Two northeastern banks have terminated a merger agreement that had been fraught with delays for almost a year.

Officials of Carnegie Bancorp, Princeton, N.J., and Philadelphia-based Regent Bancshares abandoned their deal because of concerns about reaching an April 30 deadline.

Regent had been unable to comply with parts of the already amended agreement. So rather than amend the deal further, officials there asked to call it off, said Thomas L. Gray Jr., president and chief executive of $325 million-asset Carnegie.

"It was basically Regent's fault," admitted new Regent chief executive John Lyons, a turnaround specialist. "There was real concern as to whether it could be completed on time."

The problems centered on Regent's $22 million portfolio of automobile insurance premium loans.

Although not supposed to be a high-risk venture, it cost the bank dearly in 1995 due to alleged mismanagement by an outside servicer, K-C Premium Finance in Philadelphia. The losses forced $200 million-asset Regent to delay the release of its 1995 earnings and cost it more than $4.5 million in charges when results were announced.

Regent's auditor, Arthur Andersen, then cut its ties to the bank. The Big Six accounting firm had examined the auto financing operation and, according to Mr. Lyons, feared legal action because of the losses.

As a result of the losses, Carnegie amended the merger pact. The bank required that Regent dump the portfolio and deposit $500,000 in collateral at Carnegie by the end of last October to cover a fee Regent would pay if it backed out of the deal. But Regent never deposited the money.

The loss of its accountants also meant that Regent was unable to disclose its September 1996 figures to Carnegie shareholders; waiting for December results would have taken too long.

Mr. Gray said Carnegie is now planning to expand its existing branches and seek out other growth opportunities.

Regent has hired Keefe, Bruyette & Woods Inc. to explore its options and named a chief financial officer - Joel E. Hyman, who held that title at Farmers and Mechanics Bank in Middletown, Conn.

"We think that Regent's financial situation is much improved from where it was three months ago," Mr. Lyons said. "I think we have all of our options open to us right now. We're feeling pretty upbeat."

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