOMPANYING THIS PROSPECTUS
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1996 accompanies this Prospectus. The Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997 is included in this Prospectus.
There are hereby incorporated by reference into this Prospectus and made a
part hereof the following documents filed by the Company with the Commission
pursuant to the Exchange Act: (i) the Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996, (ii) the Proxy Statement for the 1997
Annual Meeting of Shareholders, (iii) the Quarterly Report on Form 10-QSB for
the quarter ended March 31, 1997, (iv) Current Reports on Form 8-K filed on
April 16, May 5, 1997, June 6, 1997, and July __, 1997 and (v) the description
of the Common Stock contained in the Company's Registration Statement on Form
8-A filed pursuant to Section 12 of the Exchange Act, including any amendment
thereto or report filed under the Exchange Act for the purpose of updating such
description.
-3-
<PAGE>
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Any person to whom a copy of this Prospectus is delivered, including a
beneficial owner, may obtain without charge, upon written or oral request, a
copy of any of the documents incorporated by reference herein, except for the
exhibits to such documents, unless such exhibits are specifically incorporated
by reference herein. Requests should be directed to Richard P. Rosa, Sr. V.P.,
Carnegie Bancorp, 619 Alexander Road, Princeton, New Jersey 08540, (609)
520-0601.
-4-
<PAGE>
CARNEGIE BANCORP
SERVICE AREA MAP OF BANKING LOCATIONS
OF CARNEGIE BANK, N.A.
[MAP OF SERVICE AREA DESCRIBING LOCATIONS OF BANK BRANCHES]
-5-
<PAGE>
THE COMPANY
Carnegie Bancorp (the "Company") is a New Jersey business corporation and a
one-bank holding company registered under the Bank Holding Company Act. The
principal activities of the Company are owning and supervising Carnegie Bank,
N.A. (the "Bank") which engages in a commercial banking business in Mercer,
Burlington, Hunterdon, Morris and Ocean counties, New Jersey and Bucks County,
Pennsylvania. The Company directs the policies and coordinates the financial
resources of the Bank. At March 31, 1997, the Company had consolidated total
assets of $382.7 million, total deposits of $341.6 million, total loans of
$266.4 million and shareholders' equity of $24.8 million.
The Bank is a national bank which commenced business in 1988 as a state
chartered commercial bank. The Bank currently operates from its main office in
Princeton, New Jersey and from seven branch offices in Hamilton Township,
Denville, Flemington, Marlton, Montgomery and Toms River, New Jersey and
Langhorne, Pennsylvania. The deposits of the Bank are insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC") up to
applicable limits. The operations of the Bank are subject to the supervision and
regulation of the Federal Reserve Board, the FDIC and the Office of the
Comptroller of the Currency.
The Bank's loan products consist primarily of commercial loans (a majority
of which are secured by mortgages on owner-occupied properties), commercial
mortgages, loans to professionals secured by business or personal assets, and to
a lesser extent, residential mortgage loans. The Bank offers a full array of
deposit accounts including time deposits, checking, savings accounts and money
market accounts. The Bank targets small businesses, professionals, and high net
worth individuals as its primary customers, and does not engage in high volume,
consumer banking. The Bank believes it competes successfully for its target
market by offering attentive and personal customer service. This service
includes having loan officers intimately involved in the loan approval process
and delivering prompt responses to customer loan applications.
The principal executive offices of the Company and the Bank are located at
619 Alexander Road, Princeton, New Jersey 08540, and the telephone number is
(609) 520-0601.
RECENT DEVELOPMENTS
On July 14, 1997, the Company announced its preliminary results for the
quarter ended June 30, 1997. The Company announced net income after taxes for
the quarter ended June 30, 1997 of $806,000, compared to $564,000 for the same
period last year, an increase of 43%. Primary and fully diluted net income per
share for the second quarter of 1997 were $.35 and $.34 respectively, compared
to $.27 per share for both primary and fully diluted net income for the second
quarter of 1996.
The Company further announced that for the six months ended June 30, 1997,
income after taxes increased to $1,573,000, ($.68 per share primary and $.67 per
share fully diluted net income), compared to $1,170,000 ($.56 per share for both
primary and fully diluted net income) for the first six months of 1996,
representing an increase of 34%. Shares outstanding increased to 2,146,758 at
June 30, 1997, compared to 1,843,059 at June 30, 1996.
As of June 30, 1997, the Company's total loans increased to $270 million,
or an increase of 39% over June 30, 1996. The Company's total assets increased
to over $371 million, an increase of 34% compared to 1996. For the second
quarter 1997, the Company's total deposits increased to $327 million, or an
increase of 49% over the same period last year.
On July 16, 1997, the Company's Board of Directors declared a third quarter
cash dividend of $.14 per share. The dividend will be payable on September 17,
1997 to shareholders of record on August 27, 1997. This represents the 23rd
consecutive quarter in which the Company has paid a cash dividend.
-6-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth at and for each of the
five years presented below, except for the "Performance Ratios," "Net
Charge-offs (Recoveries) to Average Loans" and "Leverage Capital", are derived
from the consolidated financial statements of the Company, which have been
audited by Coopers & Lybrand, LLP independent auditors, whose report thereon is
incorporated by reference herein. The selected consolidated financial
information for the three-month periods ended March 31, 1997 and 1996 are
derived from unaudited financial statements of the Company, which, in the
opinion of management, include all adjustments, consisting only of normal,
recurring accruals which are necessary for a fair presentation of the data for
these periods. The results of operations for the three months ended March 31,
1997 are unaudited and are not necessarily indicative of the results of
operations to be expected for the twelve months ending December 31, 1997. The
selected consolidated financial information should be read in conjunction with
the consolidated financial statements of the Company, including the related
notes, thereto incorporated by reference herein. See "Additional Financial
Information."
<TABLE>
<CAPTION>
==============================================================================================================================
Three Months Ended Years Ended
March 31, December 31,
--------------------- --------------------------------------------------------
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
- ------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT DATA:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income...................... $7,445 $5,344 $24,464 $18,706 $13,555 $9,877 $8,217
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense..................... 3,645 2,327 10,884 8,464 5,149 3,639 3,451
----- ----- ------ ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income.................. 3,800 3,017 13,580 10,242 8,406 6,238 4,766
- ------------------------------------------------------------------------------------------------------------------------------
Provision for loan losses ........... 146 172 1,609 369 650 429 476
--- --- ----- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income after
provision for loan losses ........ 3,654 2,845 11,971 9,873 7,756 5,809 4,290
- ------------------------------------------------------------------------------------------------------------------------------
Non-interest income.................. 187 299 1,360 744 495 471 607
- ------------------------------------------------------------------------------------------------------------------------------
Non-interest expense................. 2,693 2,280 10,054 7,724 6,056 4,696 3,399
----- ----- ------ ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes .......... 1,148 864 3,277 2,893 2,195 1,584 1,498
- ------------------------------------------------------------------------------------------------------------------------------
Income tax expense................... 381 258 1,133 765 656 520 485
--- --- ----- --- --- --- ---
==============================================================================================================================
Net income........................... $767 $606 $2,144 $2,128 $1,539 $1,064 $1,013
==== ==== ====== ====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Net income - primary................. $0.33 $0.29 $1.01 $1.08 $1.11 $0.98 $0.93
- ------------------------------------------------------------------------------------------------------------------------------
- fully diluted 0.33 0.29 $1.00 1.07 1.11 0.98 0.93
- ------------------------------------------------------------------------------------------------------------------------------
Cash dividends(1).................... 0.14 0.12 0.49 0.48 0.40 0.32 0.24
- ------------------------------------------------------------------------------------------------------------------------------
Book value........................... 11.91 11.26 11.65 11.27 9.56 9.90 9.19
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
Three Months Ended Years Ended
March 31, December 31,
--------------------- --------------------------------------------------------
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average 1997 1996 1996 1995 1994 1993 1992
shares outstanding:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Primary..................... 2,320,768 2,098,955 2,124,807 1,972,776 1,381,622 1,090,471 1,090,471
- ------------------------------------------------------------------------------------------------------------------------------
Fully diluted............... 2,320,768 2,098,955 2,141,706 1,990,386 1,381,622 1,090,471 1,090,471
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Total assets......................... $382,663 $268,295 $343,357 $250,562 $195,654 $154,363 $119,478
- ------------------------------------------------------------------------------------------------------------------------------
Federal funds sold................... 18,425 5,950 -- -- -- 2,350 11,345
- ------------------------------------------------------------------------------------------------------------------------------
Net loans............................ 266,378 180,252 263,797 162,587 138,897 116,266 80,811
- ------------------------------------------------------------------------------------------------------------------------------
Investment securities................ 75,724 64,444 53,374 70,577 44,920 28,728 21,496
- ------------------------------------------------------------------------------------------------------------------------------
Deposits............................. 341,607 235,682 302,562 210,201 176,789 143,178 108,214
- ------------------------------------------------------------------------------------------------------------------------------
Total stockholders'
equity............................ 24,771 21,780 23,742 21,794 18,056 10,798 10,021
- ------------------------------------------------------------------------------------------------------------------------------
Average equity to
average total assets.............. 6.87% 8.60% 7.75% 8.84% 7.67% 7.10% 9.25%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS:
- ------------------------------------------------------------------------------------------------------------------------------
Return on average
assets(3)........................... 0.88% 0.95% 0.75% 0.95% 0.87% 0.81% 0.98%
- ------------------------------------------------------------------------------------------------------------------------------
Return on average
stockholders' equity(3)............ 12.82% 11.05% 9.68% 10.72% 11.39% 11.38% 10.60%
- ------------------------------------------------------------------------------------------------------------------------------
Net interest margin(2)(3) ........... 4.64% 5.21% 5.11% 5.02% 5.16% 5.08% 4.93%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
ASSET QUALITY RATIOS:
- ------------------------------------------------------------------------------------------------------------------------------
Allowance for loan
losses to total loans ............. 1.03% 1.00% 1.00% 1.07% 1.00% 0.84% 0.99%
- ------------------------------------------------------------------------------------------------------------------------------
Allowance for loan
losses to non-accrual loans ....... 55.36% 46.86% 79.74% 43.56% 67.80% 30.44% 34.42%
- ------------------------------------------------------------------------------------------------------------------------------
Non-performing
loans to total loans................ 1.85% 2.13% 1.25% 2.45% 1.47% 2.75% 2.87%
- ------------------------------------------------------------------------------------------------------------------------------
Non-performing assets
to total assets..................... 1.47% 1.57% 1.11% 1.61% 1.06% 2.09% 1.96%
- ------------------------------------------------------------------------------------------------------------------------------
Net charge-offs
to average outstanding loans ..... 0.02% 0.06% 0.34% 0.01% 0.19% 0.28% 0.35%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
LIQUIDITY AND
CAPITAL RATIOS:
- ------------------------------------------------------------------------------------------------------------------------------
Dividend payout...................... 42.36% 41.56% 48.56% 44.50% 35.91% 32.80% 25.84%
- ------------------------------------------------------------------------------------------------------------------------------
Loans to deposits.................... 78.79% 77.25% 88.07% 78.18% 79.36% 81.89% 75.42%
- ------------------------------------------------------------------------------------------------------------------------------
Tier I risk-based capital ........... 9.01% 10.93% 8.81% 12.04% 14.06% 9.61% 13.10%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
Three Months Ended Years Ended
March 31, December 31,
--------------------- --------------------------------------------------------
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total risk-based capital ............ 10.01% 11.84% 9.79% 13.03% 15.06% 10.48% 14.16%
- ------------------------------------------------------------------------------------------------------------------------------
Leverage capital..................... 7.07% 8.46% 7.20% 8.87% 10.47% 8.20% 8.40%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Cash dividends per share have not been restated for stock dividends.
(2) Yields on tax-exempt obligations have been computed on a fully tax-
equivalent basis, assuming a Federal income tax rate of 34%.
(3) The component of annualized income in the referenced quarterly ratios is
calculated by dividing the quarterly income by the number of days within
the quarter and annualizing the income based on the number of days within
the year.
-9-
<PAGE>
RISK FACTORS
Prospective investors should consider the following risk factors, in
addition to other information contained or incorporated by reference herein, in
connection with a decision to purchase the shares offered hereby.
ABILITY TO SUSTAIN GROWTH; PROFITABILITY
The Company has grown rapidly in the past five years and intends to
continue to grow rapidly in the near future. The Company's assets, deposits and
net loans have increased from $119.5 million, $108.2 million and $80.8 million,
respectively at the end of 1992 to $382.7 million, $341.6 million and $266.4
million at March 31, 1997. Historically, the Company's growth has been
internally generated through greater penetration of its existing markets and de
novo branching. Continued growth may be accomplished through internal expansion
and possible acquisitions of financial institutions. As a consequence of the
Company's growth strategy, the Company's short term profitability could be
negatively impacted.
The Company's continued rapid growth and success will depend on its ability
to attract additional deposits, locate sound loan and investment opportunities,
expand into new marketplaces and identify potential acquisition candidates. In
addition, the Company's continued rapid growth and success also depends on the
ability of its officers and key employees to manage such growth effectively, to
attract and retain skilled employees and to expand the capabilities of the
Company's management information systems. Accordingly, there can be no assurance
that the Company will be successful in managing its expansion and the failure to
do so would adversely effect the Company's financial position.
SOURCES OF DIVIDENDS ON COMMON STOCK
The Company is a legal entity separate and distinct from the Bank. The
Company has no material assets other than its ownership of the Bank. Earnings of
the Company are wholly dependent on the earnings of the Bank, as the Company has
engaged in no significant operations of its own. Accordingly, the earnings of
the Company, and its ability to pay dividends with respect to the Common Stock,
are largely dependent on the receipt by the Company of the earnings of the Bank
in the form of dividends. Any restriction on the ability of the Bank to pay
dividends to the Company could significantly and adversely affect the ability of
the Company to pay dividends with respect to the Common Stock. The Bank's
ability to pay dividends or make other capital distributions to the Company is
governed by regulations imposed by the Office of the Comptroller of the
Currency, the Bank's primary regulator.
-10-
<PAGE>
COMPETITION
The Bank's principal market area is served by branch offices of large
commercial banks and thrift institutions. A number of these institutions have
substantially greater resources than the Company to expend upon advertising and
marketing, and their substantially greater capitalization enables them to make
much larger loans. The Company's success depends a great deal upon its judgment
that large and mid-size financial institutions do not adequately serve small
businesses, professionals and high net worth individuals in its principal market
area and the Company's ability to compete favorably for such customers.
In addition to existing competition, on September 29, 1994, the Riegel-Neal
Interstate Banking and Branching Efficiency Act (the "Interstate Act") was
signed into law. The Interstate Act reduces restrictions on the acquisition of
New Jersey financial institutions by out of state bank holding companies and
financial institutions, and permits the operations of acquired New Jersey
institutions to be conducted under existing charters, thereby making
acquisitions of New Jersey institutions more efficient and cost effective for
out of state bank holding companies and financial service institutions. Adoption
of the Interstate Act may make the New Jersey banking market even more
competitive than it currently is.
LENDING RISKS
The risk of non-payment (or deferred or delayed payment) of loans is
inherent in commercial banking. Such non-payment, or delayed or deferred payment
of loans to the Bank, if they occur, may have a material adverse effect on the
Company's earnings and overall financial condition. Additionally, in compliance
with applicable banking laws and regulation, the Bank maintains an allowance
for loan losses created through charges against earnings. As of March 31, 1997,
the Bank's allowance for loan losses was $2.8 million. The Bank's marketing
focus on small to medium-size businesses and professionals may result in the
assumption by the Bank of certain lending risks that are different from or
greater than those which would apply to loans made to larger companies. Company
management seeks to minimize the Company's credit risk exposure through credit
controls which include evaluation of potential borrowers, available collateral,
liquidity and cash flow. However, there can be no assurance that such procedures
will actually reduce loan losses.
SUPERVISION AND REGULATION
The federal and state laws and regulations applicable to the Company and
the Bank give regulatory authorities extensive discretion in connection with
their supervisory and enforcement responsibilities, and generally have been
promulgated to protect
-11-
<PAGE>
depositors and the deposit insurance funds and not for the purpose of protecting
stockholders. These laws and regulations can materially affect the future
business of the Company and the Bank. Laws and regulations now affecting the
Company and the Bank may be changed at any time, and the interpretation of such
laws and regulations by bank regulatory authorities is also subject to change.
The Company can give no assurance that future changes in laws and regulations or
changes in their interpretation will not adversely affect the business of the
Company and the Bank.
USE OF PROCEEDS
The total gross proceeds from the exercise of the Warrants may range from
zero to $_____________, depending upon the number of Warrants exercised by the
Warrant Conversion Agents. The proceeds of the exercise of Warrants will be paid
directly to the Company. The Company will not receive any proceeds from the sale
of the Common Stock. The Company will receive proceeds from the exercise of
Warrants by the Warrant Conversion Agents and other holders of the Warrants. If
all Warrants outstanding on the date hereof are exercised, the Company will
receive gross proceeds of $________. The Company will pay estimated expenses
relating to the exercise of the Warrants and the sale of the Common Stock of
approximately $_____________, assuming ______ Warrants are purchased and
exercised by the Warrant Conversion Agents, yielding gross proceeds upon the
exercise of Warrants of $_______. See "Plan of Distribution by Warrant
Conversion Agents." The Company intends to use the proceeds for general
corporate purposes and to support its continued growth and expansion both
through internal expansion and the possible acquisition of other financial
institutions, although the Company does not currently have any agreements or
commitments for specific acquisitions.
PLAN OF DISTRIBUTION BY WARRANT CONVERSION AGENTS
The shares of Common Stock offered hereby are being sold by Janney
Montgomery Scott Inc. and First Colonial Securities Group, Inc., the Warrant
Conversion Agents. The shares of Common Stock will be acquired by the Warrant
Conversion Agents pursuant to the terms of a Warrant Conversion Agency Agreement
dated July 23, 1997 between the Warrant Conversion Agents and the Company
(the "Warrant Conversion Agreement"). Pursuant to the terms of the Warrant
Conversion Agreement, the Warrant Conversion Agents will act as conversion
agents to facilitate the exercise of Warrants and further to purchase Warrants
that become available on the open market, exercise the Warrants, and then sell
the Common Stock purchased. The Warrant Conversion Agents will purchase the
Warrants from time to time at the then prevailing market prices on the Nasdaq
National Market where the Warrants trade. The open market purchases by the
Warrant Conversion Agents will continue until the warrant expiration date.
-12-
<PAGE>
The Company will pay the Warrant Conversion Agents commissions of $.40 per
Warrant for any Warrants exercised by holders after May 6, 1997 and $.97 per
Warrant for any open market purchases by the Warrant Conversion Agents during
the Conversion and Sales Period. In addition to these commissions, the Company
has agreed to pay the Warrant Conversion Agents a standby underwriting fee of
$100,000 and a non-accountable expense allowance of $40,000. The total fees and
expenses payable to the Warrant Conversion Agents under the Warrant Conversion
Agreement may not be less than $375,000 nor more than $500,000. From May 6, 1997
through July 16, 1997, 68,421 Warrants had been exercised.
The Warrant Conversion Agents will receive the net proceeds of the offering
of Common Stock. Although the Company will not receive proceeds from the sale of
the Common Stock, the Company will receive proceeds upon the exercise of the
Warrants by the holders thereof and the Warrant Conversion Agents. The Company
will use the proceeds for general corporate purposes and to facilitate the
Company's plans for expansion. See "Use of Proceeds".
The Company and the Warrant Conversion Agents have agreed in the Warrant
Conversion Agreement to indemnify each other against certain liabilities,
including certain liabilities under the Securities Act, and to contribute to
payments that each may be required to make in respect thereof.
Michael E. Golden, a director of the Company, is the principal stockholder
and Chief Executive Officer of First Colonial Securities Group, Inc. who, along
with Janney Montgomery Scott Inc., are acting as Warrant Conversion Agents.
The foregoing includes a summary of the terms of the Warrant Conversion
Agreement and does not purport to be complete. Reference is made to a copy of
the Warrant Conversion Agreement that is on file as an exhibit to the
Registration Statement to which this Prospectus is a part.
ADDITIONAL FINANCIAL INFORMATION
The Company's unaudited consolidated financial statements at and for the
three months ended March 31, 1997 and 1996 are included as Appendix A to this
Prospectus. The Company's audited financial statements at and for the years
ended December 31, 1996 and 1995 are included in the Company's 1996 Annual
Report to shareholders, copies of which accompany this Prospectus.
-13-
<PAGE>
WARRANT AND TRANSFER AGENT
The Company's warrant and transfer agent for Warrants and Common Stock is
Registrar and Transfer Company, with an office at 10 Commerce Drive, Cranford,
New Jersey 07016.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon for
the Company by McCarter & English, Newark, New Jersey.
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1995 and the
consolidated statements of income, stockholders equity and cash flows for each
of the three years in the period ended December 31, 1996, incorporated by
reference into the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996, have been audited by Coopers & Lybrand, LLP, independent
auditors, as set forth in their report thereon included therein, which report
includes an explanatory paragraph regarding the change in method of accounting
for certain investment securities in 1994, which is incorporated by reference
herein in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
-14-
<PAGE>
APPENDIX A
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
----------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
[ ] Transition report under Section 13 or 15(d)
of the Exchange Act
For the transition period from ________ to ________
Commission file number 0-2456
CARNEGIE BANCORP
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEW JERSEY 22-3257100
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
619 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540
-----------------------------------------------
(Address of principal executive offices)
(609) 520-0601
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
----------------------------------------------------
(Former name, former 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 Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceeding 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
COMMON STOCK, NO PAR -- 2,090,046 SHARES OUTSTANDING AS OF APRIL 25, 1997
================================================================================
A-1
<PAGE>
INDEX
CARNEGIE BANCORP AND SUBSIDIARY
----------
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at
March 31, 1997 (Unaudited) and December 31, 1996 ............ 3
Consolidated Condensed Statements of Income for the three
months ended March 31, 1997 and 1996 (Unaudited) ............ 4
Consolidated Condensed Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 (Unaudited) ...... 5
Notes to Consolidated Condensed Financial Statements........... 6 - 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................... 12 - 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................. 22
Item 2. Changes in Securities ......................................... 22
Item 3. Defaults Upon Senior Securities ............................... 22
Item 4. Submission of Matters to a Vote of Security Holders ........... 22
Item 5. Other Information ............................................. 22
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit 27 -- Financial Data Schedule .................... 22
b. Reports on Form 8-K ...................................... 22
SIGNATURES ............................................................ 23
A-2
<PAGE>
<TABLE>
CARNEGIE BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
March 31, 1997 December 31,
(Unaudited) 1996
----------- ------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks..................................... $ 12,906 $ 16,745
Federal funds sold.......................................... 18,425 --
-------- --------
Total cash and cash equivalents .................. 31,331 16,745
-------- --------
Investment Securities:
Available for sale.......................................... 52,792 30,110
Held to maturity (fair value $22,750 at March 31,
1997 and $23,258 at December 31, 1996).................... 22,932 23,264
------- -------
Total investment securities ...................... 75,724 53,374
------- -------
Loans, net of allowance for loan losses of $2,761 at
March 31, 1997 and $2,665 at December 31, 1996.............. 266,378 263,797
Premises and equipment, net................................... 4,715 4,482
Other real estate owned....................................... 644 473
Accrued interest receivable and other assets.................. 3,871 4,486
-------- --------
TOTAL ASSETS ..................................... $382,663 $343,357
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand deposits........................ $43,410 $42,372
Interest bearing deposits:
Savings deposits.......................................... 177,617 139,671
Other time deposits....................................... 60,357 62,008
Certificates of deposit $100,000 and over................. 60,223 58,511
-------- --------
Total deposits ................................... 341,607 302,562
------- -------
Short-term borrowings......................................... -- 1,000
Long-term debt................................................ 14,425 14,425
Accrued interest payable and other liabilities................ 1,860 1,628
-------- --------
Total liabilities ................................ 357,892 319,615
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized 5,000,000 shares;
issued and outstanding 2,080,526 at March 31, 1997
and 1,940,942 at December 31, 1996...................... 10,403 9,705
Capital surplus........................................... 14,407 12,711
Undivided profits......................................... 193 1,530
Net unrealized holding (losses) on securities
available for sale...................................... (232) (204)
-------- --------
Total stockholders' equity ....................... 24,771 23,742
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $382,663 $343,357
======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
A-3
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
Dollars in thousands, except per share data
Three Months Ended
March 31,
------------------
1997 1996
------ ------
Interest income:
Loans, including fees ............................... $6,304 $4,252
Federal funds sold .................................. 113 10
Investment securities:
Taxable .......................................... 959 839
Tax-exempt ....................................... 69 243
------ ------
Total interest income ......................... 7,445 5,344
------ ------
Interest expense:
Savings deposits .................................... 1,693 677
Other time deposits ................................. 960 849
Certificates of deposit $100,000 and over ........... 743 491
Short-term borrowings ............................... 23 310
Long-term debt ...................................... 226 --
------ ------
Total interest expense ........................ 3,645 2,327
------ ------
Net interest income ........................... 3,800 3,017
Provision for loan losses .............................. 146 172
------ ------
Net interest income after provision
for loan losses ............................ 3,654 2,845
------ ------
Non-interest income:
Service fees on deposits ............................ 114 90
Other fees and commissions .......................... 164 81
Investment securities gains ......................... -- 195
Investment securities losses ........................ (91) (67)
------ ------
Total non-interest income ..................... 187 299
------ ------
Non-interest expense:
Salaries and wages .................................. 1,054 862
Employee benefits ................................... 278 214
Occupancy expense ................................... 368 327
Furniture and equipment ............................. 270 211
Other ............................................... 723 666
------ ------
Total non-interest expense .................... 2,693 2,280
------ ------
Income before income taxes .................... 1,148 864
Income tax expense ..................................... 381 258
------ ------
Net Income .................................... $ 767 $ 606
====== ======
Per Common Share:
Net income -- primary ............................... $ 0.33 $ 0.29
Net income -- fully diluted ......................... $ 0.33 $ 0.29
Cash Dividends ...................................... $ 0.14 $ 0.12
Weighted average shares outstanding (in thousands):
Primary ............................................. 2,321 2,099
Fully Diluted ....................................... 2,321 2,099
See accompanying notes to consolidated condensed financial statements.
A-4
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended
March 31,
--------------------
1997 1996
-------- --------
(000's omitted)
Cash flows from operating activities:
Net income ........................................... $ 767 $ 606
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................... 269 207
Provision for loan losses ........................ 146 172
Accretion of investment discount ................. (25) (4)
Amortization of investment premium ............... 34 141
Gain on sale of available-for-sale securities..... -- (195)
Loss on sale of available-for-sale securities .... 91 67
Decrease (increase) in accrued interest
receivable and other assets .................... 632 (375)
Increase (decrease) in accrued interest
payable and other liabilities .................. 232 (234)
-------- --------
Net cash provided by operating activities ... 2,146 385
-------- --------
Cash flows from investing activities:
Proceeds from sale of securities available-for-sale .. 6,636 18,999
Proceeds from maturities and principal paydowns of
investment securities ............................. 771 1,291
Purchase of securities available-for-sale ............ (29,902) (3,004)
Purchase of securities held-to-maturity .............. -- (11,823)
Net increase in loans made to customers .............. (2,900) (17,839)
Cash collected on previously charged-off loans ....... 2 2
Additions to premises and equipment .................. (502) (446)
-------- --------
Net cash used in investing activities ....... (25,895) (12,820)
-------- --------
Cash flows from financing activities:
Net increase in deposits ............................. 39,045 25,481
Net decrease in short term borrowings ................ (1,000) (7,500)
Proceeds from common stock issued on exercise
of options and warrants ............................ 576 --
Cash paid for dividends .............................. (286) (210)
-------- --------
Net cash provided by financing activities ... 38,335 17,771
-------- --------
Net change in cash and cash equivalents ................ 14,586 5,336
Cash and cash equivalents as of beginning of year ...... 16,745 10,207
-------- --------
Cash and cash equivalents as of end of period .......... $ 31,331 $ 15,543
======== ========
Supplemental disclosures:
Cash paid during the period for:
Interest ............................................. $ 3,492 $ 2,315
Income taxes ......................................... $ 0 $ 0
See accompanying notes to consolidated condensed financial statements.
A-5
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
NOTE A -- BASIS OF PRESENTATION
The consolidated condensed financial statements included herein have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
financial statement date and the reported amounts of revenues and expenses
during the reporting period. Since management's judgement involves making
estimates concerning the likelihood of future events, the actual results could
differ from those estimates which will have a positive or negative effect on
future period results. The accompanying consolidated condensed financial
statements reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim periods presented.
Such adjustments are of a normal recurring nature. These consolidated condensed
financial statements should be read in conjunction with the audited financial
statements and the notes thereto as of and for the year ended December 31, 1996.
The results for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
Income per common share is computed by dividing net income by the weighted
average number of common shares and common share equivalents (when dilutive)
outstanding during each period after giving retroactive effect to stock
dividends declared. The common share equivalents of options and warrants in the
computation of primary earnings per share is computed utilizing the Treasury
Stock method. For purposes of this computation, the average market price of
common stock during each three-month quarter included in the period being
reported upon, is used, when dilutive. The ending market price of common stock
is used, however, for fully diluted income per share if the ending price is
higher than the average price.
The consolidated condensed financial statements include the accounts of the
Company and Carnegie Bank, N.A., its wholly-owned subsidiary. All significant
inter-company accounts and transactions have been eliminated.
NOTE B -- INVESTMENT SECURITIES
The Company classifies its investments in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," ("SFAS 115"). SFAS 115 requires that an enterprise classify
its investments in debt securities as either securities held to maturity
(carrying amount equals amortized cost), securities available for sale (carrying
amount equals estimated fair value; unrealized gains and losses recorded in a
separate component of stockholders' equity, net of taxes) or trading securities
(carrying amount equals estimated fair value; unrealized gains and losses
included in the determination of net income).
The Company has evaluated all of its investments in debt securities and has
classified them as either held to maturity or available for sale. Any security
which is a U.S. Government security, U.S. Government agency security, an agency
mortgage-backed security, or an obligation of a state or political subdivision
may be placed in the held-to-maturity category if acquired with the intent and
ability to maintain the security in the portfolio until maturity. Premiums and
discounts on these securities are amortized or accreted based on the effective
yield method. Realized gains and losses from the sale of securities available
for sale are determined on a specific identification cost basis.
A-6
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)--Continued
Management determines the appropriate classification of securities at the time
of purchase. At March 31, 1997 and December 31, 1996, a majority of the
Company's investment securities was classified as available for sale. Due to
this classification, the Company's stockholders' equity will be affected by
changing interest rates which affect the market price of the Company's
securities available for sale. At March 31, 1997 and December 31, 1996, no
investment securities were classified as trading securities.
The following tables present the book values, market values and gross unrealized
gains and losses of the Company's investment securities portfolio as of March
31, 1997 and December 31, 1996.
March 31, 1997
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- -------
(Dollars in thousands)
Securities available for sale (1):
U.S. Government ................. $21,559 $ -- ($125) $21,434
Mortgage-backed securities ...... 15,491 42 ( 226) 15,307
Obligations of State and
Political Subdivisions ........ 8,060 -- -- 8,060
Other securities ................ 8,049 -- ( 58) 7,991
------- ---- ---- -------
$53,159 $ 42 ($409) $52,792
======= ==== ==== =======
Securities held to maturity:
U.S. Government ................. $ 9,036 $ 56 ($ 9) $ 9,083
Mortgage-backed securities ...... 13,896 -- ( 229) 13,667
------- ---- ---- -------
$22,932 $ 56 ($238) $22,750
======= ==== ==== =======
- ----------
(1) Net unrealized losses of $232 thousand, net of a tax benefit of $135
thousand, were reported as a reduction to stockholders' equity at March 31,
1997.
December 31, 1996
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- -------
(Dollars in thousands)
Securities available for sale (2):
U.S. Government ................. $ 5,986 $ -- ($ 50) $ 5,936
Mortgage-backed securities ...... 15,524 49 ( 267) 15,306
Obligations of State and
Political Subdivisions ........ 890 -- -- 890
Other securities ................ 8,032 -- ( 54) 7,978
------- ---- ---- -------
$30,432 $ 49 ($371) $30,110
======= ==== ==== =======
Securities held to maturity:
U.S. Government ................. $ 9,035 $208 -- $ 9,243
Mortgage-backed securities ...... 14,229 -- ( 214) 14,015
------- ---- ---- -------
$23,264 $208 ($214) $23,258
======= ==== ==== =======
- ----------
(2) Net unrealized losses of $204 thousand, net of a tax benefit of $118
thousand, were reported as a reduction to stockholders' equity at December
31, 1996.
A-7
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)--Continued
NOTE C -- LOANS AND ALLOWANCE FOR LOAN LOSSES
The following table summarizes the components of the loan portfolio as of March
31, 1997 and December 31, 1996.
LOAN PORTFOLIO BY TYPE OF LOAN
March 31, 1997 December 31, 1996
------------------- -------------------
Amount % Amount %
-------- ------ -------- ------
(Dollars in thousands)
Commercial and financial........ $ 79,604 29.6% $ 79,907 30.0%
Real estate construction........ 15,872 5.9% 16,905 6.3%
Residential mortgage............ 24,681 9.2% 23,173 8.7%
Commercial mortgage............. 137,081 50.9% 133,908 50.3%
Installment..................... 11,901 4.4% 12,569 4.7%
-------- ------ -------- ------
$269,139 100.0% $266,462 100.0%
======== ===== ======== =====
The following table represents activity in the allowance for loan losses for the
three month period ended March 31, 1997 and 1996.
ALLOWANCE FOR LOAN LOSSES
Three Months Ended
March 31,
----------------------
1997 1996
------ ------
(Dollars in thousands)
Balance -- beginning of period ................... $2,665 $1,754
Charge-offs ...................................... (52) (107)
Recoveries ....................................... 2 2
------ ------
Net (charge-offs) recoveries ..................... (50) (105)
Provision for loan losses ........................ 146 172
------ ------
Balance -- end of period ......................... $2,761 $1,821
====== ======
NOTE D -- ACCOUNTING FOR LOAN IMPAIRMENT
Loans aggregated for evaluation under SFAS No. 114 are those loans risk rated by
the Bank as substandard and doubtful. At March 31, 1997, the recorded investment
in loans for which impairment has been recognized totaled $4,737,000 of which
$1,070,000 related to loans with no valuation allowance because the Bank expects
repayment in full and $3,667,000 is related to loans with a corresponding
valuation allowance of $361,000. The total amount of impaired loans measured
using the present value of expected future cash flows amounted to $699,000 and
the total amount of impaired loans measured using the fair value of the loan's
collateral amounted to $4,038,000. For the quarter ended March 31, 1997, the
average recorded investment in impaired loans was approximately $4,520,000. The
Company recognized no income on impaired loans during the portion of the year
that they were impaired.
A-8
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)--Continued
At December 31, 1996, the recorded investment in loans for which impairment has
been recognized totaled $4,175,000 of which $1,070,000 related to loans with no
valuation allowance because the Bank expects repayment in full and $3,105,000 is
related to loans with a corresponding valuation allowance of $315,000. The total
amount of impaired loans measured using the present value of expected future
cash flows amounted to $714,000 and the total amount of impaired loans measured
using the fair value of the loan's collateral amounted to $3,461,000. For the
year ended December 31, 1996, the average recorded investment in impaired loans
was approximately $3,523,000. The Company recognized $15,000 of interest on
impaired loans on a cash basis, during the portion of the year that they were
impaired.
NOTE E -- RECLASSIFICATIONS
Certain amounts in the financial statements presented for prior periods have
been reclassified to conform with the 1997 presentation.
NOTE F -- DIVIDENDS
The Board of Directors declared both a stock dividend and a cash dividend in
January, 1997. Stockholders of record on February 12, 1997 received a 5% stock
dividend on March 19, 1997 and stockholders of record on February 19, 1997
received a $.14 per share cash dividend, paid on March 19, 1997. Weighted
average shares outstanding and earnings per share have been retroactively
adjusted to reflect the stock dividend.
The Board of Directors also declared a second quarter cash dividend of $.14 per
share on April 23, 1997. The dividend will be payable on June 18, 1997 to
shareholders of record on May 21, 1997.
NOTE G -- STOCK WARRANTS
On August 16, 1994 the Company issued, through a public offering, 690,000 units.
Each unit consisted of one share of common stock and one warrant to purchase one
share of common stock at an exercise price of $15.09 for a period of three years
from the date of issuance. At March 31, 1997 there were 563,282 warrants
outstanding. As adjusted for the Company's 1995, 1996, and 1997 5% stock
dividends these warrants are convertible into 652,069 shares of common stock
which is equivalent to an effective price per share of approximately $13.04.
A-9
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)--Continued
NOTE H -- SHORT-TERM BORROWINGS
The composition of short-term borrowings follows:
March 31, December 31,
1997 1996
-------- ------------
(Dollars in thousands)
Overnight Federal funds purchased
-- balance...................................... $ -- $ 1,000
-- weighted average rate........................ -- 7.38%
-- maturity date................................ -- 1/02/97
NOTE I -- LONG-TERM DEBT
The composition of long-term debt follows:
March 31, December 31,
1997 1996
-------- ------------
(Dollars in thousands)
6.27% fixed rate term borrowing with Federal
Home Loan Bank-NY, due 4/22/98............... $10,000 $10,000
6.50% fixed rate repurchase agreement
with Salomon Bros., due 4/19/99.............. 4,425 4,425
------- -------
$14,425 $14,425
======= =======
NOTE J -- MERGER AGREEMENT TERMINATED
On January 15, 1997 Carnegie Bancorp announced the termination of the Amended
and Restated Agreement and Plan of Merger that had provided for the merger of
Regent Bancshares Corp. into Carnegie Bancorp and the concurrent merger of each
company's respective subsidiary banks.
NOTE K -- RECENTLY ISSUED ACCOUNTING STANDARDS
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS
AND EXTINGUISHMENTS OF LIABILITIES.
FASB has issued SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities", as amended by SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of SFAS 125",
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. Earlier or retroactive
application is not permitted. This Statement provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components approach
that focuses on control. Adoption of this pronouncement did not have a material
impact on the Company's consolidated financial statements.
A-10
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)--Continued
EARNINGS PER SHARE.
Issued in March, 1997, SFAS No. 128, "Earnings per Share", establishes standards
for computing and presenting earnings per share (EPS) and applies to entities
with publicly held common stock or potential common stock. This Statement
simplifies the standards for computing earnings per share previously found in
APB Opinion No. 15, "Earnings per Share", and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. This Statement is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. This Statement requires restatement of all
prior-period EPS data presented. Adoption of this pronouncement is not expected
to have a material impact on the Company's consolidated financial statements.
DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE.
FASB has also issued SFAS No. 129, "Disclosure of Information about Capital
Structure", establishing standards for disclosing information about an entity's
capital structure. This Statement continues the previous requirements to
disclose certain information about an entity's capital structure found in APB
Opinions No. 10, "Omnibus Opinion - 1966", and No. 15, "Earnings per Share", and
FASB Statement No. 47, "Disclosure of Long-Term Obligations", for entities that
were subject to the requirements of those standards. This Statement eliminates
the exemption of nonpublic entities from certain disclosure requirements of
Opinion No. 15 as provided by FASB Statement No. 21, "Suspention of the
Reporting of Earnings per Share and Segment Information by Nonpublic
Enterprises". It supersedes specific disclosure requirements of Opinions No. 10
and No. 15 and Statement No. 47 and consolidates them in this Statement for ease
of retrieval and for greater visibility to nonpublic entities. This Statement is
effective for financial statements issued for periods ending after December 15,
1997. It contains no change in disclosure requirements for entities that were
previously subject to the requirements of Opinions No. 10 and No. 15 and
Statement No. 47 and therefore its adoption will have no effect on the Company's
consolidated financial statements.
A-11
<PAGE>
CARNEGIE BANCORP AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This financial review presents Management's discussion and analysis of
financial condition and results of operations. It should be read in
conjunction with the consolidated condensed financial statements and the
accompanying notes included elsewhere herein.
FINANCIAL CONDITION
Total assets at March 31, 1997 increased by $39.3 million, or 11.4%, to $382.7
million compared to $343.4 million at December 31, 1996. Total assets averaged
$352.9 million in the first three months of 1997, a $67.1 million, or 23.5%,
increase from the 1996 full year average of $285.8 million. Average loans
increased $62.0 million, or 30.2%, to $267.5 million in the first three months
of 1997, from the 1996 full year average of $205.5 million. Average investment
securities decreased by $2.8 million, or 4.5%, to $59.7 million; average
Federal funds sold increased by $6.8 million to $8.8 million; and the average
of all other assets increased by $1.8 million, or 9.9%, to $19.9 million
during the first three months of 1997 compared to the full year 1996 averages.
These increases in average assets were funded primarily by a $78.6 million, or
33.9%, increase in average deposits, as the first quarter of 1997 average
deposits increased to $310.7 million from the full year 1996 average of $232.1
million. The decrease in average borrowed funds from $30.9 million for the
1996 full year average to $16.1 million during the first three months of 1997,
an average decrease of $14.8 million, or 91.9%, was also attributable to the
increase in average deposits.
It is the intention of management to use both its borrowing capacity and
deposit raising capacity in a proportion that best controls cost, meets
liquidity needs, and satisfies asset/liability mananagement objectives. During
1996, the Company utilized borrowed funds to temporarily fund loan growth, as
well as for asset/liability management purposes. During the first quarter of
1997, the Company utilized deposits generated both from recently opened branch
offices and from promotional programs in the Bank's existing offices to raise
deposits, to fund securities purchases and to repay borrowings.
LENDING ACTIVITY
Total loans at March 31, 1997 were $269.1 million, a 1.0%, or $2.6 million
increase from December 31, 1996. Average loans increased by $62.0 million, or
30.2%, to $267.5 million in the first three months of 1997 compared to the
1996 full year average. Changes in the composition of the average loan
portfolio during the period included increases of $57.2 million in commercial
loans and commercial mortgages, $1.9 million in residential mortgages and an
increase of $3.0 million in other installment loans.
The 32.8% increase in average commercial loans and commercial mortgages over
the 1996 full year averages is partially attributable to the greater
penetration of the marketplace and an improvement in the general economic
environment in New Jersey and partially to the purchase of $32.8 million of
loan participations from Regent National Bank in September and October, 1996,
and Carnegie's purchase of the remaining balance of $3.3 million in these
loans in
A-12
<PAGE>
January, 1997. Carnegie opened a new branch office in Toms River, New Jersey in
the fourth quarter of 1995, a new office in Montgomery and a new office in
Flemington, New Jersey and a new office in Langhorne, Pennsylvania during the
first six months of 1996. Having strong regional lenders on site in these
offices has helped to provide the growth Carnegie has experienced during 1996
and has contributed to the higher average loan volume in late 1996 and early
1997. Management intends to continue to pursue quality loans in all lending
categories within the Company's market area.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was $2.8 million, or 1.03% of total loans, at
March 31, 1997 compared to $2.7 million, or 1.00% of total loans, at December
31, 1996. The balance of non-performing loans, which includes non-accrual
loans and excludes accruing loans past due 90 days or more of $427 thousand,
was $5.0 million, or 1.9% of total loans at March 31, 1997. This compares to
non-performing loans, excluding accruing loans past due 90 days or more of
$839 thousand, of $3.3 million, or 1.2% of total loans at December 31, 1996.
The majority of the Company's loans are collateralized by real estate and
personal guarantees. Asset quality is a major corporate objective and
management believes that the total allowance for loan losses is adequate to
absorb potential losses in the loan portfolio, although future changes in
economic conditions, borrowers ability to repay their loans, regulatory
requirements and other factors may require future additions to the allowance.
INVESTMENT SECURITIES ACTIVITY
Average investment securities decreased by $2.8 million in the first three
months of 1997 compared to the 1996 full year average. At period end March 31,
1997 compared to December 31, 1996, investments increased $22.4 million, or
41.9%. During 1996, some of the proceeds of security sales, principal paydowns
and maturities were used to fund loan growth rather than to fund additional
purchases of investment securities. Strong deposit growth during the fourth
quarter of 1996 and first quarter of 1997 was primarily used to reduce
borrowed funds, and secondarily to increase the investment securities
portfolio.
During the first three months of 1997, proceeds from the sale of securities
available-for-sale amounted to $6.6 million, resulting in a $91 thousand loss
on the sales, and was offset by the purchase of $29.9 million in securities,
all of which were classified as available-for-sale. These purchases were
funded primarily by a net increase in deposits of $39.0 million during the same
period.
During the first three months of 1996, proceeds from the sale of securities
available-for-sale were $19.0 million, and the Company purchased $14.8 million
of securities, of which $3.0 million were classified as available-for-sale and
$11.8 million as held-to-maturity. The remaining proceeds from the sale of
securities and cash flows from net increases in deposits of $25.5 million were
used to fund loan growth and reduce short-term borrowed funds during the first
three months of 1996.
At March 31, 1997, net unrealized losses in the Company's available-for-sale
securities portfolio amounted to $367 thousand and net unrealized losses in
the held-to-maturity securities portfolio amounted to $182 thousand. Net
unrealized losses of $232 thousand, net of a tax benefit of $135 thousand,
were reported as a reduction to stockholders' equity at March 31, 1997.
A-13
<PAGE>
DEPOSITS
Average total deposits increased by $78.6 million, or 33.9%, to $310.7 million
for the three months ended March 31, 1997 compared to the 1996 full year
average of $232.1 million. The growth in deposits during this period was
primarily due to the expansion of the Company's branch system and its
aggressive pricing on certificates of deposit in comparison to the Company's
marketplace. Additionally, a new product was introduced in September 1996, a
seven month "no penalty" certificate of deposit that allows for complete or
partial withdrawals without penalty. This product is reflected in the
Company's "savings deposits" which grew from $4.4 million at March 31, 1996 to
$105.1 million at March 31, 1997.
Changes in the average deposit mix include a $20.4 million, or 19.9%, increase
in certificates of deposit; a $8.8 million, or 16.4%, decrease in money
market deposit accounts; a $63.3 million, or 324.6%, increase in savings
deposits, including the Company's "no penalty" certificate of deposit; a $3.1
million, or 19.2%, increase in NOW account deposits; and a $631 thousand, or
1.6%, increase in non-interest bearing demand deposits. The dramatic increase
in savings deposits reflects the increase in the Company's new "no penalty"
seven month certificate of deposit.
Deposits are obtained primarily from the market areas which the Company
serves. As of March 31, 1997 the Company did not have any brokered deposits
and neither solicited nor offered premiums for such deposits.
LIQUIDITY
Liquidity is a measurement of the Company's ability to meet present and future
funding obligations and commitments. The Company adjusts its liquidity levels
in order to meet funding needs for deposit outflows, repayment of borrowings,
when applicable, and the funding of loan commitments. The Company also adjusts
its liquidity level as appropriate to meet its asset/liability objectives.
Principal sources of liquidity are deposit generation, access to purchased
funds, including Federal Home Loan Bank borrowings, maturities and repayments
of loans and investment securities, net interest income and fee income. Liquid
assets (consisting of cash, Federal funds sold and investment securities
classified as available-for-sale) comprised 22.0% and 13.6% of the Company's
total assets at March 31, 1997 and December 31, 1996, respectively.
As shown in the Consolidated Condensed Statements of Cash Flows, the Company's
primary source of funds at March 31, 1997 was from deposit growth and
secondarily through sales of securities. Deposits increased $39.0 million and
$25.5 million, respectively, and proceeds from sales of securities increased
$6.6 million and $19.0 million, respectively for the three months ended March
31, 1997 and 1996. During 1996, the Company utilized borrowed funds as a
temporary funding source for loan growth, as well as for asset/liability
management purposes, until sufficient deposits were generated from the market
areas which the Company serves.
The Company also has several secondary sources of liquidity. Many of the
Company's loans are originated pursuant to underwriting standards which make
them readily marketable to other financial institutions or investors in the
secondary market. In addition, in order to meet liquidity needs on a temporary
basis, the Bank has lines of credit in the amount of $5.5 million for the
purchase of Federal funds with other financial institutions and may borrow
funds at the Federal Reserve discount window, subject to the Bank's ability to
supply collateral. In addition, the Bank has an overnight line of credit with
the Federal Home Loan Bank--New York ("FHLB-NY") in the amount of $16.2
million. In aggregate with the overnight line, subject to certain
requirements, the Bank may also obtain term advances with FHLB-NY of up to 25%
of the Bank's assets.
A-14
<PAGE>
The Company believes that its liquidity position is sufficient to provide
funds to meet future loan demand or the possible outflow of deposits, in
addition to being able to adapt to changing interest rate conditions. Long
term debt on the balance sheet as of March 31, 1997 totaling $14.4 million is
matched against specific loans or investments, for asset and liability
management purposes. The long term debt consists of $10 million of FHLB-NY
term advances with maturities greater than one year, and $4.4 million of
repurchase agreements from Solomon Brothers with a maturity greater than one
year.
CAPITAL RESOURCES
Stockholders' equity increased by $1.0 million at March 31, 1997 compared to
December 31, 1996. The changes in stockholders' equity during the three months
ended March 31, 1997 were comprised of an increase from net income of $767
thousand; a reduction of $28 thousand (net of tax provision) in unrealized
holding losses in the Company's portfolio of securities available-for-sale, as
a $204 thousand unrealized loss became a $232 thousand unrealized loss, a
reduction by cash dividends paid of $286 thousand, and an increase of $576
thousand in proceeds from exercised options and warrants.
During the three months ended March 31, 1997, the Company paid $286 thousand,
or 37.3% of net income, in cash dividends compared to $210 thousand, or 34.7%
of net income in cash dividends for the same period in 1996.
The Company's primary regulator, the Board of Governors of the Federal Reserve
System (which regulates bank holding companies), has issued guidelines
classifying and defining bank holding company capital into the following
components: (1) Tier I Capital, which includes tangible stockholders' equity
for common stock and certain qualifying preferred stock, and excludes net
unrealized gains or losses on available-for-sale securities and deferred tax
assets that are dependent on projected taxable income greater than one year in
the future, and (2) Tier II Capital (Total Capital), which includes a portion
of the allowance for loan losses and certain qualifying long-term debt and
preferred stock that does not qualify for Tier I Capital. The risk-based
capital guidelines require financial institutions to apply certain risk
factors ranging from 0% to 100%, against assets to determine total risk-based
assets. The minimum Tier I and the combined Tier I and Tier II capital to
risk-weighted assets ratios are 4.0% and 8.0%, respectively. The Federal
Reserve Bank also has adopted regulations which supplement the risk-based
capital guidelines to include a minimum leverage ratio of Tier I Capital to
total assets of 3.0% to 5.0%. Regulations have also been issued by the Bank's
primary regulator, the Office of the Comptroller of the Currency, establishing
similar ratios.
The following table summarizes the risk-based and leverage capital ratios for
the Company and the Bank at March 31, 1997, as well as the regulatory required
minimum capital ratios:
March 31, 1997 Minimum
----------------- Regulatory
Company Bank Requirement
------- ----- ------------
Risk-based Capital:
Tier I capital ratio .................... 9.01% 8.63% 4.00%
Total capital ratio ..................... 10.01% 9.63% 8.00%
Leverage ratio ............................ 7.07% 6.79% 3.00%-5.00%
As noted in the above table, the Company's and the Bank's capital ratios
exceed the minimum regulatory requirements.
A-15
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1996
NET INCOME
The Company earned $767 thousand, or $0.33 net income per share on a primary
basis and fully diluted basis, for the three months ended March 31, 1997,
compared to $606 thousand, or $0.29 for both primary and fully diluted net
income per share, for the three months ended March 31, 1996, an increase of
$161 thousand, or 26.6%. The increase in net income was primarily due to a
$783 thousand, or 26.0%, increase in net interest income, and a $26 thousand,
or 15.1%, decrease in provision for loan losses; these items were partially
offset by a reduction in non-interest income of $112 thousand, or 37.5%, a
$413 thousand, or 18.1%, increase in non-interest expenses and a $123
thousand, or 47.7%, increase in income tax provision.
NET INTEREST INCOME
Net interest income on a fully tax-equivalent ("FTE") basis, which adjusts for
the tax-exempt status of income earned on certain investments to express such
income as if it were taxable, increased $703 thousand, or 22.4% for the three
months ended March 31, 1997 compared to the same prior year period.
Interest income on a "FTE" basis, increased $2.0 million, or 37.0%, to $7.5
million for the three months ended March 31, 1997 compared to $5.5 million for
the same period in 1996. The improvement in interest income was primarily due
to volume increases in the loan portfolio as Carnegie benefited from strong
loan demand and the purchase of $32.8 million in loan participations from
Regent National Bank during the last two quarters of 1996 and $3.3 million in
the first quarter of 1997, which produced a volume related increase in
interest income on loans of $2.4 million. Volume related interest income was
further increased by $98 thousand due to increased Federal funds sold and
decreased by $206 thousand due to reduced investment securities as proceeds on
sales of investment securities were used to fund loan growth and to reduce
borrowed funds.
The $2.3 million volume related increase in total interest income was reduced
by $224 thousand resulting primarily from rate related reductions amounting to
$302 thousand as loan interest rates repriced to lower current yields and was
offset by investment securities rate related increases amounting to $73
thousand as lower yielding securities were replaced with higher yielding
securities. Total interest income was further reduced by $57 thousand due to
one additional day during the first quarter of 1996 compared to the first
quarter of 1997.
Interest expense for the first three months of 1997 increased $1.3 million, or
56.6%, compared to the same prior year period. The increase in interest
expense was due primarily to net volume increases in deposits which accounted
for $865 thousand, and net rate increases which accounted for $480 thousand,
and was offset by a decrease of $27 thousand attributable to one less day
during the first quarter of 1997 compared to the first quarter of 1996. The
interest expense rate and volume increases are the result of pricing decisions
made by management in response to the need for cost effective sources of
funds, primarily to provide for loan growth.
A-16
<PAGE>
The following tables titled "Consolidated Average Balance Sheets with
Resultant Interest and Average Rates" and "Analysis of Changes in Consolidated
Net Interest Income" present by category the major factors that contributed to
the changes in net interest income for the quarter ended March 31, 1997
compared to the quarter ended March 31, 1996.
A-17
<PAGE>
<TABLE>
CARNEGIE BANCORP AND SUBSIDIARY
CONSOLIDATED AVERAGE BALANCE SHEETS WITH RESULTANT INTEREST AND AVERAGE RATES
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
---------------------------------- ----------------------------------
Average Interest Average Average Interest Average
Balance Earned Rate Balance Earned Rate
------- -------- ------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning Assets:
Federal Funds Sold ............................ $ 8,841 $ 113 5.18% $ 811 $ 10 4.95%
Investment Securities:
Securities available for sale:
U. S. Gov't & Mtge-backed Securities....... 23,949 401 6.79% 38,843 624 6.44%
State & Political Subdivisions (1)......... 4,587 105 9.24% 18,780 368 7.86%
Other Securities .......................... 8,039 126 6.36% 4,979 83 6.69%
-------- ------ ----- -------- ------ ------
36,575 632 7.00% 62,602 1,075 6.89%
Securities held to maturity:
U. S. Gov't & Mtge-backed Securities....... 23,087 431 7.57% 7,796 132 6.79%
State & Political Subdivisions (1)......... -- -- -- -- -- --
-------- ------ ----- -------- ------ ------
23,087 431 7.57% 7,796 132 6.79%
Total Investment Securities............ 59,662 1,063 7.22% 70,398 1,207 6.88%
-------- ------ ----- -------- ------ ------
Loans: (2)(3)
Comm'l Loans & Comm'l Mtgs................. 231,391 5,541 9.71% 140,589 3,554 10.14%
Residential Mortgages ..................... 24,067 506 8.53% 22,103 514 9.33%
Installment Loans ......................... 12,067 267 8.97% 7,918 184 9.32%
-------- ------ ----- -------- ------ ------
Total Loans ........................... 267,525 6,314 9.57% 170,610 4,252 10.00%
-------- ------ ----- -------- ------ ------
Total Earning Assets ....................... 336,028 7,490 9.04% 241,819 5,469 9.07%
Non-Interest Earning Assets:
Loan Loss Reserve ............................. (2,746) (1,783)
Held For Sale Securities Valuation............. (329) 890
All Other Assets .............................. 19,902 15,584
------- -------
TOTAL ASSETS ............................... 352,855 256,510
======= =======
LIABILITIES & EQUITY
Interest-Bearing Liabilities:
Savings and Money Market Accounts.............. $146,566 1,693 4.68% $ 77,423 678 3.51%
Time Deposits ................................. 122,864 1,703 5.62% 97,138 1,340 5.53%
Borrowed Funds ................................ 16,135 249 6.26% 22,379 309 5.54%
-------- ------ ----- -------- ------ ------
Total Interest-Bearing Liabilities.......... 285,565 3,645 5.18% 196,940 2,327 4.74%
Demand Deposits ............................... 41,315 37,094
Other Liabilities ............................. 1,719 410
Shareholders' Equity .......................... 24,256 22,066
-------- --------
TOTAL LIABILITIES & EQUITY ................. $352,855 $256,510
======== ========
NET INTEREST INCOME (fully taxable basis) ........ $3,845 $3,142
====== ======
NET INTEREST MARGIN (fully taxable basis) ........ 4.64% 5.21%
===== ======
EQUITY TO ASSETS RATIO ........................... 6.87% 8.60%
===== ======
- ----------
(1) The tax-equivalent basis adjustment was computed based on a Federal income tax rate of 34%.
(2) Includes nonperforming loans.
(3) Included in interest income are loan fees.
</TABLE>
A-18
<PAGE>
<TABLE>
CARNEGIE BANCORP AND SUBSIDIARY
ANALYSIS OF CHANGES IN CONSOLIDATED NET INTEREST INCOME
The Rate/Volume Analysis reflects the extent to which changes in interest rates and changes in the volume of
interest-earning assets and interest-bearing liabilities have affected the Company's interest income and
interest expense during the periods presented. This analysis is presented on on a tax equivalent basis. Changes
attributable to both volume and rate have been allocated proportionately.
<CAPTION>
Three Months Ended March 31, 1997
Compared to Three Months Ended
March 31, 1996
---------------------------------------------
Increase (Decrease) Due To
---------------------------------------------
Volume Rate Time Net
------ ---- ---- -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest Earned On:
Federal Funds Sold ...................................... 98 5 0 103
Investment Securities:
Securities available for sale:
U. S. Gov't & Mtge-backed Securities................. (237) 20 (6) (223)
State & Political Subdivisions....................... (275) 16 (4) (263)
Other Securities .................................... 50 (7) 0 43
----- ---- --- -----
(462) 29 (10) (443)
----- ---- --- -----
Securities held to maturity:
U. S. Gov't & Mtge-backed Securities................. 256 44 (1) 299
State & Political Subdivisions....................... 0 0 0 0
----- ---- --- -----
256 44 (1) 299
----- ---- --- -----
Total Investment Securities...................... (206) 73 (11) (144)
----- ---- --- -----
Loans:
Comm'l Loans & Comm'l Mtgs........................... 2,270 (244) (39) 1,987
Residential Mortgages ............................... 45 (48) (5) (8)
Installment Loans ................................... 95 (10) (2) 83
----- ---- --- -----
Total Loans ..................................... 2,410 (302) (46) 2,062
----- ---- --- -----
Total Interest Income ................................ 2,302 (224) (57) 2,021
----- ---- --- -----
Interest Paid On:
Savings and Money Market Accounts........................ 599 424 (8) 1,015
Time Deposits ........................................... 351 27 (15) 363
Borrowed Funds .......................................... (85) 29 (4) (60)
----- ---- --- -----
Total Interest Expense ............................... 865 480 (27) 1,318
----- ---- --- -----
Net Interest Income .................................. 1,437 (704) (30) 703
===== ==== === =====
</TABLE>
A-19
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses decreased to $146 thousand for the first three
months of 1997 compared to a provision of $172 thousand for the same period in
1996. The provision is the result of management's review of several factors,
including increased loan balances and management's assessment of economic
conditions, credit quality and other factors that would have an impact on
future possible losses in the loan portfolio. The allowance for loan losses
totaled $2.8 million, or 1.03% of total loans, and 55.4% of non-performing
loans, and non-performing loans totaled $5.0 million, or 1.9% of total loans
at March 31, 1997.
The moderate provision for loan losses during the first quarter of 1997 is a
result of normal loan growth and management's evaluation of the adequacy of
the allowance for loan losses to absorb potential losses in the loan
portfolio.
NON-INTEREST INCOME
Total non-interest income was $187 thousand for the first three months of 1997
compared to $299 thousand for the first three months of 1996, a decrease of
$112 thousand, or 37.5%. The decrease was primarily attributable to losses on
securities sales amounting to $91 thousand during the first quarter of 1997
compared to net gains on securities sales of $128 thousand during the first
quarter of 1996, offset by higher first quarter 1997 service fees on deposits
of $24 thousand and higher other fees and commissions of $83 thousand. The
increase in service fees on deposits was due to normal deposit growth and the
increase in other fees and commissions was primarily due to $85 thousand for
an investment security placement fee collected during the first quarter of
1997.
NON-INTEREST EXPENSE
Total non-interest expenses increased $413 thousand, or 18.1%, for the three
months ended March 31, 1997 compared to the same period in 1996. The increase
was due primarily to increased employment expense resulting from staff
expansion as the Company increased loan production staff and other department
support staff and fully staffed its new branches, as well as increases in
occupancy expenses, equipment expenses and other expenses generally
attributable to the Company's growth. Of this increase, employment costs
increased $256 thousand, or 23.8%, and reflected increases in the number of
employees from 112 full-time equivalents at March 31, 1996 to 123 full-time
equivalents at March 31, 1997, as well as merit and cost of living
adjustments.
Occupancy expenses increased $41 thousand, or 12.5%, for the first three
months of 1997 compared to the same period in 1996. The increase was
attributable primarily to increased lease expense of $27 thousand and
increased leasehold depreciation expenses of $11 thousand. These increases
were due to two newly opened branch offices as well as normal annual lease
increases on other office facilities, and increased leasehold depreciation due
to the new facilities.
Furniture and equipment expenses increased $59 thousand, or 28.0%, for the
first quarter of 1997 compared to the first quarter of 1996 due primarily to
depreciation and maintenance costs on purchases of enhanced computer
equipment, depreciation on replacements of other furniture and equipment, as
well as depreciation and maintenance costs associated with the new facilities.
A-20
<PAGE>
Other expenses increased $57 thousand, or 8.6%, for the first three months of
1997 compared to the first three months of 1996. The increase was attributable
to increased other expenses resulting from the continued growth of the
Company, as costs of supplies, communications, advertising, insurance,
professional fees and misellaneous other expenses increased.
INCOME TAX EXPENSE
The Company recognized an income tax provision, which includes both Federal
and State taxes, of $381 thousand for the three months ended March 31, 1997,
for an effective income tax rate of 33.2%. This compared to $258 thousand, for
an effective income tax rate of 29.9% for the same period in 1996. The
increase in the effective tax rate is due primarily to a 70.9% increase in the
Company's taxable income, at the Federal tax rate of 34%, without a
proportionate increase in tax-exempt income, which decreased by 71.6% due to
sale of substantially all of the Company's tax exempt securities during the
second quarter of 1996.
A-21
<PAGE>
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
On January 15, 1997 Carnegie Bancorp announced the termination of
the Amended and Restated Agreement and Plan of Merger that had
provided for the merger of Regent Bancshares Corp. into Carnegie
Bancorp and the concurrent merger of each company's respective
subsidiary banks.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -- Financial Data Schedule
(b) Reports on Form 8-K --
The Registrant filed a Current Report on Form 8-K dated January 15,
1997, announcing the termination of its merger with Regent
Bancshares Corp.
The Registrant filed a Current Report on Form 8-K dated February 3,
1997 announcing its year end 1996 results of operations, a 5% stock
dividend and a cash dividend.
A-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNEGIE BANCORP
(Registrant)
Date: May 12, 1997 By: /s/ RICHARD ROSA
----------------------------------
Richard Rosa
Senior Vice President
and Chief Financial Officer
A-23
<PAGE>
No person has been authorized to give any information or to make any
representation in connection with the offering described herein, other than
information and representations contained in this Prospectus, and if given or
made, such information or representations should not be relied upon as having
been authorized by Carnegie Bancorp. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to purchase, any of the securities
offered by this Prospectus to or from any person in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such an offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus nor any distribution of the securities made under
this Prospectus shall, under any circumstances, create an implication that there
has been no change in the information contained herein or in the affairs of
Carnegie Bancorp since the date hereof or any of the dates as of which
information is furnished herein.
TABLE OF CONTENTS
==============================================================================
Page
- ------------------------------------------------------------------------------
Available Information......................................... 3
- ------------------------------------------------------------------------------
Information Incorporated by Reference
and Accompanying this Prospectus ............................. 3
- ------------------------------------------------------------------------------
The Company................................................... 6
- ------------------------------------------------------------------------------
Recent Developments........................................... 6
- ------------------------------------------------------------------------------
Selected Consolidated Financial Data.......................... 7
- ------------------------------------------------------------------------------
Risk Factors.................................................. 10
- ------------------------------------------------------------------------------
Use of Proceeds............................................... 12
- ------------------------------------------------------------------------------
Plan of Distribution by Warrant Conversion Agents ............ 12
- ------------------------------------------------------------------------------
Additional Financial Information.............................. 13
- ------------------------------------------------------------------------------
Warrant and Transfer Agent.................................... 14
- ------------------------------------------------------------------------------
Legal Matters................................................. 14
- ------------------------------------------------------------------------------
Experts....................................................... 14
- ------------------------------------------------------------------------------
Appendix A--Unaudited Consolidated Financial Statements
for the three months ended March 31, 1997..................... A-1
==============================================================================
CARNEGIE BANCORP
--------------------
PROSPECTUS
--------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee . . . . . . . . . . . . . . . $ 3,062
Accounting Fees and Expenses . . . . . . . . . . . 10,000
Legal Fees and Expense . . . . . . . . . . . . . . 25,000
Transfer Agent Fees. . . . . . . . . . . . . . . . 2,500
NASD Fees. . . . . . . . . . . . . . . . . . . . . 15,013
Miscellaneous Expenses . . . . . . . . . . . . . . 4,425
-------
Total . . . . . . . . . . . . . . . . . . . . . . $60,000
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VII of the Certificate of Incorporation of the Company provides
that the Company shall indemnify its present and former officers, directors,
employees and agents and persons serving at its request against expenses,
including attorneys' fees, judgments, fines or amounts paid in settlement
incurred in connection with any pending or threatened civil or criminal
proceedings to the fullest extent permitted by the New Jersey Business
Corporation Act. Article VII also provides that such indemnification shall not
exclude any other rights to indemnification to which a person may otherwise be
entitled, and authorizes the Company to purchase insurance on behalf of any of
the persons enumerated against any liability whether or not the Company would
have the power to indemnify him under the provisions of Article VII.
The New Jersey Business Corporation Act empowers a corporation to indemnify
a corporate agent against his expenses and liabilities incurred in connection
with any proceeding (other than a derivative lawsuit) involving the corporate
agent by reason of his being or having been a corporate agent if (a) the agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) with respect to any
criminal proceeding, the corporate agent had no reasonable cause to believe his
conduct was unlawful. For purposes of the Act, the term "corporate agent"
includes any present or former director, officer, employee or agent of the
corporation, and a person serving as a "corporate agent" for any other
enterprise at the request of the corporation.
With respect to any derivative action, the corporation is empowered to
indemnify a corporate agent against his expenses (but not his liabilities)
incurred in connection with any proceeding involving the corporate agent by
reason of his being or having been a corporate agent if the agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. However, only the court
II-1
<PAGE>
in which the proceeding was brought can empower a corporation to indemnify a
corporate agent against expenses with respect to any claim, issue or matter as
to which the agent was adjudged liable for negligence or misconduct.
The corporation may indemnify a corporate agent in a specific case if a
determination is made by any of the following that the applicable standard of
conduct was met: (i) the Board of Directors, or a committee thereof, acting by a
majority vote of a quorum consisting of disinterested directors; (ii) by
independent legal counsel if there is not a quorum of disinterested directors or
if the disinterested quorum empowers counsel to make the determination; or (iii)
by the stockholders.
A corporate agent is entitled to mandatory indemnification to the extent
that the agent is successful on the merits or otherwise in any proceeding, or in
defense of any claim, issue or matter in the proceeding. If a corporation fails
or refuses to indemnify a corporate agent, whether the indemnification is
permissive or mandatory, the agent may apply to a court to grant him the
requested indemnification. In advance of the final disposition of a proceeding,
the corporation may pay an agent's expenses if the agent agrees to repay the
expenses unless it is ultimately determined he is entitled to indemnifications.
ITEM 16. EXHIBITS
Exhibit No. Description
- ----------- -----------
1 Warrant Conversion Agency Agreement
5 Opinion of McCarter & English as to the legality
of the securities to be registered.*
23(a) Consent of Coopers & Lybrand.
23(b) Consent of McCarter & English (Included in Exhibit
5 hereto).
24 Powers of Attorney of directors of Carnegie
Bancorp in favor of Thomas L. Gray, Jr.
and Mark A. Wolters*
- ------------
* Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes: (1) to file, during any
period during which offers or sales are being made, a post-effective amendment
to this Registration Statement: (i) to include any Prospectus required by
Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the
Prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereto)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; or (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
The undersigned Registrant hereby undertakes to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned Registrant hereby undertakes, for purposes of determining
any liability under the Securities Act of 1933, to treat each post effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering and
to file a post effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all of the
requirements for filing on Form S-2 and has duly authorized this Preeffective
Amendment No. 2 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Princeton, State of New
Jersey on July 24, 1997.
CARNEGIE BANCORP
By: /s/ THOMAS L. GRAY, JR.
------------------------
Thomas L. Gray, Jr.
President and Chief
Executive Officer
In accordance with the requirements of the Securities Act, this
Preeffective Amendment No. 2 to the registration statement has been signed by
the following persons in the capacities and on the dates indicated:
Name Title Date
---- ----- ----
/s/ THOMAS L. GRAY, JR. President, Chief July 24, 1997
- -----------------------------
Thomas L. Gray, Jr. Executive Officer and
Director (Principal
Executive Officer)
/s/ RICHARD P. ROSA* Senior Vice President July 24, 1997
- ----------------------------- and Chief Financial
Richard P. Rosa Officer (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ BRUCE A. MAHON* Director and Chairman of July 24, 1997
- ----------------------------- the Board
Bruce A. Mahon
/s/ MICHAEL E. GOLDEN* Director July 24, 1997
- -----------------------------
Michael E. Golden
/s/ THEODORE H. DOLCI, JR.* Director July 24, 1997
- ----------------------------
Theodore H. Dolci, Jr.
/s/ JAMES E. QUACKENBUSH* Director July 24, 1997
- -----------------------------
James E. Quackenbush
/s/ STEVEN L. SHAPIRO* Director July 24, 1997
- -----------------------------
Steven L. Shapiro
/s/ MARK A. WOLTERS* Director July 24, 1997
- -----------------------------
Mark A. Wolters
/s/ SHELLEY M. ZEIGER* Director July 24, 1997
- -----------------------------
Shelley M. Zeiger
* Executed pursuant to a power of attorney.
================================================================================
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1 Warrant Conversion Agency Agreement
5 Opinion of McCarter & English as to the legality of the
securities to be registered.*
23(a) Consent of Coopers & Lybrand.
23(b) Consent of McCarter & English (Included in Exhibit 5
hereto).
24 Powers of Attorney of directors of Carnegie Bancorp in
favor of Thomas L. Gray, Jr. and Mark A. Wolters*
- ----------
* Previously filed.
CARNEGIE BANCORP
619 ALEXANDER ROAD
PRINCETON, NEW JERSEY 08540
WARRANT CONVERSION AGENCY AGREEMENT
July 23, 1997
JANNEY MONTGOMERY SCOTT INC.
1801 Market Street
Philadelphia, PA 19103-1675
FIRST COLONIAL SECURITIES GROUP INC.
10 Lake Center Executive Park - Suite 202
401 North Route 73
Marlton, NJ 08053
Dear Sirs:
Carnegie Bancorp, a New Jersey business corporation (the "Company") has
outstanding warrants (the "Warrants") which entitle the holder thereof to
purchase 1.157 shares of the Company's Common Stock, no par value, (the "Common
Stock") at an exercise price of $15.09 per Warrant for a period of time, which
expires at 5:00 P.M., Eastern Daylight Time, on August 18, 1997, unless such
period of time is extended by the Company (the "Warrant Expiration Date"). The
Company has listed the Warrants on the NASDAQ National Market and currently has
an effective registration statement on Form S-3 registering under Section 5 of
the Securities Act of 1933, as amended (the "Act"), the underlying shares of the
Common Stock to be delivered upon the exercise of such Warrants.
The Company desires to enter into an agreement with Janney Montgomery
Scott Inc. and First Colonial Securities Group Inc. (collectively the "Warrant
Conversion Agents") by which they agree to: (1) purchase Warrants available for
sale on the open market prior to the Warrant Expiration Date; (2) exercise such
Warrants into the Common Stock (the "Shares"); and (3) sell the Shares through
the Warrant Conversion Agents' retail distribution networks and to a lesser
extent, through the institutional marketplace (the "Offering"). Moreover, the
Warrant Conversion Agents agree to contact holders of the Warrants to solicit
the exercise of Warrants by such holders or to recommend that the holders sell
their Warrants in the open market. Furthermore, the Warrant Conversion Agents
agree to solicit interest in the Common Stock of the Company after the Warrant
Expiration Date through their institutional and retail sales network.
During the Offering, the price per share of the Shares to be sold by the
Warrant Conversion Agents will be at prevailing market prices, which will not
exceed the greater of the last sale or current asked price per share of the
Common Stock as reported in the NASDAQ National Market, adjusted for any
concession to dealers, which will not be increased more than once during any
trading day (the "Offer Price"). The Warrant Conversion Agents may also make
sales to securities
1
<PAGE>
traders at prices which represent concessions from the Offer Price. The amount
of such concessions is to be determined from time to time by the Warrant
Conversion Agents. Any Shares so offered are offered subject to prior sale when,
as and if received by the Warrant Conversion Agents and subject to their right
to reject orders in whole or in part.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
agree, intending to be legally bound hereby, as follows:
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents, warrants to, and agrees with the Warrant Conversion Agents
that:
(a) A registration statement on Form S-2, relating to the sale of
the Shares acquired by the Warrant Conversion Agents as contemplated hereby has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission. Copies of such
registration statement have been delivered by the Company to the Warrant
Conversion Agents. As used in this Agreement, unless the context otherwise
requires, "Registration Statement" means that registration statement (together
with all documents incorporated therein by reference) at the time when it
becomes effective under the Act; and "Prospectus" means the prospectus (together
with all documents incorporated therein by reference) included in the
Registration Statement with any changes contained in any prospectus filed with
the Commission by the Company with the consent of the Warrant Conversion Agents
pursuant to Rule 424(b) of the Rules and Regulations.
(b) The Registration Statement, any post-effective amendment
thereof, and the Prospectus, as amended or supplemented, including any document
filed by the Company hereafter pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to
the termination of the Offering of any the Shares acquired by the Warrant
Conversion Agents hereunder ("Incorporated Document"), will contain all
statements that are required by the Act and the Rules and Regulations; and the
Registration Statement, any post-effective amendment thereof and the Prospectus
as amended or supplemented (including any Incorporated Documents) will comply in
all material respects with the requirements of the Act and the Rules and
Regulations and will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading; provided that the Company makes
no representation or warranty as to information contained in or omitted from the
Registration Statement or the Prospectus, or any amendments thereof or
supplements thereto, in reliance upon and in conformity with, written
information furnished to the Company by the Warrant Conversion Agents
specifically for inclusion therein.
(c) The authorized capital stock of the Company as of March 31,
1997, is as set forth in the Company's Form 10-QSB for the period ended March
31, 1997, found at Appendix A to the Prospectus. All of the outstanding shares
of capital stock have been duly authorized, validly issued, fully paid and
nonassessable and are duly listed on the NASDAQ National Market. All of
2
<PAGE>
the Warrants and the Shares issuable upon exercise of the Warrants will, when
issued, be validly authorized, issued and outstanding, fully paid and
non-assessable with no personal liability attaching to the ownership thereof,
and will be listed on the NASDAQ National Market. The capital stock of the
Company, including the Shares, conforms to the description thereof contained or
incorporated by reference in the Prospectus. Except as contemplated by this
Agreement or as disclosed in or contemplated by the Prospectus or any document
incorporated by reference in the Registration Statement, there are no preemptive
or other rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, the Common Stock created by the Company or any subsidiary
of the Company other than pursuant to the Company's certificate of
incorporation, charter, bylaws or other governing documents, and neither the
filing of the Registration Statement nor the offering or sale of the Shares, as
contemplated by this Agreement, gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any shares
of capital stock or other securities of the Company. Except as contemplated by
this Agreement or as disclosed in or contemplated by the Prospectus or
incorporated by reference in the Registration Statement, neither the Company nor
any subsidiary of the Company has outstanding any option, warrant, convertible
security, or other right permitting or requiring it to issue, or convert any
obligation into, or exchange any obligation for, shares of capital stock, nor
has the Company or any such subsidiary agreed to issue or sell any shares of
capital stock or any such option, warrant, convertible security or other right.
(d) On and after the date hereof and prior to the Warrant Expiration
Date, there will be no change in the outstanding capital stock of the Company
and the Company will not issue or sell or enter into any agreement (other than
this Agreement), arrangement or understanding of any kind, or take any action,
for the issuance or sale of any capital stock of the Company or warrants or
options for the purchase of capital stock of the Company or securities
convertible into capital stock of the Company without the prior approval of the
Warrant Conversion Agents, except for (i) the issuance of the Shares upon the
exercise of the Warrants and (ii) the issuance of Common Stock or options
pursuant to any existing employee stock option, stock purchase or restricted
stock plans.
(e) As of the close of business on July 22, 1997, there were 486,637
outstanding Warrants.
(f) Each Warrant is exercisable, until the close of business on the
Warrant Expiration Date, into 1.157 shares of the Company's Common Stock by
surrender of Warrant Certificates for exercise to the Registrar and Transfer
Company of Cranford, New Jersey (the "Warrant and Transfer Agent"), prior to the
Warrant Expiration Date. The holder of each Warrant may purchase 1.157 fully
paid and nonassessable shares of the Common Stock for $15.09 by surrender of
Warrant Certificates together with a check made payable to "Carnegie Bancorp"
for the exercise price to the Warrant and Transfer Agent prior to the Warrant
Expiration Date.
(g) Neither the Commission nor the Blue Sky or securities authority
of any jurisdiction has issued an order suspending the effectiveness of the
Registration Statement, preventing or suspending the use of the Prospectus, the
Registration Statement or any amendment thereof or supplement thereto, refusing
to permit the effectiveness of the Registration Statement, or
3
<PAGE>
suspending the registration or qualification of the Shares; and none of such
authorities has instituted or threatened to institute any proceedings with
respect to such an order.
(h) Coopers & Lybrand, LLP, whose report appears in the Registration
Statement and the Prospectus, are independent public or certified accountants
with regard to the Company as required by the Act and the Rules and Regulations.
(i) Except as described in or contemplated by the Registration
Statement and the Prospectus, there has not been any material adverse change in
or adverse development which materially adversely affects the business,
properties, condition (financial or other) or results of operations of the
Company and its subsidiaries taken as a whole from the dates as of which
information is given in the Registration Statement and the Prospectus.
(j) Neither the Company nor any of its subsidiaries is in violation
of its certificate of incorporation, charter, bylaws or other governing
documents, or in default under any agreement, indenture or instrument, the
effect of which violation or default would be material to the Company and its
subsidiaries taken as a whole.
(k) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby and the issuance and
delivery of the Shares upon the exercise of the Warrants, will not (i) conflict
with or result in a breach of any of the terms and provisions of, or constitute
a default (or an event which with notice or lapse of time, or both, would
constitute a default) or require, except for such consents as have been obtained
and are currently in effect, consent under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to the terms of any agreement or
other instrument to which the Company or any of its subsidiaries is a party or
by which any of such companies or their respective properties or assets may be
bound or violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, government or regulatory agency or body
which has jurisdiction over the Company or any of its subsidiaries or any of
their respective properties or assets, which conflicts, breaches, defaults,
violations or liens would, in the aggregate, have a material adverse effect on
the Company and its subsidiaries, taken as a whole, or (ii) violate or conflict
with any provision of the certificate of incorporation, charter, bylaws, or
other governing documents of the Company or any of its subsidiaries. No consent,
approval, authorization, order, registration, filing, qualification, license or
permit of or with any court or any public, governmental or regulatory agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
their respective properties or assets is required for the execution, delivery
and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby, including the exercise of the Warrants, and
the issuance, sale and delivery of the Shares pursuant to this Agreement, except
the registration under the Act of the Shares, and the consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses and
permits as may be required under state securities or Blue Sky laws in connection
with the acquisition and distribution of the Shares by the Warrant Conversion
Agents.
(l) The Company and each of its subsidiaries have been duly
incorporated, are validly existing and in good standing under the laws of the
jurisdiction of its respective
4
<PAGE>
incorporation; is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in the United States in which its
ownership or lease of property or the conduct of its businesses requires such
qualification (except where the failure to so qualify would not have a material
adverse effect upon the Company and its subsidiaries taken as a whole); and has
all corporate power and authority necessary to own or hold its properties and to
conduct the businesses in which it is engaged.
(m) The financial statements and schedules, including the related
notes, of the Company and its subsidiaries, included or incorporated by
reference in the Registration Statement or any Prospectus present fairly, and
the financial statements included in any Incorporated Document will present
fairly, the financial condition and results of operations of the entities
purported to be shown thereby at the dates and for the periods indicated, and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as
otherwise noted therein.
(n) There is no litigation or governmental proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries, which might, if adversely determined, materially adversely affect
the purchase and sale of the Shares or which might result in any material
adverse change in the financial condition, results of operations or business of
the Company and its subsidiaries taken as a whole or which is required to be
disclosed in the Registration Statement or the Prospectus and which is not so
disclosed.
(o) There are no contracts or other documents that are required to
be filed as exhibits to the Registration Statement by the Act or by the Rules
and Regulations or which were required to be filed as exhibits to any document
incorporated by reference in the Registration Statement which have not been so
filed.
(p) The documents incorporated by reference in the Registration
Statement and the Prospectus have been, and each Incorporated Document will be,
prepared by the Company in conformity in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder and
such documents have been, or in the case of an Incorporated Document will be,
timely filed as required thereby. Accurate copies of each of the documents
incorporated by reference in the Registration Statement and the Prospectus have
been delivered by the Company to the Warrant Conversion Agents.
(q) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, prior to the
termination of the Offering contemplated by this Agreement, any action designed
to cause or result in, or which has constituted or which would constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Shares.
(r) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company has not paid or
declared any dividends or other distributions with respect to its capital stock
(other than regular quarterly cash dividends); and (ii) there has not been any
change in
5
<PAGE>
the capital stock (other than (A) the sale of Common Stock pursuant to this
Agreement, (B) the issuance of shares of Common Stock upon exercise of Warrants
disclosed in the Registration Statement as being outstanding, and (C) the
issuance of shares of Common Stock upon the exercise of outstanding stock
options issued pursuant to the Company's employee and director benefit plans.)
(s) This Agreement has been duly and validly authorized, executed
and delivered by the Company and is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting the rights of creditors generally and
by equitable principles and except as obligations of the Company under the
indemnification provisions hereof may be limited under federal or state
securities laws.
(t) The Company and its subsidiaries have all necessary consents,
approvals, authorizations, orders, registrations, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies and bodies,
material to the ownership of their respective properties and conduct of their
respective businesses as now being conducted and as described in the
Registration Statement and the Prospectus, except for such authorizations,
registrations, qualifications, licenses and permits, the absence of which,
singly or in the aggregate, would not have a material adverse effect upon the
Company, its financial condition or results of operation, and no such consent,
approval, authorization, order, registration qualification, license or permit
contains a materially burdensome restriction not adequately disclosed in the
Registration Statement and the Prospectus. The conduct of the business of the
Company and each of its subsidiaries is in compliance in all material respects
with all applicable federal, state, local and foreign laws and regulations,
except where failure to be so in compliance would not materially adversely
affect the condition, business or results of operation of the Company and its
subsidiaries taken as a whole.
(u) The Company and its subsidiaries have filed all federal, state
and foreign income and franchise tax returns legally required to be filed by the
Company and such subsidiaries and have paid all taxes as shown as due thereon
except for taxes being contested in good faith, and the Company has no knowledge
of any material tax deficiency which has been asserted against the Company or
any subsidiary which could materially and adversely affect the financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole.
2. PURCHASE, SALE AND DELIVERY. On the basis of the representations
and warranties herein contained, but subject to the terms and conditions herein
set forth, the Company and the Warrant Conversion Agents agree as follows:
(a) It is understood that the Warrant Conversion Agents intend to
sell the Shares at the Offer Price. Nothing contained herein shall limit the
right of the Warrant Conversion Agents, in their discretion, to determine the
price or prices at which, or the time or times when, any such Shares shall be
sold, whether or not prior to the Warrant Expiration Date and whether or not for
long or short accounts.
(b) The Company understands that from the date hereof until 5:00
P.M., Eastern Daylight Time, on the Warrant Expiration Date, the Warrant
Conversion Agents shall be obligated
6
<PAGE>
to purchase the Warrants in the open market or otherwise, in such amounts and at
times and prices as they may deem advisable and shall exercise all such Warrants
so purchased by them. The Warrant Conversion Agents agree to present for
exercise all Warrants held by them. The Shares may be sold by the Warrant
Conversion Agents at prices prevailing from time to time in the open market. The
Company shall pay to the Warrant Conversion Agents on the Settlement Date (as
hereinafter defined), the sum of $0.97 for each Warrant purchased by the Warrant
Conversion Agents, exercised by the Warrant Conversion Agents into the Shares,
and sold in the open market (the "Take-Up Fee"). For all Warrants exercised by
any person after May 6, 1997 which are not subject to the Take-Up Fee, the
Company agrees to pay on the Settlement Date to the Warrant Conversion Agents
$0.40 per Warrant exercised (the "Non-Take-Up Fee"). The Company agrees to pay
to the Warrant Conversion Agents the aggregate of the Non-Take-Up Fees plus
$40,000 on the Settlement Date notwithstanding the termination of this Agreement
by any party hereto.
3. CERTAIN FEES, EXPENSES AND PAYMENTS. As compensation to the Warrant
Conversion Agents for its commitment under this Agreement, the Company will pay
to the Warrant Conversion Agents on the Settlement Date, in addition to the
Take-Up Fee and Non-Take-Up Fee, an aggregate amount equal to the sum of
$100,000 (the "Standby Fee") plus a non-accountable expense allowance in
connection therewith of $40,000. Such amount shall be paid by certified or
official bank check or checks payable in New York Clearing House funds.
The aggregate total of the Take-Up Fee, Non-Take-Up Fee, Standby Fee
and nonaccountable expense allowance shall be subject to an overall minimum
payment of $375,000 and an overall maximum payment of $500,000; provided,
however, that if all Warrants are converted to shares of the Common Stock prior
to the Effective Date of the Registration Statement or the Company terminates
this Agreement after the Effective Date of the Registration Statement but prior
to the Warrant Expiration Date, then the Company agrees to pay the Warrant
Conversion Agents the minimum payment of $375,000 on the Settlement Date.
4. SETTLEMENT DATE. No later than the third business day after; (a) this
Agreement has been terminated by one or more of the parties hereto; (b) all
Warrants have been converted into shares of Common Stock; or (c) the Warrant
Expiration Date, whichever event occurs first, or such other date as shall be
mutually agreed by the parties (the "Settlement Date"), the parties shall
exchange all documents and instruments required by the terms of this Agreement
at the offices of Janney Montgomery Scott Inc., 1801 Market Street,
Philadelphia, Pennsylvania 19103-1675, or such other location as may be mutually
agreed upon by the parties, for the payment by the Company of all fees and
expenses to the Warrant Conversion Agents. The Company shall pay such fees and
expenses to the Warrant Conversion Agents in accordance with Paragraphs 2(b) and
3 hereof.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees:
(a) To furnish promptly to the Warrant Conversion Agents and to
counsel for the Warrant Conversion Agents an executed copy of the Registration
Statement as originally filed with the Commission, and each amendment thereto
filed with the Commission, including all consents and exhibits filed therewith.
7
<PAGE>
(b) To deliver promptly to the Warrant Conversion Agents such number
of conformed copies of the Registration Statement as originally filed and each
amendment thereto and such number of the Prospectus and each amended or
supplemented Prospectus, and any documents incorporated by reference in any of
the foregoing, as the Warrant Conversion Agents may reasonably request.
(c) To file with the Commission any amendment of the Registration
Statement or any supplement to the Prospectus as the Warrant Conversion Agents
may request for the purpose of describing the Warrant Conversion Agents' plan of
distribution for the Shares acquired by it hereunder or that may, in the
judgment of the Company or the Warrant Conversion Agents, be required by the Act
or requested by the Commission (including the staff thereof); and to file in a
timely manner with the Commission any document required to be filed with the
Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act and
incorporated by reference in the Registration Statement or the Prospectus.
(d) Prior to filing with the Commission any amendment of the
Registration Statement or supplement to the Prospectus, or to filing any
Prospectus pursuant to Rule 424 of the Rules and Regulations, or to filing any
document incorporated by reference in any of the foregoing, to furnish copies
thereof to the Warrant Conversion Agents and counsel for the Warrant Conversion
Agents and to obtain the consent of the Warrant Conversion Agents to the filing.
(e) To advise the Warrant Conversion Agents promptly (i) when the
Registration Statement and any post-effective amendment thereto becomes
effective; (ii) of any request or proposed request by the Commission for an
amendment to the Registration Statement, a supplement to the Prospectus or any
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation or, to the Company's knowledge, threat of any proceeding for that
purpose; (iv) of receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares issuable upon the exercise of the
Warrants or of the Shares for sale in any jurisdiction or the initiation or, to
the Company's knowledge, threat of any proceeding for that purpose; and (v) of
the happening of any event which makes untrue any statement of a material fact
made in the Registration Statement or the Prospectus, or which requires the
making of a change in the Registration Statement or the Prospectus in order to
make any material statement therein not misleading.
(f) If the Company is aware that the Commission is contemplating the
issuance of any stop order suspending the effectiveness of the Registration
Statement, to use every reasonable effort to prevent the issuance of such stop
order, and if the Commission shall issue a stop order suspending the
effectiveness of the Registration Statement, to make every reasonable effort to
obtain the lifting of that order at the earliest possible time.
(g) As soon as practicable after the effective date of the
Registration Statement, to make generally available to its security holders and
to deliver to the Warrant Conversion Agents an earnings statement, conforming
with the requirements of Section 11(a) of the Act, covering a period of at least
twelve consecutive months beginning after the effective date of the Registration
8
<PAGE>
Statement, which the Company will satisfy by complying with Rule 158 under the
Act and by making timely filings under the Exchange Act.
(h) For a period of five years from the effective date of the
Registration Statement, to furnish to the Warrant Conversion Agents copies of
all public reports and all information, documents, reports and financial
statements furnished by the Company to stockholders or the Commission pursuant
to the Exchange Act or any rule or regulation of the commission thereunder.
(i) To endeavor to qualify the Shares issuable upon the exercise of
the Warrants and the Shares for offer and sale under the securities laws of such
jurisdictions in the United States as the Warrant Conversion Agents may
reasonably request.
(j) To mail or cause to be mailed not later than 5:00 P.M., Eastern
Daylight Time, on the first business day after the Effective Date of the
Registration Statement a notice of the Warrant Expiration Date of all the
outstanding Warrants (the "Notice of Expiration Date") by first class mail to
the registered holders of such Warrants, together with a copy of the Prospectus,
and any other document requested to be delivered and mailed therewith by the
Warrant Conversion Agents.
(k) To pay (i) the costs incident to the preparation, printing and
filing under the Act of the Registration Statement and any amendments and
exhibits thereto, the Prospectus and any amendments or supplements to the
Prospectus and the several documents required to be furnished to the Warrant
Conversion Agents pursuant to this Agreement; (ii) the costs incident to the
preparation, printing, filing and distribution of the Notice of Expiration Date
and such other documents as may be distributed in connection with the
transactions contemplated by this Agreement, to the Warrant Conversion Agents
and the holders of the Warrants; (iii) the fees and expenses (including fees and
disbursements of counsel to the Warrant Conversion Agents in connection
therewith) of qualifying the Common Stock issuable upon exercise of the Warrants
and the Shares under the securities laws of the several jurisdictions and of
preparing and printing "Blue Sky" memoranda, if necessary; (iv) the fees and
expenses of listing the Common Stock issuable upon exercise of the Warrants and
the Shares on the NASDAQ National Market; (v) all costs incident to the
authorization, issuance, sale and delivery of the Shares and all transfer taxes
which may be required to be paid by the Warrant Conversion Agents in connection
with any exercise of the Warrants, and consummation of the transactions
contemplated by this Agreement, including any transfer taxes payable on the sale
of the Shares by the Warrant Conversion Agents; and (vi) all other costs and
expenses incident to the performance of the obligations of the Company under
this Agreement.
(l) To direct the Warrant Agent to advise the Warrant Conversion
Agents prior to the close of business on each business day through the Warrant
Expiration Date of the aggregate number of Warrants and the exercise on the
preceding business day and on a cumulative basis and otherwise to cooperate with
the Warrant Conversion Agents to facilitate the exercise of the Warrants which
shall be delivered to the Warrant and Transfer Agent on or prior to the Warrant
Expiration Date.
9
<PAGE>
(m) To take no action prior to 5:00 P.M., Eastern Daylight Time, on
the Warrant Expiration Date, the effect of which would be to require an
adjustment in the exercise price of the Warrants from the present indication set
forth above.
(n) Not to withdraw or apply for withdrawal of the Registration
Statement prior to such time as the Warrant Conversion Agents shall have advised
the Company that the offering and sale of the Shares by the Warrant Conversion
Agents contemplated by this Agreement shall have been completed.
(o) During the 180 days following the effective date of the
Registration Statement, except with the Warrant Conversion Agents' prior written
consent and except for the issuance of the Shares and the issuance of shares of
the Common Stock or options pursuant to any existing employee stock option,
restricted stock or stock purchase plans, the Company will not offer for sale,
sell or otherwise dispose of, or file a registration statement under the Act
covering, any shares of its Common Stock, or sell or grant options, or warrants
with respect to, or securities convertible into, any shares of its Common Stock.
6. CONDITION OF WARRANT CONVERSION AGENTS' OBLIGATIONS. The obligations of
the Warrant Conversion Agents hereunder are subject to the accuracy in all
material respects of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M., Eastern Daylight Time, on July 23, 1997, or at such later date
and time as shall be consented to in writing by the Warrant Conversion Agents
(the "Effective Date"); no stop order suspending such effectiveness, nor any
order directed to any document incorporated, or deemed to be incorporated, by
reference in the Registration Statement and the Prospectus, shall have been
issued, and prior to that time no stop order proceeding shall have been
initiated or threatened by the Commission and no challenge by the Commission by
appropriate proceedings shall have been made to the accuracy or adequacy of any
document incorporated, or deemed to be incorporated, by reference in the
Registration Statement and the Prospectus; any request of the Commission for
inclusion of additional information in the Registration Statement or the
Prospectus or otherwise shall have been complied with; and the Company shall not
have filed with the Commission the Prospectus or any amendment or supplement to
the Registration Statement or the Prospectus or any Incorporated Document
without the consent of the Warrant Conversion Agents.
(b) The Warrant Conversion Agents shall not have discovered and
disclosed to the Company that the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto contains an untrue statement of a
fact which, in the opinion of counsel for the Warrant Conversion Agents, may be
material or omits to state a fact which, in the opinion of such counsel, may be
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) Since the respective dates as of which information is given in
the Prospectus there has not been any material change in the capital stock of
the Company or any material adverse
10
<PAGE>
change in the indebtedness for money borrowed of the Company or any material
adverse change in, or any development that materially adversely affects, the
business, properties, financial condition or results of operations of the
Company.
(d) McCarter & English, counsel to the Company, shall have furnished
to the Warrant Conversion Agents its opinion (addressed to the Warrant
Conversion Agents), dated as of the Effective Date, which opinion shall be in
the format provided for and in accordance with the terms of the Legal Opinion
Accord of the ABA Section of Business Law, to the effect that:
(i) Each of the Company and each of its subsidiaries (A) has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation; (B) is duly qualified
to do business and is in good standing as a foreign corporation in all
jurisdictions in which its ownership of property or the conduct of its business
requires such qualification (except where the failure to so qualify would not
have a material adverse effect upon the Company and its subsidiaries taken as a
whole); and (C) has all corporate power and authority necessary to own its
properties and conduct the business in which it is engaged as described in the
Registration Statement;
(ii) The Warrants have been duly authorized and validly issued
and are nonassessable, and free of preemptive rights arising under the Company's
certificate of incorporation and bylaws, by operation of law, or under any
document filed as an exhibit to the Registration Statement or any Incorporated
Document, with no personal liability attaching to the ownership thereof, and are
duly listed on the NASDAQ National Market. The shares of Common Stock issuable
upon the exercise of the Warrants will, when issued upon full payment therefor,
be validly authorized, issued and outstanding, fully paid and non-assessable and
free of preemptive rights arising under the Company's certificate of
incorporation and bylaws, by operation of law, or under any document filed as an
exhibit to the Registration Statement or any Incorporated Document, with no
personal liability attaching to the ownership thereof, and will, upon notice of
issuance, be listed on the NASDAQ National Market;
(iii) The certificates evidencing the Shares to be sold
hereunder and the shares issued upon the exercise of the Warrants are in due and
proper form under New Jersey law. All corporate action required to be taken for
the authorization, issue, sale and delivery of the Shares have been validly and
sufficiently taken. The notices and procedures used by the Company to effect the
exercise of the Warrants comply with the terms of the Warrant Certificate;
(iv) There are no preemptive or other rights to subscribe for
or to purchase, and no restrictions upon the voting or transfer of, the Shares
pursuant to the Company's corporate charter and bylaws or any agreement or other
instrument filed as an exhibit to the Registration Statement or any Incorporated
Document; and neither the filing of the Registration Statement nor the offering
or sale of the Shares gives rise to any rights for or relating to the
registration of any shares of capital stock of the Company or any subsidiary of
the Company arising under the Company's certificate of incorporation and bylaws,
by operation of law, or under any document filed as an exhibit to the
Registration Statement or any Incorporated Document;
11
<PAGE>
(v) The Common Stock conforms as to legal matters to the
statements concerning the Common Stock of the Company contained or incorporated
by reference in the Prospectus, and the authorized and outstanding shares of
capital stock of the Company are as set forth in the Prospectus;
(vi) Such counsel has no reason to believe that either the
Registration Statement or the Prospectus (including any document incorporated,
or deemed to be incorporated by reference, in the Prospectus) contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except that counsel need express no opinion with respect to the financial
statements, schedules and the notes thereto and other financial data included in
the Registration Statement or the Prospectus;
(vii) To counsel's actual knowledge, there is no litigation or
any governmental proceeding pending or threatened against the Company or any of
its subsidiaries which would adversely affect the subject matter of this
Agreement or is required to be disclosed in the Prospectus which is not
disclosed and correctly summarized therein;
(viii) To counsel's actual knowledge, there are no contracts
or other documents which are required to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations, or which were
required to be filed as exhibits to any document incorporated by reference in
the Prospectus by the Exchange Act or the rules or regulations thereunder, which
have not been filed as exhibits to the Registration Statement or to such
document or incorporated therein by reference as permitted by the Rules and
Regulations or the rules and regulations under the Exchange Act, as the case may
be;
(ix) To counsel's actual knowledge, neither the Company nor
any of its subsidiaries is in violation of its corporate charter or bylaws, or,
in default under any agreement, indenture or instrument filed as an exhibit to
the Registration Statement or to any Incorporated Document, the effect of which
violation or default would be material to the Company and its subsidiaries taken
as a whole;
(x) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company; the execution, delivery and performance of this Agreement by the
Company, will not conflict with, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the assets of the Company or any of its
subsidiaries pursuant to the terms of, or constitute a default under, any
agreement, indenture or instrument filed as an exhibit to the Registration
Statement or any Incorporated Document, or result in a violation of the
corporate charter or bylaws of the Company or any of its subsidiaries or any
order, rule or regulation known to such counsel of any court or governmental
agency having jurisdiction over the Company, any of its subsidiaries or their
property; and no consent, authorization or order of, or filing or registration
with, any court or governmental agency is required for the execution, delivery
and performance of this Agreement by the Company, except such as may be required
by the Act, the Exchange Act, or state securities laws, or such as has been
obtained by the Company;
12
<PAGE>
(xi) To the best of such counsel's knowledge, since the end of
its last fiscal year, the Company has filed all documents and amendments to
previously filed documents required to be filed by it pursuant to Sections 13,
14 or 15(d) of the Exchange Act;
(xii) The Registration Statement is effective under the Act,
no stop order suspending its effectiveness has been issued, and, to the
knowledge of such counsel, no proceeding for that purpose is pending or
threatened by the Commission;
(xiii) To the best of such counsel's knowledge, no order of
the Commission directed to any document incorporated or deemed to be
incorporated in the Prospectus has been issued and no challenge by the
Commission has been made to the accuracy or adequacy of any such document;
(xiv) The Registration Statement and the Prospectus, when
filed with the Commission, complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations and the documents
incorporated or deemed to be incorporated by reference in the Prospectus, when
filed with the Commission, complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except, in both cases, as to financial statements and financial and statistical
data contained therein, as to which counsel need not opine;
(xv) The exercisability of the Warrants shall expire at 5:00
P.M., Eastern Daylight Time, on the Warrant Expiration Date.
In giving the opinions in subparagraph 6(d), counsel may rely as to matters of
law, other than the law of the United States and the State of New Jersey upon an
opinion or opinions of local counsel, who may be counsel for the Company, which
states that the Warrant Conversion Agents are entitled to rely thereon, provided
that any such opinion or opinions are delivered to the Warrant Conversion Agents
and that McCarter & English shall state that they have no reason to believe that
such opinions are not correct.
(e) Coopers & Lybrand, LLP shall have delivered a letter addressed
to the Warrant Conversion Agents in form and substance satisfactory to the
Warrant Conversion Agents in all respects (including the non-material nature of
the changes or decreases, if any, referred to in clause (iii) below) dated as of
the Effective Date, to the effect that:
(i) Confirming that they are independent public accountants
within the meaning of the Act and the Rules and Regulations and stating that the
section of the Registration Statement under the caption "Experts" is correct
insofar as it relates to them;
(ii) Stating that, in their opinion, the consolidated
financial statements of the Company audited by them and incorporated in the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the Regulations;
13
<PAGE>
(iii) Stating that, on the basis of specified procedures,
which included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the minutes of
the meetings of the stockholders and the Board of Directors of the Company and
audit and compensation committees of such Board, if any, and inquiries to
certain officers and other employees of the Company who are or were responsible
for financial and accounting matters and other specified procedures and
inquiries, nothing has come to their attention that would cause them to believe
that (A) the unaudited consolidated financial statements and related schedules
of the Company included in the Registration Statement, if any (1) do not comply
as to form in all material respects with the applicable accounting requirements
of the Act and the Rules and Regulations, or (2) were not fairly presented in
conformity with generally accepted accounting principles on a basis
substantially consistent with that of the audited consolidated financial
statements and related schedules included in the Registration Statement; or (B)
at a specified date, not more than five business days prior to the date of such
letter, there was any change in the capital stock or consolidated long-term debt
of the Company or any decrease in consolidated interest earning assets, total
assets or stockholders' equity as compared with the amounts shown in the
December 31, 1996 and March 31, 1997 balance sheets of the Company included in
the Registration Statement, other than as set forth in or contemplated by the
Registration Statement and Prospectus, or if there was any change or decrease,
setting forth the amount of such change or decrease; and
(iv) Stating that they have compared specific dollar amounts,
numbers of shares and other information (including any pro forma information)
pertaining to the Company set forth in the Registration Statement and Prospectus
that have been specified by the Warrant Conversion Agents prior to the date of
this Agreement, to the extent that such amounts, numbers, percentages and
information may be derived from the general accounting or other records of the
Company, with the results obtained from the application of specified readings,
inquiries and other appropriate procedures (which procedures do not constitute
an audit in accordance with generally accepted auditing standards) set forth in
the letter, and found them to be in agreement.
(f) On the Effective Date, the Company shall have furnished to the
Warrant Conversion Agents a certificate addressed to the Warrant Conversion
Agents, dated the Effective Date and executed by any two of the following:
(i) the Chairman of the Board;
(ii) the President; or
(iii) any Executive Vice President or the Chief Financial
Officer of the Company stating that:
(A) The representations and warranties of the Company set
forth in Paragraph 1 are true and correct as of the Effective Date, and the
Company has complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied on or prior to the Effective Date;
14
<PAGE>
(B) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any amendment thereof, no stop order
suspending the effectiveness of the Registration Statement has been issued; and
to the best of the knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or contemplated under the Act;
(C) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus and that, in
his or her opinion and to the best of his or her knowledge as of the Effective
Date, the statements made in the Registration Statement and the Prospectus are
true and correct, and neither the Registration Statement nor the Prospectus
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and
(D) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction nor event has
occurred which should have been disclosed in an amendment to the Registration
Statement or in a supplement to or amendment of any prospectus which has not
been disclosed.
All opinions and other documents deliverable hereunder shall be deemed to
be in compliance with the provisions hereof only if they are in form and
substance reasonably satisfactory to counsel for the Warrant Conversion Agents.
All statements in any certificate, letter or other document delivered pursuant
hereto by or on behalf of the Company and executed by an officer of the Company
shall be deemed to constitute representations and warranties of the Company. The
Company will furnish the Warrant Conversion Agents with such conformed copies of
such opinions, certificates, letters and other documents as the Warrant
Conversion Agents shall reasonably request.
If any conditions specified in this Paragraph 6 shall not have been
fulfilled when and as required by this Agreement, this Agreement and all
obligations of the Warrant Conversion Agents hereunder may be canceled at, or at
any time prior to, the Effective Date, by the Warrant Conversion Agents. Any
such cancellation shall be without liability of the Warrant Conversion Agents to
the Company. Notice of such cancellation shall be given to the Company in
writing, or by telegraph or telephone and confirmed in writing.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company shall indemnify and hold harmless the Warrant
Conversion Agents and each person, if any, who controls the Warrant Conversion
Agents within the meaning of either the Act or the Exchange Act from and against
any loss, claim, damage or liability, joint or several, and any action in
respect thereof, to which the Warrant Conversion Agents or any such controlling
person may become subject, under the Act, the Exchange Act, or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, the Prospectus, any Incorporated
Document, the Notice of Expiration Date or the Registration Statement or
Prospectus as amended or supplemented, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading,
15
<PAGE>
and promptly shall reimburse each of the Warrant Conversion Agents and each such
controlling person in investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action, or (iii) the breach of any of
the representations and warrants herein by the Company; provided, however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement or the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any of the Warrant Conversion Agents
specifically for inclusion therein. The foregoing indemnity agreement is in
addition to any liability that the Company may otherwise have to any of the
Warrant Conversion Agents or any of the controlling person of any Warrant
Conversion Agents.
(b) The Warrant Conversion Agents shall indemnify and hold harmless
the Company, each of its directors and officers who signed the Registration
Statement and any person who controls the Company within the meaning of either
the Act or the Exchange Act from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof to which the
Company or any such director, officer or controlling person may become subject,
under the Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, the
Prospectus or the Registration Statement or Prospectus as amended or
supplemented, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through the Warrant Conversion Agents by or on behalf of the Warrant
Conversion Agents specifically for inclusion therein; and shall reimburse the
Company for any legal and other expenses reasonably incurred by the Company or
by any such director, officer or controlling person in investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action. The foregoing indemnity agreement is in addition to any liability
that the Warrant Conversion Agents may otherwise have to the Company or any of
its directors, officers or controlling persons.
(c) Promptly after receipt by an indemnified party under this
Paragraph 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Paragraph 7, notify the indemnifying party in
writing of the claim or the commencement of that action, provided that the
failure to notify the indemnifying party shall relieve it from any liability
under this Paragraph 7 as to the particular item for which indemnification is
being sought, but not from any liability that it may have to an indemnified
party otherwise than under this Paragraph 7. If any such claim or action shall
be brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate therein,
and, to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Paragraph 7 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof
16
<PAGE>
other than reasonable costs of investigation; provided, however, that the
Warrant Conversion Agents shall have the right to employ counsel to represent
the Warrant Conversion Agents and its controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Warrant Conversion Agents against the Company under this Paragraph 7 if,
in the reasonable judgment of the Warrant Conversion Agents, either because
there may be legal defenses available to the indemnified parties which are
different from or additional to those available to the Company, there may exist
a conflict of interest which would make it inappropriate for the same counsel to
represent both the Company and the indemnified parties or for some other reason,
it is advisable for the Warrant Conversion Agents and its controlling persons to
be represented by separate counsel, and in that event the fees and expenses of
one such separate counsel shall be paid by the Company. No indemnifying party
shall be liable for any settlement effected without its consent of any claim or
action.
(d) If the indemnification provided for in this Paragraph 7 shall
for any reason be unavailable to an indemnified party under Paragraph 7(a) or
7(b) in respect of any loss, claim, damage or liability, or any action in
respect thereof, referred to therein, then each indemnifying party shall, in
lieu of indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one
hand and the Warrant Conversion Agents on the other from the Offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Warrant Conversion Agents on the other with
respect to the statements or omissions that resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Warrant Conversion Agents on the other with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the Offering of the Shares (before deducting expenses) received by the
Company bear to the total compensation (after deducting therefrom losses, if
any, incurred in selling the Shares) received by the Warrant Conversion Agents
with respect to the Offering. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company or the Warrant Conversion Agents,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Warrant Conversion Agents agree that it would not be just and equitable
if contributions pursuant to this Paragraph 7(d) were to be determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Paragraph
7(d) shall be deemed to include, for purposes of this Paragraph 7(d), any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this Paragraph 7(d), the Warrant Conversion Agents shall not be
required to contribute any amount in excess of the amount by which the
compensation (after deducting therefrom losses, if any, incurred in the sale of
the Shares) received by the Warrant Conversion Agents pursuant to Paragraph 2(b)
hereof exceeds the amount of any damages that the
17
<PAGE>
Warrant Conversion Agents shall be required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent representation.
(e) The Warrant Conversion Agents confirm that the statements with
respect to the Offering of the Shares set forth on the cover page of, and under
the caption "Plan of Distribution of Warrant Conversion Agents" in the
Prospectus are correct and the Company and the Warrant Conversion Agents agree
that such statements constitute the only information furnished in writing to the
Company by or on behalf of the Warrant Conversion Agents for inclusion in the
Registration Statement or the Prospectus.
The foregoing contribution agreement shall in no way affect the
contribution liabilities of any person having liability under Section 11 of the
Act other than the Company, its directors and officers, and the Warrant
Conversion Agents and the persons controlling the Company or the Warrant
Conversion Agents.
Promptly after receipt by any party to this Agreement of notice of the
commencement of any action, suit or proceeding, such person will, if a claim for
contribution in respect thereof is to be made against another party (the
"contributing party"), notify the contributing party of the commencement thereof
within a reasonable time thereafter, but the omission so to notify the
contributing party will not relieve the contributing party from any liability it
may have to any party other than for contribution. Any notice given pursuant to
any other paragraph of this Section 7 shall be deemed to be like notice
hereunder. In case any such action, suit or proceeding is brought against any
party, and such person so notifies a contributing party of the commencement
thereof, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified.
(f) The indemnity agreements contained in this Paragraph 7 and the
representations, warranties and agreements of the Company in Paragraphs 1 and 5
hereof shall survive the completion of the transactions contemplated hereby and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
indemnified party.
8. OPEN MARKET TRANSACTIONS.
(a) Commencing upon the Effective Date and until 5:00 P.M., Eastern
Daylight Time, on the Warrant Expiration Date, the Warrant Conversion Agents
shall purchase the Warrants in the open market in such amounts and at such
prices as the Warrant Conversion Agents may deem advisable. The Warrant
Conversion Agents agree to convert into shares of the Common Stock all Warrants
so purchased.
(b) It is understood that prior to the Effective Date and after the
Warrant Expiration Date, the Warrant Conversion Agents may offer to the public
shares of Common Stock, including shares acquired through the purchase and the
exercise of the Warrants at prices set from
18
<PAGE>
time to time by the Warrant Conversion Agents. Each such price when set will not
exceed the greater of the last sale or current asked price of the Common Stock
as reported in the NASDAQ National Market plus the amount of any concession to
dealers, and an offering price on any calendar day will not be increased more
than once during such day.
9. SALES TO SECURITIES DEALERS. The Warrant Conversion Agents may (but
shall be under no obligation to) make sales of the Shares acquired through the
exercise of the Warrants to securities dealers at prices which represent
concessions from the prices at which such Shares are then being offered to the
public. The amount of such concessions is to be determined from time to time by
the Warrant Conversion Agents. Any Shares so offered are offered subject to
prior sale, when, as and if received by the Warrant Conversion Agents and
subject to its right to reject orders in whole or in part.
10. SURRENDER OF WARRANTS. The Warrant Conversion Agents agree that
Warrants beneficially owned by them then will be surrendered for exercise into
the Shares and such Shares will be sold into the open market pursuant to the
Registration Statement.
11. SOLICITING CONVERSIONS. The Warrant Conversion Agents shall be
obligated to assist the Company in soliciting the exercise of the Warrants into
shares of the Common Stock by the holders thereof.
12. NOTICES. Except as otherwise provided in this Agreement:
(a) whenever notice is required by the provisions of this Agreement
to be given to the Company, such notice shall be in writing or by facsimile or
telex addressed to the Company at 619 Alexander Road, Princeton, New Jersey,
08540, Attention: Thomas L. Gray, Jr., with a copy to Robert A. Schwartz,
McCarter & English, Four Gateway Center, 100 Mulberry Street, P.O. Box 652,
Newark, New Jersey 07101-0656.
(b) whenever notice is required by the provisions of this Agreement
to be given to the Warrant Conversion Agents, such notice shall be in writing or
by facsimile or telex addressed to the Warrant Conversion Agents, c/o Janney
Montgomery Scott Inc., 1801 Market Street, Philadelphia, Pennsylvania
19103-1675, Attention: Mr. Edward J. Losty and First Colonial Securities Group,
Inc., 10 Lake Center Executive Park, 401 North Route 73, Suite 202, Marlton, New
Jersey 08053, Attention: Ben Lichtenberg, with a copy to John B. Lampi, Schnader
Harrison Segal & Lewis, 30 North Third Street, Suite 700, Harrisburg,
Pennsylvania 17101-1713.
13. EFFECTIVE DATE AND TERMINATION.
(a) The Company, by notice to the Warrant Conversion Agents, or the
Warrant Conversion Agents, by notice to the Company, may terminate this
Agreement for the reasons hereinafter provided in Subparagraphs 13(b) and (c),
respectively; however, the provisions of this Paragraph 13, Paragraphs 2(b), 3,
4, 5(k), 7 and 12 hereof shall at all times be effective and the giving of any
notice shall not affect any obligations of the Company or the Warrant Conversion
Agents thereunder.
19
<PAGE>
(b) This Agreement may be terminated by the Company, by giving
notice to the Warrant Conversion Agents, if (i) trading in the Common Stock or
Warrants, as the case may be, has been suspended by the NASDAQ Stock Market;
(ii) the Company has been placed under a regulatory memorandum of understanding
or other written directive by any state or federal bank supervisory agency;
(iii) one or both of the Warrant Conversion Agents have filed, or been
involuntarily placed, under the protection of the United States bankruptcy laws;
or (iv) a general banking moratorium shall have been declared by federal or
state authorities.
(c) This Agreement may be terminated by the Warrant Conversion
Agents, by giving notice to the Company, if (i) a general banking moratorium
shall have been declared by federal or state authorities; (ii) the United States
is or becomes engaged in hostilities that result in the declaration of a
national emergency on or after the date hereof; (iii) the Company or any
subsidiary shall have sustained a loss or damage by fire, flood, accident or
other calamity which is material to the property, business or condition
(financial or other) of the Company and the subsidiaries considered as a whole,
the Company or any subsidiary shall have become a party or subject to litigation
material to the Company and the subsidiary considered as a whole, or there shall
have been, since the respective dates as of which information is given in the
Registration Statement or the Prospectus, any material adverse change or
development in the general affairs, condition (financial or other), business,
key personnel, capitalization, properties, results of operations, net worth or
business prospectus of the Company and the subsidiaries considered as a whole,
whether or not arising in the ordinary course of business, which loss, damage or
change, in the judgment of the Warrant Conversion Agents shall render it
inadvisable to proceed with the transactions contemplated herein, whether or not
such loss shall have been insured; or (iv) trading in securities generally on
the NYSE or the American Stock Exchange or the over-the-counter market shall
have been suspended or minimum prices shall have been established on such
exchange or market by the Commission or by such exchange.
(d) If notice shall have been given by the Company pursuant to
subsection (a) of this Paragraph 13 hereof terminating this Agreement, or if the
Company shall fail to tender the Shares for delivery to the Warrant Conversion
Agents for any reason permitted under this Agreement, the Company shall pay the
Warrant Conversion Agents the fees and expenses as provided under Paragraphs
2(b), 3 and 4 hereof. In any event, the Company shall pay its own expenses in
accordance with Paragraph 5(k).
(e) Any notice referred to in this Paragraph 13 may be given at the
addresses specified in Paragraph 12 hereof in writing or by telegraph or
telephone, and if by telegraph or telephone, shall be immediately confirmed in
writing.
14. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure
to the benefit of and be binding upon the Warrant Conversion Agents, the Company
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (a) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control the Warrant Conversion Agents within the meaning of
the Act, and
20
<PAGE>
(b) the indemnity agreement of the Warrant Conversion Agents contained in
Paragraph 7 hereof shall be deemed to be for the benefit of directors of the
Company, officers of the Company who have signed the Registration Statement and
any person who controls the Company within the meaning of the Act. Nothing in
this Agreement is intended or shall be construed to give any person other than
the persons mentioned in the preceding two sentences any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
15. SURVIVAL OF INDEMNITIES, CONTRIBUTION, WARRANTIES AND REPRESENTATIONS.
The respective indemnity and contribution agreements of the Company and the
Warrant Conversion Agents contained in Section 7 hereof, the representations,
warranties and covenants of the Company contained herein and the representations
and warranties of the Warrant Conversion Agents contained herein shall remain
operative and in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
Warrant Conversion Agents or the Company or any of their respective directors or
officers, or any controlling person referred to in said Section 7, and shall
survive the payment for the Warrants and sale of the Shares.
16. CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) "BUSINESS DAY" means any day which the New York Stock Exchange
is open for trading;
(b) "SUBSIDIARY" has the meaning set forth in Rule 405 of the Rules
and Regulations; and
(c) any representation, warranty or opinion as to the accuracy and
completeness of any document included as an exhibit to the Registration
Statement shall be understood to refer to the authenticity and completeness of
the copy of such document included as such exhibit and not to the contents of
such document (and an opinion, certificate or other document delivered pursuant
to this Agreement may so state).
17. GOVERNING LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania.
This Agreement may be executed in one or more counterparts and, if executed in
more than one counterpart, the executed counterparts shall together constitute a
single instrument.
21
<PAGE>
If the foregoing correctly sets forth the agreement between the Company
and the Warrant Conversion Agents, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
CARNEGIE BANCORP
By: ______________________________
Thomas L. Gray, Jr., President
Accepted:
JANNEY MONTGOMERY SCOTT INC.
By: ______________________________
FIRST COLONIAL SECURITIES GROUP, INC.
By: ______________________________
22
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this
Pre-effective Amendment No. 2 to Registration Statement No. 333-28781 of
Carnegie Bancorp (the "Company") of our report dated February 3, 1997, which
includes an explanatory paragraph regarding the change in method of accounting
for certain investment securities in 1994, on our audits of the consolidated
financial statements of Carnegie Bancorp and Subsidiary as of December 31, 1996
and 1995 and for the years ended December 31, 1996, 1995 and 1994 which is
included in the 1996 Annual Report on Form 10-KSB which is incorporated by
reference herein. We also consent to the reference to our Firm under the caption
"Experts".
Princeton, New Jersey
July 25, 1997
