U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number - 0-21346
TRIANGLE BANCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1764546
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Glenwood Avenue
Raleigh, North Carolina 27612
(Address of principal executive offices)
(Zip Code)
Telephone: (919) 881-0455
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 9,680,291
Class Outstanding at May 7, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Consolidated Balance Sheets as of March 31, 1996 and December 31,
1995 and the Consolidated Statements of Income and Cash Flows for the
three month periods ended March 31, 1996 and March 31, 1995 have been
included as Attachments to this report.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Highlights
During the first quarter of 1996, Triangle Bancorp, Inc. ("the
Company") continued its strategy of growth with the purchase of $55
million in deposits from First Union National Bank. As part of this
transaction, the Company's subsidiary, Triangle Bank ("Triangle") added
two new markets and increased its size in two other markets.
Operating Results for the Three Months Ended March 31, 1996 and 1995
The Company's net income for the three months ended March 31, 1996 was
$2,384,000 compared to $901,000 for the same period in 1995, an
increase of 165%. Excluding 1995 first quarter after tax merger
expenses of $840,000, earnings were $1,741,000 representing an increase
of 37%. Earnings per common share were $0.24 for the three months ended
March 31, 1996 compared to $0.10 ($0.17 without merger expenses) per
common share for the same period in 1995.
For the three months ended March 31, 1996 the annualized returns on
average assets and equity were 1.19% and 12.92%, respectively, compared
to 0.53% and 5.60%, respectively for the same period in 1995. Without
merger expenses, the 1995 return on average assets and equity were
1.02% and 10.82%.
Core earnings for the period were positively impacted by an increase in
net interest income due to an increase in the volume of earning assets
and costing liabilities. This was offset by a compression of the net
yield on earning assets to 4.88% as of March 31, 1996 from 5.30% as of
March 31, 1995. The net interest income for the three months ended
March 31, 1996 was $8,937,000 compared to $8,189,000 for the same
period in 1995 an increase of $748,000 or 9%.
For the three months ended March 31, 1996, a loan loss provision of
$310,000 was made compared to a provision of $140,000 for the same
period in 1995. The increase in provision is due to loan growth.
Noninterest income for the three months ended March 31, 1996 was
$1,977,000 compared to $1,659,000 for the same period in 1995 an
increase of $318,000 or 19%. The increase of noninterest income is due
to a $271,000 increase in service charges on deposit accounts due to a
fee increase and an increase in the number of accounts in the first
quarter of 1996, and a
Part I, Item 2 (Continued)
$53,000 increase in other commissions and fees, primarily in mortgage
loan origination income.
Noninterest expenses decreased by $1,527,000 for the three months ended
March 31, 1996 compared to the same period in 1995 or 18%. A
significant portion of this decrease was in merger expenses which were
$6,000 for the three months ended March 31, 1996 compared to $1,334,000
for the same period in 1995. In the first quarter of 1995, the Company
acquired three banks resulting in the aforementioned merger expenses.
Another cause for the decline in noninterest expenses in 1996 was the
decrease in the Federal deposit insurance premium.
Financial Condition
Total assets were $837 million as of March 31, 1996 an increase of
$42.6 million from December 31, 1995. The increase from December 31,
1995 to March 31, 1996 is in the loan portfolio as well as in
securities available for sale. This growth was funded by the purchase
of $55 million in deposits from four branch offices of Raleigh Federal
from First Union in January, 1996. With this purchase, a deposit
premium of approximately $3.5 million was recorded resulting in an
increase in intangible assets over the 1995 amount.
The Company continued to maintain strong loan loss reserves during the
period. As a result of loan growth, the provision was increased to
$310,000 for the three months ended March 31, 1996 from $140,000 for
same period in 1995. Nonaccrual loans were $1,119,000 at March 31, 1996
versus $2,343,000 at March 31, 1995. The loan loss reserves at March
31, 1996 were 1.50% of total loans. A summary of certain information
related to the loan loss reserves and nonperforming assets as of March
31, 1996 follows:
Part I, Item 2 (Continued)
RESERVE FOR LOAN LOSSES AND NONPERFORMING ASSETS
(Dollars in Thousands)
Analysis of Reserve for Loan Losses:
Beginning Balance, January 1, 1996 $ 8,402
Allowance disposed of in sale (98)
Deduct charge-offs:
Commercial financial and agricultural 5
Real estate, construction and land development 9
Installment loans to individuals 59
Credit card and related plans 44
117
Add recoveries:
Commercial, financial and agricultural 105
Real estate, construction and land development 10
Installment loans to individuals 10
Credit card and related plans 4
129
Net recoveries 12
Additions charged to operations 310
Ending balance, March 31, 1996 $ 8,626
Ratio of net charge-offs to average loans outstanding during the period (0.002%)
Analysis of Nonperforming Assets:
Nonaccrual loans:
Commercial, financial and agricultural $ 178
Real estate, construction and land development 776
Installment loans to individuals 165
1,119
Loans contractually past due 90 days or more
as to principal or interest 1,250
Foreclosed assets 359
TOTAL $ 2,728
Part 1, Item 2 (Continued)
Financial Condition (Continued)
Total deposits were $710 million at March 31, 1996 an increase of $48
million from December 31, 1995. The increase from December 31, 1995 is
due to the purchase of $55 million in deposits as discussed above.
Capital
The adequacy of capital is reviewed regularly, in light of current
plans and economic conditions, to ensure that sufficient capital is
available for current and future needs, to minimize the Company's cost
of capital and to assure compliance with regulatory requirements. The
Company's capital ratios as of March 31, 1996 are as follows:
Actual Required Excess
Percent Percent Percent
Tier 1 Capital to Risked Based Assets 9.91 % 4.00 % 5.91 %
Total Capital to Risked Based Assets 11.29 % 8.00 % 3.29 %
Leverage Ratio 7.52% 4.00 % 3.52 %
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings involving the Company.
Item 2. Changes in Securities
There have been no changes in the rights of the holders of the common
stock of the Company.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Part II (Continued)
Item 4. Submission of Matters to a Vote of Security Holders
On April 23, 1996 the annual shareholders meeting was held by the
Company to vote (i) to elect eight members of the Board of Directors, (ii) to
consider a proposal to ratify the appointment of Coopers & Lybrand L.L.P. as
independent public accountants of the Company for 1996, and (iii) to consider
and act on any other matters that may properly come before the Annual Meeting.
Directors elected at the meeting:
FOR AGAINST ABSTAIN NOT
VOTED
David T. Clancy 6,765,252 70,283
Syd W. Dunn, Jr. 6,760,251 75,284
Willie S. Edwards 6,761,736 73,799
Robert L. Guthrie 6,765,252 70,283
John B. Harris, Jr. 6,765,252 70,283
Earl Johnson, Jr. 6,763,988 71,547
O. A. Keller, III 6,763,421 72,114
J. L. Maxwell, Jr. 6,765,206 70,329
Directors whose term of offices continued after the meeting:
H. Leigh Ballance, Jr.
James P. Godwin, Sr.
Wendell H. Murphy
Michael S. Patterson
N. Johnson Tilghman
Syndor M. White, Jr.
J. Blount Williams
Charles H. Ashford, Jr.
Edwin B. Borden
Robert E. Bryan, Jr.
William C. Burkhardt
N. Leo Daughtry
George W. Holt
Edythe P. Lumsden
The results of proposal 2, election of auditors, was 6,768,983 for, 15,316
against and 51,236 abstain.
Part II (Continued)
Item 5. Other Information
N/A
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(19) Report furnished to security holders.
b) Reports on Form 8-K
(i) A Form 8-K was filed on January 3, 1996. The 8-K reported the
results of the Company and The Village Bank as of November 30, 1995
pursuant to the Amended and Restated Agreement of Combination by and
among the Company, Triangle Bank and The Village Bank. A Consolidated
Balance Sheet and Income Statement of Triangle Bancorp, Inc. and
Subsidiary as of and for the eleven months ended November 30, 1995 was
included.
(ii) A Form 8-K was filed on January 11, 1996 reporting the proforma
financial results of the Company and The Village Bank as of September
30, 1995 and for each of the years ended December 31, 1994, 1993 and
1992. Consolidated proforma income statements were filed for the nine
months ended September 30, 1995 and for each of the years ended
December 31, 1994, 1993, and 1992.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
March 31, December 31,
ASSETS 1996 1995
Cash and due from banks $ 32,650,493 $39,788,852
Federal funds sold - 2,500,000
Interest-bearing deposits in banks 774,469 727,870
Securities available for sale 114,664,803 95,655,464
Securities held to maturity, market value;
$79,370,000 and $78,959,000 79,373,683 75,530,819
Loans held for sale 2,275,045 3,496,948
Loans, less allowance for losses of
$8,626,416 and $8,402,149 563,867,072 537,907,153
Premises and equipment, net 16,134,742 14,908,373
Interest receivable 7,583,987 6,903,653
Deferred income taxes 6,315,687 6,102,077
Intangible assets 11,812,168 8,610,768
Other assets 1,848,638 2,564,612
----------------- -----------------
Total assets $837,300,787 $794,696,589
----------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $120,831,868 $121,306,023
Interest-bearing demand 82,025,186 83,643,146
Savings and money market 147,342,884 136,852,591
Large denomination certificates of deposit 49,540,894 40,751,898
Other time 310,019,612 279,456,688
----------------- -----------------
Total deposits 709,760,444 662,010,346
Short-term debt 43,441,386 49,420,534
Interest payable 5,771,611 6,013,090
Other liabilities 4,044,585 4,140,536
----------------- -----------------
Total other liabilities 53,257,582 59,574,160
----------------- -----------------
Total liabilities 763,018,026 721,584,506
----------------- -----------------
Commitments and contingencies*
SHAREHOLDERS' EQUITY
Common stock, no par value 20,000,000 56,824,385 56,608,316
authorized; 9,685,291 shares and 9,663,578
shares outstanding at March 31, 1996 and
December 31, 1995
Undivided profits 17,651,244 15,945,106
Unrealized gain (loss) on securities available for sale (192,868) 558,661
----------------- -----------------
Total shareholders' equity 74,282,761 73,112,083
----------------- -----------------
Total liabilities and shareholders' equity $837,300,787 $794,696,589
----------------- -----------------
*Standby letters of credit outstanding at March 31, 1996 amounted to $1,741,000
The accompanying notes are an integral part of the financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
For the three For the three
months ended months ended
March 31, 1996 March 31, 1995
INTEREST INCOME:
Interest and fees on loans $ 13,260,133 $ 11,102,737
Securities 2,624,155 2,422,590
Interest bearing deposits 3,339 1,327
Interest rate swap 3,785 -
Federal funds sold 27,979 160,464
------------------ ------------------
Total interest income 15,919,391 13,687,118
INTEREST EXPENSE:
Large denomination certificates of deposit 692,395 798,245
Other deposits 5,870,912 4,359,637
Short-term 418,248 159,241
Other borrowed funds 719 181,117
------------------ ------------------
Total interest expense 6,982,274 5,498,240
------------------ ------------------
Net interest income 8,937,117 8,188,878
Provision for loan losses 310,000 140,000
------------------ ------------------
Net interest income after provision
for loan losses 8,627,117 8,048,878
------------------ ------------------
NONINTERST INCOME:
Service charges on deposit accounts 1,385,744 1,115,115
Other commissions and fees 494,733 441,641
Gain (loss) on sale of securities (4,061) (16,810)
Gain on sale of foreclosed assets 16,090 23,894
Referral and bookkeeping fees 46,929 93,651
Other operating income 37,218 1,186
------------------ ------------------
Total noninterest income 1,976,653 1,658,677
------------------ ------------------
NONINTERST EXPENSE:
Salaries and employee benefits 3,158,794 3,214,469
Occupancy expense 635,969 481,327
Furniture and equipment expense 559,579 554,760
Professional fees 347,824 457,579
Federal deposit insurance expense 46,358 338,065
Advertising and public relations 243,684 179,077
Office expenses 181,727 250,423
Merger expense 6,160 1,334,200
Amortization of intangible assets 321,194 202,650
Other operating expense 1,308,515 1,324,644
------------------ ------------------
Total noninterest expense 6,809,804 8,337,194
------------------ ------------------
Net income before income taxes 3,793,966 1,370,361
Income tax expense 1,410,000 469,000
------------------ ------------------
Net income $ 2,383,966 $ 901,361
------------------ ------------------
Primary income per share data:
Net income $ 0.24 $ 0.10
Average common equivalent shares 9,978,535 9,721,096
Income per share data assuming full dilution:
Net income $ 0.24 $ 0.10
Average common equivalent shares 9,978,491 9,722,396
Cash dividends declared per share $ 0.07 $ 0.03
The accompanying notes are an integral part of the financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
March 31 March 31
1996 1995
---------------- ----------------
Cash flows from operating activities:
Net income $ 2,383,966 $ 901,361
Adjustments to reconcile net income to net cash
provided (used ) by operations:
Depreciation and amortization 694,277 298,763
Accretion of discount on investment securities,
net of amortization of premiums 22,873 (22,051)
Loss on sale of investments (4,061) (16,810)
Gain on sale of foreclosed assets 16,090 23,894
Write down of fixed assets - 957,000
Provision for loan losses 310,000 140,000
TT&L - (231,399)
Change in other assets and liabilities:
Interest receivable (678,184) (254,062)
Deferred tax asset (122,001) (463,152)
Other assets 542,418 444,480
Interest payable (384,359) 532,546
Other liabilities (125,951) 657,706
Mortgage loans held for sale:
Originations (6,712,899) (3,270,231)
Sales 7,934,802 3,268,788
---------------- ----------------
Net cash provided (used) by operating activities 3,876,971 2,966,833
---------------- ----------------
Cash flows from investing activities:
Intangibles - 331,409
Net increase in interest bearing time deposits (3,328,695) 1,497,000
Proceeds from maturities of investment securities available for sale 2,911,912 4,530,133
Proceeds from maturities of investment securities held to maturity 5,695,110 6,849,582
Proceeds from sales of investment securities available for sale 7,500,050 4,341,528
Proceeds from sales of investment securities held to maturity -
Purchases of investment securities available for sale (30,282,883) (5,980,781)
Purchases of investment securities held to maturity (9,538,343) (4,035,625)
Net increase in loans made to customers (26,121,244) (15,939,639)
Capital expenditures, bank premises and equipment (1,222,784) (540,270)
Proceeds from sale of foreclosed assets 192,535 114,000
Cash acquired, net of costs, in acquisition 51,240,734
---------------- ----------------
Net cash used by investing activities (2,953,608) (8,832,663)
---------------- ----------------
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
UNAUDITED
March 31 March 31
1996 1995
---------------- ----------------
Cash flows from financing activities:
Net increase in deposit accounts (4,074,217) 7,711,788
Net increase (decrease) in short-term debt (5,979,148) (8,343,252)
Net increase (decrease) in other borrowings - (7,198,742)
Proceeds from exercise of stock options and warrants 41,163 50,993
Cash dividends paid (677,827) (301,284)
Proceeds common stock issuance 174,906
---------------- ----------------
Net cash provided by financing activities (10,515,123) (8,080,497)
---------------- ----------------
Net increase (decrease) in cash and
cash equivalents (9,591,760) (13,946,327)
Cash and cash equivalents at beginning of period 43,016,722 53,513,586
---------------- ----------------
Cash and cash equivalents at end of period $33,424,962 $39,567,259
================ ================
Supplemental Disclosure of cash flow information:
Interest Paid $ 7,227,475 $ 4,532,501
Income Taxes Paid $ 585,192 $ 93,800
Schedule of noncash investing and financing activities: $ 7,866,485
Transfers to securities held to maturity from
securities available for sale
Non cash aspects of acquisition
Liabilities assumed $55,325,891
Less the fair value of non-cash assets acquired 4,085,157
----------------
Net cash received $51,240,734
The accompanying notes are an integral part of the financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
1. Financial statement presentation and management representation
The consolidated financial statements include the accounts and
results of operations of Triangle Bancorp, Inc. and its
wholly-owned subsidiary, Triangle Bank. All significant
intercompany transactions and accounts are eliminated in
consolidation.
The interim consolidated financial statements as of and for
the three months ended March 31, 1996 and 1995 are unaudited.
In the opinion of management, the consolidated financial
statements contain all adjustments, consisting of normal
recurring adjustments, necessary to present fairly, in all
material respects, the consolidated financial position as of
March 31, 1996 and 1995, and the results of operations and
cash flows for the periods ended March 31, 1996 and 1995. For
the period ended March 31, 1995, $1,344,000 in merger expenses
were incurred. The results for the interim periods are not
necessarily indicative of what results will be for the year
ended December 31, 1996.
2. Stock-Based compensation
Effective January 1, 1996 the Company adopted Statement of
Financial Accounting Standards No. 123, Accounting for Stock
Based Compensation. As permitted by SFAS 123, the Company has
chosen to apply APB Opinion 25 and related Interpretations in
accounting for its stock-based compensation plans.
Accordingly, no compensation cost has been recognized for its
fixed stock plans. Had compensation cost for the Company's
stock-based compensation plans been determined based on the
fair value at the grant date for awards under those plans
consistent with the method of SFAS 123, the effect on the
Company's net income and earnings per share would have been
immaterial.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIANGLE BANCORP, INC.
Date: May 14, 1996 /s/ Michael S. Patterson
Michael S. Patterson,
President and CEO
Date: May 14, 1996 /s/ Debra L. Lee
Debra L. Lee,
EVP/Chief Financial Officer
TRIANGLE BANCORP, INC.
EXHIBIT INDEX
EXHIBIT
NUMBER NAME PAGE
19 Report furnished to security holders. 15