As filed with the Securities and Exchange Commission on June 9, 1997.
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CARNEGIE BANCORP
----------------
(Exact Name of Registrant and Specified in Its Charter)
NEW JERSEY
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(State or Other Jurisdiction of Incorporation or Organization)
22-3257100
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(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 the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
================================================================================
<PAGE>
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.
[ ]___________________________________
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed
Title of Proposed Maximum
Shares Amount Maximum Aggregate Amount of
To Be To Be Price Per Offering Registration
Registered Registered Share(1) Price(1) Fee
- --------------------------------------------------------------------------------
Common 587,801 17.188 $10,103,124 $3,062
Stock, no
par value
================================================================================
(1) Estimated solely for the purpose of determining the registration fee, and
based on the average of the high and low prices of the Common Stock, as quoted
on the Nasdaq National Market on June 3, 1997.
<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 expire at
5:00 P.M., Eastern Daylight Time, on August 18, 1997, (the "Warrant Expiration
Date") 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.
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<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.
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<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-3 (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
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-Q for the
quarter ended March 31, 1997, (iv) Current Reports on Form 8-K filed on April
16, May 5, 1997, and June 6, 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. All
documents filed by the Company pursuant to
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<PAGE>
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus shall be deemed to be incorporated by reference into the Prospectus
and to be a part hereof as of their respective dates.
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.
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<PAGE>
CARNEGIE BANCORP
SERVICE AREA MAP OF BANKING LOCATIONS
OF CARNEGIE BANK, N.A.
[MAP OF SERVICE AREA DESCRIBING LOCATIONS OF BANK BRANCHES]
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<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 superior 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.
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<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>
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<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 _______ __, 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 at the then prevailing market prices on the Nasdaq National Market. The
open market purchases by the Warrant Conversion Agents will continue for a
thirty day period
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<PAGE>
commencing on the date of this Prospectus and ending on the Warrant Expiration
Date (the "Conversion and Sales Period").
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.
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 incorporated by reference herein. See
"Information Incorporated by Reference."
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<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.
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<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......................... 3
- ------------------------------------------------------------------------------
The Company................................................... 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
Miscellaneous Expenses . . . . . . . . . . . . . . 4,438
-------
Total . . . . . . . . . . . . . . . . . . . . . . $45,000
=======
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
- ------------
* To be filed by amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to file, during any period in
which it offers or sells securities, a post-effective amendment to this
registration statement to include any additional or changed material information
on the plan of distribution.
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-3 and has duly authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Princeton, State of New Jersey on June 5, 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
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 June 5, 1997
- -----------------------------
Thomas L. Gray, Jr. Executive Officer and
Director (Principal
Executive Officer)
/s/ RICHARD P. ROSA Senior Vice President June 5, 1997
- ----------------------------- and Chief Financial
Richard P. Rosa Officer (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ BRUCE A. MAHON Director and Chairman of June 5, 1997
- ----------------------------- the Board
Bruce A. Mahon
/s/ MICHAEL E. GOLDEN Director June 5, 1997
- -----------------------------
Michael E. Golden
/s/ THEODORE H. DOLCI, JR. Director June 5, 1997
- ----------------------------
Theodore H. Dolci, Jr.
/s/ JAMES E. QUACKENBUSH Director June 5, 1997
- -----------------------------
James E. Quackenbush
/s/ STEVEN L. SHAPIRO Director June 5, 1997
- -----------------------------
Steven L. Shapiro
/s/ MARK A. WOLTERS Director June 5, 1997
- -----------------------------
Mark A. Wolters
/s/ SHELLEY M. ZEIGER Director June 5, 1997
- -----------------------------
Shelley M. Zeiger
================================================================================
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
- ----------
* To be filed by amendment.
EXHIBIT NO. 5
June 6, 1997
Re: Registration Statement on Form S-3
----------------------------------
Carnegie Bancorp
619 Alexander Road
Princeton, New Jersey 08540
Dear Sirs:
We have served as counsel to Carnegie Bancorp, Inc., a New Jersey
corporation (the "Company"), in connection with the preparation and filing by
the Company of a Registration Statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission, covering up to 587,801
shares (the "Shares") of common stock, no par value, of the Company to be
publicly offered by the Warrant Conversion Agents (as such term is defined in
the Registration Statement).
In rendering this opinion, we have examined the Company's Certificate of
Incorporation and bylaws, each as amended to date, minutes of proceedings and
consents of the Board of Directors of the Company, and originals or copies of
such documents, instruments, records, and certificates of public officials and
officers of the Company as we have deemed necessary. In connection with such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as copies, and we have also made
such other investigations of fact and law as we have deemed relevant in
connection with the opinion set forth below. In rendering this opinion, we have
relied upon the accuracy of the certificates, documents, instruments,
certificates, and records we have examined as to the matters of fact covered
thereby.
Based on the foregoing, we are of the opinion that the Shares are duly and
validly issued, and are fully-paid and non-assessable.
We hereby consent to the use of our name in the Registration Statement
under the caption "Legal Matters" and we also hereby consent to the filing of
this opinion as an exhibit to the Registration Statement. In giving the
foregoing consent, we do not admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Sincerely,
McCarter & English
Exhibit No. 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Carnegie Bancorp (the "Company") on Form S-3 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 incorporated by reference into the Company's Annual Report on Form
10-KSB which is incorporated by reference herein. We also consent to the
reference to our Firms Under the caption "Experts".
Princeton, New Jersey
June 6, 1997
Exhibit No. 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas L. Gray, Jr. and/or Mark A. Wolters as his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments and post-effective amendments to that
certain Registration Statement of Carnegie Bancorp on Form S-3, and to file the
same with all exhibits thereto, and grants unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in one or more counterparts.
The foregoing Power of Attorney was prepared in conjunction with the
Registration Statement on Form S-3 and has been duly signed by the following
persons in the capacities and dates indicated.
==============================================================================
Signature Title Date
- --------- ----- ----
- ------------------------------------------------------------------------------
/s/ THOMAS L. GRAY, JR. Director June 5, 1997
- ---------------------------
Thomas L. Gray, Jr.
- ------------------------------------------------------------------------------
/s/ BRUCE A. MAHON Director June 5, 1997
- --------------------------
Bruce A. Mahon
- ------------------------------------------------------------------------------
/s/ THEODORE H. DOLCI, JR. Director June 5, 1997
- --------------------------
Theodore H. Dolci, Jr.
- ------------------------------------------------------------------------------
/s/ MICHAEL E. GOLDEN Director June 5, 1997
- --------------------------
Michael E. Golden
- ------------------------------------------------------------------------------
/s/ RICHARD P. ROSA Director June 5, 1997
- --------------------------
Richard P. Rosa
- ------------------------------------------------------------------------------
/s/ MARK A. WOLTERS Director June 5, 1997
- --------------------------
Mark A. Wolters
- ------------------------------------------------------------------------------
/s/ JAMES E. QUACKENBUSH Director June 5, 1997
- --------------------------
James E. Quackenbush
- ------------------------------------------------------------------------------
/s/ STEVEN L. SHAPIRO Director June 5, 1997
- --------------------------
Steven L. Shapiro
- ------------------------------------------------------------------------------
/s/ SHELLY M. ZEIGER Director June 5, 1997
- --------------------------
Shelly M. Zeiger
==============================================================================
