U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number - 0-21346
TRIANGLE BANCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1764546
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Glenwood Avenue
Raleigh, North Carolina 27612
(Address of principal executive offices)
(Zip Code)
Telephone: (919) 881-0455
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 10,472,216
Class Outstanding at May 9, 1997
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Consolidated Balance Sheets as of March 31, 1997 and December 31,
1996 and the Consolidated Statements of Income and Cash Flows for the
three month periods ended March 31, 1997 and March 31, 1996 have been
included as Attachments to this report.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
HIGHLIGHTS
During the first quarter of 1997, Triangle Bancorp ("the Company")
continued it's strategy of growth with the signing of a Letter of
Intent to acquire Bank of Mecklenburg, Charlotte, North Carolina on
March 27, 1997. Bank of Mecklenburg has $274 million in assets as of
March 31, 1997; this transaction is discussed further in Part II, Item
5. The Company's subsidiary, Triangle Bank ("Triangle") opened a de
novo branch in Raleigh and entered the in-store delivery market in
April with plans for additional in-store locations throughout 1997.
Also in the first quarter of 1997, the Company surpassed the one
billion dollar mark in total assets.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
The Company's net income for the three months ended March 31, 1997 was
$3,042,000 compared to $2,547,000 for the same period in 1996, an
increase of 19%. Earnings per common share were $0.28 for the three
months ended March 31, 1997 compared to $0.24 per common share for the
same period in 1996.
For the three months ended March 31, 1997 the annualized returns on
average assets and equity were 1.25% and 14.01%, respectively, compared
to 1.18% and 12.69%, respectively for the same period in 1996.
Core earnings for the period were positively impacted by an increase in
net interest income due to an increase in the volume of earning assets.
Net interest income for the three months ended March 31, 1997 was
$10,600,000 compared to $9,442,000 for the same period in 1996 an
increase of $1,158,000 or 12%. Average earning assets increased $114
million, primarily in loans ($78 million) and investment securities
($30 million). Average costing liabilities increased by $97 million,
$31 million in savings and money market deposits and $61 million in
time deposits less than $100,000. The net yield on interest earning
assets decreased slightly to 4.74% at March 31, 1997 from 4.78% as of
March 31, 1996.
For the three months ended March 31, 1997, a loan loss provision of
$500,000 was made compared to a provision of $312,000 for the same
period in 1996. The increase in provision was due to growth in the loan
portfolio and a continued commitment to maintaining adequate loan loss
reserves.
Part I, Item 2 (Continued)
Noninterest income for the three months ended March 31, 1997 was
$1,988,000 compared to $2,048,000 for the same period in 1996 a
decrease of $60,000 or 3%. Increases were seen in income from
investment services and the sale of loans. However, they were offset by
a decrease in service charge income primarily in overdraft charges; a
decrease in fees related to mortgage originations and associated fees
due to a decrease in volume; and a decrease in other income which
included a loss of $104,000 on the sale of a vacant facility.
Noninterest expenses were relatively flat with an increase of $116,000,
or 1.6%, for the three months ended March 31, 1997 compared to the same
period in 1996. During the first quarter of 1997, personnel costs
deferred associated with SFAS 91 were adjusted upward to more
accurately reflect the cost of originating loans. This resulted in a
decrease in salaries and employee benefits compared to the first
quarter of 1996. Increases in occupancy and office expenses were
incurred due to the net addition of four branches over the first
quarter of 1996.
FINANCIAL CONDITION
Total assets were $1.01 billion as of March 31, 1997 an increase of $39
million from December 31, 1996. The increase from December 31, 1996 to
March 31, 1997 is in the loan portfolio as well as securities available
for sale. This growth was funded by a $32 million increase in deposit
accounts primarily in savings and money market and time deposits less
than $100,000.
The Company continued to maintain strong loan loss reserves during the
period. As a result of loan growth, the provision was increased to
$500,000 for the three months ended March 31, 1997 from $312,000 for
same period in 1996. Nonaccrual loans were $2,011,000 at March 31, 1997
versus $1,120,000 at March 31, 1996. This increase reflect is the
results of two relationships as well as loan growth of 14%. The loan
loss reserves at March 31, 1997 were 1.52% of gross loans and 226% of
nonperforming assets and other real estate owned compared to 1.49% and
311%, respectively, at March 31, 1996. Although nonaccrual loans have
increased from the year ago period, management feels loan loss reserves
are adequate. A summary of certain information related to the loan loss
reserves and nonperforming assets as of March 31, 1997 follows:
Part I, Item 2 (Continued)
RESERVE FOR LOAN LOSSES AND NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
ANALYSIS OF RESERVE FOR LOAN LOSSES:
Beginning Balance, January 1, 1997 $ 9,715
-------
Deduct charge-offs:
Commercial financial and agricultural 10
Real estate, construction and land development 19
Installment loans to individuals 37
Credit card and related plans 93
-------
159
Add recoveries:
Commercial, financial and agricultural 234
Real estate, construction and land development 6
Installment loans to individuals 80
Credit card and related plans 18
-------
338
-------
Net recoveries 179
Additions charged to operations 500
-------
Ending balance, March 31, 1997 $10,394
=======
Ratio of net charge-offs to average loans outstanding during the period (0.027%)
ANALYSIS OF NONPERFORMING ASSETS:
Nonaccrual loans:
Commercial, financial and agricultural $1,068
Real estate, construction and land development 906
Installment loans to individuals 37
------
2,011
Loans contractually past due 90 days or more
as to principal or interest 2,140
Foreclosed assets 451
------
TOTAL $4,602
------
Part 1, Item 2 (Continued)
FINANCIAL CONDITION (CONTINUED)
Total deposits were $879 million at March 31, 1997 an increase of $31
million from December 31, 1996. The increase from December 31, 1996 is
due to internal growth in savings, money market and time deposits less
than $100,000.
CAPITAL
The adequacy of capital is reviewed regularly, in light of current
plans and economic conditions, to ensure that sufficient capital is
available for current and future needs, to minimize the Company's cost
of capital and to assure compliance with regulatory requirements. The
Company's capital ratios as of March 31, 1997 are as follows:
ACTUAL REQUIRED EXCESS
PERCENT PERCENT PERCENT
------- -------- -------
Tier 1 Capital to Risked Based Assets 11.04 % 4.00 % 7.04 %
Total Capital to Risked Based Assets 12.39 % 8.00 % 4.29 %
Leverage Ratio 7.91 % 4.00 % 3.91 %
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings involving the Company.
Item 2. Changes in Securities
There have been no changes in the rights of the holders of the common
stock of the Company.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Part II (Continued)
Item 4. Submission of Matters to a Vote of Security Holders
On April 28, 1997 the annual shareholders meeting was held by the
Company to vote (i) to consider and act upon a proposal to amend the
Company's Bylaws to increase the maximum number of directors from 24 to
26; (ii) to elect 13 members of the Board of Directors; (iii) to
consider a proposal to approve the Triangle Bancorp, Inc. Employee
Stock Purchase Plan, as amended and restated; (iv) to consider a
proposal to ratify the appointment of Coopers & Lybrand L.L.P. as
independent public accountants of the Company for 1997, and (v) to
consider and act on any other matters that may properly come before the
Annual Meeting.
The results of proposal (i), amendment of bylaws: 6,927,148 for;
327,724 against; and 261,089 abstain.
The results of proposal (ii), election of directors:
FOR AGAINST ABSTAIN NOT
VOTED
Carole S. Anders 7,423,708 0 92,252 0
H. Leigh Ballance 7,423,860 0 92,100 0
James P. Godwin, Sr. 7,263,346 0 252,614 0
Michael A. Maxwell 7,377,316 0 138,644 0
Wendell H. Murphy 7,236,026 0 279,934 0
Michael S. Patterson 7,424,922 0 91,038 0
Patrick H. Pope 7,378,687 0 137,273 0
William R. Pope 7,376,038 0 139,922 0
Billy N. Quick, Sr. 7,416,989 0 98,791 0
J. Dal Snipes 7,380,589 0 135,371 0
N. Johnson Tilghman 7,425,213 0 90,747 0
Sydnor B. White, Jr. 7,425,568 0 90,392 0
J. Blount Williams 7,425,517 0 90,443 0
Part II, Item 4 (Continued)
Directors whose term of offices continued after the meeting:
Charles H. Ashford, Jr.
Edwin B. Borden
Robert E. Bryan, Jr.
N. Leo Daughtry
George W. Holt
Edythe P. Lumsden
David T. Clancy
Syd W. Dunn, Jr.
Willie S. Edwards
Robert L. Guthrie
John B. Harris
Earl Johnson, Jr.
J. L. Maxwell, Jr.
The results of proposal (iii), approval of Employee Stock Purchase
Plan: 7,237,990 for; 211,572 against; and 66,399 abstain.
The results of proposal (iv), ratification of independent public
accountants: 7,373,943 for; 72,315 against; and 69,703 abstain.
Item 5. Other Information
On March 27, 1997 the Company announced the signing of a Letter of
Intent with Bank of Mecklenburg, Charlotte, North Carolina whereby Bank
of Mecklenburg will be acquired by and operate as a subsidiary of the
Company. The Definitive Agreement was signed April 25, 1997 and the
transaction is subject to receipt of shareholder and regulatory
approvals as well as the satisfaction of various other conditions.
Pursuant to the Definitive Agreement, the Company will exchange 1.00
shares of its common stock for each share of Bank of Mecklenburg's
common stock issued and outstanding. It is contemplated the transaction
will be accounted for as a pooling of interests and the stock exchange
will qualify as tax free reorganization. As of March 31, 1997, Bank of
Mecklenburg had $274 million in assets.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(19) Report furnished to security holders.
(27) Financial data schedule.
Part II, Item 6 (Continued)
b) Reports on Form 8-K
(i) A Form 8-K was filed on April 1, 1997 announcing the Company signed
a Letter of Intent with Bank of Mecklenburg, Charlotte, North Carolina
whereby Bank of Mecklenburg will be acquired by and operated as a
subsidiary of the Company.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
March 31, December 31,
1997 1996
ASSETS
Cash and due from banks $ 29,223,457 $34,614,622
Federal funds sold 4,170,000 1,010,891
Interest-bearing deposits in banks 399,607 879,360
Securities available for sale 163,684,418 146,086,069
Securities held to maturity, market value;
$90,440,000 and $97,667,000 90,395,620 97,111,953
Loans held for sale 3,794 2,412,738
Loans, less allowance for losses of
$10,394,405 and $9,715,387 671,744,493 639,718,248
Premises and equipment, net 19,912,563 20,181,307
Interest receivable 9,544,852 8,812,952
Deferred income taxes 7,021,929 6,700,349
Intangible assets 11,290,201 11,654,033
Other assets 2,209,321 1,922,477
------------------- -----------------
Total assets $1,009,600,255 $971,104,999
=================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $132,745,490 $139,904,711
Interest-bearing demand 77,456,515 83,961,295
Savings and money market 198,904,539 181,658,946
Large denomination certificates of deposit 67,807,990 61,684,287
Other time 402,579,437 380,554,636
------------------- -----------------
Total deposits 879,493,971 847,763,875
Short-term debt 25,466,603 15,962,391
Other borrowings 5,000,000 10,000,000
Interest payable 6,119,428 6,593,267
Other liabilities 5,363,741 3,889,128
------------------- -----------------
Total other liabilities 41,949,772 36,444,786
------------------- -----------------
Total liabilities 921,443,743 884,208,661
------------------- -----------------
Commitments and contingencies*
SHAREHOLDERS' EQUITY
Common stock, no par value 20,000,000 61,425,426 61,544,172
authorized; 10,488,854 shares and
10,468,036 shares outstanding at March 31,
1997 and December 31, 1996, respectively
Undivided profits 27,238,335 25,245,470
Unrealized gain (loss) on securities available for sale (507,249) 106,696
------------------- -----------------
Total shareholders' equity 88,156,512 86,896,338
------------------- -----------------
Total liabilities and shareholders' equity $1,009,600,255 $971,104,999
=================== ==================
*Standby letters of credit outstanding at March 31, 1997 amounted to $3,305,533
The accompanying notes are an integral part of the consolidated financial
statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
For the three For the three
months ended months ended
March 31, 1997 March 31, 1996
INTEREST INCOME:
Interest and fees on loans $ 15,573,312 $ 13,795,245
Securities 3,549,844 3,128,609
Interest bearing deposits 5,791 10,823
Interest rate swap -- 3,785
Federal funds sold 111,124 33,980
------------ ------------
Total interest income 19,240,071 16,972,442
INTEREST EXPENSE:
Large denomination certificates of deposit 978,943 812,185
Other deposits 7,236,768 6,296,726
Short-term debt 324,587 420,533
Other borrowed funds 99,608 719
------------ ------------
Total interest expense 8,639,906 7,530,163
------------ ------------
Net interest income 10,600,165 9,442,279
Provision for loan losses 500,000 312,500
------------ ------------
Net interest income after
provision for loan losses 10,100,165 9,129,779
------------ ------------
NONINTERST INCOME:
Service charges on deposit accounts 1,376,534 1,442,966
Other commissions and fees 465,744 499,752
Gain (loss) on sale of securities (9,813) (4,188)
Gain on sale of foreclosed assets -- 16,090
Gain on sale of loans 85,224 --
Triangle Investment Services 92,511 46,929
Other operating income (22,258) 46,139
------------ ------------
Total noninterest income 1,987,942 2,047,688
------------ ------------
NONINTERST EXPENSE:
Salaries and employee benefits 3,289,201 3,360,018
Occupancy expense 671,543 640,993
Furniture and equipment expense 567,357 582,755
Professional fees 434,140 355,010
Federal deposit insurance expense 18,000 53,518
Advertising and public relations 213,778 244,079
Office expenses 340,722 181,862
Amortization of intangible assets 352,162 342,126
Other operating expense 1,373,752 1,384,536
------------ ------------
Total noninterest expense 7,260,655 7,144,897
------------ ------------
Net income before income taxes 4,827,452 4,032,570
Income tax expense 1,785,000 1,485,537
------------ ------------
Net income $ 3,042,452 $ 2,547,033
============ =============
Primary income per share data:
Net income 0.28 0.24
Average common equivalent shares 10,860,014 10,758,460
Income per share data assuming full dilution:
Net income 0.28 0.24
Average common equivalent shares 10,873,226 10,759,117
Cash dividends declared per share 0.10 0.07
The accompanying notes are an integral part of the consolidated financial
statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
MARCH 31, MARCH 31,
1997 1996
Cash flows from operating activities:
Net income $ 3,042,452 $ 2,547,033
Adjustments to reconcile net income to net cash provided (used) by
operations:
Depreciation and amortization 791,194 713,937
Accretion of discount on investment securities,
net of amortization of premiums 57,467 28,004
Provision for loan losses 500,000 312,500
Loss (Gain) on sale of investments 9,813 4,188
Loss (Gain) on Fixed Assets (129,072) --
Mortgage loans held for sale:
Originations (948,368) (6,712,899)
Sales 3,357,312 7,927,578
Provision (benefit) for deferred taxes (21,580) (122,001)
Gain on sale of foreclosed assets -- 16,090
Change in other assets and liabilities:
Interest receivable (731,900) (678,184)
Other assets (286,844) 400,141
Interest payable (473,839) (384,359)
Other liabilities 1,474,613 (128,439)
--------- ----------
Net cash provided (used) by operating activities 6,641,248 3,923,589
--------- ----------
Cash flows from investing activities:
Proceeds from maturity and principal paydown of securities AFS 2,854,881 6,379,690
Proceeds from maturities and principal paydown of securities HTM 11,031,019 5,695,110
Proceeds from sales of investment securities AFS 22,972,797 7,500,050
Proceeds from sales of investment securities HTM -- --
Purchases of investment securities AFS (44,441,766) (31,282,024)
Purchases of investment securities HTM (4,280,174) (9,538,343)
Net increase in loans made to customers (32,526,245) (27,835,286)
Capital expenditures, bank premises and equipment (239,399) (1,222,784)
Proceeds from sale of foreclosed assets -- 192,535
Proceeds from sale of premises and equipment 209,851 --
Proceeds from sale of mortgage servicing portfolio -- --
Net cash acquired, in acquisition and divestitures -- 51,240,736
------------ ----------
Net cash used by investing activities (44,419,036) 1,129,684
------------ ----------
Cash flows from financing activities:
Net increase or (decrease) in deposit accounts 31,730,096 (6,653,191)
Net increase (decrease) in short-term debt 9,504,212 (5,979,148)
Net increase (decrease) in other borrowings (5,000,000) --
Proceeds from common stock issuance 239,638 41,163
Repurchase of stock (542,728) --
Cash dividends paid (1,049,585) (677,827)
Cash payments for fractional shares -- --
Shares issued under stock plans 184,346 174,906
---------- ------------
Net cash provided by financing activities 35,065,979 (13,094,097)
---------- ------------
Net (decrease) in cash and cash equivalents (2,711,809) (8,040,824)
Cash and cash equivalents at beginning of period 36,504,873 45,621,841
---------- ----------
Cash and cash equivalents at end of period $ 33,793,064 $ 37,581,017
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
For the Three Months Ended March 31, 1997 and 1996
(Unaudited)
1. Financial statement presentation and management representation
The consolidated financial statements include the accounts and
results of operations of Triangle Bancorp, Inc. and its
wholly-owned subsidiary, Triangle Bank. All significant
intercompany transactions and accounts are eliminated in
consolidation.
The interim consolidated financial statements as of and for
the three months ended March 31, 1997 and 1996 are unaudited.
In the opinion of management, the consolidated financial
statements contain all adjustments, consisting of normal
recurring adjustments, necessary to present fairly, in all
material respects, the consolidated financial position as of
March 31, 1997 and 1996, and the results of operations and
cash flows for the periods then ended. The results for the
interim periods are not necessarily indicative of what
results will be for the year ended December 31, 1997.
2. Earnings Per Share
The Company will adopt Statement of Financial Accounting
Standards (SFAS) No. 128 "Earnings Per Share" on December 31,
1997. SFAS No. 128 requires the Company to change its method
for computing, presenting and disclosing earnings per share
information. Upon adoption, all prior period data presented
will be restated to conform to the provisions of SFAS No. 128.
If the Company had adopted SFAS No. 128 for the period ended
March 31, 1997, the following computation would have been
presented on the consolidated statements of income:
Three Months Three Months
Ended March Ended March
31, 1997 31, 1996
Basic income per common share:
Net income $3,042,452 $2,547,033
Weighted average shares:
Common shares outstanding 10,477,363 10,424,422
Basic income per common share $0.29 $0.24
2. Earnings Per Share (Continued)
Three Months Three Months
Ended March Ended March
31, 1997 31, 1996
Diluted income per common share:
Net income $3,042,452 $2,547,033
Weighted average shares:
Common shares outstanding 10,477,363 10,424,422
Dilutive effect of subordinated
debt options 6,055 4,687
Dilutive effect of stock options 376,596 329,351
---------- ----------
Total shares 10,860,014 10,758,460
Diluted income per common share $0.28 $0.24
3. Subsequent Event:
On April 25, 1997 the Company entered into a definitive
agreement to acquire all the outstanding common stock of the
Bank of Mecklenburg. The transaction is subject to shareholder
and regulatory approval and is expected to be accounted for as
a pooling of interests in the fourth quarter of 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIANGLE BANCORP, INC.
Date: May 12, 1997 /s/ Debra L. Lee
Debra L. Lee,
EVP/Chief Financial Officer
TRIANGLE BANCORP, INC.
EXHIBIT INDEX
EXHIBIT
NUMBER NAME PAGE
19 Report furnished to security holders.
27 Financial Data Schedule