Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [section. mark]240.14a-11(c) or
[section. mark]240.14a-12
TRIANGLE BANCORP INC.
(Name of Registrant as Specified In Its Charter)
__________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fees (Check the appropriate box):
[X} No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
*Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Dated Filed:
TRIANGLE BANCORP, INC.
4300 GLENWOOD AVENUE
RALEIGH, NORTH CAROLINA 27612
(919) 881-0455
------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1997
NOTICE is hereby given that the Annual Meeting of Shareholders of Triangle
Bancorp, Inc. (the "Corporation") will be held as follows:
PLACE: Greenville Hilton
207 Southwest Greenville Boulevard
Greenville, North Carolina 27834
DATE: Monday, April 28, 1997
TIME: 3:00 P.M.
THE PURPOSES OF THE ANNUAL MEETING ARE:
1. To consider and act upon a proposal to amend
Article III, Section 2 of the Corporation's Bylaws to increase the
maximum number of directors of the Corporation from 24 to 26.
2. To elect 13 members of the Board of Directors.
3. To consider a proposal to approve the Triangle Bancorp, Inc. Employee
Stock Purchase Plan, as amended and restated.
4. To consider and act upon a proposal to ratify the appointment of
Coopers & Lybrand L.L.P. as independent public accountants of the
Corporation for 1997.
5. To consider and act on any other matters that may properly come before
the Annual Meeting.
The record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting has been set as of the close of business on March
10, 1997.
EVEN IF YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE REQUESTED TO
MARK, DATE AND SIGN THE ENCLOSED APPOINTMENT OF PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR
APPOINTMENT OF PROXY AND VOTE YOUR SHARES IN PERSON.
Sincerely,
Susan C. Gilbert, Secretary
March 21, 1997
TRIANGLE BANCORP, INC.
4300 GLENWOOD AVENUE
RALEIGH, NORTH CAROLINA 27612
PROXY STATEMENT
MAILING DATE: ON OR ABOUT MARCH 24, 1997
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1997
GENERAL
This Proxy Statement is being distributed in connection with the
solicitation by the Board of Directors of Triangle Bancorp, Inc. (the
"Corporation") of appointments of proxy in the form enclosed herewith for the
1997 Annual Meeting of Shareholders of the Corporation and any adjournments
thereof. The meeting will be held on Monday, April 28, 1997, beginning at 3:00
P.M., at the Greenville Hilton, 207 Southwest Greenville Boulevard, Greenville,
North Carolina.
As used in this Proxy Statement, the term "Triangle" or the "Bank"
refers to the Corporation's commercial bank subsidiary, Triangle Bank.
VOTING OF APPOINTMENTS OF PROXIES; REVOCATION
Persons named in the enclosed appointment of proxy as proxies for
shareholders at the Annual Meeting are Steven R. Ogburn, Debra L. Lee and
William V. Leaming, Jr. Shares represented by each appointment of proxy which is
properly executed, returned and not revoked, will be voted in accordance with
the directions contained therein. If no directions are given, those shares will
be voted "FOR" the election of each of the 13 nominees for director named in
Proposal 2 below and "FOR" each of the other proposals described herein. If, at
or before the time of the Annual Meeting, any nominee named in Proposal 2 has
become unavailable for any reason, the proxies will be authorized to vote for a
substitute nominee. On such other matters as may properly come before the
meeting, the proxies will be authorized to vote shares represented by
appointments of proxy in accordance with their best judgment.
A shareholder may revoke an appointment of proxy at any time before the
shares represented by it have been voted by filing with Susan C. Gilbert,
Secretary of the Corporation, an instrument revoking it or a properly executed
appointment of proxy bearing a later date, or by attending the Annual Meeting
and announcing his or her intention to vote in person.
EXPENSES OF SOLICITATION
The Corporation will pay the cost of preparing, assembling and mailing
this Proxy Statement and other proxy solicitation expenses. In addition to the
use of the mail, appointments of proxy may be solicited in person or by
telephone by officers, directors or employees of the Corporation and its
subsidiaries without additional compensation.
1
RECORD DATE
The Board of Directors has set March 10, 1997, as the record date (the
"Record Date") for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Only shareholders of record on that date will be
entitled to vote at the Annual Meeting.
VOTING SECURITIES
The voting securities of the Corporation are the shares of its no par
value common stock (the "Common Stock"), of which 20,000,000 shares were
authorized and 10,468,036 shares were outstanding on December 31, 1996. As of
December 31, 1996, there were approximately 7,000 holders of record of the
Corporation's Common Stock.
VOTING PROCEDURES; VOTES REQUIRED FOR APPROVAL
At the Annual Meeting, each shareholder will be entitled to cast one
vote for each share of Common Stock held of record on the Record Date for each
matter submitted for voting and, in the election of directors, for each director
to be elected. In accordance with North Carolina law, shareholders are not
entitled to vote cumulatively in the election of directors. Abstentions and
broker nonvotes will have no effect.
In the case of Proposal 1 below, for such proposal to be approved, at
least 75% of all shares of Common Stock voted at the Annual Meeting must be
voted in favor of the proposal.
In the case of Proposal 2 below, the 13 directors receiving the
greatest number of votes shall be elected.
In the case of Proposal 3 below, for such proposal to be approved, the
number of votes cast for approval must exceed the number of votes cast against
the proposal.
In the case of Proposal 4 below, for such proposal to be approved, the
number of votes cast for approval must exceed the number of votes cast against
the proposal.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
There are no persons who were known to management of the Corporation to
beneficially own more than 5% of the Corporation's Common Stock as of February
28, 1997.
Set forth below is information as of February 28, 1997 regarding the
beneficial ownership of the Corporation's Common Stock by its current directors,
nominees for director, and certain named executive officers individually, and by
all current directors, nominees for director, and executive officers of the
Corporation as a group.
AMOUNT AND NATURE
NAME OF OF BENEFICIAL OWNERSHIP PERCENT OF
BENEFICIAL OWNER OF STOCK (1) CLASS (2)
Carole S. Anders 28,340 0.27%
Charles H. Ashford, Jr. 25,512 0.24
H. Leigh Ballance, Jr. 23,347 0.22
Edwin B. Borden 23,694 0.23
Robert E. Bryan, Jr. 15,523 0.15
David T. Clancy 72,631 0.69
2
AMOUNT AND NATURE
NAME OF OF BENEFICIAL OWNERSHIP PERCENT OF
BENEFICIAL OWNER OF STOCK (1) CLASS (2)
N. Leo Daughtry 55,595 0.53
Syd W. Dunn, Jr. 22,727 0.22
Willie S. Edwards 18,767 0.18
James P. Godwin, Sr. 121,405 1.16
Robert L. Guthrie 31,002 0.30
John B. Harris, Jr. 26,394 0.25
George W. Holt 78,749 0.75
Earl Johnson, Jr. 48,116 0.46
Debra L. Lee 26,813 0.26
Edythe P. Lumsden 32,796 0.31
J. L. Maxwell, Jr. 113,643 1.06
Michael A. Maxwell 14,903 0.14
Wendell H. Murphy 38,953 0.37
Steven R. Ogburn 21,122 0.20
Michael S. Patterson 81,027 0.77
Patrick H. Pope 66,606(3) 0.64
William R. Pope 42,210 0.40
Billy N. Quick, Sr. 41,782 0.40
J. Dal Snipes 31,721 0.30
N. Johnson Tilghman 86,244(3) 0.82
Sydnor M. White, Jr. 38,468 0.37
J. Blount Williams 37,842 0.36
------
All Executive Officers,
Directors and Director Nominees
as a Group (28 persons) 1,240,654 11.65%
- -----------------
(1) Each director and executive officer has sole voting and investment power
over the issued and outstanding shares beneficially owned by such
individual, except for the following shares over which the directors and
executive officers indicated, and the group, share voting and/or investment
power: Ms. Anders - 3,000 shares; Dr. Ashford - 1,946 shares; Mr. Ballance
- 3,724 shares; Mr. Clancy - 63,290 shares; Mr. Daughtry - 400 shares; Mr.
Dunn - 5,616 shares; Mr. Godwin - 103,974 shares; Mr. Guthrie - 10,400
shares; Mr. Harris - 9,111 shares; Mr. Holt - 8,736 shares; Mr. Johnson -
23,275 shares; Ms. Lee - 1,500 shares; Ms. Lumsden - 26,433 shares; Mr.
Michael A. Maxwell - 13,748 shares; Mr. Murphy - 28,490 shares; Mr.
Patterson - 3,485 shares; Mr. Ogburn - 1,520 shares; Mr. Patrick H. Pope -
30,000 shares; Mr. William R. Pope - 281 shares; Mr. Billy N. Quick, Sr. -
1,688 shares; Mr. J. Dal Snipes - 14,311 shares; Mr. White - 19,643 shares;
Mr. Williams - 22,041 shares; and members of the group - 396,612 shares.
3
This column includes certain shares owned by certain related parties of
directors and executive officers as to which shares those directors and
executive officers have disclaimed beneficial ownership, as follows: Dr.
Ashford - 9,400 shares; Mr. Guthrie - 824 shares; Mr. J. L. Maxwell, Jr. -
2,750 shares; Mr. Tilghman - 45,008 shares; and members of the group -
57,982 shares.
This column includes the number of shares for which the director or
executive officer indicated, and the directors and the four current
executive officers of the Corporation as a group, hold options to purchase,
pursuant to the Corporation's 1988 Qualified or Non-Qualified Stock Option
Plans, to the extent such options are vested, and are immediately
exercisable as follows: Ms. Anders - 4,103 shares; Dr. Ashford - 1,799
shares; Mr. Ballance - 4,851 shares; Mr. Borden - 3,399 shares; Mr. Bryan -
1,748 shares; Mr. Clancy - 5,668 shares; Mr. Daughtry - 5,741 shares; Mr.
Dunn - 1,764 shares; Mr. Edwards - 71 shares; Mr. Godwin - 24 shares; Mr.
Guthrie - 5,175 shares; Mr. Harris - 11,674 shares; Mr. Holt - 2,000
shares; Mr. Johnson - 128 shares; Ms. Lee - 12,152 shares; Ms. Lumsden -
4,072 shares; Mr. J. L. Maxwell, Jr. - 3,468 shares; Mr. Michael A. Maxwell
- 50 shares; Mr. Murphy - 1,695 shares; Mr. Ogburn - 14,516 shares; Mr.
Patterson - 49,385 shares; Mr. Patrick H. Pope - 6,222 shares; Mr. William
R. Pope - 7,464 shares; Mr. Billy N. Quick, Sr. - 15,246 shares; Mr. J. Dal
Snipes - 2,361 shares; Mr. Tilghman - 13,526 shares; Mr. White - 100
shares; Mr. Williams - 4,126 shares; and members of the group - 182,528
shares.
(2) Based on a total of 10,468,036 shares actually outstanding as of December
31, 1996, and with respect to each director or executive officer, the
shares that would be outstanding if the director exercised his or her
options to purchase shares of Common Stock of the Corporation (to the
extent vested) or, with respect to directors and the four current executive
officers of the Corporation as a group, the shares that would be
outstanding if each such individual exercised his or her options to
purchase shares of the Common Stock (to the extent vested).
(3) Included in the beneficial ownership of Mr. Patrick H. Pope and Mr.
Tilghman are 25,278 shares held by a trust in which both Mr. Pope and Mr.
Tilghman have an interest. These shares are reflected separately in the
beneficial ownership of each individual, but are included only once in the
beneficial ownership shown for the group.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and executive officers of the Corporation are required by
federal law to file reports with the Securities and Exchange Commission
regarding their initial ownership and the amount of and changes in their
beneficial ownership of the Corporation's Common Stock. Based on the
Corporation's review of reports furnished to it, all such reports were timely
filed except as follows: N. Leo Daughtry inadvertently failed to report the
purchase of 700 shares on November 8, 1995 for which the required report was
filed in December 1996; Edythe P. Lumsden inadvertently failed to report the
purchase of 1,000 shares on November 30, 1995 for which the required report was
filed in January 1997; and David T. Clancy inadvertently failed to report the
purchase of 1,200 shares on September 25, 1996 for which the required report was
filed in December 1996.
PROPOSAL 1. APPROVAL OF AMENDMENT TO ARTICLE III, SECTION 2
OF THE CORPORATION'S BYLAWS
The Board of Directors of the Corporation has voted to recommend to
the shareholders a proposed amendment to Article III, Section 2(a) of the
Corporation's Amended and Restated Bylaws to increase the maximum number of
directors from 24 to 26. Under the current Bylaws, the number of directors may
be between 10 and 24 with the number within that range to be set by the Board of
Directors. Until September 1996, the number of directors of the Corporation was
22. In September 1996, two directors resigned, leaving two vacancies. In filling
those two vacancies, the Board of Directors of the Corporation turned to
individuals serving as directors of Triangle Bank, but who did not also serve on
the Board of Directors of the Corporation. Effective February 1, 1997, those two
vacancies were filled by Carole S. Anders and William R. Pope. Also, effective
February 1, 1997, the Board of Directors of the Corporation, as allowed by the
Bylaws, increased the number of directors of the Corporation to 24 and elected
two members of the Board of Directors of Triangle Bank, Patrick H. Pope and J.
Dal Snipes, to fill the two newly created vacancies. Further, the Board of
Directors of the Corporation determined that it would be in the best interests
of the Corporation and Triangle Bank to have their respective Boards of
Directors be identical in composition. The Board of Directors of Triangle Bank
4
consists of 26 individuals, two of whom do not serve on the Board of Directors
of the Corporation. These two individuals are Michael A. Maxwell and Billy N.
Quick, Sr. In order to accommodate these two individuals on the Board of
Directors of the Corporation, the maximum number of directors of the
Corporation, as set forth in the Corporation's Bylaws, must be increased to 26.
The Board of Directors of the Corporation recommends that its shareholders adopt
the proposed amendment to the Bylaws to increase the maximum number of directors
authorized in the Corporation's Bylaws. The text of Article III, Section 2(a) of
the Corporation's Bylaws, as proposed to be amended, is as follows:
"The number of directors constituting the Board of Directors of
the corporation shall be not less than ten nor more than twenty-six as
from time to time may be fixed or changed within the said minimum and
maximum by the affirmative vote of a majority of Directors present at
any regular or special meeting of the Board of Directors at which a
quorum is present. Such minimum and maximum may not be changed by the
Board of Directors, but only by the affirmative vote of 75% of all
eligible votes present, in person or by proxy, at a meeting of
shareholders at which a quorum is present. Such minimum and maximum may
not be changed at a meeting of shareholders unless the notice of the
meeting states that the purpose, or one of the purposes, of the meeting
is to change the number of directors of the corporation."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
PROPOSAL 1.
PROPOSAL 2. ELECTION OF DIRECTORS
Assuming the Bylaw amendment set forth in Proposal 1 is approved, and
the maximum allowable number of directors of the Corporation is 26, the Board of
Directors previously has set the number of directors of the Corporation at 26,
subject to approval of the Bylaw amendment. The Bylaws of the Corporation
provide that directors be divided into three classes, approximately equal in
number, elected to staggered three-year terms. The 11 directors whose terms
expire at the Annual Meeting have been re-nominated to the Board for three-year
terms, and two other individuals, Michael A. Maxwell and Billy N. Quick, Sr.,
both of whom currently serve as directors of the Bank, have been nominated to
the Board for the terms noted below, in order to evenly stagger the terms among
each class of directors as required by the Bylaws. If the shareholders do not
approve the Bylaw amendment set forth in Proposal 1, the number of directors of
the Corporation has been set by the Board of Directors at 24 and Michael A.
Maxwell and Billy N. Quick, Sr. will not be nominees for director and only the
11 individuals whose terms expire at the Annual Meeting will be nominees for the
terms set forth below.
NAME AND AGE DIRECTOR SINCE (1) BUSINESS EXPERIENCE DURING PAST FIVE YEARS
------------ ------------------ ------------------------------------------
ONE-YEAR TERM:
Carole S. Anders 1997 Civic leader, Raleigh, North Carolina
(52)
Michael A. Maxwell New Nominee Senior Scientist since November 1995, Branch Chief from December
(58) 1974 to November 1995, U.S. Environmental Protection Agency,
Research Triangle Park, North Carolina
Patrick H. Pope 1997 Partner, Pope, Tilghman & Tart (attorneys-at-law), Dunn, North
(52) Carolina
TWO-YEAR TERM:
William R. Pope 1997 President and Chairman of the Board, Pope Enterprises, Inc.
(61 ) (operator of True-Value Hardware and Variety Stores), Coats,
North Carolina
Billy N. Quick, Sr. New Nominee Executive Vice President, Triangle Bank since October 1996;
(56 ) previously President and Chief Executive Officer, Granville
United Bank, Oxford, North Carolina
5
NAME AND AGE DIRECTOR SINCE (1) BUSINESS EXPERIENCE DURING PAST FIVE YEARS
------------ ------------------ ------------------------------------------
THREE-YEAR TERM:
H. Leigh Ballance, Jr. 1995 Executive Vice President, Triangle Bancorp, Inc. and Triangle
(51) Bank since March 1995; previously President and Chief Executive
Officer, Atlantic Community Bancorp, Inc.
James P. Godwin, Sr. 1995 President, Godwin Manufacturing Co., Inc., Dunn, North Carolina,
(55) and Godwin and Gonzalez Specialty Equipment, Inc., Puerto Rico
(truck body manufacturers)
Wendell H. Murphy 1993 President, Murphy Family Farms (swine production) and Murphy
(58) Milling Co. (feed production), Rose Hill, North Carolina;
Director of Smithfield Foods
Michael S. Patterson 1990 Chairman of the Board, Triangle Bancorp, Inc. and Triangle Bank
(50) since February 1997; President since 1990 and Chief Executive
Officer since 1991, Triangle Bank; President and Chief Executive
Officer, Triangle Bancorp, Inc. since August 1992
J. Dal Snipes 1997 President, Snipes Insurance Service, Inc., Dunn, North Carolina
(44)
N. Johnson Tilghman 1988 Partner, Pope, Tilghman & Tart (attorneys-at-Law), Dunn, North
(54) Carolina
Sydnor M. White, Jr. 1991 President, CJS, Inc. (automotive parts distributor), Raleigh,
(48) North Carolina
J. Blount Williams 1988 President, Alfred Williams & Co., Raleigh, North Carolina
(43) (office furniture and supplies)
- -------------------
(1) Refers to the year in which a person first was elected or became a
director of the Corporation or, if prior to the Corporation's
organization in August 1992, the year in which such person first was
elected a director of the Bank.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF
THE 13 NOMINEES NAMED ABOVE.
INCUMBENT DIRECTORS
The Corporation's current Board of Directors includes the following
directors whose terms will continue after the Annual Meeting. Certain
information regarding those directors is set forth in the following table:
DIRECTOR TERM
NAME AND AGE SINCE (1) BUSINESS EXPERIENCE DURING PAST FIVE YEARS EXPIRES
Charles H. Ashford, 1993 Vice President of Medical Affairs, Craven Regional 1998
Jr. Medical Authority since 1991; previously surgeon with
(61) Coastal Surgical Specialists, P.A., New Bern, North
Carolina
Edwin B. Borden 1993 President, The Borden Manufacturing Company, Goldsboro, 1998
(63) North Carolina (textile manufacturing); Director of
Carolina Power & Light Company; Director
6
TERM
NAME AND AGE DIRECTOR SINCE (1) BUSINESS EXPERIENCE DURING PAST FIVE YEARS EXPIRES
------------ ----------------- of Jefferson-Pilot Corporation; Director of Ruddick Corp.;
Director of Winston Hotels
Robert E. Bryan, Jr. 1993 Vice President, Express Stop Stores, Fayetteville, North 1998
(62) Carolina; President, Bryan Oil Co.
N. Leo Daughtry 1988 Attorney, Daughtry, Woodard, Lawrence & Starling, 1998
(56) L.L.P., Smithfield, North Carolina
George W. Holt 1995 Executive Vice President, Triangle Bank since February 1998
(66) 1995; President, Columbus National Bank from 1973 to
February 1995
Edythe P. Lumsden 1988 President, Capital Land Investment Company, Raleigh, 1998
(44) North Carolina
David T. Clancy 1988 President, Clancy & Theys Construction Company, Raleigh, 1999
(47) North Carolina
Syd W. Dunn, Jr. 1993 President, Hannah & Dunn, Inc., Greenville, North 1999
(71) Carolina (wine and spirits broker)
Willie S. Edwards 1995 General Partner in L & B Associates, Rocky Mount, North 1999
(64) Carolina (wholesale liquor distributor)
Robert L. Guthrie 1988 President and Chief Executive Officer, Associated 1999
(61) Insurers, Inc., Raleigh, North Carolina
John B. Harris, Jr. 1991 Chairman of the Board, Triangle Bank 1991 to January 1999
(67) 1997; President, John B. Harris, Jr. and Associates
(consulting), 1985-1991; President, Winston Hospitality,
Inc. (hotel management) since 1991; President and Chief
Executive Officer, Enterprise Bancorp and Enterprise
Bank, 1990 to 1991
Earl Johnson, Jr. 1991 Contractor, Southern Industrial Constructors, Inc., 1999
(65) 1962-1992; Contractor, Carolina Crane Corp., Raleigh,
North Carolina, 1992 to date
J. L. Maxwell, Jr. 1993 Chairman of the Board of Directors, Goldsboro Milling 1999
(70) Co. (turkey and hog producer), Goldsboro, North
Carolina; Director, Atlantic & East Carolina Railway
- -------------------
(1) Refers to the year in which a person first was elected or became a
director of the Corporation or, if prior to the Corporation's
organization in August 1992, the year in which such person first was
elected a director of the Bank.
DIRECTOR RELATIONSHIPS
No director, director nominee or executive officer is related to
another director or executive officer of the Corporation except for Patrick H.
Pope and William R. Pope, who are third cousins, and Patrick H. Pope and N.
Johnson Tilghman who are brothers-in-law.
7
Except for Mr. Borden who is a director of Carolina Power & Light
Company, Jefferson-Pilot Corporation, Winston Hotels and Ruddick Corp., and Mr.
Murphy who is a director of Smithfield Foods, no director is a director in any
company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934 (the "Exchange Act") or subject to the
requirements of Section 15(d) of the Exchange Act, or any company registered as
an investment company under the Investment Company Act of 1940.
DIRECTOR COMPENSATION
BOARD FEES. During 1996, directors who are not employees of the
Corporation received 45 shares of Common Stock of the Corporation for each Board
meeting attended, 30 shares for each Executive Committee meeting attended, 15
shares for each other committee meeting attended, and an annual retainer of 100
shares. In 1997, the annual retainer amount will remain at 100 shares, but
directors will receive 60 shares for each Board meeting attended, 30 shares for
each committee meeting attended, and each committee chairman will receive an
additional 10 shares for each meeting attended.
DIRECTORS' DEFERRED COMPENSATION PLAN. The Corporation maintains a
Deferred Compensation Plan for outside directors for cash compensation paid to
directors through 1994. Since January 1, 1995, directors of the Corporation are
paid in shares of Common Stock. Only individuals who were members of the Board
of Directors but who were not employees of the Corporation were eligible to
participate in the plan. Directors who elected to participate in the plan could
elect to defer a minimum of $500 of their compensation for their service as such
pursuant to the plan during each year they participated and could elect to defer
up to the full amount of directors' compensation they would receive in $100
increments. Deferred compensation was converted into stock units by dividing the
compensation deferred under the plan by the then current value of a share of the
Corporation's Common Stock. Dividends paid to holders of the Corporation's
Common Stock are credited to holders of stock units and are converted into
additional stock units on the same basis as compensation deferred under the
plan. Within 60 days after the death, disability or retirement of a director,
the director or his or her estate is entitled to be issued one share of the
Corporation's Common Stock for each stock unit and cash for fractional stock
units. As of December 31, 1996, 49,868 stock units were outstanding under the
plan.
1988 NON-QUALIFIED STOCK OPTION PLAN. The Corporation has adopted and
the shareholders have approved the 1988 Non-Qualified Stock Option Plan (the
"Non-Qualified Plan") pursuant to which options on 388,002 shares of the
Corporation's Common Stock were available for issuance to members of the
Corporation's Board of Directors and to members of Boards of Directors and
members of local boards of directors of any subsidiary of the Corporation. The
duration of the options is ten years from the date of grant. As of December 31,
1996, after giving effect to the exercise and forfeiture of options, options on
208,764 shares of Common Stock were issued and outstanding and 149,889 shares of
Common Stock are available under the Non-Qualified Plan for further issuance.
Pursuant to the terms of the Non-Qualified Plan: (i) the option price
may not be less than the fair market value of the Corporation's Common Stock on
the date of grant of the options; and (ii) options vest 20% per year from the
date of grant and are exercisable as they vest. If the option holder ceases to
perform services as a director or local director of the Corporation or its
subsidiaries for any reason during the five-year period, he or she has one year
from such cessation to exercise his or her vested options.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors of the Corporation held six regular meetings
during 1996 and one special meeting. All incumbent directors attended more than
75% of the total number of meetings of the Board of Directors and its committees
during 1996 except for Directors Daughtry, Godwin, J. Louis Maxwell, Jr. and
Murphy due to other business commitments.
The Board of Directors has several standing committees, including an
Audit Committee and a Compensation Committee. The voting members of these
committees are appointed by the Board of Directors annually from among its
members.
8
The current members of the Audit Committee are Directors Ashford,
Daughtry, Murphy, William R. Pope, Tilghman and Williams (Chairman), and
Director Nominee Michael A. Maxwell, who is a director of the Bank. The Audit
Committee serves as the Audit Committee for both the Corporation and the Bank.
The primary functions of the Audit Committee are to give additional assurance
regarding the integrity of financial information used by the Board of Directors
and distributed to the public by the Corporation, and to oversee and monitor the
activities of the Corporation's internal and external audit processes. The Audit
Committee met four times during 1996.
The Compensation Committee administers the Corporation's compensation
program and has responsibility for matters involving the compensation of
executive officers of the Corporation and the Bank. The current members of the
Compensation Committee are Directors Borden (Chairman), Clancy, Godwin, Johnson,
Lumsden and Patrick H. Pope. The Compensation Committee met one time during
1996.
The Board of Directors does not have a standing nominating committee.
EXECUTIVE OFFICERS
The Corporation has the following executive officers:
OFFICER POSITIONS WITH THE CORPORATION AND THE BANK;
AGE SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
NAME
Michael S. Patterson 50 1990 Chairman of the Board of Triangle Bancorp, Inc. and Triangle
Bank since February 1997; President since 1990 and Chief
Executive Officer since 1991, Triangle Bank; President and
Chief Executive Officer, Triangle Bancorp, Inc. since August
1992
H. Leigh Ballance, Jr. 51 1995 Executive Vice President, Triangle Bancorp, Inc. and Triangle
Bank as of March 1995; President and Chief Executive Officer,
Atlantic Community Bancorp, Inc. and Unity Bank & Trust Company
from September 1989 to March 1995.
Steven R. Ogburn 46 1993 Executive Vice President, Triangle Bancorp, Inc. and Triangle
Bank since 1996; Senior Vice President, Triangle Bancorp, Inc.
and Senior Vice President - Credit Administration, Triangle
Bank, 1993 to 1996; Senior Vice President, Centura Bank,
1986-1993
Debra L. Lee 40 1991 Executive Vice President and Chief Financial Officer, Triangle
Bancorp, Inc. and Triangle Bank since 1996; Senior Vice
President and Chief Financial Officer, Triangle Bancorp, Inc.
and Triangle Bank, 1992 to 1996; Vice President/Finance,
Triangle Bank, 1991-1992
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Charles H.
Ashford, Jr., Edwin B. Borden, John B. Harris, Jr., N. Johnson Tilghman, and
Sydnor M. White, Jr. These same individuals comprised the Compensation Committee
in 1996.
John B. Harris, Jr. is a director of the Corporation, and in 1996
served as the Chairman of the Board of Triangle and an employee of Triangle.
Effective January 1, 1997, Mr. Harris ceased being an employee of the Bank and
effective February 1, 1997, Mr. Harris ceased being the Chairman of the Bank.
Mr. Harris abstained from
9
participation in both the discussion of and voting on
matters related to his compensation as an officer of the Bank in 1996. Michael
S. Patterson, President and Chief Executive Officer of the Corporation, though
not a member of the Compensation Committee, advised the Compensation Committee
during 1996 on the compensation to be paid to executive officers, other than
himself, and to employees of the Corporation.
COMPENSATION COMMITTEE REPORT
It is the policy of the Compensation Committee to provide a fully
competitive, performance-based compensation program such as will enable the
Corporation and the Bank to attract, motivate and retain qualified senior
officers. With regard to all senior officers' compensation, the Compensation
Committee's policy is that salary levels will be established and increases will
be given commensurate with the individual officer's levels of responsibility and
performance and with the general status of the local economy, and the overall
profit performance of the Bank as it relates to attainment of budgeted goals for
profitability and return on average assets. The Corporation's executive
compensation program includes (A) annual compensation consisting of base
salaries, (B) the potential for cash incentive bonuses based on the
Corporation's financial performance, (C) long-term incentive compensation
consisting of periodic stock options, and (D) contributions to the individual
accounts of all participating employees (including executive officers) under
Triangle's Section 401(k) salary deferral plan. In addition, the Corporation
provides other employee benefits and welfare plans customary for companies of
its size.
The basis for the executive officer compensation reported in 1996 was
the salary range of various positions set in conjunction with an outside
consultant during the fall of 1994 which reviewed comparable salaries being paid
within North Carolina and the southeastern United States based upon comparable
sized banking institutions. The cash incentive compensation for 1996 was based
upon the formula within the management incentive compensation plan which plan
was approved by the Board during January 1994. A bonus pool is established in
which an executive officer will be eligible to participate if the Corporation
meets at least 80% of its defined short-term goals, which goals are set by the
Board.
In 1996, long-term incentive compensation was based upon a formula
established within the long-term incentive plan which plan was approved by the
Board during January 1995. Compensation under the plan consists of stock options
and restricted stock awards. A pool of stock options and restricted stock awards
is established in which an executive officer will be eligible to participate if
the Corporation meets at least 80% of its defined long-term goals, which goals
are set by the Board.
During January 1996 the Compensation Committee made recommendations to
the Board of Directors (and the Board of Directors made final decisions)
regarding the amounts of the 1996 salaries for Michael S. Patterson and the
Corporation's other executive officers, and during January 1997 the Compensation
Committee made recommendations to the Board of Directors (and the Board of
Directors made final decisions) regarding the amounts of the 1996 bonuses for
Michael S. Patterson and the Corporation's other executive officers. The amount
of bonus compensation in 1996 was directly tied to the attainment of the
Corporation's financial plan for 1996.
10
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The table below
indicates the cash compensation paid by the Corporation as well as other
compensation paid or accrued to the President and Chief Executive Officer and
each other executive officer whose salary and bonus was in excess of $100,000
during 1996 (the "Named Executive Officers") for services rendered in all
capacities during fiscal years 1996, 1995 and 1994, respectively.
LONG TERM COMPENSATION
ANNUAL AWARDS PAYOUTS
COMPENSATION(1)
RESTRICTED SECURITIES
OTHER STOCK UNDERLYING LTIP ALL OTHER
Name and SALARY BONUS ANNUAL AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
Principal YEAR COMPENSATION
Position ($) ($) ($) (#) ($) ($)(3)
--------- ---- ---- ------- ---- ---- ---- ------
($)(2)
Michael S. 1996 199,799 132,440 -0- -0- 14,483 -0- 9,500
Patterson, 1995 178,230 98,900 -0- -0- 17,500 -0- 10,041
President and 1994 14,811 78,800(4) -0- -0- -0- -0- 8,442
Chief Executive
Officer
H. Leigh Ballance, 1996 121,504 58,982 -0- -0- 9,256 -0- 10,629
Jr, Executive Vice 1995 116,000 50,600 -0- -0- 15,000 -0- 5,853
President 1994 -0- -0- -0- -0- -0- -0- -0-
Howard B. 1996 79,068 -0- -0- -0- -0- -0- 4,685
Montgomery, Jr. 1995 100,000 43,600 -0- -0- 10,000 -0- 5,522
Executive Vice 1994 100,000 25,000 -0- -0- 9,675 -0- 5,000
President (5)
Steven R. Ogburn, 1996 98,857 47,481 -0- -0- 7,581 -0- 8,045
Executive Vice 1995 96,957 42,400 -0- -0- 10,000 -0- 5,553
President 1994 91,092 26,600 -0- -0- 10,000 -0- 4,889
Debra L. Lee, 1996 102,925 47,481 -0- -0- 7,062 -0- 7,148
Executive Vice 1995 92,425 38,600 -0- -0- 10,000 -0- 4,706
President and 1994 80,027 23,000 -0- -0- -0- -0- 4,970
Chief Financial
Officer
----------------------
(1) Amounts shown in the table include amounts paid to the Named Executive
Officers as executive officers of the Bank. The Bank was reorganized as a
wholly-owned subsidiary of the Corporation in August 1992. Also includes
amounts deferred at the election of the Named Executive Officers under
Section 401(k) of the Internal Revenue Code and under existing deferred
compensation agreements between the Named Executive Officer and the
Corporation. The amount of that compensation for the Named Executive
Officers for 1994, 1995 and 1996 under the 401(k) plan was based on a
formula contained in the terms of that plan and was not related to the
Corporation's or the officer's performance for the year.
(2) Perquisites and personal benefits awarded to the Named Executive Officers
did not exceed 10% of the total annual salary and bonus in any year
reported.
(3) The amounts disclosed represent the Corporation's annual contribution on
behalf of the Named Executive Officers to match pre-tax elective deferral
contributions (included under Salary) made by the Named Executive Officers
under Section 401(k) of the Internal Revenue Code, and insurance premiums
paid on behalf of the Named Executive Officer.
(4) Bonus consists of $59,300 in cash and 2,000 shares of the Corporation's
Common Stock with a market value when awarded of $9.75 per share or $19,500
in the aggregate.
(5) Mr. Montgomery resigned as an officer of the Corporation and the Bank,
effective September 30, 1996.
STOCK OPTIONS. The following table sets forth information with regard
to grants of stock options during the fiscal year ended December 31, 1996, to
the Named Executive Officers. All such grants were made under the 1988 Incentive
Stock Option Plan.
STOCK OPTION GRANTS IN 1996
INDIVIDUAL GRANTS
% of Total Potential Realizable
Number of Options Value (2) at Assumed
Securities Granted to Exercise or Annual Rates of Stock
Name Underlying Employees in Base Price ($) Expiration Price Appreciation for
Options Fiscal Per Share Date Option Term ($)(at)
Granted (#) Year
(1) 5%
10%
Michael S. Patterson 14,483 15.4 15.00 1/30/06 136,624 346,233
H. Leigh Ballance, Jr. 9,256 9.8 15.00 1/30/06 87,316 221,275
Howard B. Montgomery, 7,980 8.5 15.00 1/30/06 -0- -0-
Jr.(3)
Steven R. Ogburn 7,581 8.1 15.00 1/30/06 71,515 181,232
Debra L. Lee 7,062 7.5 15.00 1/30/06 66,619 168,825
11
- ------------------
(1) One-fifth of the options vest and become exercisable in each of the five
years beginning January 1, 1997, assuming the Named Executive Officer
remains employed by the Bank. If the Named Executive Officer's employment
terminates before the end of the vesting period, the Named Executive
Officer may exercise vested options for varying periods after termination
(depending on the manner of termination) in accordance with the plan.
(2) Potential Realizable Value represents the difference between an assumed
stock price and the exercise price for the number of options granted. The
assumed stock price equals the market value of the stock on the grant date
appreciating at the indicated rate over the term of the options.
(3) Mr. Montgomery resigned as an officer of the Corporation and the Bank,
effective September 30, 1996. All options granted to Mr. Montgomery in 1996
were forfeited upon his resignation.
The following table sets forth information with regard to exercises of
stock options during the fiscal year ended December 31, 1996, by the Named
Executive Officers and the 1996 fiscal year-end value of all unexercised options
held by them.
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND FISCAL YEAR END OPTION VALUES
VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE REALIZED NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
NAME ON EXERCISE (#) ($) OPTIONS AT FY-END (#) FY-END ($) (1)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Michael S. Patterson -0- -0- 42,989 41,334 408,005 230,781
H. Leigh Ballance, Jr. -0- -0- 3,000 21,256 20,235 93,667
Howard B. Montgomery, 5,870 41,493 -0- -0- -0- -0-
Jr.(2)
Steven R. Ogburn -0- -0- 9,000 23,581 70,125 128,424
Debra L. Lee -0- -0- 13,914 20,482 121,830 108,464
- -------------------
(1) Closing price of the Corporation's Common Stock at December 31, 1996 was
$16.375.
(2) Mr. Montgomery resigned as an officer of the Corporation and the Bank,
effective September 30, 1996.
EXECUTIVE DEFERRED COMPENSATION AGREEMENTS. Michael S. Patterson,
President and Chief Executive Officer of the Corporation and the Bank, entered
into a Deferred Compensation Agreement dated March 1, 1992, with the Bank,
pursuant to which Mr. Patterson may elect annually to defer up to $30,000 of
compensation, to be recorded in an interest-bearing deferred compensation
account maintained in his name. Such account shall be paid to Mr. Patterson in
approximately equal installments over a ten-year period, with the first
installment to be made on or before 30 days following June 30, 2002. Under
certain circumstances, Mr. Patterson may elect to postpone such first
installment payment until a subsequent date. The Bank may terminate such
deferred compensation plan for Mr. Patterson at any time.
Debra L. Lee, Executive Vice President of the Corporation and the Bank,
entered into a Deferred Compensation Agreement dated June 9, 1994, with the
Bank, pursuant to which Ms. Lee may elect annually to defer up to $30,000 of
compensation, to be recorded in an interest-bearing deferred compensation
account maintained in her name. Such account shall be paid to Ms. Lee, at her
discretion, upon her voluntary termination of employment or her retirement
either in one lump sum after such termination or retirement or in approximately
equal installments over a ten-year period, with the first installment to be made
on or before 30 days following June 30, 2012. Under certain circumstances, Ms.
Lee may elect to postpone such first installment payment until a subsequent
date, provided the Bank concurs in such postponement. The Bank may terminate
such deferred compensation plan for Ms. Lee at any time.
The Bank has established a trust to administer and fund the deferred
compensation plans for Mr. Patterson and Ms. Lee, and, accordingly, contributes
periodically to the trust to fund the plans.
12
SUPPLEMENTAL EARLY RETIREMENT PLAN. In January 1996, a Supplemental
Early Retirement Plan (the "SERP") was approved by the Board of Directors of the
Corporation for the benefit of Michael S. Patterson, President and Chief
Executive Officer of the Corporation and the Bank. The SERP is a benefit plan
which will provide retirement income for Mr. Patterson, in conjunction with the
Bank's 401(k) Plan and Social Security benefits, at an amount equal to 60% of
his projected final pay at retirement. The SERP provides for payment by the
Corporation of the premiums on a life insurance policy insuring Mr. Patterson's
life, which policy will be owned by Mr. Patterson, subject to a collateral
assignment to the Corporation to secure repayment of its interest in the cash
value of the policy. The SERP includes a deferred compensation arrangement, by
which Mr. Patterson will receive a vested interest in 10% of the policy's cash
value for each year of service with the Corporation. The SERP took into
consideration the five years of service completed by Mr. Patterson on the date
of the SERP's implementation, so upon implementation Mr. Patterson immediately
was vested in 50% of the policy's cash value. If Mr. Patterson completes four
additional years of service with the Corporation, he will be eligible to receive
all of the cash value, even if his employment is terminated prior to his
retirement. If Mr. Patterson's employment is terminated before completion of
four additional years of service due to a change in control of the Corporation,
he automatically will become fully vested in 100% of the policy's cash value.
The SERP also has the benefit of providing key man coverage on Mr. Patterson.
EXECUTIVE EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL AGREEMENTS. Mr.
Patterson, the Corporation's President and Chief Executive Officer, entered into
an employment agreement with the Corporation and the Bank in December 1993. The
agreement continues until December 31, 1996, and provides for a base monthly
salary as is determined from time to time by the Bank but not less than $10,479,
together with certain fringe benefits. In the event of the involuntary
termination of his employment by the Corporation without cause, Mr. Patterson is
entitled to continue to receive, on a monthly basis for the remainder of the
term of the Agreement or 12 months after the date of such termination, whichever
is longer, his base monthly salary, all fringe benefits, and an amount equal to
the average bonus paid to Mr. Patterson over the prior three years. The Bank's
obligation to make such salary payments and to provide such fringe benefits
terminates upon Mr. Patterson's death or disability. Mr. Patterson's employment
agreement provides for certain payments to him in the event there is a change in
control of the Corporation. Specifically, upon a change in control, the term of
the agreement is set at three years from the date of the change in control.
Further, Mr. Patterson may terminate the agreement upon a change in control of
the Corporation if, after one year from the date of such change in control, he
determines that he has not been assigned duties commensurate with his duties
prior to the change in control under terms or conditions satisfactory to him. If
Mr. Patterson so terminates the agreement, the agreement provides that the
Corporation will pay to him for the remainder of the term of the agreement an
amount equal to 100% of his then base monthly salary, fringe benefits, and an
annual amount equal to the average of the bonus paid to Mr. Patterson over the
prior three years. The agreement further provides that, unless terminated by the
other party, the term automatically is extended for an additional year on the
same terms and conditions set forth in the agreement. Consequently, the
agreement's term automatically was extended to December 31, 1997.
H. Leigh Ballance, Jr., an Executive Vice President of the Corporation,
entered into an employment agreement with the Corporation and the Bank on April
1, 1995. The agreement continues until April 1, 1998, and provides for a base
annual salary as is determined from time to time by the Bank but not less than
$116,000, together with certain fringe benefits. In the event of the involuntary
termination of his employment by the Corporation without cause, Mr. Ballance is
entitled to continue to receive, on a monthly basis for the remainder of the
term of the Agreement, his base salary and health and disability insurance
coverage. The Bank's obligation to make such salary payments and to provide such
fringe benefits terminates upon Mr. Ballance's death or disability. Mr.
Ballance's employment agreement provides for certain payments to him in the
event there is a change in control of the Corporation. Specifically, upon a
change in control, the term of the agreement is set at three years from the date
of the change in control. Further, Mr. Ballance may terminate the agreement upon
a change in control of the Corporation if, after one year from the date of such
change in control, he determines that he has not been assigned duties
commensurate with his duties prior to the change in control under terms or
conditions satisfactory to him. If Mr. Ballance so terminates the agreement, the
agreement provides that the Corporation will pay to him for the remainder of the
term of the agreement an amount equal to 100% of his then base monthly salary,
fringe benefits, and an annual amount equal to the average of the bonus paid to
Mr. Ballance over the prior
13
three years. The agreement further provides that, unless terminated by the
other party, the term automatically is extended for an additional year on the
same terms and conditions set forth in the agreement.
Steven R. Ogburn, an Executive Vice President of the Corporation, and
Debra L. Lee, Executive Vice President and Chief Financial Officer of the
Corporation, each entered into a Change of Control Agreement with the
Corporation and the Bank on June 18, 1996. Each agreement continues until June
18, 1998. Each agreement provides that in the event of a termination of the
officer's employment in connection with, or within 24 months after, a change of
control of the Corporation or the Bank, for reasons other than cause, the
officer shall receive an amount equal to two times (i) his or her then current
salary plus (ii) the average of the cash bonus paid to the officer by the Bank
under the Bank's cash bonus plan during the immediately preceding two years.
Further, in such event, the officer shall continue to receive for a period of
two years after his or her termination all benefits the officer was receiving
and entitled to on his or her termination date, or the officer may elect to
receive the dollar equivalent of such benefits. The officer may elect to receive
all such payments either in one lump sum or in 24 equal monthly payments. In
addition, the officer may terminate the agreement upon a change of control of
the Corporation if, within 24 months of such change of control, the officer is
assigned duties inconsistent with his or her duties at the time of the change of
control, his or her annual base salary is reduced below the amount in effect
prior to the change of control, the officer's benefits are reduced below the
level prior to the change of control (unless benefits are reduced for all
employees), or the officer is transferred to a location more than 50 miles from
Raleigh without the officer's consent. Each agreement further provides that,
unless terminated by the Corporation and the Bank, notice of which must be given
at least 13 months prior to the next anniversary date, the term automatically is
extended for an additional two years on the same terms and conditions set forth
in the agreement.
PERFORMANCE GRAPH
The following line graph illustrates the cumulative total shareholder
return on the Corporation's Common Stock over the five-year period ending
December 31, 1996 and the cumulative total return over the same period of the
indexes listed below. Each graph assumes $100 originally invested on December
31, 1991. No dividends were paid by the Bank prior to its holding company
reorganization. The Corporation paid a quarterly cash dividend of $.04 per share
from the third quarter of 1994 through the second quarter of 1995, a quarterly
cash dividend of $.06 per share in the third and fourth quarter of 1995, a
quarterly cash dividend of $.07 in the first quarter of 1996, a quarterly cash
dividend of $.08 in the second and third quarters of 1996, and a quarterly cash
dividend of $.10 in the fourth quarter of 1996. The numbers in the graph assume
that all cash dividends were reinvested.
The graph reflects the Nasdaq U.S. Index, the Standard & Poors 500
Index and a regional peer group index based on the common equity securities of a
group of financial institutions in the southeastern United States, which index
was prepared by an entity not affiliated with the Corporation.
14
TRIANGLE BANCORP, INC.
PERFORMANCE GRAPH
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
TRIANGLE BANCORP, INC. 100 123 136 170 247 290
NASDAQ INDEX 100 116 134 131 185 227
S & P 500 INDEX 100 108 118 120 165 203
REGIONAL PEER GROUP 100 156 179 202 272 332
INDEX(1)
- ----------------
(1) Includes the following financial institutions: Bank of Granite
Corporation, Carolina First Corporation, CCB Financial Corporation,
Centura Banks, Inc., Century South Banks, Inc., F & M National
Corporation, First Bancorp, First Charter Corporation, Jefferson
Bankshares, Inc., LSB Bancshares, Inc., and MainStreet BankGroup, Inc.
Allied Bankshares, Inc., First National Bancorp, Premier Bankshares
Corporation and United Carolina Bancshares Corporation have been
removed from the group as they all have been or are in the process of
being acquired. Sources: Fact Set Data Systems, Inc., Center for
Research in Security Prices.
15
INDEBTEDNESS OF MANAGEMENT
The Corporation has had, and expects to have in the future, banking
transactions, including loans, in the ordinary course of business with its and
the Bank's directors, executive officers and their associates. In the opinion of
management of the Corporation, the outstanding indebtedness and commitments to
such individuals were made in the ordinary course of business and on
substantially the same terms, including interest rates, collateral, and payment
terms, as those prevailing at the same time for comparable transactions with
other persons, and do not involve more than the normal risk of collectability or
present other unfavorable features. At December 31, 1996, indebtedness of
directors and executive officers of the Corporation to Triangle totaled an
aggregate of $4,008,000 or 4.6% of shareholders' equity.
TRANSACTIONS WITH MANAGEMENT
In 1996, the Corporation purchased insurance through Associated
Insurers, Inc. ("Associated") as an agent. Robert L. Guthrie, a director of the
Corporation, is the President and Chief Executive Officer of Associated. The
Corporation paid premiums to Associated in 1996 in the amount of $231,000. Also
in 1996, the Corporation paid Clancy & Theys Construction Company $1,760,000 for
construction projects for the Corporation's headquarters building and various
branch offices. David T. Clancy, a director of the Corporation, is President of
Clancy & Theys Construction Company. Office furniture for various of the Bank's
offices and the Corporation's headquarters building were purchased from Alfred
Williams & Co. for an aggregate price of $284,000 in 1996. J. Blount Williams, a
director of the Corporation, is President of Alfred Williams & Co.
Management of the Corporation believes that the terms of these
transactions were at least as favorable to the Corporation as those available
from other sources.
PROPOSAL 3. APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN,
AS AMENDED AND RESTATED
In 1995, the Corporation's Board of Directors adopted the Triangle
Bancorp, Inc. Employee Stock Purchase Plan (the "Stock Purchase Plan"). Pursuant
to the Plan, eligible employees of the Corporation and its subsidiaries may
elect to have the Corporation deduct a certain percentage of their salary to be
held in trust and periodically used to purchase Common Stock of the Corporation
in the open market at market prices. The purpose of the Stock Purchase Plan
generally is to encourage the continued service of employees of the Company and
its subsidiaries by giving them an opportunity to become shareholders, or to
increase their shareholdings, and to share in the benefit of potential increases
in the value of the Common Stock.
During January 1997, the Corporation's Board of Directors approved,
subject to shareholder approval, an amendment and restatement of the Stock
Purchase Plan to allow the Stock Purchase Plan to qualify as a stock purchase
plan under Section 423 of the Code. As a stock purchase plan qualified under
Section 423 of the Code, eligible employees will receive a tax benefit, as
described below. A discussion of the Stock Purchase Plan, as proposed to be
amended and restated, follows.
Persons eligible to participate in the Stock Purchase Plan
("Participants") are all those active employees of the Corporation and its
subsidiaries, except persons whose customary employment is 20 hours or less per
week. At January 31, 1997, there were a total of 353 employees of the
Corporation and its subsidiaries who would be eligible as Participants based on
the above criteria.
The Stock Purchase Plan allows each Participant to specify a dollar
amount of compensation to be deducted by the Corporation from the Participant's
periodic payment of salary or wages, provided that such deduction does not
exceed 10% of a Participant's compensation. Compensation includes salary,
bonuses and fringe benefits, and deferred compensation. After deduction, the
amount is held in trust by Wachovia Bank & Trust Company (the "Trustee") in an
account for the Participant. Deducted amounts will be held in an account with
the Trustee for the employee and will be applied toward the purchase of Common
Stock. Beginning in July 1997, and every July and January thereafter, the
Trustee will purchase as many whole shares of Common Stock as possible with the
money held in each Participant's
16
account. The Common Stock purchased will be newly issued shares of Common Stock.
No employee may purchase during any calendar year shares having a fair market
value in excess of $25,000. Further, no Participant may purchase shares if the
purchase would make the Participant the owner of 5% or more of the outstanding
shares of Common Stock.
Purchases of Common Stock will be made by the Trustee every six months
on June 30 and December 31. The purchase price per share (the "Purchase Price")
of Common Stock will be 85% of the lesser of the "fair market value" of a share
of Common Stock on January 1 or June 30, if the purchase is made on June 30, or
85% of the lesser of the "fair marker value" of a share of Common Stock on July
1 or December 31, if the purchase is made on December 31. Thus, Participants
will receive a 15% discount on the then market price of the Common Stock. For
purposes of the Stock Purchase Plan, the "fair market value" of a share will be
the closing price of a share of Common Stock on the Nasdaq National Market
System on the purchase date. Shares of Common Stock purchased will be held by
the Trustee in the Participant's account until such time as the Participant
elects to withdraw the shares. While held in the account by the Trustee, a
Participant will be entitled to vote all such shares and receive cash and stock
dividends thereon. Additionally, while held in the account, any cash dividends
paid on the Common Stock held in the account will automatically be reinvested in
newly issued whole shares of Common Stock.
Under the Code, no taxable income is realized by a Participant for the
15% discount on the purchase price of the Common Stock. No tax deduction may be
taken by the Corporation for the discount, however. The Board of Directors
believes that this tax advantage will further encourage employees of the
Corporation and its subsidiaries to purchase Common Stock of the Corporation,
and therefore believes that the proposed amendment to the Stock Purchase Plan is
in the best interest of the Corporation and its shareholders.
A total of 250,000 shares of Common Stock are reserved for purchase
under the Stock Purchase Plan. In the event of increases, decreases or changes
in the Corporation's outstanding Common Stock resulting from a stock dividend,
recapitalization, reclassification, stock split, consolidation, combination or
similar event, or resulting from an exchange of shares or merger or other
reorganization in which the Corporation is the surviving entity, an appropriate
adjustment will be made in the aggregate number of shares which are reserved
under the Stock Purchase Plan and in the Purchase Price. In the event of the
merger or consolidation or similar reorganization or transaction in which the
Corporation is not the surviving entity, shares of the successor entity shall be
substituted for shares of Common Stock.
If the amended and restated Stock Purchase Plan is approved, it will be
effective as of July 1, 1997 and Participants may begin deductions under the
amended and restated Stock Purchase Plan at that time. Unless earlier terminated
by the Board of Directors of the Corporation, the Stock Purchase Plan will
terminate on December 31, 2006. A Participant may withdraw from the Stock
Participation Plan at any time. Termination of a Participant's employment with
the Corporation or its subsidiaries will result in the automatic withdrawal of
the Participant from the Stock Purchase Plan.
The Stock Purchase Plan will be administered by a committee (the
"Committee") appointed by and consisting of two or more members of the
Corporation's Board of Directors who are not employees of the Corporation or any
of its subsidiaries and who are otherwise "disinterested directors" as such term
is defined in Rule 16b-3 promulgated under the Exchange Act. Among other things,
the Committee is authorized to interpret and establish rules and to make all
determinations and take all other actions relating to and reasonable or
advisable in administering the Stock Purchase Plan. To the extent permitted by
applicable law, members of the Committee will be indemnified by the Corporation
for legal expenses and liability incurred in connection with the administration
of the Stock Purchase Plan, except for actions or inactions which are not in
good faith or which constitute willful misconduct.
The Board of Directors, upon recommendation of the Committee, may, from
time to time, amend, modify, suspend, terminate or discontinue the Stock
Purchase Plan without notice. Any modification or amendment of the Stock
Purchase Plan that (I) increases the aggregate number of shares of Common Stock
reserved under the Stock Purchase Plan, (II) changes the method of determining
the Purchase Price, or (III) materially changes the eligibility requirements for
participation in the Stock Purchase Plan shall be subject to the approval of the
Corporation's shareholders.
17
Approval by the shareholders of the Stock Purchase Plan, as amended and
restated, is required under the Code. If the Stock Purchase Plan, as amended and
restated, is not approved by the shareholders, the Stock Purchase Plan, as it
currently exists will remain in effect.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE "FOR" PROPOSAL 3.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P., Certified Public Accountants, has
been appointed by the Board of Directors to serve as the Corporation's
independent accountants for 1997, and a proposal to ratify that appointment will
be introduced at the Annual Meeting. If shareholders do not approve this
proposal, the Board of Directors will reconsider the appointment.
Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they desire
to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 4.
PROPOSALS OF SHAREHOLDERS
It currently is expected that the 1998 Annual Meeting will be held
during April 1998. Any proposal of a shareholder which is intended to be
presented at the 1998 Annual Meeting must be received by the Corporation at its
principal executive office in Raleigh, North Carolina, not later than November
28, 1997, in order to be included in the Corporation's proxy statement and form
of appointment of proxy to be issued in connection with that meeting.
March 21, 1997
18
*******************************************************************************
APPENDIX
REVOCABLE APPOINTMENT OF PROXY
TRIANGLE BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1997
Appointment of Proxy Solicited by Board of Directors
The undersigned hereby appoints Steven R. Ogburn, Debra L. Lee and William V.
Leaming, Jr., or any of them, with full powers of substitution, to act as
attorneys and proxies to vote all shares of common stock of Triangle Bancorp,
Inc. (the "Corporation") held of record by the undersigned on March 10, 1997 at
the Annual Meeting of Shareholders to be held at the Greenville Hilton, 207
Southwest Greenville Boulevard, Greenville, North Carolina, on Monday, April 28,
1997, at 3:00 P.M., and at any adjournments thereof, as follows:
1. Approval of an amendment to Article III, Section 2 of the Corporation's
Bylaws to increase the maximum number of directors of the Corporation from
24 to 26.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
2. Election of directors:
[ ] [ ]
FOR ALL NOMINEES WITHHOLD AUTHORITY TO VOTE
LISTED BELOW FOR ALL NOMINEES
LISTED BELOW
For One-Year Terms: Carole S. Anders, Michael A. Maxwell and Patrick H.
Pope For Two-Year Terms: William R. Pope and Billy N. Quick, Sr.
For Three-Year Terms: H. Leigh Ballance, Jr., James P. Godwin, Sr.,
Wendell H. Murphy, Michael S. Patterson, J. Dal Snipes, N. Johnson
Tilghman, Sydnor M. White, Jr., and J. Blount Williams
Instruction: To withhold your vote for one or more nominees, write the
name(s) of such nominee(s) on the line below.
3. Approval of Triangle Bancorp, Inc. Employee Stock Purchase Plan , as
amended and restated.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. Ratification of appointment of Coopers & Lybrand L.L.P., as independent
public accountants for fiscal 1997:
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
5. Transaction of any other business that may properly come before the
meeting.
The Board of Directors recommends a vote FOR each of the listed proposals.
THIS APPOINTMENT OF PROXY WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE
GIVEN, THIS APPOINTMENT OF PROXY WILL BE VOTED FOR PROPOSALS 1, 3 AND 4, AND, IN
THE ELECTION OF DIRECTORS, BY CASTING AN EQUAL NUMBER OF VOTES FOR EACH NOMINEE
LISTED UNDER PROPOSAL 2. IF, AT OR BEFORE THE TIME OF THE MEETING, ANY NOMINEE
LISTED UNDER PROPOSAL 2 HAS BECOME UNAVAILABLE FOR ANY REASON, THE PROXIES HAVE
THE DISCRETION TO VOTE FOR A SUBSTITUTE NOMINEE.
This appointment of proxy may be revoked at any time before it is exercised by
filing with the Secretary of the Corporation either an instrument revoking it or
a duly executed appointment of proxy bearing a subsequent date or by attending
the Annual Meeting and voting in person.
The undersigned acknowledges receipt from the Corporation, prior to the
execution of this appointment of proxy, of the Notice of Annual Meeting, a Proxy
Statement dated March 21, 1997, and the 1996 Annual Report to Shareholders.
Dated:
Print Name of Shareholder
Signature of Shareholder
Please date and sign your name exactly as your name appears on this appointment
of proxy. If shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title.
If shareholder is a corporation, please sign in full corporate name by the
president or other authorized officer. If shareholder is a partnership, please
sign in partnership name by authorized person.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS APPOINTMENT OF PROXY
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE
TRIANGLE BANCORP
ANNUAL REPORT
1996
Shareholder Information
Annual Meeting
The Annual Meeting of the shareholders of Triangle Bancorp, Inc. will be held on
Monday, April 28, 1997, at the Greenville Hilton, 207 Southwest Greenville
Boulevard, Greenville, NC at 3:00 p.m.
Common Stock
At December 31, 1996, the Company had 10,468,036 shares of common stock
outstanding which was held by approximately 7,000 shareholders of record. The
Company's stock is traded Over-the-Counter on the NASDAQ National Market under
the ticker symbol TRBC.
Stock Transfer Agent and Registrar
First Citizens Bank
Stock Transfer Department
2917 Highwoods Boulevard
Raleigh, North Carolina 27604
Independent Accountants
Coopers & Lybrand L.L.P.
Certified Public Accountants
150 Fayetteville Street Mall
Suite 2300
Raleigh, North Carolina 27601
Quarterly Common Stock Prices
and Dividends
The following table sets forth the range of high and low per share sales prices
as reported by NASDAQ for the Company's common stock. The table also sets forth
per share dividend information for the period indicated. See "Management's
Discussion and Analysis of Financial Condition and Results of Operation"
contained elsewhere in this report for a description of limitations on the
ability of the Company to pay dividends.
Dividend Reinvestment and Stock Purchase Plan
Triangle Bancorp, Inc. has a Dividend Reinvestment and Stock Purchase Plan which
allows shareholders to reinvest dividends and buy additional stock in any amount
up to $2,000 per quarter after they have made their initial purchase of stock.
For further information and an application, contact our Stock Transfer Agent.
About This Report
The 1996 Annual Report is presented using a
summary format intended to provide information
regarding Triangle Bancorp, Inc.'s financial position and results of operations
in a concise manner that will be meaningful and useful to our shareholders. The
audited financial statements and detailed analytical schedules are contained in
the Triangle Bancorp, Inc. Annual Report on Form 10-K for the year ended
December 31, 1996.
Form 10-K
A copy of Triangle Bancorp, Inc.'s Form 10-K Annual Report to the Securities and
Exchange Commission for 1996 will be furnished, without charge, upon written
request to:
Investor Relations
Triangle Bancorp, Inc.
P.O. Box 31828
Raleigh, North Carolina 27622
Equal Opportunity Employer
As an equal opportunity employer, Triangle Bancorp, Inc. pledges to recruit,
hire, train and promote persons in all job classifications, without regard to
race, color, religion, sex, national origin, age, disability or veteran status.
Market Makers
Dean Witter Reynolds
Herzog, Heine, Geduld, Inc.
Interstate/Johnson Lane
Legg Mason Wood Walker, Inc.
Raymond James & Associates, Inc.
Robinson Humphrey Co., Inc.
Sandler O'Neill & Partners
Scott & Stringfellow
Wedbush Morgan Securities, Inc.
Wheat First Securities, Inc.
Triangle Bancorp, Inc.
Corporate Headquarters
4300 Glenwood Avenue
Raleigh, NC 27612
(919) 881-0455
1996 1995
High Low Dividend High Low Dividend
First Quarter 16.00 13.88 .07 10.75 9.13 .03
Second Quarter 15.00 13.50 .08 10.75 9.00 .03
Third Quarter 15.25 13.50 .08 14.75 10.00 .05
Fourth Quarter 16.38 14.50 .10 15.25 11.75 .06
(Full page photo appears here)
(Bar graph appears here with the following plot points.)
92 93 94 95 96
$6.75 $7.50 $10.00 $14.25 $16.38
- ------------------------------------------------
ANNUAL STOCK PRICE
(Bar graph appears here with the following plot points.)
92 93 94 95 96
$471 $681 $742 $854 $971
- ------------------------------------------------
TOTAL ASSETS
(in millions)
(Bar graph appears here with the following plot points.)
92 93 94 95 96
$3 $4 $4 $8 $11
- ------------------------------------------------
NET INCOME
(in millions)
(Bar graph appears here with the following plot points.)
92 93 94 95 96
$0.38 $0.47 $0.41 $0.73 $1.04
- ------------------------------------------------
FULLY DILUTED EARNINGS
PER SHARE
Selected Consolidated Financial Information
- --------------------------------------------------------------------------------
1996 1995 1994 1993 1992
At Period End (in thousands)
Loans $639,718 $559,707 $467,842 $ 395,398 $ 274,895
Securities Available for Sale 146,086 127,904 102,427 -- --
Securities Held to Maturity 97,112 76,285 75,899 173,198 127,951
Total Assets 971,105 853,928 742,438 681,131 470,615
Total Deposits 847,764 714,590 636,276 583,571 407,890
Advances from the Federal Home Loan Bank 10,000 19,500 10,500 5,500 --
Subordinated Debentures -- -- 2,000 6,720 2,000
Shareholders' Equity $ 86,896 $ 79,407 $ 68,306 $ 65,304 $ 50,487
Summary of Operations (in thousands)
Net Interest Income $ 40,256 $ 35,101 $ 30,601 $ 21,213 $ 18,990
Provision for Loan Losses 2,100 428 1,250 2,147 1,905
Noninterest Income 8,494 8,066 5,758 6,278 4,558
Noninterest Expense 29,169 30,719 28,719 20,492 18,035
Net Income $ 11,301 $ 7,858 $ 4,182 $ 3,855 3,122
Per Share Data
Primary Earnings per Share $ 1.05 $ 0.74 $ 0.41 $ 0.47 $ 0.38
Fully Diluted Earnings per Share $ 1.04 $ 0.73 $ 0.41 $ 0.47 $ 0.38
Book Value $ 8.30 $ 7.62 $ 6.70 $ 6.62 $ 6.27
Cash Dividends $ 0.31 $ 0.17 $ 0.07 $ 0.02 $ 0.01
Selected Ratios
Return on Average Assets 1.22% 1.00% 0.60% 0.78% 0.69%
Return on Average Equity 13.63% 10.63% 6.21% 7.25% 6.33%
Shareholders' Equity/Total Assets 8.95% 9.30% 9.20% 9.59% 10.73%
Dear Shareholders
It is with a great deal of pride that we present the 1996 operating results for
Triangle Bancorp. For the year, net income grew by 43% from $7.9 million in 1995
to $11.3 million in 1996. Total assets grew from $854 million to $971 million,
an increase of 14%. As we stated in our 1995 report to you, our primary goal
during 1996 was to achieve the earnings potential made possible by our merger
and acquisition activity in 1995. We believe the operating results outlined in
this report show we were successful in achieving our goal. We were especially
pleased with our growth in fully diluted earnings per share, which grew by 42%
from $.73 cents per share in 1995 to $1.04 per share in 1996, and the
improvement in our return on average equity, which grew from 10.6% in 1995 to
13.6% in 1996. Due to these positive operating results, the board of directors
increased the annualized cash dividend from $.24 cents per share in the fourth
quarter of 1995 to $.40 cents per share in the fourth quarter of 1996, an
increase of 67%. As a result, we paid out $3.3 million in cash dividends, 29% of
net income, to our shareholders in 1996 compared to $1.8 million, 22% of net
income, in 1995.
Merger and acquisition activity abated in 1996 compared to the prior
year, but was still quite active. In the first quarter of 1996, we purchased
four offices of Raleigh Federal Savings Bank from First Union National Bank,
acquiring deposits totaling approximately $55 million. These offices allowed us
to enter into two new markets, Mount Olive and Clayton, and to consolidate two
offices into existing branches in Benson and Havelock. In June, we
simultaneously divested our office in Elizabeth City and acquired an office of
Southern Bank in Scotland Neck, which we immediately consolidated into our
existing office there. During the fourth quarter, we acquired Granville United
Bank, headquartered in Oxford, NC. They operated two offices in Oxford and one
in Creedmoor, with approximately $60 million in total assets. We believe these
acquisitions were good additions to our branch network and will be accretive to
earnings per share in 1997.
In keeping with our strategy to improve market share in rapidly growing
markets, we opened additional offices in Fayetteville, Greenville, New Bern and
Raleigh. We also constructed new main offices in New Bern, Fuquay-Varina and
Raleigh to serve our expanding customer base in these growing markets. With the
addition of these new offices and the acquired offices, we increased our total
banking facilities from 37 at year end 1995 to 44 offices at year end 1996.
In addition to developing our branch network, we expanded other ways in
which customers can do business with our bank. We increased the number of
proprietary ATMs from 18 in December 1995 to 26 at year end 1996. Our voice
2
response system, VoiceLink, which handled over 580,000 calls in 1996 was
expanded in the second quarter of 1996 by adding a HelpDesk option to handle
customer inquiries. It is now handling over 5,000 customer service calls per
month, and we expect this to continue to grow in 1997. To enhance our line of
business products, we added BusinessPay, a service which enables our customers
to originate ACH transactions, to our cash management services. During the first
quarter of 1997, we will add Business Online, an online PC access service, to
enable business customers to do a multitude of electronic transactions from the
convenience of their offices.
During 1997 we will continue to look for ways to improve convenience
for our customers, while at the same time lowering our cost of delivering
financial services. We will significantly increase our ATM network by adding
machines at existing offices and opening strategically located off-site cash
dispensing machines. We also have entered into an agreement with Winn Dixie
Supermarkets to open a minimum of six full service offices in stores located
within our existing market area. These branches will provide a full range of
services and expanded banking hours for our current customers, while giving us
the opportunity to market our products and services to a large number of
potential customers. If these stores meet our projections in 1997, we will
expand the number of in-store offices throughout our market area in 1998. We
believe this is an excellent way to expand our branch network at a lower cost
than traditional branches and to offer expanded hours for our customers.
During 1997 we also plan to expand our technology-based services.
During the first quarter, we will introduce our site on the Internet at
"www.trianglebank.com." This will allow existing and potential customers to get
information on bank services, begin new relationships with us, and review
shareholder information. We also are exploring the possibility of offering
online banking for retail customers in the second half of the year. However, we
will not lose sight of our commitment to superior personal service and working
with our customers on a one-to-one basis. As larger financial institutions move
toward a centralized and impersonal way of dealing with their customers, we feel
a significant opportunity will be created for us to continue to differentiate
our level of personal service as a super community bank. We strongly believe our
commitment to personal service is the main reason we have experienced such
positive growth trends in loans, deposits and profitability since our bank began
in 1988. We are committed to protecting and building on this competitive
advantage.
(Photo appears here with the following caption)
Michael S. Patterson
Chairman, President and CEO,
Triangle Bancorp, Inc. and
Triangle Bank
Triangle Bancorp, Inc. and Subsidiary 3
As we look to the future of our company, we believe the consolidation
of our industry will continue at a rapid pace for the remainder of this decade.
In North Carolina alone, the number of chartered commercial banks has declined
from 57 at year end 1993 to 47 at year end 1996. During this time, we have
merged five community banks into Triangle Bank, while growing from the 17th
largest bank in the State, with $302 million in assets to the 10th largest bank
with $971 million in assets. This merger strategy has significantly increased
shareholder value as our stock price has increased from $7.25 per share on
December 31, 1993 to $16.38 on December 31, 1996, an increase of 126%. During
this same time, the market capitalization for our company has grown from $30
million to $174 million, an increase of 480%. This strategy has been beneficial
for our shareholders and we plan to continue pursuing merger and acquisition
opportunities in 1997. In addition, we will actively seek non-bank acquisitions
to diversify our income sources.
In closing, we remain confident that Triangle Bancorp will build upon
its past successes to become one of the finest super community banking
franchises in North Carolina and the Southeast. We are committed to our mission
of providing superior returns for shareholders, exceptional products and service
for customers and career opportunities for employees. We sincerely appreciate
the support of our shareholders and encourage your attendance at our annual
meeting in Greenville, North Carolina on April 28.
Sincerely,
(signature of Michael S. Patterson appears here)
Michael S. Patterson
Chairman, President
and CEO
(Photo appears here with the following caption)
(Left to Right)
H. Leigh Ballance, Executive Vice
President; Debra L. Lee, Executive Vice
President; Steven R. Ogburn, Executive
Vice President
4
Building on Success
As results show, 1996 was a good year for Triangle Bank. We enter 1997 strongly
positioned for future growth and to take advantage of opportunities as they
arise. With total assets ranking 10th among the banks in North Carolina, we
stand, depending on your perspective, as the largest of the small or the
smallest of the large banks in the State. Our perspective is that we are large
enough to serve your financial needs and yet small enough to value the
opportunity to offer personal service to you. We also enjoy favorable
positioning in a literal sense, with branches spread throughout one of the
nation's best areas for business. Certainly when executive vice president and
banking group director Leigh Ballance says, "We are in the right place at the
right time," he means all of the above and more. He alludes to the fact that
approximately 67% of Triangle Bank's assets are held in Metropolitan Statistical
Areas (MSAs). MSAs are urbanized areas, cities with 50,000 people or more or a
total metropolitan population of 100,000 or more, as identified by the U.S.
Office of Management and Budget. These areas are important to our future as they
are noted for having favorable business conditions and a strong probability for
growth in the coming years. We have invested in these areas, which over the
long-run should yield above average asset growth.
Staying positioned is a dynamic process. Paradoxically, the success of
banks today depends on their ability to manage constant change. That is why we
will continue the development of new products and services, ones our customers
need and demand. We also will use technology and advanced marketing techniques
to fuel growth and increase profitability.
What does 1997 hold? ... a focus on service delivery, technology,
training and new customer-driven marketing efforts. In each of these areas, we
see growth and opportunity in 1997. We are implementing strategies to enhance 1)
service delivery to current customers, thereby earning their continued loyalty;
2) the use of technology in delivering fast, efficient service to keep pace with
our customers' needs; 3) the depth and extent of our training efforts to ensure
our staff members are fully prepared; and 4) the overall effectiveness of our
marketing efforts, thereby attracting new customers and ensuring that current
customers are fully banked with the financial products and services they need.
In recent years we have grown to a great extent through mergers and
acquisitions, a strategy we will continue to pursue when opportunities present
themselves. In 1997, however, we also will focus our attention on a number of
cost-effective ways to increase profitability.
Triangle Bancorp, Inc. and Subsidiary 5
Service
"...personal service without the big bank
bureaucratic syndrome."
-Wilmington, NC
"...Down home service like no other institution:
Excellent!!!."
-Lillington, NC
"...the neighborhood atmosphere...
very personal and warm."
-Durham, NC
"...I have done business
with banks all over the
U.S. from VA to AZ, now
NC. Your bank is just as
aggressive and the
service is as good as
any bank around!"
- -Havelock, NC
(Photo appears here with the
following caption)
Zane Sosna, banking center
manager at our Garner office,
has been recognized for
providing customers with
exemplary service.
6
As everyone knows, service has been and still is the business watchword of the
'90s. As our customer base grows, we will continue to offer the superior level
of customer service our customers have come to expect at Triangle Bank. How do
we know they expect and appreciate it? In addition to listening to them, in each
of our offices, customers can pick up survey cards which read, "We'd Like Your
View Of How We're Doing." These cards are sent to the president of the bank for
his review and are then forwarded to the appropriate bankers for follow-up.
Sometimes our customers let us know where there is a concern or a new service
they would like us to consider offering, but more often than not, they say
things like "I'd specifically like to comment on...the helping hand the people
give. You can't beat the people at Triangle Bank....Coming to Triangle Bank
isn't like going to the bank. It's like dropping in on your friends." Comments
like this reflect the results of our focus on customer service.
In a rapidly growing organization operating in a changing business
environment, keeping this standard of service can be a challenge. In order to
address this concern, in 1996, we stepped up our training efforts, enhanced our
branch shopping program, and re-doubled our efforts to recognize and reward
superior customer service.
This year, approximately two-thirds of our staff members participated
in training programs at Triangle Bank. With classes ranging from basics such as,
"Opening New Accounts" and "Introduction to Sales and Service" to more advanced
programs, "Relationship Selling" and "Consumer Loan School," bankers received
the instruction they needed in order to not only meet but exceed the
expectations of their customers.
Personal service will always be our hallmark. However, as we go
forward, we also will rely on cost-effective technology to maintain or improve
convenience and speed in doing business with Triangle Bank. As the needs and
expectations of our customers grow, we will keep pace with new products and
delivery systems that meet their needs.
One solution to improving
service delivery has been the implementation and upgrading of service delivery
by phone. For the past two years, VoiceLink, our voice response system, has
provided customers a fast, convenient way to carry out many account tasks
directly over the phone. By so doing, VoiceLink has allowed our sales staff to
spend more time with customers to meet their needs and develop new business. In
early 1996, we enhanced VoiceLink by
Triangle Bancorp, Inc. and Subsidiary 7
Technology
(Photo appears here with the following caption)
Sandra Temple, branch operations
manager, led the way in the start-up
and success of our HelpDesk.
8
adding a staffed HelpDesk. This offers person-to-person assistance to customers
with questions or requests which cannot be handled through VoiceLink. It is
manned by experienced customer service representatives for extended hours from 7
a.m. until 7 p.m. Monday through Friday and from 9 a.m. until 12:00 noon on
Saturdays. At this time, VoiceLink receives nearly 30,000 calls a month, with
over 5,000 of these calls choosing the HelpDesk option. And, we are constantly
on the lookout for ways to improve service through improving the system and
enhancing its efficiency and effectiveness in serving customers.
We will continue to enhance in-branch service in our current offices
and will open new offices in 1997. Some of them will be smaller, cost-effective
in-store branches in Winn-Dixie supermarkets. These offices will provide
additional convenience for our current customers and will make our bank more
accessible to a greater number of prospective customers. The first in-store
branch is scheduled to open in April 1997.
Other service delivery improvements on the consumer side include the
further expansion of our proprietary ATM network within our branch system and
beyond. ATMs are most successful when placed in areas of high traffic where
there is a need for cash.
Using market analysis, we will determine the best
locations and will increase the convenience of banking with us through increased
market presence and accessibility.
In the area of service delivery to commercial customers, including
small businesses, the convenience of online banking services is already becoming
a reality.
Within the last six months, we have introduced ACH Origination
(Automated Clearing House), which allows direct deposit of payments, markedly
reducing the cost of check handling and improving cash flow. Another online
commercial product which will be introduced in early 1997, Business Online,
gives clients instant access to their business accounts and allows them to
transfer funds, check loan balances, get information needed for tax returns--in
short, to carry on banking from their place of business. We're enthusiastic
about the dramatic savings of time and enhanced convenience these services
afford our customers.
To help determine the need to develop online banking, in January 1997
we will survey our customers and find out what their desire is for this service.
If a significant number of customers request it, 1997 will see Triangle's entry
into online banking.
Triangle Bancorp, Inc. and Subsidiary 9
Training
Our marketing is driven by the concerns of our customers. In 1997, we will more
fully utilize our database of information about our customers called an MCIF
(Marketing Customer Information File). This system organizes demographic
information about customers, including the bank services and products they have,
into a format which enables us to determine and meet their needs more
effectively. For two years, it has helped provide the bottom line for our
marketing efforts in more than one sense. From the start, the system has been
consistently maintained, updated and upgraded, in order to be used for marketing
campaigns and targeted direct mail programs. In 1997, our Marketing Department
will push the limits of the capabilities of the MCIF, with the help of
scientific market analysis, to draw profiles of customer relationships and use
them to measure profitability and to ascertain our customers' propensity to need
and purchase additional financial services. This information will form the basis
of "1 to 1" marketing efforts through database management. Our Marketing
Department will further seek new customers by using purchased databases of
non-customers who match the profiles of Triangle's most profitable customer
relationships. This increased use of our MCIF's capabilities is one reason we
expect 1997 to be a banner year for selling and cross-selling bank services.
Early in 1997, we will intro-duce Triangle Bank's web site at
www.trianglebank.com. A presence on the World Wide Web is particularly important
in serving the needs of one of our primary markets, the Research Triangle area,
where our headquarters is located and where we have a considerable investment.
Our web site will give easy access to information for current and prospective
customers, shareholders, employees and others who are interested in finding out
more about Triangle Bank and Triangle Bancorp. The Internet may prove to be our
most cost-effective marketing medium and certainly foreshadows the advent of
online banking as a delivery system of choice for those with crowded schedules.
However, even in the absence of complete online
(Photo appears here with the following caption)
The Training Department, represented
by Susan Parent (l) and Cheryl Hill (r), is
preparing bank employees to meet the
growing needs of our customers and
the challenges of an ever-changing
work environment.
10
(Photo appears here)
Triangle Bancorp, Inc. and Subsidiary 11
banking, our web site will put information about us at the fingertips of people
who are interested in Triangle Bank and who are "connected."
All of these efforts will be backed up by internal systems that have
been created to track, recognize and reward sales and service efforts through
telemarketing, in-store branches, or traditional branch offices. We'll develop
an even better understanding of which sales efforts our customers appreciate the
most based on their responsiveness.
Even in light of these investments in technology and the introduction
of delivery systems that make it easy for our customers to not come into our
bank, day in and day out, we never lose sight of the fact that banking is about
people. Every day from the windows of our corporate headquarters on Glenwood
Avenue in Raleigh, we see thousands of cars headed for Durham, the Research
Triangle Park, Chapel Hill, and points west, thousands more headed for downtown,
north Raleigh and points east. We see the traffic as both a symptom and a symbol
of the frantic pace and busy quality of lifestyles today, with problems and
opportunities almost inseparably intertwined.
We know the future of Triangle Bank is secure as long as we reach out
to people who have hopes and dreams and the desire for a bright future. We will
spend 1997 trying to serve more of them, to serve them better, to help them sort
out their financial questions and issues, and to help them save time as well as
money.
(Photo appears here with the following caption)
Kristie Jones (l) and Susan L. Fonville (r)
head up the "1 to 1" marketing efforts
of database management and direct
marketing as well as the development
and on-going management of the Bank's
web site.
12
Marketing
(Photo appears here)
Triangle Bancorp, Inc. and Subsidiary 13
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Highlights
In early 1996, Triangle Bancorp, Inc. (the "Company") completed the purchase of
four branch offices and approximately $55 million in deposits from First Union
National Bank of North Carolina ("First Union"). This transaction was accounted
for as a purchase, therefore, the operations of these branches are reflected
only from the date of purchase.
Also during 1996, the Company acquired Granville
United Bank with assets of approximately $60 million. This acquisition was
accounted for using the pooling-of-interests method of accounting, therefore,
all historical information has been restated to reflect the operations of the
combined institutions. As a result, the Company's total assets and net income
for December 31, 1995 have been restated from $795 million to $854 million, and
from $7.4 million to $7.9 million, respectively.
During 1996, the Company's
total assets grew to $971 million from $854 million at December 31, 1995. The
growth in assets of 14% reflects internal deposit growth as well as the
acquisition of the First Union deposits. These funds were principally invested
in loans as demand was strong for most of the year. The remaining funds were
invested in securities as the liquidity of the balance sheet increased through
the year. Earnings increased $3.4 million or 43% due to increased earning
assets, increased service charges on deposit accounts and a reduction in
noninterest expenses.
The returns on average assets and equity were 1.22% and
13.63%, respectively, for 1996, as compared to 1.00% and 10.63%, respectively,
for 1995. Fully diluted earnings per share were $1.04 and $0.73 for 1996 and
1995, respectively, an increase of 42%.
Earnings Analysis
Net Interest Income
Net interest income, the principal source of the Company's earnings, is the
amount of income generated by earning assets (primarily loans and investment
securities) less the total interest cost of the funds obtained to carry them
(primarily deposits). The volume, rate and mix of both earning assets and
related funding sources determine net interest income.
Net interest income for 1996 increased to $40.3 million from $35.1 million for
1995. This 15% increase primarily reflects an increase in the volume of earning
assets of $133 million while interest-bearing liabilities increased only $120
million. This positive impact was offset slightly by a decrease in the net
interest margin from 4.92% to 4.76%.
For 1995, the Company's net interest income was $35.1 million, an increase of
15% or $4.5 million over 1994. The increase primarily reflects an increase in
the net yield on earning assets of 10 basis points from 4.82% in 1994 to 4.92%
in 1995. Net interest income was favorably impacted by growth in the volume of
earning assets, primarily loans, which exceeded the volume growth in interest
bearing liabilities by $28 million. This volume growth was offset somewhat by
the fact that the yield on interest earning assets rose 78 basis points, whereas
the cost of interest-bearing liabilities increased by 92 basis points.
(Bar graph appears here with the following plot points.)
Return on Average Equity
(percent)
92 93 94 95 96
6.33 7.25 6.21 10.63 13.63
14
Provision for Loan Losses
The provision for loan losses for 1996 was $2.1 million, a significant increase
over the provision for 1995. This increase reflects the significant growth in
the loan portfolio during 1996. The Company continues to maintain adequate
levels of coverage for nonperforming assets as well as general reserves for the
portfolio as described further in the loans section of this report.
The 1995
provision for loan losses of $428,000 was 66% lower than the 1994 provision of
$1.3 million. The Company's loan loss reserve calculation continued to show
adequate reserve levels in 1995 as the loan portfolio demonstrated improving
quality and reductions in nonperforming assets.
Noninterest Income
Noninterest income for 1996 was $8.5 million versus $8.1 million for 1995, a 5%
increase. This increase resulted primarily from an increase in service charges
on deposit accounts as transaction deposit accounts increased significantly
during 1996. Other service charges decreased since 1995 as the mortgage
servicing portfolio was sold during late 1995. The gain on the sale of that
portfolio of $529,000 was nearly matched by a gain of $558,000 on the sale of
deposits of approximately $8 million during the second quarter of 1996. Finally,
other operating income was reduced during 1996 as a result of the loss on the
sale of certain fixed assets of acquired organizations.
Noninterest income
increased $2.3 million or 41% in 1995 because of a decrease in losses on sales
of securities of $1.7 million and a $529,000 gain on the sale of the mortgage
servicing portfolio. In addition, the Company incurred a $402,000 market
valuation loss on loans held for sale during 1994 that did not reoccur in 1995.
Other service charges, commission and fees were down $250,000 due primarily to a
decrease in origination income on mortgage loans.
Noninterest Expense
Noninterest expenses of $29.2 million for 1996 decreased from $30.7 million for
1995. This decrease is due to the reduction of merger expenses and other
professional services. Absent the merger expenses, noninterest expenses
increased by 2%. This small increase, relative to a 14% increase in assets, is
primarily a result of increased intangible amortization expenses from the First
Union transaction and increased facilities expenses as a new main office was
purchased and 4 additional branch sites were acquired or constructed during
1996. These increases were offset by gaining the efficiencies of combining the
operations of merged companies.
Noninterest expenses in 1995 were $30.7 million,
an increase of $2 million or 7% over 1994. The increase was primarily in merger
related expenses as they exceeded the 1994 level by $1.7 million. Other
increases were seen in equipment (due to investment in technological
improvements), amortization of intangible assets, professional fees, advertising
and office expenses. Noninterest expenses that decreased included salaries and
benefits, occupancy, Federal deposit insurance expense and other expenses. These
decreases are due to efficiencies seen as a result of merging five institutions
into one and a deposit insurance rate decrease during the year.
(Bar graph appears here with the following plot points.)
Return on Average Assets
(percent)
92 93 94 95 96
0.69 0.78 0.60 1.00 1.22
Triangle Bancorp, Inc. and Subsidiary 15
Income Taxes
The Company's income tax expense for 1996 was approximately 35% of income. This
level is less than the expected combined state and federal statutory rates due
to tax exempt securities, held as well as the adjustment of the deferred tax
asset to reflect current tax rates.
During 1995 and 1994, the Company's income
tax expense approximated the federal statutory rate. No state tax expense was
recorded due to the use of net operating loss carryforwards, which were fully
utilized in 1995.
Balance Sheet Analysis
The Company's total assets increased from $854 million in 1995 to $971 million
in 1996, a 14% increase. This growth, reflected primarily in the loan and
investment portfolios, was funded by additional deposits. The Company continued
to have a strong ratio of average earning assets to total average assets of 91%.
Loans
The loan portfolio constitutes the Company's largest earning asset. During 1996,
average net loans increased by $104 million over the 1995 level of $512 million.
This increase was due to strong loan demand throughout the year in many of the
Company's service areas.
Nonperforming assets at December 31, 1996 of $4.3 million increased by $1.2
million from December 31, 1995. Net charge-offs for 1996 were .16% of average
loans versus .20% for 1995. As a percentage of gross loans and other real estate
owned, nonperforming assets were .66% as of December 31, 1996 versus .54% at
December 31, 1995. While nonperforming assets have increased slightly, these
levels are considered to be relatively low compared to industry averages. The
components of nonperforming assets are nonaccrual loans, loans over 90 days or
more past due and other real estate owned.
The classification "nonaccrual" identifies those loans which management
recognizes as collection problems, but which have not been identified as losses.
Loans are placed on nonaccrual status when payments of interest and/or principal
have remained delinquent for a period of 90 days or more or when management's
evaluation indicates probable default prior to the 90 day delinquency period,
unless the loan is both well secured and in the process of collection. The
Company's credit policy does not allow new funds to be committed to borrowers
who have credits in nonaccrual status.
A loan is considered impaired based on current information and events, if it is
probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. The measurement of impaired loans is generally based on the present
value of expected future cash flows discounted at the historical effective
interest rate, except that collateral-dependent loans are measured for
impairment based on the fair value of the collateral. During 1996 and 1995, the
Company did not have a significant investment in loans determined to be
impaired.
There are no loans, other than those included in non-performing assets, that (i)
represent or result from trends or uncertainties which management reasonably
expects will
(Bar graph appears here with the following plot points.)
Loans
(in millions)
92 93 94 95 96
$275 $395 $468 $560 $640
16
materially impact future operating results, liquidity, or capital resources, or
(ii) represent material credits about which management is aware of any
information which causes management to have serious doubts as to the ability of
such borrowers to comply with the loan repayment terms.
The adequacy of the allowance for loan losses is monitored by management through
an internal loan review process. Among the factors determining the level of the
allowance are loan growth, projected net charge-offs, the amount of
non-performing and past due loans and current and anticipated economic
conditions.
The allowance for loan losses at December 31, 1996 was 1.50% of gross loans
(1.53% in 1995) and 227% of nonperforming assets (283% in 1995). While
nonperforming assets have increased slightly during 1996 and the coverage ratios
noted above have decreased during 1996, based on information currently available
to management as described in the previous paragraph, the allowance for loan
losses is believed to be adequate. However, future additions to the allowance
may be necessary based on changes in economic conditions or the circumstances of
individual borrowers which may impact borrowers' ability to repay their loans.
Securities, Federal Funds Sold and Interest Bearing Deposits
Securities, Federal funds sold and interest bearing deposits at the end of 1996
totaled $245 million, compared to $208 million at December 31, 1995. Securities
available for sale increased $18 million and securities held to maturity
increased $21 million. Approximately 80% of the portfolio represents US Treasury
and Agency obligations, while municipal obligations represent approximately 11%
of the portfolio.
Deposits
Deposits increased $133 million to $848 million at December 31, 1996, compared
to $715 million at December 31, 1995. This growth was found in all categories of
deposits except interest bearing demand. Approximately $55 million of this
growth relates to the acquisition of the First Union deposits in early 1996. The
remaining increase is a result of steady growth of the existing offices,
including those opened during the year.
Other Borrowings
Short-term debt consists of Federal funds purchased and securities sold under
agreement to repurchase such securities ("repurchase agreements") and decreased
by 68% to $16 million at the end of 1996. This decrease is explained primarily
by $20 million in short-term borrowings maintained at the end of 1995 in
preparation for the First Union acquisition. The acquisition of the deposit
liabilities provided adequate cash to repay this short-term borrowing in early
1996. The remainder of the decrease is reflected as an increase in long-term
borrowings as Federal Home Loan Bank advances were obtained for greater than one
year.
Capital
The Company's primary source of new capital is retained earnings. Management
feels the Company has other funding sources if needed, including the ability to
issue additional common stock or debt. The adequacy of capital is reviewed
regularly, in light of
(Bar graph appears here with the following plot points.)
Deposits
(in millions)
92 93 94 95 96
$408 $584 $636 $715 $848
Triangle Bancorp, Inc. and Subsidiary 17
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.
Current Federal
regulations require that the Bank maintain a minimum ratio of total capital to
risk weighted assets of 8%, with at least 4% being in the form of Tier I
capital, as defined in the regulations. In addition, the Bank must maintain a
leverage ratio of 4%. As of December 31, 1996, the Bank's capital exceeded the
current capital requirements. The Bank currently expects to continue to exceed
these minimums without altering current operations or strategy.
The Company
recognizes the need to balance the retention of sufficient capital to support
future growth, meet regulatory requirements and provide shareholders with a
current cash return on their investment. As a result, for the years ended
December 31, 1996 and 1995, cash dividends paid were 29% and 22% of earnings,
respectively.
Asset and Liability Management
The largest component of the Company's earnings is net interest income, which
can fluctuate widely when significant interest rate movements occur. Management
is responsible for minimizing the Company's exposure to interest rate risk and
assuring an adequate level of liquidity.
To mitigate the impact of interest rate
movements, the balance sheet must be structured so that repricing opportunities
exist for both assets and liabilities in generally equivalent amounts at
approximately the same time intervals. Imbalances in these repricing
opportunities at any point in time constitute interest rate sensitivity.
Interest rate sensitivity management measures the potential exposure to
fluctuating interest rates. The Company's objective in managing interest rate
sensitivity is to achieve reasonable stability in the net interest margin
throughout economic and interest rate cycles by maintaining the proper balance
of rate sensitive assets and liabilities. The major factors that are used to
manage interest rate risk include the mix of fixed and floating interest rates,
pricing, and maturity patterns of all asset and liability accounts. Management
regularly reviews the Company's sensitivity position and evaluates alternative
sources and uses of funds.
The Company's interest sensitivity is monitored using
computer simulation programs which analyze the effect of various rate
environments on the Company's net interest margin. In modeling the interest
sensitivity of the Company's balance sheet, assumptions must be made concerning
the repricing of nonmaturing liabilities such as deposit transaction accounts.
Management has concluded that the historical experience of the Company and the
industry in general provide the best basis for determining the repricing
characteristics of these accounts. Accordingly, management places a portion of
transaction account balances as repricing immediately and the remainder in the
one to five year time period. Using these assumptions, the Company's interest
sensitivity within a one year time frame reflects a positive impact on net
interest income in a rising interest rate environment. The Company has
historically monitored its interest sensitivity within an acceptable range in
both rising and falling interest rate environments and keeps its exposure to
changing rates to a manageable level.
To ensure that sufficient funds are
available for loan growth and deposit withdrawals, as well as to provide for
general needs, the Company must maintain an adequate level of liquidity. Both
assets and liabilities provide sources of liquidity. Asset liquidity comes from
the Company's ability to convert short-term investments into cash and from the
maturity and repayment of loans and investment securities. Liability liquidity
(Bar graph appears here with the following plot points.)
Net Charge-offs as % of
Average Loans
92 93 94 95 96
0.63 0.27 0.68 0.20 0.16
18
is provided by the Company's ability to attract deposits and borrow against
unencumbered assets. The primary source of liability liquidity is the Company's
customer base which provides core deposit growth. The overall liquidity position
of the Company is closely monitored and evaluated regularly by management.
Management believes the Company's liquidity sources at December 31, 1996 are
adequate to meet its operating needs.
Effect of Changing Prices
The results of operations and financial condition presented in this report are
based on historical cost information and are unadjusted for the effects of
inflation. Since the assets and liabilities of banks are primarily monetary in
nature (payable in fixed, determinable amounts) the performance of the Company
is affected more by changes in interest rates than by inflation. Interest rates
generally increase as the rate of inflation increases, but the magnitude of the
change in rates may be inconsistent. While the effect of inflation on banks is
normally not as significant as is its influence on those businesses which have
large investments in plant and inventories, it does have an effect during
periods of high inflation. There are normally corresponding increases in the
money supply, and banks will normally experience above-average growth in assets,
loans and deposits. Also, increases in the price of goods and services generally
will result in increased operating expenses. Inflation has not been a
significant factor in the Company's operations to date as the inflation rate has
been moderate since its inception.
Report of Independent Accountants
The Board of Directors and Shareholders
Triangle Bancorp, Inc.
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheets of Triangle Bancorp, Inc. and subsidiary, as of
December 31, 1996 and 1995 and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996 (not presented herein); and in our report
dated January 20, 1997, we expressed an unqualified opinion on those
consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated financial statements (included on pages 20 and 21 herein) is fairly
stated, in all material respects, in relation to the consolidated financial
statements from which it has been derived.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Raleigh, North Carolina
January 20, 1997
(Bar graph appears here with the following plot points.)
Efficiency Ratio
(percent)
92 93 94 95 96
76.6 74.5 79.0 71.2 59.8
Triangle Bancorp, Inc. and Subsidiary 19
Condensed Consolidated Balance Sheets
December 31, 1996 and 1995
1996 1995
(in thousands, except share data)
ASSETS
Cash and due from banks $ 34,615 $ 41,679
Federal funds sold 1,011 2,815
Interest-bearing deposits in banks 879 1,128
Securities available for sale 146,086 127,904
Securities held to maturity, estimated market
value $97,667 in 1996 and $79,752 in 1995 97,112 76,285
Loans held for sale 2,413 3,497
Loans, less allowance for loan losses of
$9,715 in 1996 and $8,685 in 1995 639,718 559,707
Premises and equipment, net 20,181 15,554
Interest receivable 8,813 7,619
Deferred income taxes 6,700 6,019
Intangible assets, net 11,654 9,124
Other assets 1,923 2,595
$971,105 $853,926
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $139,905 $126,377
Interest-bearing demand 83,961 88,956
Savings and money market accounts 181,659 9,500
Large denomination certificates of deposit 61,684 48,673
Other time 380,555 301,084
Total deposits 847,764 714,590
Short-term debt 15,962 49,421
Other borrowings 10,000
Interest payable 6,593 6,254
Other liabilities 3,890 4,254
Total liabilities 884,209 774,519
Shareholders' equity:
Common stock; no par value; 20,000,000 shares
authorized;10,468,036 shares and 10,416,078
shares issued an outstanding at December 31,
1996 and 1995, respectively 61,544 61,297
Retained earnings 25,245 17,221
Net unrealized gains on securities available for sale 107 889
Total shareholders' equity 86,896 79,407
$971,105 $853,926
20
Condensed Consolidated Statements of Income
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
(in thousands, except share data)
Interest income:
Loans and fees on loans $ 59,179 $ 50,125 $ 40,020
Federal funds sold and securities
purchased under resale agreements 222 472 508
Securities 13,405 11,532 9,759
Deposits with other financial institutions 60 112 178
Total interest income 72,866 62,241 50,465
Interest expense:
Large denomination certificates of deposit 3,557 3,600 2,095
Other deposits 27,181 22,065 16,162
Borrowed funds 1,872 1,475 1,607
Total interest expense 32,610 27,140 19,864
Net interest income 40,256 35,101 30,601
Provision for loan losses 2,100 428 1,250
Net interest income after provision for loan losses 38,156 34,673 29,351
Noninterest income:
Service charges on deposit accounts 5,696 4,688 4,711
Other service charges, commissions and fees 1,842 2,046 2,296
Gain (loss) on sales of securities (15) 87 (1,627)
Other operating income 971 1,245 378
Total noninterest income 8,494 8,066 5,758
Noninterest expense:
Salaries 11,067 10,936 10,925
Employee benefits 2,302 2,143 2,287
Occupancy expense 2,693 2,037 2,071
Equipment expense 2,463 2,391 2,141
Amortization of intangible assets 1,396 1,054 727
Merger expenses 494 2,582 880
Legal and professional fees 1,035 1,744 1,134
Stationery, printing and supplies 973 1,065 896
Other operating expense 6,746 6,767 7,658
Total noninterest expense 29,169 30,719 28,719
Income before income taxes 17,481 12,020 6,390
Income tax expense 6,180 4,162 2,208
Net income $ 11,301 $ 7,858 $ 4,182
Primary earnings per share $ 1.05 $ .74 $ .41
Fully diluted earnings per share $ 1.04 $ .73 $ .41
Triangle Bancorp, Inc. and Subsidiary 21
TRIANGLE BANK
- --------------------------------------------------------------------------------
Executive Management David Parker Patricia Holloway
Tar River Region Retail Banking
Michael S. Patterson
Chairman, Jerry W. Powell E.W. Hooks
President and CEO Greenville Whiteville
H. Leigh Ballance, Jr. Joseph E. Pressly, Jr. David A. May
Executive Vice President Goldsboro Nashville
Banking Group
Deborah V. Reed Susan Parent
Debra L. Lee Finance Training and Retail Sales
Executive Vice President
Chief Financial Officer Arthur R. Rogers Roy J. Parker, III
Greenville Goldsboro
Steven R. Ogburn
Executive Vice President Walter G. Rogers Joann G. Ricks
Chief Credit Officer Credit Administration Seaboard and Scotland Neck
Executive Vice President Stephen R. Salisbury Robert B. Riley
Credit Administration Rocky Mount
C.W. Carpenter
Dunn Judy M. Stephenson Kevin Roberts
Raleigh New Bern
George W. Holt
Whiteville Edward O. Wessell Ron Schappell
Branch Administration Cary
Billy N. Quick
Oxford Kirk A. Whorf Peter Siemion
Funds Management Credit Review
Senior Vice President
David Woodell Dorothy J. Smith
Max E. Ashworth, Sr. Chapel Hill/Durham Battleboro
Fuquay-Varina
Vice President Jay B. Temple
Larry D. Barbour Raleigh
Raleigh Henry Andrews
Carrboro Sandra A. Temple
Dennis I. Bellefeuille Branch Services
Employee Benefits Robert Bromhal
Raleigh James L. Thompson
Charles T. Bowers Tarboro
Sanford Lucinda Cole
Audit Ruby Ward
Robert E. Branch Raleigh
Capital Region Laura S. Copeland
Credit Card John E. Warren
Gary J. Brock Rocky Mount
Credit Administration Darrell Fowler
Dunn Meredith Wilkins
Lou Cunningham Fayetteville
Banking Group Prudence T. Frederick
Marketing Susan C. Gilbert
Susan L. Fonville Corporate Secretary
Marketing Wayne L. Gentry
Raleigh
Malcolm F. Forde
Human Resources Vernell R. Glover, Jr.
Bailey and Middlesex
Daniel T. Fox
Chapel Hill W. Erik Gray
Wilmington
D. Nicholson Guy
Southeast Region William E. Greene
Garner
William V. Leaming
Operations Richard Hawkins
Durham
22
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
Carole S. Anders Willie S. Edwards Michael S. Patterson (1)
Community Volunteer Real Estate Developer Chairman, President and CEO
Raleigh Washington Triangle Bank
Triangle Bancorp, Inc.
Charles H. Ashford Jr., M.D. James P. Godwin Sr. (1) Raleigh
Physician President
New Bern Godwin Manufacturing Co., Inc. Patrick H. Pope (1)
Dunn Partner
John B. Harris Jr. Pope, Tilghman & Tart
President Robert L. Guthrie Dunn
Winston Hospitality, Incorporated President
Raleigh Associated Insurers, Inc. William R. Pope
Raleigh President and CEO
H. Leigh Ballance Jr. Pope's Distributing Company
Executive Vice President George W. Holt Coats
Triangle Bank Executive Vice President
Triangle Bancorp, Inc. Triangle Bank Billy N. Quick Sr. (2)
Raleigh Whiteville Executive Vice President
Triangle Bank
E. B. Borden (1) Earl Johnson Jr. (1) Oxford
President Chairman
Borden Manufacturing Co. Carolina Crane Corporation J. Dal Snipes
Goldsboro Raleigh President
Snipes Insurance Service, Inc.
Robert E. Bryan Jr. Edythe P. Lumsden (1) Dunn
Chairman President
Express Stop, Inc. Capital Land Investment Company N. Johnson Tilghman
Fayetteville Raleigh Partner
Pope, Tilghman & Tart
David T. Clancy (1) J. L. Maxwell Jr. Dunn
President Chairman
Clancy & Theys Construction Co. Goldsboro Milling Company Sydnor M. White Jr.
Raleigh Goldsboro President
CJS, Inc.
N. Leo Daughtry Michael A. Maxwell (2) Raleigh
Attorney Senior Scientist
Daughtry, Woodard, Lawrence, Environmental Protection Agency J. Blount Williams
and Starling Chapel Hill President
Smithfield Alfred Williams & Company
Wendell H. Murphy Raleigh
Syd W. Dunn Chairman and CEO
Chairman Murphy Family Farms
Hannah & Dunn, Inc. Rose Hill
Greenville
(1) Executive Committee Members
(2) Triangle Bank Board only
Triangle Bancorp, Inc. and Subsidiary 23
(Full page photo appears here)
Left to Right
Front to Back
June Campbell, Credit Administration
Sarah Wiggs, Check Imaging
Scott Chandler, Data Processing
Vivian Dobbin, Document Imaging
Joan Franklin, Deposit Services
Don Raper, Rocky Mount
Max Ashworth, Fuquay-Varina
Fran McAllister, Loan Operations
Karen Singletary, Finance
Joann Ricks, Scotland Neck/Seaboard
Sondra Collins, Cameron Village
Debbie Birkenmeyer, Administration
Tim Barbour, Benson
Kirk Whorf, Funds Management
Dwight Scott, General Services
TRIANGLE BANCORP
Post Office Box 31828
Raleigh, NC 27622
www.trianglebank.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT UNDER Section 13 or 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
TRANSITION REPORT Pursuant to Section 13 or 15(d) of THE SECURITIES
EXCHANGE ACT of 1934
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 (I.R.S. Employer
of incorporation) Identification No.)
4300 Glenwood Avenue
Raleigh, North Carolina 27612
(Address of principal executive offices) (Zip Code)
(919) 881-0455
(Registrant's Telephone Number Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - No Par Value
(Title of Class)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 28, 1997, based upon the average
of the bid and ask price of the Common Stock ($19.75) on March 12, 1997, was
approximately $186,054,000. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.
As of March 11, 1997, 10,478,605 shares of no par value common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement for the 1997 Annual
Shareholders Meeting (the "Proxy Statement") is incorporated by reference into
Part III hereof.
-1-
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Triangle Bancorp, Inc. (the "Corporation") was incorporated
under the laws of North Carolina on November 27, 1991 for the purpose of
becoming a one-bank holding company. The Corporation acquired Triangle Bank (the
"Bank") in August 1992 as part of the reorganization of the Bank into a one-bank
holding company structure. Pursuant to the reorganization, the former
shareholders of the Bank became shareholders of the Corporation. The Bank is the
Corporation's only subsidiary and the Corporation holds all of the outstanding
stock of the Bank. To date, the Corporation has not engaged in any material
activities other than its ownership of the Bank.
As a bank holding company, the Corporation's primary business
is that of owning the capital stock of the Bank and promoting the general
development of its business. At December 31, 1996, the consolidated assets of
the Corporation and the Bank were approximately $971 million.
RECENT AND PENDING ACQUISITIONS
On October 24, 1996, Granville United Bank ("Granville"), a
commercial bank organized under the laws of the state of North Carolina, was
merged into the Bank and added three branch offices and $60 million in assets to
the Bank. This acquisition was accounted for using the pooling-of-interests
method of accounting, therefore, all historical information has been restated to
reflect the operations of the Bank and Granville combined. As a result, the
Corporation's total assets and net income as of and for the year ended December
31, 1995, have been restated from $795 million to $854 million, and from $7.4
million to $7.9 million, respectively.
In January 1996, the Corporation completed the purchase of
four branch offices and approximately $55 million in deposits of Raleigh Federal
Savings Bank from First Union National Bank of North Carolina ("First Union").
The Bank also completed a branch swap transaction which included divesting of
net deposits of $3.7 million during 1996. These transactions were accounted for
as purchases, therefore, the operations of these branches are reflected from the
date of purchase.
In October 1996, the Corporation signed an agreement to sell
two offices, both located in Sanford, North Carolina to Raleigh-based NB
Acquisition Corp. The agreement has a to-be-formed bank purchasing all of the
deposits of these offices, estimated at $27 million, and certain assets, both
fixed assets and loans, valued at approximately $10 million, as of December 31,
1996. The transaction is expected to be completed in the second quarter of 1997.
In addition, it is anticipated that the Corporation will
continue to investigate and hold discussions and negotiations in connection with
possible acquisitions of, or combinations with, other banks and financial
service entities. As of the date hereof, the Corporation has not entered into
any agreements or understandings with respect to any such transactions other
than the divestiture previously discussed.
-2-
BUSINESS OF THE BANK
The Bank, headquartered in Raleigh, North Carolina, is
chartered as a state bank under the laws of the State of North Carolina and is a
member of the Federal Reserve System (the "Federal Reserve"). Deposit insurance
is provided by the Bank Insurance Fund ("BIF") of the FDIC. The sole business of
the Bank is to provide banking services to businesses and individuals in the
communities it serves through 44 branches in eastern North Carolina. The Bank
primarily serves small and medium-sized businesses as well as consumers within
its markets.
The Bank began business on January 4, 1988. On June 30, 1991,
Enterprise Bancorp, Inc., a North Carolina bank holding company, and its
wholly-owned subsidiary, Enterprise Bank, National Association, merged into the
Bank, adding approximately $34 million in assets to the Bank. On December 28,
1993, New East Bancorp, a North Carolina holding company, and its wholly-owned
subsidiaries, New East Bank of the Albemarle, New East Bank of the Cape Fear,
New East Bank of Goldsboro, New East Bank of Greenville and New East Bank of New
Bern, merged into the Bank, adding seven branches and approximately $131 million
in assets to the Bank. The Bank merged with Columbus National Bank, Standard
Bank and Trust, Unity Bank and Trust Co. and The Village Bank as well as
acquiring three branch offices from NationsBank during 1995, adding
approximately $409 million in assets. The Bank's wholly owned subsidiary, Unity
Financial Services (acquired through Unity Bank and Trust Co. merger), changed
its name to Triangle Investment Services in October 1995. This subsidiary
provides discount brokerage services. As discussed above, the Bank merged with
Granville, acquired four branches from First Union and completed a branch swap
transaction during 1996.
BANKING SERVICES. The Bank offers a wide range of banking
services, including acceptance of deposits, checking services, debit cards, 24
hour phone access to account information, commercial and consumer loans,
mortgages, real estate development and construction loans, safe deposit boxes,
and credit cards. The Bank offers its customers fully-automated, 24-hour teller
machines ("ATMs"). This service is provided by ATM machines at selected branch
locations and by giving the Bank's customers access to the ATM network of the
Cirrus system and the HONOR system, which operate ATMs in many states.
DEPOSITS. The Bank offers a variety of deposit accounts,
including savings, checking and time deposits of various types ranging from
daily "money market" accounts to longer-term certificates of deposit. Retirement
accounts, such as Individual Retirement Accounts, are also offered. The Bank
seeks to maintain stability in its deposits by establishing direct relationships
with its depositors. Therefore, the Bank has not accepted brokered deposits. At
December 31, 1996, the Bank had deposits of approximately $848 million.
LENDING ACTIVITIES. The Bank offers a wide range of consumer,
commercial real estate development, construction, and mortgage loans to small to
medium-sized businesses and to individuals. Loans are generally secured by real
property, equipment, inventory, accounts receivable, or other assets. In
addition, the Bank often obtains personal guarantees from the owners of the
businesses to which loans are extended. The Bank's lending policies are
established and periodically reviewed by its Board of Directors. Loan policies
are also subject to the regulations of federal and state bank regulators.
Real estate loans constituted the largest portion of the
Bank's loans. Real estate loans include both loans to businesses to finance or
refinance real estate used for the business and loans to individuals for
residential real estate. Commercial loans include credit lines for working
capital, short-term seasonal, or inventory financing as well as longer term
loans. The Bank also offers residential real estate, construction, and land
development loans to developers and builders. Finally, the Bank offers consumer
loans to individuals, but such loans constitute the least significant portion of
its loans on a percentage basis.
-3-
The residential real estate development and construction
industries have accounted for approximately 8% of the Bank's loans. In addition,
when loans that are substantially secured by real estate are taken into account,
loans secured in full or in part by real estate constitute approximately 63% of
the outstanding loans of the Bank. The Bank closely monitors its loan portfolio
and believes its current loan loss reserves adequately reflect problem loans
that have been identified to date.
INVESTMENTS. The Bank seeks to maintain liquidity by
maintaining investments in liquid securities. Currently, investments include
primarily United States Treasury obligations and federal agency and municipal
securities. At December 31, 1996, the average maturity of the Bank's available
for sale and held to maturity investment portfolios were approximately 39 and 38
months, respectively.
COMPETITION. Commercial banking in North Carolina is extremely
competitive, due in large part to statewide branching. Currently, many of the
Bank's competitors are significantly larger and have greater resources than the
Bank. The Bank continues to encounter significant competition from a number of
sources, including bank holding companies, commercial banks, thrift and savings
and loan institutions, credit unions, and other financial institutions and
financial intermediaries. Among commercial banks, the Bank competes in its
market area with some of the largest banking organizations in the state, several
of which have as many as 200 to 300 branches in North Carolina and billions in
assets. The Bank also competes for interest-bearing funds with a number of
investment alternatives, including brokerage firms, "money-market" mutual funds,
insurance companies, government and corporate bonds, and other securities.
Competition with the Bank is not limited to financial institutions based in
North Carolina. The enactment of federal legislation authorizing nationwide
interstate banking has greatly increased the size and financial resources of
some of the Bank's competitors. Consequently, many of the Bank's competitors
have substantially higher lending limits due to their greater total
capitalization, and many perform functions for their customers, such as trust
services that the Bank does not offer. As a result of the interstate banking
legislation, the Bank's market is open to future penetration by banks located in
other states provided the other state allows acquisitions of its banking
institutions by North Carolina banking institutions, thereby increasing
competition. To date, there is interstate branching among banks in North
Carolina, Virginia, South Carolina and Tennessee.
The management of the Bank believes banks compete in the
following areas: convenience of location, interest rates for deposits and loans,
types of accounts and services offered, and quality of the personnel providing
services. In its early years, the Bank sought to attract depositors and
borrowers primarily through offering competitive interest rates for both loans
and deposits. More recently, the Bank has determined to compete primarily
through the quality of its services and experience of its personnel. The Bank
endeavors to provide quality service by operating centrally-located branches,
staffed with experienced bank personnel. The Bank offers a variety of accounts
and loans comparable to those offered by other banks. The Bank also relies on
the personal contacts of its officers and directors to attract depositors and
borrowers in its target market of small to medium-sized businesses. In addition
to its central Board of Directors, the Bank has established local boards of
directors in most of the communities served to promote contacts in the business
communities.
EMPLOYEES. At December 31, 1996, the Corporation employed 312
full-time employees and 115 part-time employees. None of its employees are
covered by a collective bargaining agreement. The Corporation believes its
relationship with its employees to be good.
The Bank has a 401(k) plan for substantially all employees.
The Corporation has a qualified incentive stock option plan for key officers and
employees of the Corporation and its subsidiaries, and a non-qualified stock
option plan for directors and certain officers of the Corporation and its
subsidiaries. The Corporation also has an employee stock purchase plan which
allows employees to purchase the Corporation's stock through payroll deductions.
This plan is proposed to be amended to allow such purchases to be made at a
-4-
15% discount from the stock's fair market value. The Bank also has change of
control agreements and employment agreements that contain "change of control"
provisions with certain officers that would benefit such officers in the event
of a change of control of the Corporation and its subsidiaries.
PROPERTIES
The following table sets forth the location of the Bank's main
office and its branch offices, as well as certain information relating to these
offices as of December 31, 1996. There are no encumbrances on any of the owned
facilities. The Bank believes its facilities are adequate for its business
needs.
Year Approximate Owned or
Office Location Opened Sq. Footage Leased
MAIN OFFICE
4300 Glenwood Avenue 1996 27,000 Owned
Raleigh, NC 27612
BRANCH OFFICES
Hwy. 264 1990 2,293 Owned
Bailey, NC 27807
301 W. Main Street 1990 4,315 Owned
Battleboro, NC 27809
400 South Wall Street 1993 2,500 Owned
Benson, NC 27504
505 W. Main Street 1987 1,500 Owned
Carrboro, NC 27510
215 East Chatham Street 1988 2,050 Owned
Cary, NC 27511
101 Advent Court 1994 3,200 Owned
Cary, NC 27511
77 S. Elliott Road 1982 13,300 Leased
Chapel Hill, NC 27514
11460 U.S. 15-501 N. 1984 1,960 Leased
Chapel Hill, NC 27514
442 E. Main Street 1996 2,450 Leased
Clayton, NC 27520
608 North Main Street 1995 2,580 Owned
Creedmoor, NC 27522
-5-
Year Approximate Owned or
Office Location Opened Sq. Footage Leased
1100 West Broad Street 1991 10,000 Owned
Dunn, NC 28335
3412 Westgate Drive 1986 10,000 Owned
Durham, NC 27707
991 S. McPherson Church Rd. 1989 3,200 Owned
Fayetteville, NC 28303
123 Rowan Street 1996 1,700 Owned
Fayetteville, NC 28303
1381 North Main Street 1989 3,160 Owned
Fuquay-Varina, NC 27529
1027 Highway 70 West 1989 3,000 Leased
Garner, NC 27529
106 North Spence Avenue 1989 9,928 Building Owned;
Goldsboro, NC 27534 Ground Leased
2310 Charles Street 1990 12,500 Owned
Greenville, NC 27858
2100 W. Arlington Blvd. 1996 2,500 Owned
Greenville, NC 27858
207 W. Main Street 1995 5,500 Leased
Havelock, NC 28532
Hwy. 421 and Old West Road 1992 2,500 Owned
Lillington, NC 27546
Nash & Railroad Street 1990 2,186 Owned
Middlesex, NC 27557
215 N. Center Street 1996 2,400 Leased
Mount Olive, NC 28365
343 W. Washington Street 1993 1,560 Bldg. Owned
Nashville, NC 27856 Land Leased
1801 S. Glenburnie Road 1991 2,500 Owned
New Bern, NC 28562
-6-
Year Approximate Owned or
Office Location Opened Sq. Footage Leased
1307 U.S. Hwy 70E 1996 1,200 Bldg. Owned
New Bern, NC 28562 Land Leased
109 Hillsboro Street 1990 6,800 Leased
Oxford, NC 27565
703 Linden Avenue 1991 1,344 Owned
Oxford, NC 27565
2127 Clark Avenue 1992 2,050 Owned
Raleigh, NC 27608
4800 Six Forks Road 1988 11,100 Leased
Raleigh, NC 27609
6408 Falls of Neuse Rd. 1996 2,500 Owned
Raleigh, NC 27615
Hwy. 43 1990 1,305 Leased
Red Oak, NC 27868
450 N. Winstead Avenue 1992 12,996 Owned
Rocky Mount, NC 27804
129 South Steele Street 1992 7,137 Leased
Sanford, NC 27330
2800 Williams Street 1994 1,850 Leased
Sanford, NC 27330
810 S. Main Street 1990 4,194 Owned
Scotland Neck, NC 27874
200 Main Street 1990 3,280 Owned
Seaboard, NC 27876
Main Street & Hwy. 301S 1990 833 Owned
Sharpsburg, NC 27878
102 E. Branch Street 1990 3,533 Owned
Spring Hope, NC 27882
325 Main Street 1995 5,200 Leased
Tarboro, NC 27886
-7-
Year Approximate Owned or
Office Location Opened Sq. Footage Leased
100 Hope Lodge Street 1995 1,500 Leased
Tarboro, NC 27886
100 East Main Street 1974 5,250 Owned
Whiteville, NC 28472
221 W. Williamson Street 1974 851 Owned
Whiteville, NC 28472
4008 Oleander Drive 1992 2,500 Leased
Wilmington, NC 28403
In addition, the Bank owns an approximate 13,100 square foot
operations center in Selma, North Carolina.
-8-
GOVERNMENTAL REGULATION
GENERAL. Holding companies, banks and many of their nonbank
affiliates are extensively regulated under both federal and state law. The
following is a brief summary of certain statutes, rules and regulations
affecting the Corporation and the Bank. This summary is qualified in its
entirety by reference to the particular statutory and regulatory provisions
referred to below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the Corporation's business. Supervision,
regulation and examination of the Corporation and the Bank by the bank
regulatory agencies are intended primarily for the protection of the Bank's
depositors rather than holders of the common stock of the Corporation.
Congress has approved legislation which permits adequately
capitalized and managed bank holding companies to acquire control of a bank in
any state (the "Interstate Banking Law"). Existing state laws setting minimum
age restrictions on target banks can be retained, so long as the age requirement
does not exceed five years. Acquisitions will be subject to anti-trust
provisions that cap at 10% the portion of the United States' bank deposits a
single bank holding company may control, and cap at 30% the portion of a state's
deposits a single bank holding company may control. States have the authority to
waive the 30% cap.
Under the Interstate Banking Law, beginning on June 1, 1997,
banks also will be permitted to merge with one another across state lines,
subject to concentration, capital and Community Reinvestment Act requirements
and regulatory approval. A state can authorize mergers earlier than June 1, 1997
(as have North Carolina, Virginia, South Carolina and Tennessee among others),
or it can opt out of interstate branching by enacting legislation before June 1,
1997. Effective with the date of enactment, a state can also choose to permit
out-of-state banks to open new branches within its borders. In addition, if a
state chooses to allow interstate acquisition of branches, then an out-of-state
bank also may acquire branches by merger.
Interstate branches that primarily siphon off deposits without
servicing a community's credit needs will be prohibited. If loans are less than
50% of the average of all institutions in the state, the branch will be reviewed
to see if it is meeting community credit needs. If it is not, the branch may be
closed and the bank may be restricted from opening a new branch in the state.
HOLDING COMPANY REGULATION
GENERAL. The Corporation is a holding company registered with
the Federal Reserve under the Bank Holding Company Act (the "BHC Act"). As such,
the Corporation and its subsidiary are subject to the supervision, examination
and reporting requirements contained in the BHC Act and the regulation of the
Federal Reserve. The BHC Act requires that a bank holding company obtain the
prior approval of the Federal Reserve before (i) acquiring direct or indirect
ownership or control of more than 5% of the voting shares of any bank, (ii)
taking any action that causes a bank to become a subsidiary of the bank holding
company, (iii) acquiring all or substantially all of the assets of any bank or
(iv) merging or consolidating with any other bank holding company.
The BHC Act generally prohibits a bank holding company, with
certain exceptions, from engaging in activities other than banking, or managing
or controlling banks or other permissible subsidiaries, and from acquiring or
retaining direct or indirect control of any company engaged in any activities
other than those activities determined by the Federal Reserve to be closely
related to banking, or managing or controlling banks, as to be a proper incident
thereto. In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of
-9-
interest or unsound banking practices. For example, factoring accounts
receivable, acquiring or servicing loans, leasing personal property, conducting
discount securities brokerage activities, performing certain data processing
services, acting as agent or broker in selling credit life insurance and certain
other types of insurance underwriting activities have all been determined by
regulations of the Federal Reserve to be permissible activities of bank holding
companies. Pursuant to delegated authority, the Federal Reserve Bank of Richmond
has authority to approve certain activities of holding companies within its
district, including the Corporation, provided the nature of the activity has
been approved by the Federal Reserve. Despite prior approval, the Federal
Reserve has the power to order a holding company or its subsidiaries to
terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness or stability of any bank subsidiary of that bank
holding company.
Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the Federal Reserve on any extensions of credit
to the bank holding company or any of its subsidiaries, investments in the stock
or securities thereof and the acceptance of such stock or securities as
collateral for loans to any borrower. A bank holding company and its
subsidiaries are also prevented from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.
The Federal Reserve may issue cease and desist orders against
bank holding companies and non-bank subsidiaries to stop actions believed to
present a serious threat to a subsidiary bank. The Federal Reserve also
regulates certain debt obligations, changes in control of bank holding companies
and capital requirements.
Under the provisions of the North Carolina law, the Holding
Company is registered with and subject to supervision by the North Carolina
Commissioner of Banks (the "Commissioner").
CAPITAL REQUIREMENTS. The Federal Reserve has established
risk-based capital guidelines for bank holding companies and state member banks
based on the capital framework for international banking organizations developed
by the Basle Committee on Banking Regulations and Supervisory Practices. The
minimum standard for the ratio of capital to risk-weighted assets (including
certain off balance sheet obligations, such as standby letters of credit) is 8%.
At least half of this capital must consist of common equity, retained earnings
and a limited amount of perpetual preferred stock, less certain goodwill items
("Tier I capital"). The remainder ("Tier 2 capital") may consist of a limited
amount of other preferred stock, subordinated debt and a limited amount of loan
loss reserves.
The Federal Reserve also has adopted a minimum (leverage)
ratio of Tier 1 capital to total assets of 4%. The 4% Tier 1 capital to total
assets ratio constitutes the leverage standard for bank holding companies and
state member banks, and will be used in conjunction with the risk-based ratio in
determining the overall capital adequacy of banking organizations. In proposing
such standards, the Federal Reserve emphasized that in all cases the suggested
standards are supervisory minimums and that an institution would be permitted to
maintain such minimum levels of capital only if it were a strong banking
organization, rated composite one under the CAMEL rating system for banks or the
BOPEC rating system for bank holding companies. The Federal Reserve noted that
most expansion-oriented banking organizations have maintained leverage capital
ratios of between 4% and 5% of total assets, and it is likely that these ratios
will be applied to the Corporation. At December 31, 1996, the Corporation had
not been advised by the Federal Reserve of a minimum leverage capital ratio
requirement specifically applicable to it.
As of December 31, 1996 the Corporation had Tier I
risk-adjusted, total regulatory capital and leverage capital of approximately
11.0%, 12.2% and 8.2%, respectively, all in excess of the minimum requirements.
-10-
BANK REGULATION
The Bank is subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations, and is
supervised and examined by the Commissioner and the Federal Reserve. The Federal
Reserve and the Commissioner regularly examine the operations of banks over
which they exercise jurisdiction. They have the authority to approve or
disapprove the establishment of branches, mergers, consolidations, and other
similar corporate actions, and to prevent the continuance or development of
unsafe or unsound banking practices and other violations of law. The Federal
Reserve and the Commissioner regulate and monitor all areas of the operations of
banks and their subsidiaries, including loans, mortgages, issuances of
securities, capital adequacy, loss reserves, and compliance with the CRA and
other laws and regulations. Interest and certain other charges collected and
contracted for by the banks are also subject to state usury laws and certain
federal laws concerning interest rates.
The deposit accounts of the Bank are insured by the BIF of the
FDIC up to a maximum of $100,000 per insured depositor. The FDIC issues
regulations and conducts periodic examinations, requires the filing of reports,
and generally supervises the operations of its insured banks. This supervision
and regulation is intended primarily for the protection of depositors. Any
insured bank that is not operated in accordance with or does not conform to FDIC
regulations, policies, and directives may be sanctioned for noncompliance. Civil
and criminal proceedings may be instituted against any insured bank or any
director, officer, or employee of such bank for the violation of applicable laws
and regulations, breaches of fiduciary duties, or engaging in any unsafe or
unsound practice. The FDIC has the authority to terminate insurance of accounts
pursuant to procedures established for that purpose.
Although the Corporation is not subject to any direct legal or
regulatory restrictions on dividends (other than the requirements under the
North Carolina corporation laws that a distribution may not be made if after
giving it effect the corporation would not be able to pay its debts as they
become due in the usual course of business or the corporation's total assets
would be less than its liabilities), the Corporation's ability to pay cash
dividends is dependent upon the amount of dividends paid by its subsidiary. The
ability of the Bank to pay dividends to the Corporation is subject to statutory
and regulatory restrictions on the payment of cash dividends, including the
requirement under the North Carolina banking laws that cash dividends be paid
only out of undivided profits and only if the bank has surplus of a specified
level. Federal bank regulatory agencies also have the general authority to limit
the dividends paid by insured banks and bank holding companies if such payment
is deemed to constitute an unsafe and unsound practice.
Like the Corporation, the Bank is required by federal
regulations to maintain certain minimum capital levels. The levels required of
the Bank are the same as required for the Corporation. At December 31, 1996, the
Bank had Tier I risk-adjusted, total regulatory capital and leverage capital of
approximately 10.8%, 12.1% and 8.1% respectively, all in excess of the minimum
requirements.
The Bank is subject to insurance assessments imposed by the
FDIC. Effective January 1, 1997, the FDIC adopted a risk-based assessment
schedule providing for annual assessment rates ranging from 0% to .27% of an
institution's average assessment base, applicable to institutions insured by
both the BIF and the Savings Association Insurance Fund ("SAIF"). The actual
assessment to be paid by each insured institution is based on the institution's
assessment risk classification, which is based on whether the institution is
considered "well capitalized", "adequately capitalized" or "under capitalized",
as such terms are defined in the applicable federal regulations, and whether the
institution is considered by its supervisory agency to be financially sound or
to have supervisory concerns. The FDIC also is authorized to impose one or more
special assessments in any amount deemed necessary to enable repayment of
amounts borrowed by the FDIC from the United States
-11-
Treasury Department and, beginning in 1997, all banks will pay additional annual
assessments at the rate of .013%. Effective January 1, 1999, there will be a
merger of the SAIF and the BIF insurance funds of the FDIC. One of the principal
issues is the amount of additional funds needed to recapitalize the SAIF prior
to the merger. In September 1996, a one-time special assessment was levied on
SAIF-insured deposits (including such deposits held by commercial banks) at the
rate of .657% on all SAIF-insured deposits held as of March 31, 1995. The Bank
has no SAIF-insured deposits and therefore will not be subject to such
assessment. It cannot be predicted as to whether any further assessments will be
made on BIF-insured banks.
Banks are subject to the Community Reinvestment Act of 1977
("CRA"). Under the CRA, the appropriate federal bank regulatory agency is
required, in connection with its examination of a bank, to assess such bank's
record in meeting the credit needs of the community served by that bank,
including low and moderate-income neighborhoods. The regulatory agency's
assessment of the bank's record is made available to the public. Further, such
assessment is required of any bank which has applied to (i) charter a national
bank, (ii) obtain deposit insurance coverage for a newly chartered institution,
(iii) establish a new branch office that will accept deposits, (iv) relocate an
office or (v) merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution. In the case of a
bank holding company applying for approval to acquire a bank or other bank
holding company, the Federal Reserve will assess the record of each subsidiary
bank of the applicant bank holding company, and such records may be the basis
for denying the application.
MONETARY POLICY AND ECONOMIC CONTROLS
The Corporation and the Bank are directly affected by
government policy and by regulatory measures affecting the banking industry in
general. Of primary importance is the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), whose actions directly affect the money
supply and, in general, affect banks' lending abilities by increasing or
decreasing the cost and availability of funds to banks. The Federal Reserve
Board regulates the availability of bank credit in order to combat recession and
curb inflationary pressures in the economy by open market operations in United
States government securities, changes in the discount rate on member bank
borrowings, changes in reserve requirements against bank deposits, and
limitations on interest rates that banks may pay on time and savings deposits.
Deregulation of interest rates paid by banks on deposits and
the types of deposits that may be offered by banks have eliminated minimum
balance requirements and rate ceilings on various types of time deposit
accounts. The effect of these specific actions and, in general, the deregulation
of deposit interest rates have generally increased banks' cost of funds and made
them more sensitive to fluctuations in money market rates. In view of the
changing conditions in the national economy and money markets, as well as the
effect of actions by monetary and fiscal authorities, no prediction can be made
as to possible future changes in interest rates, deposit levels, loan demand, or
the business and earnings of the Bank or the Corporation. As a result, banks,
including the Bank, are facing a significant challenge to maintain acceptable
net interest margins.
GUIDE 3 DISCLOSURES
The following schedule is provided as an index to the
disclosure requirements under Guide 3 of the Guides for the Preparation and
Filing of Reports and Registration Statements under the Securities Exchange Act
of 1934.
-12-
REFERENCE TO
FORM 10-K
INDEX TO GUIDE 3 DISCLOSURES TABLE PAGE
I. DISTRIBUTION OF ASSETS, LIABILITIES
AND SHAREHOLDERS' EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
(A) Average Balance Sheets 1 15
(B) Net Interest Income Analysis 1 15
(C) Net Interest Income and Volume/Rate
Variance 2 16
II. SECURITIES PORTFOLIO
(A) Book Value of Securities 4 23
(B) Securities by Maturity 4 21
(C) This item is not applicable since no items exist
that relate to this disclosure
III. LOAN PORTFOLIO
(A) Types of Loans 3 17
(B) Maturities and Sensitivity of Loans to
Changes in Interest Rates 3 17
(C) Risk Elements 3 19
Management's policy is to discontinue the accrual of interest
and reverse unpaid interest when management deems that
collection of additional interest is doubtful.
(D) This item is not applicable since no items existed from
inception through December 31, 1996 that related to the
disclosures of this item.
-13-
REFERENCE TO
FORM 10-K
INDEX TO GUIDE 3 DISCLOSURES TABLE PAGE
IV. SUMMARY OF LOAN LOSS EXPERIENCE
(A) Analysis of Allowance for Loan Losses 3 18
(B) Allocation of the Allowance for Loan
Losses 3 19
V. DEPOSITS
(A) Average Deposits and Rates paid 1 15
Items B, C and E are not applicable
(D) Outstanding balances and maturities
of certificates of deposits in
amounts of $100,000 or more as
of December 31, 1996 5 24
VI. RETURN ON EQUITY AND ASSETS 7 26
VII. SHORT-TERM BORROWINGS 6 25
VIII. INTEREST SENSITIVITY TABLE 8 26
-14-
TABLE 1
INTEREST INCOME AND AVERAGE BALANCES
(Dollars in Thousands)
1996 1995 1994
------------------------------- ---------------------------- ------------------------------
Average Interest Average Average Interest Average Average Interest Average
Balance Inc/Exp. Yld/Rate Balance Inc/Exp. Yld/Rate Balance Inc/Exp. Yld/Rate
------------------------------- ---------------------------- ------------------------------
INTEREST EARNING ASSETS
Taxable Investment Securities $ 207,641 $ 12,521 6.03% $ 180,870 $ 11,044 6.11% $ 165,479 $ 9,184 5.55%
Non-Taxable Investment Securities* 16,806 884 5.26% 9,884 488 4.94% 11,054 575 5.20%
Federal Funds Sold 4,121 222 5.39% 8,215 472 5.75% 12,207 508 4.16%
Interest Bearing Deposits with Banks 775 60 7.74% 1,748 112 6.41% 2,692 178 6.61%
Loans, net** 616,390 59,179 9.60% 512,247 50,125 9.79% 443,270 40,020 9.03%
Total Interest Earning Assets 845,733 72,866 8.62% 712,964 62,241 8.73% 634,702 50,465 7.95%
NONINTEREST EARNINGS ASSETS
Cash and Due from Banks 32,539 30,071 29,377
Premises and Equipment, Net 18,106 12,281 11,764
Interest Receivable and Other 29,187 27,301 26,034
Unrealized Loss on Securities
Available for Sale (364) (275) (362)
Total Noninterest Earning Assets 79,468 69,378 66,813
TOTAL ASSETS $ 925,201 $ 782,342 $ 701,515
INTEREST BEARING LIABILITIES
Demand Deposits $ 84,097 1,109 1.32% $ 86,022 1,658 1.93% $ 87,510 1,734 1.98%
Savings Deposits 166,831 5,501 3.30% 129,814 4,382 3.38% 127,158 3,618 2.85%
Time Deposits 422,586 24,128 5.71% 348,513 19,625 5.63% 298,699 12,914 4.32%
Borrowed Funds 35,652 1,872 5.25% 24,572 1,475 6.00% 25,038 1,598 6.38%
Total Interest Bearing Liabilities 709,166 32,610 4.60% 588,921 27,140 4.61% 538,405 19,864 3.69%
NONINTEREST BEARING LIABILITIES
Demand Deposits 122,765 109,486 88,708
Interest Payable and Other 10,383 10,013 7,059
Total Noninterest Bearing Liabilities 133,148 119,499 95,767
TOTAL LIABILITIES 842,314 708,420 634,172
STOCKHOLDERS' EQUITY 82,887 73,922 67,343
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 925,201 $ 782,342 $ 701,515
INTEREST RATE SPREAD 4.02% 4.12% 4.26%
NET YIELD ON INTEREST-BEARING
ASSETS $ 40,256 4.76% $ 35,101 4.92% $ 30,601 4.82%
*Yield is not computed on a tax equivalent basis. **Includes non-accrual loans and loans held for sale.
-15-
TABLE 2
RATE/VOLUME VARIANCE ANALYSIS
(IN THOUSANDS)
1996 COMPARED TO 1995 1995 COMPARED TO 1994
---------------------- -----------------------
VARIANCE VARIANCE
ATTRIBUTABLE TO ATTRIBUTABLE TO
------------------ --------------------
INTEREST INTEREST
INCOME INCOME
EXPENSE EXPENSE
VARIANCE RATE VOLUME VARIANCE RATE VOLUME
INTEREST EARNING ASSETS
Taxable Investment Securities $ 1,477 $ (139) $ 1,616 $ 1,860 $ 965 $ 895
Non-Taxable Investment Securities 396 34 362 (87) (28) (59)
Federal Funds Sold (250) (28) (222) (36) 159 (195)
Time Deposits (52) 20 (72) (66) (5) (61)
Loans, net 9,054 (961) 10,015 10,105 3,538 6,567
TOTAL INTEREST EARNINGS ASSETS $10,625 $(1,074) $11,699 $11,776 $4,629 $7,147
INTEREST BEARING LIABILITIES
Demand Deposits $ (549) $ (513) $ (36) $ (76) $ (47) $ (29)
Savings Deposits 1,119 (104) 1,223 764 687 77
Time Deposits 4,503 277 4,226 6,711 4,326 2,385
Borrowed Funds 397 (203) 600 (123) (94) (29)
TOTAL INTEREST BEARING LIABILITIES $5,470 $ (543) $6,013 $ 7,276 $4,872 $2,404
-16-
TABLE 3
LOANS
(In Thousands)
At December 31,
ANALYSIS OF LOANS: 1996 1995 1994 1993 1992
Commercial, Financial and Agricultural $155,559 $154,479 $148,367 $ 132,191 $ 91,985
Real Estate, Construction and Land Development 54,331 46,925 57,038 38,567 25,820
Real Estate, Mortgage 322,616 254,066 178,388 158,441 115,169
Real Estate, Equity Lines of Credit 35,055 30,915 25,710 23,135 15,607
Installment Loans to Individuals 76,170 72,850 57,632 51,309 26,764
Other 5,702 9,157 9,938 2,598 4,747
TOTAL $649,433 $568,392 $477,073 $ 406,241 $ 280,092
ANALYSIS OF CERTAIN LOAN MATURITIES AT DECEMBER 31, 1996
(In Thousands)
Real Estate
Commercial Construction
Financial and Land
& Agricultural Development TOTAL
---------------------------------------------------------
Due within One Year $ 69,595 $ 27,249 $ 96,844
Due after One Year-Five Years
Fixed Rate 21,505 1,425 22,930
Variable Rate 59,037 24,310 83,347
TOTAL 80,542 25,735 106,277
Due after Five - Ten Years
Fixed Rate 1,289 340 1,629
Variable Rate 4,133 1,007 5,140
TOTAL 5,422 1,347 6,769
TOTAL $155,559 $ 54,331 $209,890
-17-
TABLE 3 (CONTINUED)
RESERVE FOR LOAN LOSSES AND NON-PERFORMING ASSETS
(Dollars in Thousands)
At December 31
Analysis of Reserve for Loan Losses: 1996 1995 1994 1993 1992
Beginning Balance $ 8,685 $ 9,261 $ 10,912 $ 4,698 $4,463
Deduct Charge-Offs:
Commercial, Financial and Agricultural 850 1,258 1,625 686 864
Real Estate, Construction and Land Development -- -- 1,151 77 93
Real Estate, Mortgage 220 358 156 135 747
Installment to Individuals 676 407 505 200 232
Other -- 2 7 -- 13
TOTAL 1,746 2,025 3,444 1,098 1,949
Add Recoveries:
Commercial, Financial and Agrricultural 591 748 196 184 94
Real Estate, Construction and Land Development -- 7 12 0 36
Real Estate, Mortgage 43 136 195 20 100
Installment to Individuals 140 130 42 62 49
TOTAL 774 1,021 445 266 279
Net Charge-Offs 972 1,004 2,999 832 1,670
Additions Charged to Operations 2,100 428 1,250 2,147 1,905
Provision for acquired loans (98) -- 980 110 --
Allowance acquired -- -- -- 4,789 --
Ending Balance $ 9,715 $ 8,685 $10,143 $ 10,912 $ 4,698
Ratio of Net Charge-Offs During the Period to
Average Loans outstanding during the period 0.16% 0.20% 0.68% 0.27% 0.63%
-18-
TABLE 3 (continued)
ALLOCATION OF THE RESERVE FOR LOAN LOSSES
At December 31,
(Dollars in Thousands)
1996 1995 1994
Percent of Percent of Percent of
loans in each loans in each loans in each
Category to Category to Category to
Amount Total loans Amount Total loans Amount Total loans
Commercial, Financial and
Agricultural 3,670 23.95% $ 3,296 27.18% $ 3,310 31.10%
Real Estate, Construction and
Land Development 151 8.37% 245 8.26% 645 11.96%
Real Estate, Mortgage 1,780 49.67% 1,719 44.70% 2,563 37.39%
Real Estate, Equity Lines of Credit 359 5.40% 306 5.44% 250 5.39%
Installment Loans to Individuals 1,150 11.73% 1,097 12.82% 917 12.08%
Other 51 0.88% 68 1.60% 21 2.08%
Unallocated 2,554 0.00% 1,954 0.00% 1,555 0.00%
TOTAL $ 9,715 100.00% $ 8,685 100% $ 9,261 100.00%
1993 1992
Percent of Percent of
loans in each loans in each
Category to Category to
Amount Total loans Amount Total loans
Commercial, Financial and
Agricultural $ 4,380 32.54% $ 1,372 32.84%
Real Estate, Construction and
Land Development 605 9.49% 584 9.22%
Real Estate, Mortgage 3,017 39.00% 1,451 41.12%
Real Estate, Equity Lines of Credit 241 5.69% 74 5.57%
Installment Loans to Individuals 763 12.63% 264 9.56%
Other 18 0.65% 20 1.69%
Unallocated 1,888 0.00% 933 0.00%
$ 10,912 100.00% $ 4,698 100.00%
TOTAL
-19-
TABLE 3 (CONTINUED)
====================================================================================================================================
ANALYSIS OF NONPERFORMING ASSETS
(In Thousands)
At December 31,
1996 1995 1994 1993 1992
---------------------------------------------------
Nonaccrual Loans $1,666 $ 1,532 $ 1,738 $ 3,849 $ 934
Loans contractually past due 90 or more days as
to principal or interest 2,107 1,033 1,028 220 892
Foreclosed Assets 507 499 799 1,859 2,742
---------------------------------------------------
$4,280 $ 3,064 $ 3,565 $ 5,928 $ 4,568
===================================================
====================================================================================================================================
-20-
TABLE 4
================================================================================
SECURITIES
(Dollars in Thousands)
BOOK VALUE AT DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Due After Due After
One Year Five Years
Due in One Through Through Due After Market Average
Year or Less Five Years Ten Years Ten Years Total Value Maturity In Years
----------------------------------------------------------------------------------------------
AVAILABLE FOR SALE
U.S. Treasury Securities $35,906 $80,797 $116,703 $116,892 1.31
U.S. Agencies 1,089 2,887 $ 737 4,713 4,648 4.81
Mortgage Backed Securities - $ 611 3,425 4,036 3,972 13.93
State and Political Subdivisions 607 466 619 12,679 14,371 14,341 6.04
Collateralized Mortgaged Obligations 502 1,643 2,145 2,108 12.68
Other Investments 4,125 4,125 4,125
----------------------------------------------------------------------------------------------
Total $37,602 $ 84,150 $1,732 $ 22,609 $146,093 $146,086 7.75
==============================================================================================
HELD TO MATURITY
U.S. Agencies $ 26,876 $39,356 $ 3,857 $ 2,045 $ 72,134 $ 72,583 4.83
State and Political Subdivisions 1,026 3,725 3,803 4,109 12,663 12,918 5.9
Mortgage Backed Securities 1,173 4,214 875 2,449 8,711 8,564 5.75
Collateralized Mortgaged Obligations 2,037 1,013 3,050 3,025 15.67
Other Investments - 554 554 577 3.7
----------------------------------------------------------------------------------------------
Total $ 29,075 $ 47,849 $ 10,572 $ 9,616 $97,112 $ 97,667 7.16
==============================================================================================
====================================================================================================================================
21
TABLE 4 (cont'd)
===========================================================================
SECURITIES
WEIGHTED AVERAGE YIELDS* AT DECEMBER 31, 1996
Due After Due After
One Year Five Years
Due in One Through Through Due After
Year or Less Five Years Ten Years Ten Years Total
-----------------------------------------------------------------
Available for Sale
U.S. Treasury Securities 5.84% 5.99% 0.00% 0.00% 5.94%
U.S. Agencies 4.90% 5.34% 0.00% 6.59% 5.43%
Mortgage Backed Securities 0.00% 0.00% 6.07% 6.98% 6.84%
State and Political Subdivisions 3.53% 4.27% 4.78% 5.14% 5.03%
Collateralized Mortgage Obligations 0.00% 0.00% 5.42% 5.31% 5.34%
Other Investments 0.00% 0.00% 0.00% 6.72% 6.72%
----------------------------------------------------------------
Total 5.78% 5.96% 5.42% 5.77% 5.88%
================================================================
Held to Maturity
U.S. Agencies 5.63% 6.27% 7.58% 4.80% 6.07%
State and Political Subdivisions 4.83% 5.08% 5.32% 5.59% 5.30%
Mortgage Backed Securities 5.47% 5.92% 5.65% 6.86% 6.10%
Collateralized Mortgage Obligations 0.00% 0.00% 6.17% 4.66% 5.67%
Other Investments 0.00% 8.89% 0.00% 0.00% 8.89%
----------------------------------------------------------------
Total 5.60% 6.18% 6.34% 5.65% 5.97%
================================================================
*Yields are not computed on a tax equivalent basis.
==============================================================================
-22-
TABLE 4 (CONT'D)
==============================================================================
SECURITIES
(IN THOUSANDS)
December 31,
------------------------------------------------------------
1996 1995
Available For Sale Book Value Market Value Book Value Market Value
U.S. Treasury Securities $116,703 $ 116,892 $ 89,928 91,108
U.S. Agencies 4,715 4,648 21,627 21,566
State and Political Subdivisions 14,369 14,341 1,557 1,568
Mortgage Backed Securities 4,036 3,972 6,471 6,471
Collateralized Mortgage Obligations 2,145 2,108 2,766 2,715
Other Investments 4,125 4,125 4,478 4,476
-------------------------------------------------------
$146,093 $ 146,086 $ 126,827 $ 127,904
=======================================================
HELD TO MATURITY
U.S. Agencies $ 72,134 $ 72,583 $ 49,047 $ 52,190
State and Political Subdivisions 12,663 12,918 8,934 9,286
Mortgage Backed Securities 8,711 8,564 13,598 13,529
Collateralized Mortgage Obligations 3,050 3,025 3,068 3,067
Other Investments 554 577 1,638 1,680
-------------------------------------------------------
$ 97,112 $ 97,667 $ 76,285 $ 79,752
=======================================================
======================================================================================================================
-23-
TABLE 5
==============================================================================
LARGE TIME DEPOSIT MATURITIES
Analysis of Time Deposits of $100,000 or more at December 31, 1996
(In Thousands):
Total
----------------
Remaining maturity of three months or less $ 35,801
Remaining maturity of over three through 12 months 21,796
Remaining maturity of over twelve months 4,087
================
Total time deposits of $100,000 or more $ 61,684
================
===============================================================================
-24-
TABLE 6
SHORT-TERM BORROWINGS
(Dollars in Thousands)
At December 31,
1996 1995
Securities Securities
Sold Under Federal Home Sold Under Federal Home
Federal Funds Agreement to Loan Federal Funds Agreement to Loan
Purchased Repurchase Bank Combined Purchased Repurchase Bank Combined
End of Year:
Amount Outstanding $ 3,900 $ 12,062 $ 15,962 $ 15,000 $ 14,921 $ 19,500 $ 49,421
Weighted Average
Interest Rate 7.00% 4.61% 5.19% 6.00% 4.38% 5.52% 5.32%
Maximum amount outstanding
at any month end during
the year $ 26,000 $ 11,235 $ 34,500 $ 71,735 $ 15,000 $ 15,442 $ 19,500 $ 49,942
Averages:
Average outstanding
balance during the
year $ 8,847 $ 11,754 $ 14,221 $ 34,822 $ 3,471 $ 11,368 $ 6,045 $ 20,884
Weighted average
interest rate during
the year 5.78% 4.56% 5.67% 5.32% 6.09% 5.16% 5.78% 5.49%
1994
Securities
Sold Under Federal Home
Federal Funds Agreement to Loan
Purchased Repurchase Bank Combined
End of Year:
Amount Outstanding $ 5,900 $ 10,511 $ 16,411
Weighted Average
Interest Rate 6.35% 5.13% 0.00% 5.57%
Maximum amount outstanding
at any month end during
the year $ 22,475 $ 8,970 $ 31,445
Averages:
Average outstanding
balance during the
year $ 7,456 $ 7,155 $ - $ 14,611
Weighted average
interest rate during
the year 4.36% 3.80% 0.00% 4.09%
-25-
TABLE 7
==============================================================================
SELECTED KEY FINANCIAL RATIOS (1)
1996 1995 1994
------------------ ------------------ --------
Return on Assets 1.22% 1.00% 0.60%
Return on Equity 13.63% 10.63% 6.21%
Dividend Payout Ratio 29.00% 22.41% 17.05%
Equity to Assets 8.96% 9.45% 9.60%
==============================================================================
(1) All ratios are computed on average daily balances, except dividend payout.
TABLE 8
==============================================================================
INTEREST SENSITIVITY (2)
December 31, 1996
(Dollars in Thousands)
12/31/96 0-3 4-12 1 to 5 Over
Balance Months Months Years 5 years
-------------------------------------------------------------
Federal Funds Sold $ 1,011 $ 1,011
Interest Bearing Deposits in Banks 879 879
Securities 243,198 19,730 $ 55,655 $134,346 $ 33,467
Loans Held for Sale 2,413 2,413
Loans 649,433 343,181 104,073 180,689 21,490
-------------------------------------------------------------
Earning Assets 896,934 367,214 159,728 315,035 54,957
-------------------------------------------------------------
Total Assets $ 971,105
=============
Interest Bearing Demand Deposits $ 83,961 67,463 16,498
Savings and Money Market Account 181,659 57,627 110,751 13,281
Time Deposits 442,239 174,567 200,238 64,313 3,121
Other Borrowings 25,962 15,962 10,000
-------------------------------------------------------------
Costing Liabilities $ 733,821 190,529 257,865 252,527 32,900
-------------------------------------------------------------
GAP $ 176,685 $ (98,1$7) $ 62,508 $22,057
------------------------------------------------
% of Total Assets 18.19% -10.11% 6.44% 2.27%
------------------------------------------------
Cumulative GAP $ 176,685 $ 78,548 $141,056 $163,113
------------------------------------------------
% of Total Assets 18.19% 8.09% 14.53% 16.80%
------------------------------------------------
=============================================================================================================================
(2) Assumptions used include the maturity distribution units for
non-maturity deposits and no pre-payments on loans.
-26-
ITEM 2. PROPERTIES
See Item 1. Description of Business-Properties.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the
Corporation or its direct or indirect subsidiaries is a party or of which any of
their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Corporation's shareholders in
the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The stock price and shareholder data appears on page FS-1 of
this Annual Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data appears on page FS-2
of this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition
and results of operations for the years ended December 31,
1996, and December 31, 1995, appears on pages FS-3 through
FS-8 of this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, together with the
report thereon of Coopers & Lybrand L.L.P. dated January 20,
1997, appears on pages FS-9 through FS-34 of this Annual
Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
No changes in accountants or disagreements on accounting or
financial disclosure occurred in the period from January 1, 1995 through the
date hereof.
-27-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the captions "Proposal 1.
Election of Directors", "Incumbent Directors, Director
Relationships", and "Executive Officers" in the Corporation's
definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 28, 1997 (the "Proxy
Statement") is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the captions "Director
Compensation", "Compensation Committee Report", "Compensation
Committee Interlocks and Insider Participation", "Executive
Compensation" and "Performance Graph" in the Proxy Statement
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the caption "Beneficial
Ownership of Voting Securities" in the Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the captions "Indebtedness of
Management" and "Transactions with Management" in the Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements:
Report of Independent Accountants . . . . . . . FS-9
Consolidated Balance Sheets as of
December 31, 1996 and 1995 . . . . . . . . . FS-10
Consolidated Statements of
Income for the years ended
December 31, 1996, 1995 and 1994 . . . . . . . . FS-11
Consolidated Statements of Changes in
Shareholders' Equity for the
years ended December 31, 1996, 1995
and 1994 . . . . . . . . . . . . . . . . . . . FS-12
-28-
Consolidated Statements of Cash
Flows for the years ended December 31,
1996, 1995 and 1994 . . . . . . . . . . FS-13 to FS-14
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . FS-15 to FS-34
-29-
The following exhibits listed in accordance with the number assigned to
each in the Exhibit Table of Item 601 of Regulation S-K under the Securities Act
of 1933, as amended, are included in this Form 10-K. Exhibit numbers omitted are
not applicable.
EXHIBIT PAGE IN
NUMBER FORM 10-K
2(a) Agreement and Plan of Reorganization and Merger
By and Among Granville United Bank, Triangle
Bancorp, Inc. and Triangle Bank dated as of
June 7, 1996 (incorporated by reference to
Exhibit 2(a) to the Registrant's Form S-4
(Registration No. 333-7253) as declared effective by
the Commission on July 31, 1996)
2(b) Purchase and Assumption Agreement By and Among First Union National
Bank of North Carolina and Triangle Bank dated as of September 20, 1995
(incorporated by reference to Exhibit 10(a) to the Registrant's Form
8-K filed with the Commission on October 4, 1995)
3(a) Articles of Incorporation of Triangle Bancorp, Inc. as
amended at the meeting of shareholders on May 23, 1995 37
3(b) Bylaws of Triangle Bancorp, Inc. as amended at the special
meeting of shareholders on February 23, 1995 (incorporated by
reference to Exhibit 3(b) to the Registrant's Form 10-K for
the fiscal year ended December 31, 1994 as filed with the
Commission on March 31, 1995)
4 Specimen of Common Stock Certificate of Triangle Bancorp,
Inc. (incorporated by reference to Exhibit 4 to the Registrant's
Form 10-K for the fiscal year ended December 31, 1993 as
filed with the Commission on March 31, 1994)
-30-
EXHIBIT PAGE IN
NUMBER FORM 10-K
10(a) Triangle Bancorp, Inc. 1988 Incentive Stock Option Plan, 64
as amended on May 23, 1995
10(b) Triangle Bancorp, Inc. 1988 Non-Qualified Stock Option Plan, as amended
on November 15, 1994 (incorporated by reference to Exhibit 10 (b) to
the Registrant's Form 10-K for the fiscal year ended December 31, 1994
as filed with the Commission on March 31, 1995).
10(c) Triangle Bancorp, Inc. 401(k) Plan (incorporated by reference
to Exhibit 10(c) to the Registrant's Form S-4 (Registration No.
33-86226) declared effective by the Commission on January 20, 1995)
10(d) Triangle Bancorp, Inc. Deferred Compensation Plan for Outside
Directors (incorporated by reference to Exhibit 10(c) to the
Registrant's Form 10-K for the fiscal year ended December 31,
1993 as filed with the Commission on March 31, 1994)
10(e) Employment Agreement between Triangle Bancorp, Inc.
and Michael S. Patterson (incorporated by reference to Exhibit
10(a) to the Registrant's Form 10-K for the fiscal year ended
December 31, 1993 as filed with the Commission on March 31, 1994)
10(f) Deferred Compensation Agreement between Triangle Bancorp,
Inc. and Michael S. Patterson (incorporated by reference to
Exhibit 10(g) to the Registrant's Form S-4 (Registration No.
33-86226) as declared effective by the Commission on
January 20, 1995)
10(g) Deferred Compensation Agreement between Triangle Bancorp, Inc.
and Debra L. Lee (incorporated by reference to Exhibit 10(i) to the
Registrant's Form S-4 (Registration No. 33-86226) as declared
effective by the Commission on January 20, 1995)
10(h) Employment Agreement between Triangle Bancorp, Inc. and
George W. Holt (incorporated by reference to Exhibit 10(j) to
the Registrant's Form 10-K filed on March 31, 1995)
10(i) Employment Agreement between Triangle Bancorp, Inc.
and H. Leigh Ballance, Jr. (incorporated by reference to Exhibit 10(k) to
the Registrant's Form 10-K filed on March 31, 1995)
-31-
EXHIBIT PAGE IN
NUMBER FORM 10-K
10(j) Split Dollar Insurance Agreement and Deferred Compensation
Agreement between Triangle Bancorp, Inc. and Michael S. Patterson
(incorporated by reference to Exhibit 10(n) to the Registrant's Form
10-K filed on March 31, 1996)
10(k) Change of Control Agreement among Triangle Bancorp, Inc., Triangle
Bank and Steven R. Ogburn 70
10(l) Change of Control Agreement among Triangle Bancorp, Inc., Triangle
Bank and Debra L. Lee 78
21 Subsidiaries of Registrant 87
23 Consent of Coopers & Lybrand L. L. P. 88
27 Financial Data Schedule 89
99(a) Management's Report on Financial Statements, Assessment of the
Internal Control Structure over Financial Reporting, and Compliance
with Laws and Regulations 91
99(b) Report of Independent Accountants on Management's Report on
Financial Statements, Assessment of the Internal Control Structure
over Financial Reporting, and Compliance with Laws and Regulations 92
(b) Reports on Form 8-K
On January 4, 1996, a Form 8-K was filed reporting completion of one
month of combined operations of the Company and Village. A consolidated balance
sheet and statement of income were included in the filing.
On January 11, 1996, a Form 8-K was filed reporting completion of the
purchase of Village including a Pro Forma Combined Balance Sheet as of September
30, 1995, a Pro Forma Combined Statement of Income for the nine months ended
September 30, 1995 and a Pro Forma Combined Statement of Income for the year
ended December 31, 1994.
On December 9, 1996, a Form 8-K was filed to provide a description of
the Company's securities in a 1934 Act filing that could be incorporated by
reference into future filings. There were no changes in the type of securities
or the rights thereunder.
-32-
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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.
By:/s/ Michael S. Patterson
Michael S. Patterson
President and Chief Executive
Officer, Director
Signature Title Date
/s/ Debra L. Lee Chief Financial Officer 1/28/97
Debra L. Lee (Principal Financial and
Accounting Officer)
/s/ Charles H. Ashford, Jr. Chairman of the Board 1/28/97
Charles H. Ashford, Jr.
/s/ H. Leigh Ballance, Jr. Director 1/28/97
H. Leigh Ballance, Jr.
/s/ E.B. Borden Director 1/28/97
E.B. Borden
/s/ Robert E. Bryan, Jr. Director 1/28/97
Robert E. Bryan, Jr.
/s/ David T. Clancy Director 1/28/97
David T. Clancy
Director
N. Leo Daughtry
-33-
Signature Title Date
/s/ Syd W. Dunn Director 1/28/97
Syd W. Dunn
/s/ Willie S. Edwards Director 1/28/97
Willie S. Edwards
/s/ James P. Godwin, Sr. Director 1/28/97
James P. Godwin, Sr.
/s/ Robert L. Guthrie Director 1/28/97
Robert L. Guthrie
Director
John B. Harris, Jr.
/s/ George W. Holt Director 1/28/97
George W. Holt
/s/ Earl Johnson, Jr. Director 1/28/97
Earl Johnson, Jr.
Director
Edythe P. Lumsden
/s/ J.L. Maxwell, Jr. Director 1/28/97
J.L. Maxwell, Jr.
Director
Wendell H. Murphy
-34-
Signature Title Date
Director
N. Johnson Tilghman
Director
Sydnor M. White, Jr.
/s/ J. Blount Williams Director 1/28/97
J. Blount Williams
-35-
INDEX TO EXHIBITS
PAGE NUMBER IN
SEQUENTIAL
NUMBERING
EXHIBIT DESCRIPTION SYSTEM
3(a) Articles of Incorporation of Triangle Bancorp, Inc. as
amended at the meeting of shareholders on May 23, 1995 37
10(a) Triangle Bancorp, Inc. 1988 Incentive Stock Option
Plan, as amended on May 23, 1995 64
10(k) Change of Control Agreement among Triangle
Bancorp, Inc. Triangle Bank and Steven R. Ogburn 70
10(l) Change of Control Agreement among Triangle
Bancorp, Inc., Triangle Bank and Debra L. Lee 78
21 Subsidiaries of Registrant 87
23 Consent of Coopers & Lybrand L.L.P. 88
27 Financial Data Schedule 89
99(a) Management's Report on Financial Statements, Assessment
of the Internal Control Structure over Financial Reporting,
and Compliance with Laws and Regulations 91
99(b) Report of Independent Accountants on Management's
Report on Financial Statements, Assessment of the Internal
Control Structure over Financial Reporting, and Compliance
with Laws and Regulations 92
-36-