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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-Q
(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, 1998
--------------
[ ] Transition report under Section 13 or 15(d) of
the Exchange Act
For the transition period from __________ to __________
Commission file number 0-2456
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CARNEGIE BANCORP
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-3257100
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
619 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540
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(Address of principal executive offices)
(609) 520-0601
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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 preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
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 -- 2,759,337 SHARES OUTSTANDING AS OF MAY 11, 1998
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INDEX
CARNEGIE BANCORP AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE NO.
- ----------------------------- --------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets at March 31, 1998
(Unaudited) and December 31, 1997 ............................ 3
Consolidated Condensed Statements of Income for the three
months ended March 31, 1998 and 1997 (Unaudited) ............. 4
Consolidated Condensed Statements of Cash Flows for the
three months ended March 31, 1998 and 1997 (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 - 22
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings ............................................ 23
Item 2. Changes in Securities and Use of Proceeds .................... 23
Item 3. Defaults Upon Senior Securities .............................. 23
Item 4. Submission of Matters to a Vote of Security Holders .......... 23
Item 5. Other Information ............................................ 23
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit 27 - Financial Data Schedule ................... 23
b. Reports on Form 8-K .................................... 23
SIGNATURES ............................................................ 24
2
CARNEGIE BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31,
1998 December 31,
(UNAUDITED) 1997
--------- --------
ASSETS (Dollars in thousands)
Cash and cash equivalents:
Cash and due from banks .................................................. $ 16,960 $ 14,385
Federal funds sold ....................................................... 1,000 1,725
- ------------------------------------------------------------------------------ -------- --------
Total cash and cash equivalents ............................. 17,960 16,110
- ------------------------------------------------------------------------------ -------- --------
Investment Securities:
Available for sale ....................................................... 47,555 52,483
Held to maturity (fair value $63,234 at March 31, 1998
and $68,993 at December 31, 1997) .................................. 63,209 68,988
- ------------------------------------------------------------------------------ -------- --------
Total investment securities ................................. 110,764 121,471
- ------------------------------------------------------------------------------ -------- --------
Loans, net of allowance for loan losses of $2,891 at March 31, 1998
and $2,956 at December 31, 1997 .......................................... 286,076 284,789
Premises and equipment, net .................................................. 3,954 4,235
Other real estate owned ...................................................... 693 523
Accrued interest receivable and other assets ................................. 4,094 4,758
- ------------------------------------------------------------------------------ -------- --------
Total Assets ................................................ $423,541 $431,886
============================================================================== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing demand deposits ..................................... $ 51,643 $ 56,430
Interest bearing deposits:
Savings deposits ..................................................... 174,804 156,981
Other time deposits .................................................. 47,546 43,741
Certificates of deposit $100,000 and over ............................ 43,195 75,745
- ------------------------------------------------------------------------------ -------- --------
Total deposits .............................................. 317,188 332,897
- ------------------------------------------------------------------------------ -------- --------
Short-term borrowings ........................................................ 39,250 32,300
Long-term debt ............................................................... 29,425 29,425
Accrued interest payable and other liabilities ............................... 1,968 2,040
- ------------------------------------------------------------------------------ -------- --------
Total liabilities ........................................... 387,831 396,662
- ------------------------------------------------------------------------------ -------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized 5,000,000 shares;
issued and outstanding 2,753,261 at March 31, 1998
and 2,751,816 at December 31, 1997 ................................... 13,766 13,759
Capital surplus .......................................................... 19,494 19,486
Undivided profits ........................................................ 2,424 1,942
Accumulated other comprehensive income ................................... 26 37
- ------------------------------------------------------------------------------ -------- --------
Total stockholders' equity .................................. 35,710 35,224
- ------------------------------------------------------------------------------ -------- --------
Total Liabilities and Stockholders' Equity .................. $423,541 $431,886
============================================================================== ======== ========
See accompanying notes to consolidated condensed financial statements.
3
CARNEGIE BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
-------- -------
(Dollars in thousands,
except per share data)
Interest income:
Loans, including fees ............................. $ 6,526 $ 6,304
Federal funds sold ................................ 7 113
Investment securities:
Taxable ..................................... 1,717 959
Tax-exempt .................................. 134 69
- ----------------------------------------------------------- ------- -------
Total interest income ................. 8,384 7,445
- ----------------------------------------------------------- ------- -------
Interest expense:
Savings deposits .................................. 1,762 1,693
Other time deposits ............................... 682 960
Certificates of deposit $100,000 and over ......... 843 743
Short-term borrowings ............................. 531 23
Long-term debt .................................... 439 226
- ----------------------------------------------------------- ------- -------
Total interest expense ................ 4,257 3,645
- ----------------------------------------------------------- ------- -------
Net interest income ................... 4,127 3,800
Provision for loan losses ................................. 160 146
- ----------------------------------------------------------- ------- -------
Net interest income after provision
for loan losses ................ 3,967 3,654
- ----------------------------------------------------------- ------- -------
Non-interest income:
Service fees on deposits .......................... 101 114
Other fees and commissions ........................ 64 164
Investment securities gains ....................... 1 --
Investment securities losses ...................... -- (91)
- ----------------------------------------------------------- ------- -------
Total non-interest income ............. 166 187
- ----------------------------------------------------------- ------- -------
Non-interest expense:
Salaries and wages ................................ 1,054 1,054
Employee benefits ................................. 280 278
Occupancy expense ................................. 397 368
Furniture and equipment ........................... 297 270
Other ............................................. 825 723
- ----------------------------------------------------------- ------- -------
Total non-interest expense ............ 2,853 2,693
- ----------------------------------------------------------- ------- -------
Income before income taxes ............ 1,280 1,148
Income tax expense ........................................ 413 381
- ----------------------------------------------------------- ------- -------
Net Income ............................ $ 867 $ 767
=========================================================== ======= =======
Other comprehensive income, net of tax:
Unrealized holding losses arising during the period (11) (28)
- ----------------------------------------------------------- ------- -------
Comprehensive Income .................. $ 856 $ 739
=========================================================== ======= =======
Per Common Share:
Net income - basic ................................ $ 0.31 $ 0.37
Net income - diluted .............................. $ 0.30 $ 0.33
Cash Dividends .................................... $ 0.14 $ 0.14
Weighted average shares outstanding (in thousands):
Basic ............................................. 2,753 2,062
Diluted ........................................... 2,938 2,339
See accompanying notes to consolidated condensed financial statements.
4
CARNEGIE BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
-------- --------
(Dollars in thousands)
Cash flows from operating activities:
Net income .......................................................... $867 $767
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................. 284 269
Provision for loan losses ................................. 160 146
Accretion of investment discount .......................... (1) (25)
Amortization of investment premium ........................ 344 34
Gain on sale of available-for-sale securities ............. (1) --
Loss on sale of available-for-sale securities ............. -- 91
Gain on disposal of equipment ............................. (3) --
Decrease in accrued interest receivable and
other assets ........................................ 670 632
(Decrease) increase in accrued interest
payable and other liabilities ....................... (72) 232
- --------------------------------------------------------------------------- -------- --------
Net cash provided by operating activities ........... 2,248 2,146
- --------------------------------------------------------------------------- -------- --------
Cash flows from investing activities:
Proceeds from sale of securities available-for-sale ................. 500 6,636
Proceeds from maturities and principal paydowns of
securities available-for-sale .................................. 4,671 439
Proceeds from maturities and principal paydowns of
securities held-to-maturity .................................... 5,527 332
Purchase of securities available-for-sale ........................... (350) (29,902)
Net increase in loans made to customers ............................. (1,619) (2,900)
Cash collected on previously charged-off loans ...................... 2 2
Additions to premises and equipment ................................. -- (502)
- --------------------------------------------------------------------------- -------- --------
Net cash used in investing activities ............... 8,731 (25,895)
- --------------------------------------------------------------------------- -------- --------
Cash flows from financing activities:
Net (decrease) increase in deposits ................................. (15,709) 39,045
Net increase (decrease) in short-term borrowings .................... 6,950 (1,000)
Proceeds from common stock issued on exercise of
options and warrants ........................................... 15 576
Cash paid for dividends ............................................. (385) (286)
- --------------------------------------------------------------------------- -------- --------
Net cash provided by financing activities ........... (9,129) 38,335
- --------------------------------------------------------------------------- -------- --------
Net change in cash and cash equivalents ................................... 1,850 14,586
Cash and cash equivalents as of beginning of year ......................... 16,110 16,745
- --------------------------------------------------------------------------- -------- --------
Cash and cash equivalents as of end of period ............................. $ 17,960 $ 31,331
- --------------------------------------------------------------------------- -------- --------
Supplemental disclosures:
Cash paid during the period for:
Interest ............................................................ $ 4,304 $ 3,492
Income taxes ........................................................ $ 129 --
See accompanying notes to consolidated condensed financial statements.
5
CARNEGIE BANCORP AND SUBSIDIARIES
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 judgment 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, 1997.
The results for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1998.
Earnings 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 year after giving retroactive effect to stock dividends
declared. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. The common share
equivalents of options and warrants in the computation of diluted 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 consolidated condensed financial statements include the accounts of the
Company, Carnegie Bank, N.A., and TMRF, LLC, a limited liability company formed
to acquire, hold, operate and dispose of real property. 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 stockholder's 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
6
CARNEGIE BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONTINUED
portfolio until maturity. Premiums and discounts on these securities are
amortized or accreted on a basis that approximates the effective yield method.
Realized gains and losses from the sale of securities available for sale are
determined on a specific identification cost basis.
Management determines the appropriate classification of securities at the time
of purchase. At March 31, 1998 and December 31, 1997, a majority of the
Company's investment securities was classified as held to maturity. 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, 1998, 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, 1998 and December 31, 1997.
March 31, 1998
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- -------
(Dollars in thousands)
Securities available for sale (1):
U.S. Government .................. $11,526 $ 44 $ -- $11,570
Mortgage-backed securities ....... 19,313 111 (85) 19,339
Obligations of State and
Political Subdivisions ....... 8,398 9 -- 8,407
Other securities ................. 8,273 -- (34) 8,239
---------------------------------------------
$47,510 $164 ($119) $47,555
=============================================
Securities held to maturity:
U.S. Government .................. $ 8,038 $163 ($ --) $ 8,201
Mortgage-backed securities ....... 55,171 51 (189) 55,033
---------------------------------------------
$63,209 $214 ($189) $63,234
=============================================
(1) Net unrealized gains of $26 thousand, net of a tax provision of $19
thousand, were reported as an increase to stockholders' equity at March 31,
1998.
December 31, 1997
----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- -------
(Dollars in thousands)
Securities available for sale (2):
U.S. Government .................. $13,068 $ 58 $ -- $13,126
Mortgage-backed securities ....... 20,727 115 (92) 20,750
Obligations of State and
Political Subdivisions ....... 10,369 20 -- 10,389
Other securities ................. 8,257 -- (39) 8,218
---------------------------------------------
$52,421 $193 ($131) $52,483
=============================================
Securities held to maturity:
U.S. Government .................. $ 8,037 $199 $ -- $ 8,236
Mortgage-backed securities ....... 60,951 53 (247) 60,757
---------------------------------------------
$68,988 $252 ($247) $68,993
=============================================
(2) Net unrealized gains of $37 thousand, net of a tax provision of $25
thousand, were reported as an increase to stockholders' equity at December
31, 1997.
7
CARNEGIE BANCORP AND SUBSIDIARIES
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, 1998 and December 31, 1997.
LOAN PORTFOLIO BY TYPE OF LOAN
March 31, 1998 December 31, 1997
------------------ ------------------
Amount % Amount %
-------- ------- ------- ------
(Dollars in thousands)
Commercial and financial ............. $ 81,503 28.2% $ 85,737 29.8%
Real estate construction ............. 12,374 4.3% 11,412 4.0%
Residential mortgage ................. 23,343 8.1% 24,527 8.5%
Commercial mortgage .................. 158,643 54.9% 152,477 53.0%
Installment .......................... 13,104 4.5% 13,592 4.7%
-------- ----- -------- -----
$288,967 100.0% $287,745 100.0%
======== ===== ======== =====
The following table represents activity in the allowance for loan losses for the
three month period ended March 31, 1998 and 1997.
ALLOWANCE FOR LOAN LOSSES
Three Months Ended
March 31,
------------------------
1998 1997
------- -------
(Dollars in thousands)
Balance--beginning of period .................. $ 2,956 $ 2,665
Charge-offs .................................. (227) (52)
Recoveries ................................... 2 2
------- -------
Net (charge-offs) recoveries ................. (225) (50)
Provision for loan losses .................... 160 146
------- -------
Balance--end of period ........................ $ 2,891 $ 2,761
======= =======
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, 1998, the recorded investment
in loans for which impairment has been recognized totaled $3,840,000 with a
corresponding valuation allowance of $468,000. The total amount of impaired
loans measured using the present value of expected future cash flows amounted to
$1,180,000 and the total amount of impaired loans measured using the fair value
of the loan's collateral amounted to $2,660,000. For the quarter ended March 31,
1998, the average recorded investment in impaired loans was approximately
$4,352,000. The Company recognized $35,000 in income on impaired loans during
the portion of the year that they were impaired.
At December 31, 1997, the recorded investment in loans for which impairment has
been recognized totaled $4,863,000. These loans have corresponding valuation
allowance of $473,000. The total amount of impaired loans measured using the
present value of expected future cash flows amounted to $1,785,000 and the total
amount of impaired loans measured using the fair value of the loan's collateral
amounted to
8
CARNEGIE BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONTINUED
$3,078,000. For the year ended December 31, 1997, the average recorded
investment in impaired loans was approximately $4,927,000. The Company
recognized $123,000 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 a cash dividend in January, 1998. Stockholders
of record on February 18, 1998 received a $.14 per share cash dividend, paid on
March 18, 1998.
The Board of Directors also declared a second quarter cash dividend of $.14 per
share on April 15, 1998. The dividend will be payable on June 17, 1998 to
shareholders of record on May 20, 1998.
NOTE G - SHORT-TERM BORROWINGS
The composition of short-term borrowings follows:
March 31, December 31,
1998 1997
--------- --------
(Dollars in thousands)
Overnight Federal funds purchased
- balance .................................. $ 9,000 $ --
- weighted average rate .................... 6.38% --
- maturity date ............................ 04/01/98 --
Fixed rate term borrowing with Federal
Home Loan Bank-NY
- balance .................................. $ 10,000 $ 10,000
- weighted average rate .................... 6.27% 6.27%
- maturity date ............................ 04/22/98 04/22/98
Repurchase agreement with Morgan Stanley
- balance .................................. $ 20,250 $ 22,300
- weighted average rate .................... 5.65% 6.05%
- maturity date ............................ 04/22/98 01/20/98
9
CARNEGIE BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONTINUED
NOTE H - LONG-TERM DEBT
The composition of long-term debt follows:
March 31, December 31,
1998 1997
-----------------------
(Dollars in thousands)
6.50% fixed rate repurchase agreement with Salomon
Bros., due 4/19/99 ............................. 4,425 4,425
5.91% fixed rate repurchase agreement with Salomon
Bros., due 7/22/02 ............................. 12,500 12,500
5.84% fixed rate repurchase agreement with Salomon
Bros., due 8/13/02 ............................. 12,500 12,500
------- -------
$29,425 $29,425
======= =======
NOTE I - MERGER AGREEMENT
On December 15, 1997, the Company and Sovereign Bancorp, Inc., the parent
company of Sovereign Bank, jointly announced the execution of a definitive
agreement for Sovereign to acquire the Company. The terms of the agreement call
for Sovereign to exchange $35.50 in Sovereign common stock for each outstanding
share of the Company's common stock.
The December 15, 1997 announcement indicated the price would stay fixed at
$35.50 per the Company's share if Sovereign's average stock price remained
between $18.00 and $22.00 per share during the 15-day period prior to the
closing of the transaction. If the average price of Sovereign's stock dropped to
$18.00 per share or below during the pricing period prior to closing, the
Company's shareholders would receive a fixed rate of 1.972 shares (the "Maximum
Exchange Ratio") of Sovereign common stock for each share of the Company's
common stock. Conversely, if Sovereign's average stock price is $22.00 per share
or higher, the Company's shareholders would receive a fixed rate of 1.614 shares
(the "Minimum Exchange Ratio") of Sovereign common stock for each share of the
Company's common stock. The Company has the right to terminate the agreement if
the average stock price of Sovereign during the 15-day pricing period falls
below $14.47 and Sovereign's decline in value is 15% greater than the percentage
decline of a group of similar financial institutions, subject to Sovereign's
right to increase the exchange ratio in order to result in a minimum price of
$28.53 in Sovereign common stock.
On January 23, 1998, Sovereign announced a 20% stock dividend to its
shareholders. This stock dividend will not affect the value that the Company's
shareholders will received as a result of this acquisition; although the
exchange ratio will be adjusted accordingly. Because of Sovereign's stock
dividend, the $18.00 price adjusts to $15.00 per share (equivalent to 2.367
shares of Sovereign for each share of the Company) and the $22.00 price adjusts
to $18.33 per share (equivalent to 1.937 shares of Sovereign for each share of
the Company). If the average price of Sovereign's stock drops to $15.00 per
share or below during the pricing period prior to closing, the Company's
shareholders would receive a fixed rate of 2.367 shares (the "Maximum Exchange
Ratio") of Sovereign common stock for each share of the Company's common stock.
Conversely, if Sovereign's average stock price is $18.33 per share or higher,
the Company's shareholders would receive a fixed rate of 1.937 shares (the
"Minimum Exchange Ratio") of Sovereign
10
CARNEGIE BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
CONTINUED
common stock for each share of the Company's common stock. The effective date
for the adjustment was March 27, 1998 (the ex-dividend date). After March 27,
1998, the Company has the right to terminate the agreement if the average stock
price of Sovereign during the 15-day pricing period falls below $12.06 and
Sovereign's decline in value is 15% greater than the percentage decline of a
group of similar financial institutions, subject to Sovereign's right to
increase the exchange ratio in order to result in a minimum price of $28.53 in
Sovereign common stock. The merger is subject to the approval of various
regulatory agencies and the Company's shareholders. It is anticipated that the
transaction will close at the end of the second quarter of 1998, and will be
accounted for as a pooling of interests.
11
CARNEGIE BANCORP AND SUBSIDIARIES
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, 1998 decreased by $8.4 million, or 1.9%, to $423.5
million compared to $431.9 million at December 31, 1997. Total assets averaged
$421.9 million in the first three months of 1998, a $35.3 million, or 9.1%,
increase from the 1997 full year average of $386.6 million. Average loans
increased $14.3 million, or 5.2%, to $286.7 million in the first three months of
1998, from the 1997 full year average of $272.4 million. Average investment
securities increased by $24.4 million, or 26.4%, to $116.9 million; average
Federal funds sold decreased by $4.7 million to $0.6 million; and the average of
all other assets increased by $1.2 million, or 5.8%, to $20.6 million during the
first three months of 1998 compared to the full year 1997 averages.
These increases in average assets were funded primarily by a $29.0 million, or
78.6%, increase in average borrowings, as the first quarter of 1998 average
borrowings increased to $65.9 million from the full year 1997 average of $36.9
million. The decrease in average deposits from $319.0 million for the 1997 full
year average to $318.4 million during the first three months of 1998, an average
decrease of $0.6 million, or 1.9%, was also attributable to the increase in
average borrowings combined with an increase in average stockholders' equity of
$6.7 million, or 23.4%.
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 management objectives. During 1997, the Company
utilized borrowed funds to temporarily fund loan growth, as well as for
asset/liability management purposes. During the first quarter of 1998, the
Company utilized borrowings to fund securities purchases and to increase loans.
LENDING ACTIVITY
- ----------------
Total loans at March 31, 1998 were $289.0 million, a 0.4%, or $1.2 million
increase from December 31, 1997. Average loans increased by $14.3 million, or
5.2%, to $286.7 million in the first three months of 1998 compared to the 1997
full year average. Changes in the composition of the average loan portfolio
during the period included increases of $13.5 million in commercial loans and
commercial mortgages, an increase of $1.3 million in other installment loans,
and a decrease of $0.5 million in residential mortgages.
The 5.7% increase in average commercial loans and commercial mortgages over the
1997 full year averages is partially attributable to the greater penetration of
the marketplace and an improvement in the general economic environment in New
Jersey. 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
12
offices has helped to provide the growth Carnegie has experienced during 1997
and has contributed to the higher average loan volume in late 1997 and early
1998. 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 $2.9 million, or 1.00% of total loans, at
March 31, 1998 compared to $3.0 million, or 1.03% of total loans, at December
31, 1997. The balance of non-performing loans, which includes non-accrual loans
and excludes accruing loans past due 90 days or more of $96 thousand, was $4.0
million, or 1.4% of total loans at March 31, 1998. This compares to
non-performing loans, excluding accruing loans past due 90 days or more of $381
thousand, of $4.3 million, or 1.5% of total loans at December 31, 1997.
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 increased by $24.4 million in the first three
months of 1998 compared to the 1997 full year average. At period end March 31,
1998 compared to December 31, 1997, investments decreased $10.7 million, or
8.8%. During 1997, some of the proceeds of security sales, principal paydowns
and maturities were used to fund loan growth as well as to fund additional
purchases of investment securities. Increased borrowings during the fourth
quarter of 1997 and first quarter of 1998 was primarily used to increase the
investment securities portfolio.
During the first three months of 1998, proceeds from the maturities and
principal paydowns of securities available-for-sale amounted to $4.7 million and
proceeds from the maturities and principal paydowns of securities
held-to-maturity amounted to $5.5 million. These proceeds combined with an
increase of $7.0 million in short-term borrowings were offset by the decrease of
$15.7 million in deposits.
During the first three months of 1997, proceeds from the sales 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.
At March 31, 1998, net unrealized gains in the Company's available-for-sale
securities portfolio amounted to $45 thousand and net unrealized gains in the
held-to-maturity securities portfolio amounted to $25 thousand. Net unrealized
gains of $26 thousand, net of a tax provision of $19 thousand, were reported as
an increase to stockholders' equity at March 31, 1998.
13
DEPOSITS
- --------
Average total deposits decreased by $0.6 million, or 1.9%, to $318.4 million for
the three months ended March 31, 1998 compared to the 1997 full year average of
$319.0 million. The modest decrease in deposits during this period was primarily
due to the Company's less 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,
which decreased from $105.1 million at March 31, 1997 to $91.1 million at March
31, 1998, is reflected in the Company's "savings deposits." Non-interest bearing
demand deposits increased $8.2 million comparing March 31, 1998 to March 31,
1997.
Changes in the average deposit mix for the three months ended March 31, 1998
compared to the 1997 full year average include a $6.6 million, or 5.8%, decrease
in certificates of deposit; a $1.8 million, or 4.2%, increase in money market
deposit accounts; a $0.3 million, or 0.3%, increase in savings deposits,
including the Company's "no penalty" certificate of deposit; a $1.1 million, or
6.0%, increase in NOW account deposits; and a $2.8 million, or 6.1%, increase in
non-interest bearing demand deposits.
Deposits are obtained primarily from the market areas which the Company serves.
As of March 31, 1998 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 and other financial institutions
repurchase agreements, 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 15.5% and 15.9% of the Company's total assets at
March 31, 1998 and December 31, 1997, respectively.
As shown in the Consolidated Condensed Statements of Cash Flows, the Company's
primary source of funds at March 31, 1998 was from increased short-term
borrowings and from maturities and principal paydowns of securities. Short-term
borrowings increased $7.0 million for the three months ended March 31, 1998
while proceeds from maturities and principal paydowns of securities
available-for-sale and held-to-maturity amounted to $4.7 million and $5.5
million, respectively. While deposits decreased $15.7 million for the three
months ended March 31, 1998, deposits increased $39.0 million for the same time
period during 1997. Proceeds from sales of securities amounted to $6.6 million
for the three months ended March 31, 1997. During 1997, the Company utilized
deposit growth and proceeds from the sales of securities as a temporary funding
source for securities purchases, as well as for asset/liability management
purposes.
14
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 $7.0 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 $32.5 million. In
aggregate with the overnight line, subject to certain requirements the Bank may
also obtain term advances with FHLB-NY of up to 30% of the Bank's assets.
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 of
$29.4 million and short-term borrowings of $39.2 million as of March 31, 1998
are matched against specific loans or investments, for asset and liability
management purposes.
CAPITAL RESOURCES
- -----------------
Stockholder's equity increased by $0.5 million at March 31, 1998 compared to
December 31, 1997. The changes in stockholders' equity during the three months
ended March 31, 1998 were comprised of an increase from net income of $867
thousand; a reduction of $11 thousand (net of tax provision) in unrealized
holding gains in the Company's portfolio of securities available-for-sale, as a
$37 thousand unrealized gain became a $26 thousand unrealized gain, a reduction
by cash dividends paid of $385 thousand, and an increase of $15 thousand in
proceeds from exercised options and warrants.
During the three months ended March 31, 1998, the Company paid $385 thousand, or
44.4% of net income, in cash dividends compared to $286 thousand, or 37.3% of
net income in cash dividends for the same period in 1997.
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 similarly ratios.
The following table summarizes the risk-based and leverage capital ratios for
the Company and the Bank at March 31, 1998, as well as the regulatory required
minimum capital ratios:
15
March 31, 1998 Minimum
------------------- Regulatory
Company Bank Requirement
------- ----- ----------
Risk-based Capital:
Tier I capital ratio ..... 12.03% 9.76% 4.00%
Total capital ratio ...... 13.01% 10.73% 8.00%
Leverage ratio ............. 8.45% 6.86% 3.00%-5.00%
As noted in the above table, the Company's and the Bank's capital ratios exceed
the minimum regulatory requirements.
16
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1997
NET INCOME
- ----------
The Company earned $867 thousand, or $0.31 net income per share on a basic basis
and $0.30 net income per share on a diluted basis, for the three months ended
March 31, 1998, compared to $767 thousand, or $0.33 for both basic and diluted
net income per share, for the three months ended March 31, 1997, an increase of
$100 thousand, or 13.0%. The increase in net income was primarily due to a $327
thousand, or 8.6%, increase in net interest income; these items were partially
offset by a $14 thousand, or 9.6%, increase in provision for loan losses, a
reduction in non-interest income of $21 thousand, or 11.2%, a $160 thousand, or
5.9%, increase in non-interest expenses and a $32 thousand, or 8.4%, 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 $359 thousand, or 9.3% for the three
months ended March 31, 1998 compared to the same prior year period.
Interest income on a "FTE" basis, increased $1.0 million, or 13.0%, to $8.5
million for the three months ended March 31, 1998 compared to $7.5 million for
the same period in 1997. The improvement in interest income was primarily due to
volume increases in the investment securities portfolio as Carnegie purchased
$52.5 million in U.S. Government agency securities, designated as
held-to-maturity, during the third quarter of 1997, which produced a volume
related increase in interest income on investment securities of $1.1 million.
Volume related interest income was further increased by $456 thousand due to
increased loan demand and decreased by $106 thousand due to reduced Federal
funds sold as increased borrowings were used to fund investment securities
purchases.
The $1.4 million volume related increase in total interest income was reduced by
$450 thousand resulting primarily from rate related reductions amounting to $236
thousand as loan interest rates repriced to lower current yields and by
investment securities rate related decreases amounting to $214 thousand.
Interest expense for the first three months of 1998 increased $0.6 million, or
16.8%, compared to the same prior year period. The increase in interest expense
was due primarily to net volume increases in deposits which accounted for $671
thousand and was offset by a decrease of $59 thousand attributable to net rate
decreases. 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.
17
Interest on loans to and obligations of states, municipalities and other public
entities is not subject to Federal income tax. As such, the stated (pre-tax)
yield on these assets is lower than the yields on taxable assets of similar risk
and maturity. In order to make the pre-tax income and resultant yields
comparable to taxable loans and investments, a tax-equivalent basis adjustment
was added to interest income in the following tables. This adjustment has been
calculated using the U.S. Federal statutory income tax rate of 34%. The
following table summarizes the amount that has been added to interest income as
presented in the Consolidated Condensed Statements of Income.
Three Months Ended
March 31,
-----------------
1998 1997
------ ------
Income per consolidated statements of income ............... $8,384 $7,445
Tax equivalent basis adjustment:
Loans ................................................... 8 9
Investment securities ................................... 69 36
------ ------
Interest income adjusted to fully tax-equivalent basis ..... 8,461 7,490
Interest expense ........................................... 4,257 3,645
------ ------
Net interest income adjusted to fully tax-equivalent basis . $4,204 $3,845
====== ======
The following tables titled "Consolidated Average Balance Sheet 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, 1998 compared to
the quarter ended March 31, 1997.
18
CONSOLIDATED AVERAGE BALANCE SHEET
WITH RESULTANT INTEREST AND AVERAGE RATES
- -----------------------------------------
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
---------------------------------------- -------------------------------------
Average Interest Average Average Interest Average
Balance Income/Expense Rate Balance Income/Expense Rate
----------- -------------- ------- ------- -------------- -------
(Dollars in thousands)
ASSETS
============================================
Earning Assets:
Federal Funds Sold ......................... $ 567 $ 7 5.01% $ 8,841 $ 113 5.18%
Investment Securities:
Securities available for sale:
U. S. Gov't & Mtge-backed Securities ....... 32,549 521 6.49% 23,949 401 6.79%
State & Political Subdivisions (1) ......... 9,455 203 8.71% 4,587 105 9.24%
Other Securities ........................... 8,262 141 6.92% 8,039 126 6.36%
-------- ------ ---- ------ ------ ----
50,266 865 6.98% 36,575 632 7.00%
Securities held to maturity:
U.S. Gov't & Mtge-backed Securities ........ 66,642 1,055 6.42% 23,087 431 7.57%
State & Political Subdivisions (1) ......... 0 0 0.00% 0 0 0.00%
-------- ------ ---- ------ ------ ----
66,642 1,055 6.42% 23,087 431 7.57%
Total Investment Securities ................ 116,908 1,920 6.66% 59,662 1,063 7.22%
-------- ------ ---- ------ ------ ----
Loans: (2)(3)
Comm'l Loans & Comm'l Mtgs ................. 248,864 5,724 9.33% 231,391 5,541 9.71%
Residential Mortgages ...................... 24,263 503 8.41% 24,067 506 8.53%
Installment Loans .......................... 13,607 307 9.15% 12,067 267 8.97%
-------- ------ ---- ------ ------ ----
Total Loans ................................ 286,734 6,534 9.24% 267,525 6,314 9.57%
-------- ------ ---- ------ ------ ----
Total Earning Assets ....................... 404,209 8,461 8.49% 336,028 7,490 9.04%
Non-Interest Earning Assets:
Loan Loss Reserve .......................... (3,002) (2,746)
Held For Sale Securities Valuation ......... 81 (329)
All Other Assets ........................... 20,612 19,902
-------- --------
Total Assets ............................... $421,900 $352,855
======== ========
LIABILITIES & EQUITY
============================================
Interest-Bearing Liabilities:
Savings and Money Market Accounts .......... $160,759 1,762 4.45% $146,566 1,693 4.68%
Time Deposits .............................. 108,707 1,525 5.69% 122,864 1,703 5.62%
Short-term borrowings ...................... 36,520 531 5.90% 1,710 23 5.45%
Long-term debt ............................. 29,425 439 6.05% 14,425 226 6.35%
-------- ------ ---- ------- ------ ----
Total Interest-Bearing Liabilities ......... 335,411 4,257 5.15% 285,565 3,645 5.18%
Demand Deposits ............................ 48,954 41,315
Other Liabilities .......................... 2,264 1,719
Shareholders' Equity ...................... 35,271 24,256
--------- --------
Total Liabilities & Equity ................. $421,900 $352,855
========= ========
NET INTEREST INCOME (FULLY TAXABLE BASIS) ....................... $4,204 $3,845
====== ======
NET INTEREST MARGIN (FULLY TAXABLE BASIS) ....................................... 4.22% 4.64%
==== ====
EQUITY TO ASSETS RATIO .......................................................... 8.36% 6.87%
==== ====
(1) The tax-equivalent basis adjustment was computed based on a Federal income
tax rate of 34%.
(2) Includes non-performing loans.
(3) Included in interest income are loan fees.
19
ANALYSIS OF CHANGES IN CONSOLIDATED NET INTEREST INCOME
Three Months Ended March 31, 1998
Compared to Three Months Ended
March 31, 1997
---------------------------------
Increase (Decrease) Due to
---------------------------------
Volume Rate Net
-------- ------- --------
(Dollars in thousands)
Interest Earned On:
Federal Funds Sold ...................... ($ 106) $ 0 ($ 106)
Investment Securities:
Securities available for sale:
U. S. Government & Agencies ......... 144 (24) 120
State & Political Subdivisions ...... 111 (13) 98
Other Securities .................... 3 12 15
------- ------- -------
258 (25) 233
Securities held to maturity:
U. S. Gov't & Mtg-backed Securities . 813 (189) 624
State & Political Subdivisions ...... 0 0 0
------- ------- -------
813 (189) 624
Total Investment Securities ..... 1,071 (214) 857
------- ------- -------
Loans:
Comm'l Loans & Comm'l Mtgs .......... 418 (235) 183
Residential Mortgages ............... 4 (7) (3)
Installment Loans ................... 34 6 40
------- ------- -------
Total Loans ..................... 456 (236) 220
------- ------- -------
Total Interest Income ................ 1,421 (450) 971
------- ------- -------
Interest Paid On:
Savings and Money Market Accounts ....... 164 (95) 69
Time Deposits ........................... (196) 18 (178)
Short-term borrowings ................... 468 40 508
Long-term debt .......................... 235 (22) 213
------- ------- -------
Total Interest Expense ............... 671 (59) 612
------- ------- -------
Net Interest Income .................. $ 750 ($ 391) $ 359
======= ======= =======
20
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses increased to $160 thousand for the first three
months of 1998 compared to a provision of $146 thousand for the same period in
1997. 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
$2.9 million, or 1.00% of total loans, and 71.4% of non-performing loans, and
non-performing loans totaled $4.0 million, or 1.4% of total loans at March 31,
1998.
The moderate provision for loan losses during the first quarter of 1998 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 $166 thousand for the first three months of 1998
compared to $187 thousand for the first three months of 1997, a decrease of $21
thousand, or 11.2%. The decrease was primarily attributable to lower first
quarter 1998 service fees on deposits of $13 thousand and lower other fees and
commissions of $100 thousand. The decrease in other fees and commissions was
primarily due to $85 thousand for an investment security placement fee collected
during the first quarter of 1997. Gains on securities sales amounting to $1
thousand during the first quarter of 1998 compared to losses on securities sales
of $91 thousand during the first quarter of 1997.
NON-INTEREST EXPENSE
- --------------------
Total non-interest expenses increased $160 thousand, or 5.9%, for the three
months ended March 31, 1998 compared to the same period in 1997. The increase
was due primarily to modest increases in employment expenses 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 $2 thousand, or 0.2%, and reflected decreases in the number of
employees from 123 full-time equivalents at March 31, 1997 to 102 full-time
equivalents at March 31, 1998, offset by merit and cost of living adjustments.
Occupancy expenses increased $29 thousand, or 7.9%, for the first three months
of 1998 compared to the same period in 1997. The increase was attributable
primarily to increased lease expense of $7 thousand and increased depreciation
on bank owned premises of $4 thousand. Repairs and maintenance on bank premises
also increased during the first three months of 1998 by $6 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 $27 thousand, or 10.0%, for the first
quarter of 1998 compared to the first quarter of 1997 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.
21
Other expenses increased $102 thousand, or 14.1%, for the first three months of
1998 compared to the first three months of 1997. 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,
OREO expenses and miscellaneous other expenses increased.
INCOME TAX EXPENSE
- ------------------
The Company recognized an income tax provision, which includes both Federal and
State taxes, of $413 thousand for the three months ended March 31, 1998, for an
effective income tax rate of 32.3%. This compared to $381 thousand, for an
effective income tax rate of 33.2% for the same period in 1997. The decrease in
the effective tax rate is due primarily to a 7.7% increase in the Company's
taxable income, at the Federal tax rate of 34%, with a greater increase in
tax-exempt income, which increased by 70.8% due to the purchase of tax exempt
securities during the third quarter of 1997 and the first quarter of 1998.
22
PART II. OTHER INFORMATION
- --------------------------
Item 1. Legal Proceedings - NONE
Item 2. Changes in Securities and Use of Proceeds - NONE
Item 3. Defaults Upon Senior Securities - NONE
Item 4. Submission of Matters to a Vote of Security Holders - NONE
Item 5. Other Information - NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Financial Data Schedule
(b) Reports on Form 8-K - NONE
23
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, 1998 By: /s/ RICHARD ROSA
------------ -----------------
RICHARD ROSA
SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER