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 September 30, 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 10,449,641
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Class Outstanding at November 11, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Consolidated Balance Sheets for September 30, 1996 and December 31,
1995, the Consolidated Statements of Income for the three and nine
month periods ended September 30, 1996 and 1995, and the Consolidated
Statements of Cash Flows for the nine month periods ended September 30,
1996 and 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 nine months of 1996, Triangle Bancorp, Inc. ("the
Company") continued its growth strategy with both acquisitions and
internal growth. In January, $55 million in deposits were purchased
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. In June, the Company
announced the signing of a definitive merger agreement with Granville
United Bank ("Granville") in Oxford, North Carolina. This merger took
place on October 24, 1996 and added $60 million in assets and 3 branch
locations; however, this acquisition is not reflected in the financial
results as of September 30, 1996.
Operating Results for the Three Months Ended September 30, 1996 and
1995
The Company's net income for the three months ended September 30, 1996
was $2,781,000, compared to earnings of $2,295,000 for the same period
in 1995, an increase of $486,000 or 21%. Earnings per share were $0.28
compared to $0.23 for the same period in 1995.
For the three months ended September 30, 1996 the annualized returns on
average assets and equity were 1.25% and 14.39%, respectively compared
to 1.23% and 13.11% for the same period in 1995.
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.
The net interest income for the three months ended September 30, 1996
was $9,848,000 compared to $8,220,000 for the same period in 1995 an
increase of $1,628,000 or 20%. The net interest margin was 4.84% for
the three months ended September 30, 1996 and September 30, 1995.
For the three months ended September 30, 1996, a loan loss provision of
$290,000 was made compared to a provision of $30,000 for the same
period in 1995. The increase in provision was made to maintain the loan
loss reserve at appropriate levels due to growth in the loan portfolio.
Part I, Item 2 (Continued)
Noninterest income for the three months ended September 30, 1996 was
$2,032,000 compared to $1,872,000 for the same period in 1995 an
increase of $160,000 or 9%. The increase of noninterest income is due
primarily to increases in service charges on deposit accounts of
$262,000 due to growth in the number of accounts and fee increases in
1996. Other changes in noninterest income include a decrease in other
commissions and fees due to the sell of mortgage servicing in the
fourth quarter of 1995 and a decrease in the volume of mortgage
origination activity.
Noninterest expenses increased by $642,000 for the three months ended
September 30, 1996 compared to the same period in 1995 or 10%.
Decreases in office expenses and professional fees were offset by
increases in salaries, occupancy expenses, amortization and other
operating expenses. These increases in 1996 expenses were due to the
addition of eight branch locations, the purchase and upfit of a new
corporate headquarters and the amortization of the deposit premium
purchased in January 1996 and September 1995.
Operating Results for the Nine Months Ended September 30, 1996 and 1995
The Company's net income for the nine months ended September 30, 1996
was $7,900,000, compared to $5,240,000 for the same period in 1995.
This represents an increase of $2,660,000 or 51%. Earnings per share
were $0.79 compared to $0.54 for the same period in 1995. Excluding the
sale of the branch in 1996 and merger-related expenses in 1996 and
1995, core earnings for the nine months ended September 30, 1996 were
$7,667,000, a 22% increase over the $6,274,000 earned during the same
period in 1995.
For the nine months ended September 30, 1996 the annualized returns on
average assets and equity were 1.24% and 14.00%, respectively compared
to 0.98% and 10.42% for the same period in 1995.
Core earnings for the nine month period ended September 30, 1996 were
positively impacted by an increase in net interest income due to an
increase in the volume of earning assets. The net interest income for
the nine months ended September 30, 1996 was $28,134,000 compared to
$24,484,000 for the same period in 1995 an increase of $3,650,000 or
15%. The net interest margin was 4.84% for the nine months ended
September 30, 1996 versus 5.04% for the same period in 1995. This
decrease in margin reduced the impact of the increased volume on net
interest income and was due to a decrease in yield on assets and a
slight increase in cost of liabilities.
For the nine months ended September 30, 1996, a loan loss provision of
$1,315,000 was made compared to a provision of $255,000 for the same
period in 1995. The increase in the provision was made to maintain the
loan loss reserve at an appropriate level due to loan growth.
Noninterest income for the nine months ended September 30, 1996 was
$6,467,000 compared to $5,297,000 for the same period in 1995 an
increase of $1,170,000 or 22%. The sale of a branch office in 1996
accounted for $558,000 of this increase. Service charges on deposit
accounts increased $720,000 due to growth in the number of accounts and
due to a fee increase in early 1996.
Part I, Item 2 (Continued)
Noninterest expenses for the nine months ended September 30, 1996
decreased $841,000 over the same period in 1995. Changes from 1996 to
1995 include decreases in merger expenses, Federal deposit insurance
premium and professional fees. Increases were seen in occupancy expense
and depreciation due to additional locations; amortization of deposit
premiums due to acquisitions in September 1995 and January 1996; and
other expenses due to growth of the Company.
Financial Condition
Total assets increased $109 million or 14%, to $904 million at
September 30, 1996 versus $795 million at December 31, 1995. Loans
increased $76 million, investments increased $21 million, premises and
equipment increased by $4 million and intangible assets (deposit
premium) increased $3 million. These increases were funded by internal
deposit growth as well as the purchase of $55 million in deposits in
January 1996.
The Company continued to maintain strong loan loss reserves during the
period with the loan loss reserves at September 30, 1996 being 1.51% of
total loans and 280% of nonperforming loans. Nonperforming loans to
total loans plus other real estate owned were .54% on September 30,
1996 compared to .67% as of September 30, 1995. Net charge offs were
.004% for the nine month period ended September 30, 1996 versus .02% in
the same period in 1995. A summary of certain information related to
the loan loss reserves and nonperforming assets as of September 30,
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 294
Real estate, construction and land development 78
Installment loans to individuals 242
Credit card and related plans 178
---
792
Add recoveries:
Commercial, financial and agricultural 456
Real estate 36
Installment loans to individuals 42
Credit card and related plans 31
---
565
Net charge-offs 227
Additions charged to operations 1,315
-----
Ending Balance, September, 30 1996 $9,392
-----
Ratio of net charge-offs to average loans outstanding during
the period 0.004%
Analysis of Nonperforming Assets:
Nonaccrual loans:
Commercial, financial and agricultural $ 854
Real estate, construction and land development 467
Installment loans to individuals 106
---
1,427
Loans contractually past due 90 days or more
as to principal or interest 1,756
Foreclosed assets 165
---
TOTAL $3,348
-----
Part 1, Item 2 (Continued)
Financial Condition (Continued)
Total deposits were $782 million as of September 30, 1996 compared to
$662 million at December 31, 1995, an increase of 18%. In January 1996,
the Company purchased $55 million in deposit accounts from First Union
accounting for a little over half of the increase; the remainder is due
to internal growth. The increase was primarily in time deposits and
savings and money market accounts. As a result of deposit growth, short
term debt decreased $14.7 million, or 30%, from December 31, 1995 to
September 30, 1996.
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 September 30, 1996 are as follows:
Actual Required Excess
Percent Percent Percent
Tier 1 Capital to Risk Based Assets 10.48% 4.00% 6.48%
Total Capital to Risk Based Assets 11.73% 8.00% 3.73%
Leverage Ratio 7.60% 4.00% 3.60%
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.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Part II (Continued)
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(19) Report furnished to security holders.
(27) Financial Data Schedule
b) Reports on Form 8-K
Not Applicable.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
September 30, December 31,
ASSETS 1996 1995
Cash and due from banks $ 48,061,719 $ 39,788,852
Federal funds sold - 2,500,000
Interest-bearing deposits in banks 700,519 727,870
Securities available for sale 116,585,188 95,655,464
Securities held to maturity, market value;
$74,629,518 and $78,959,000 75,828,633 75,530,819
Loans held for sale 1,080,085 3,496,948
Loans, less allowance for losses of
$9,391,545 and $8,402,149 613,853,862 537,907,153
Premises and equipment, net 18,869,107 14,908,373
Interest receivable 8,957,966 6,903,653
Deferred income taxes 6,389,762 6,102,077
Intangible assets 11,544,466 8,610,768
Other assets 1,693,397 2,564,612
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Total assets $ 903,564,704 $ 794,696,589
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LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 128,564,139 $ 121,306,023
Interest-bearing demand 79,887,898 83,643,146
Savings and money market 161,585,222 136,852,591
Large denomination certificates of deposit 54,996,108 40,751,898
Other time 356,820,062 279,456,688
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Total deposits 781,853,429 662,010,346
Short-term debt 34,680,795 49,420,534
Interest payable 5,405,748 6,013,090
Other liabilities 3,859,324 4,140,536
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Total other liabilities 43,945,867 59,574,160
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Total liabilities 825,799,296 721,584,506
------------------- ------------------
Commitments and contingencies*
SHAREHOLDERS' EQUITY
Common stock, no par value 20,000,000 56,721,679 56,608,316
authorized; 9,693,782 shares and 9,663,578
shares outstanding at September 30, 1996 and
December 31, 1995
Undivided profits 21,616,094 15,945,106
Unrealized gain (loss) on securities available
for sale (572,365) 558,661
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Total shareholders' equity 77,765,408 73,112,083
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Total liabilities and shareholders'
equity $ 903,564,704 $ 794,696,589
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*Standby letters of credit outstanding at September 30, 1996 amounted to
$4,183,738 The accompanying notes are an integral part of the consolidated
financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
For the three months ended For the three months ended
September 30, 1996 September 30, 1995
INTEREST INCOME:
Interest and fees on loans $14,832,091 $12,396,902
Securities 3,015,162 2,476,896
Interest bearing deposits 2,765 8,724
Interest rate swap 11,299 0
Federal funds sold 6,102 52,819
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Total interest income 17,867,419 14,935,341
INTEREST EXPENSE:
Large denomination certificates of deposit 777,799 826,380
Other deposits 6,757,208 5,432,891
Short-term debt 478,690 414,520
Other borrowed funds 5,608 41,078
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Total interest expense 8,019,305 6,714,869
Net interest income 9,848,114 8,220,472
Provision for loan losses 290,000 30,000
--------------------- ---------------------
Net interest income after
provision for loan losses 9,558,114 8,190,472
NONINTERST INCOME:
Service charges on deposit accounts 1,341,741 1,080,051
Other commissions and fees 438,654 615,409
Gain (loss) on sale of securities 18,229 (955)
Gain on sale of foreclosed assets 0 39,475
Gain on sale of branch 0 0
Gain on sale of loans 39,524
Other fee income 70,213 18,171
Other operating income 123,638 119,612
--------------------- ---------------------
Total noninterest income 2,031,999 1,871,763
NONINTERST EXPENSE:
Salaries and employee benefits 3,223,803 3,086,731
Occupancy expense 684,939 474,929
Furniture and equipment expense 565,410 606,890
Professional fees 343,030 380,046
Federal deposit insurance expense 42,925 (10,550)
Advertising and public relations 226,258 198,141
Office expenses 182,638 217,949
Merger expense 130,913 101,993
Amortization of intangible assets 336,504 260,898
Other operating expense 1,442,400 1,220,182
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Total noninterest expense 7,178,820 6,537,209
--------------------- ---------------------
Net income before income taxes 4,411,293 3,525,026
Income tax expense 1,630,000 1,230,000
--------------------- ---------------------
Net income $2,781,293 $2,295,026
===================== =====================
Primary income per share data:
Net income $0.28 $0.23
Average common equivalent shares 9,970,869 9,862,286
Income per share data assuming full dilution:
Net income $0.28 $0.23
Average common equivalent shares 9,975,938 9,860,701
Cash dividends declared per share $0.08 $0.05
The accompanying notes are an integral part of the consolidated
financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
For the nine months ended For the nine months ended
September 30, 1996 September 30, 1995
INTEREST INCOME:
Interest and fees on loans $42,124,563 $35,252,713
Securities 8,485,185 7,238,546
Interest bearing deposits 8,862 10,429
Interest rate swap 58,209 -
Federal funds sold 34,081 349,780
--------------------- ---------------------
Total interest income 50,710,900 42,851,468
INTEREST EXPENSE:
Large denomination certificates of deposit 2,208,876 2,537,705
Other deposits 18,778,325 14,677,915
Short-term debt 1,583,687 865,386
Other borrowed funds 6,327 286,108
Total interest expense --------------------- ---------------------
22,577,215 18,367,114
Net interest income 28,133,685 24,484,354
Provision for loan losses 1,315,000 255,000
--------------------- ---------------------
Net interest income after
provision for loan losses 26,818,685 24,229,354
NONINTEREST INCOME:
Service charges on deposit accounts 4,085,516 3,365,764
Other commissions and fees 1,355,353 1,512,390
Gain (loss) on sale of securities 6,288 (97,376)
Gain on sale of foreclosed assets 17,908 63,369
Gain on sale of branch 558,133 -
Gain on sale of loans 39,524 -
Other fee income 187,016 176,642
Other operating income 217,190 276,646
--------------------- ---------------------
Total noninterest income 6,466,928 5,297,435
NONINTEREST EXPENSE:
Salaries and employee benefits 9,444,697 9,318,268
Occupancy expense 1,951,160 1,415,966
Furniture and equipment expense 1,778,616 1,665,423
Professional fees 841,619 1,206,647
Federal deposit insurance expense 158,295 669,022
Advertising and public relations 655,300 570,682
Office expenses 603,415 720,509
Merger expense 189,082 1,639,963
Amortization of intangible assets 981,391 721,695
Other operating expense 4,137,011 3,653,226
--------------------- ---------------------
Total noninterest expense 20,740,586 21,581,401
--------------------- ---------------------
Net income before income taxes 12,545,027 7,945,388
Income tax expense 4,645,000 2,705,000
--------------------- ---------------------
Net income $7,900,027 $5,240,388
===================== =====================
Primary income per share data:
Net income $0.79 $0.54
Average common equivalent shares 9,965,151 9,783,906
Income per share data assuming full dilution:
Net income $0.79 $0.54
Average common equivalent shares 9,972,809 9,838,535
Cash dividends declared per share $0.23 $0.12
The accompanying notes are an integral part of the consolidated financial
statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
SEPT. 30 SEPT. 30
1996 1995
----------------------- ----------------------
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash
provided (used) by operations: $ 7,900,027 $ 5,240,388
Depreciation and amortization 2,346,197 1,502,270
Accretion of discount on investment securities,
net of amortization of premiums 200,756 221,253
Loss (gain) on sale of investments (6,288) 97,376
Gain on sale of foreclosed assets (17,908) (63,359)
Fixed asset write-offs - 957,000
Provision for loan losses 1,315,000 255,000
Change in other assets and liabilities:
Interest receivable (2,056,549) (3,746,804)
Deferred tax asset 203,315 2,342,975
Other assets 558,282 680,098
Interest payable (750,223) 2,914,570
Other liabilities (311,212) 2,442,827
Mortgage loans held for sale:
Originations (16,118,841) (13,303,044)
Sales 18,535,699 12,275,278
----------------------- ----------------------
Net cash provided (used) by operating activities 11,798,256 11,815,828
----------------------- ----------------------
Cash flows from investing activities:
Intangibles - (4,383,044)
Proceeds from maturities of investment securities available for sale 12,963,230 11,390,186
Proceeds from maturities of investment securities held to maturity 15,710,000 5,922,242
Proceeds from sales of investment securities available for sale 26,390,412 19,613,541
Proceeds from sales of investment securities held to maturity - -
Purchases of investment securities available for sale (58,872,516) (43,894,960)
Purchases of investment securities held to maturity (19,235,157) (25,913,401)
Net increase in loans made to customers (74,847,047) (98,275,657)
Capital expenditures, bank premises and equipment (4,812,388) (8,930,675)
Proceeds from sale of foreclosed assets 364,704 110,000
Proceeds from sale of fixed assets - 41,000
Cash acquired, net of costs, in acquisition 41,073,448 -
----------------------- ----------------------
Net cash used by investing activities (61,265,314) (144,320,768)
----------------------- ----------------------
Cash flows from financing activities:
Net increase in interest bearing time deposits 48,926,969 -
Net increase or (decrease) in deposit accounts 23,141,016 115,050,757
Net increase (decrease) in short-term debt (14,739,739) 12,758,673
Net increase (decrease) in other borrowings - 186,262
Proceeds from exercise of stock options and warrants 170,167 417,613
Cash dividends paid (2,229,035) (1,180,486)
Cash payments for fractional shares (2,720)
Proceeds from stock 186,015 -
Repurchase of stock (242,818) -
----------------------- ----------------------
Net cash provided by financing activities 55,212,574 127,230,099
----------------------- ----------------------
Net increase (decrease) in cash and
cash equivalents 5,745,516 (5,274,841)
Cash and cash equivalents at beginning of period 43,016,722 54,028,116
----------------------- ----------------------
Cash and cash equivalents at end of period $ 48,762,238 $ 48,753,275
======================= ======================
The accompanying notes are an integral part of the financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 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. Triangle Bank has two
wholly owned subsidiaries, Triangle Bank Leasing Corp., which
is inactive, and Triangle Investment Services which provides
investment services. All significant intercompany transactions
and accounts are eliminated in consolidation.
The interim consolidated financial statements as of and for
the three and nine months ended September 30, 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 September 30, 1996 and 1995, and the results of operations
and cash flows for the periods ended September 30, 1996 and
1995. For the period ended September 30, 1996 and September
30, 1995, $189,000 and $1,640,000, respectively, in pre-tax
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 themethod of SFAS 123, the effect on the Company's net
income and earnings per share would have been immaterial.
3. Reclassifications
Certain items included in the 1995 financial statements have
been reclassified to conform to the 1996 presentation. These
reclassifications have no effect on the net income or
stockholders' equity previously reported.
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: November 13, 1996 /s/ Michael S. Patterson
------------------ --------------------------
Michael S. Patterson,
President and CEO
Date: November 13, 1996 /s/ Debra L. Lee
----------------- -----------------
Debra L. Lee,
Chief Financial Officer
TRIANGLE BANCORP, INC.
EXHIBIT TABLE
PAGE
(19) Report furnished to security holders
(27) Financial Data Schedule