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.
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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.
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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.
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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
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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.
<TABLE>
<CAPTION>
Year Approximate Owned or
Office Location Opened Sq. Footage Leased
<S> <C> <C> <C> <C>
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
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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
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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
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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
</TABLE>
In addition, the Bank owns an approximate 13,100 square foot
operations center in Selma, North Carolina.
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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
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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.
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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
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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 was not subject to the
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-
<PAGE>
<TABLE>
<CAPTION>
REFERENCE TO
FORM 10-K
INDEX TO GUIDE 3 DISCLOSURES TABLE PAGE
<S> <C> <C>
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.
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
REFERENCE TO
FORM 10-K
INDEX TO GUIDE 3 DISCLOSURES TABLE PAGE
<S> <C> <C>
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
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
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
------------------------------- ---------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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.
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
TABLE 3
LOANS
(In Thousands)
At December 31,
ANALYSIS OF LOANS: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
ANALYSIS OF CERTAIN LOAN MATURITIES AT DECEMBER 31, 1996
(In Thousands)
Real Estate
Commercial Construction
Financial and Land
& Agricultural Development TOTAL
---------------------------------------------------------
<S> <C> <C> <C>
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
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C>
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) -- 98 110 --
Allowance acquired -- -- -- 4,789 --
Ending Balance $ 9,715 $ 8,685 $9,261 $ 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%
</TABLE>
-18-
<PAGE>
TABLE 3 (continued)
ALLOCATION OF THE RESERVE FOR LOAN LOSSES
At December 31,
(Dollars in Thousands)
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C>
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%
<CAPTION>
1993 1992
Percent of Percent of
loans in each loans in each
Category to Category to
Amount Total loans Amount Total loans
<S> <C> <C> <C> <C>
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
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
TABLE 3 (CONTINUED)
====================================================================================================================================
ANALYSIS OF NONPERFORMING ASSETS
(In Thousands)
At December 31,
1996 1995 1994 1993 1992
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
===================================================
====================================================================================================================================
</TABLE>
-20-
<PAGE>
TABLE 4
================================================================================
SECURITIES
<TABLE>
<CAPTION>
(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
<S> <C> <C> <C> <C> <C> <C> <C>
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
==============================================================================================
====================================================================================================================================
</TABLE>
21
<PAGE>
TABLE 4 (cont'd)
===========================================================================
SECURITIES
WEIGHTED AVERAGE YIELDS* AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C>
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.
==============================================================================
</TABLE>
-22-
<PAGE>
TABLE 4 (CONT'D)
==============================================================================
SECURITIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------
1996 1995
Available For Sale Book Value Market Value Book Value Market Value
<S> <C> <C> <C> <C>
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 2,587 2,596
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 3,448 3,448
-------------------------------------------------------
$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
=======================================================
======================================================================================================================
</TABLE>
-23-
<PAGE>
TABLE 5
==============================================================================
LARGE TIME DEPOSIT MATURITIES
Analysis of Time Deposits of $100,000 or more at December 31, 1996
(In Thousands):
<TABLE>
<CAPTION>
Total
----------------
<S> <C>
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
================
</TABLE>
===============================================================================
-24-
<PAGE>
TABLE 6
SHORT-TERM BORROWINGS
(Dollars in Thousands)
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
<TABLE>
<CAPTION>
1994
Securities
Sold Under Federal Home
Federal Funds Agreement to Loan
Purchased Repurchase Bank Combined
<S> <C> <C> <C> <C>
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%
</TABLE>
-25-
<PAGE>
TABLE 7
==============================================================================
<TABLE>
<CAPTION>
SELECTED KEY FINANCIAL RATIOS (1)
1996 1995 1994
------------------ ------------------ --------
<S> <C> <C> <C>
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%
</TABLE>
==============================================================================
(1) All ratios are computed on average daily balances, except dividend payout.
TABLE 8
==============================================================================
<TABLE>
<CAPTION>
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
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 $ (98,137) $ 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%
------------------------------------------------
=============================================================================================================================
</TABLE>
(2) Assumptions used include the maturity distribution units for
non-maturity deposits and no pre-payments on loans.
-26-
<PAGE>
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-
<PAGE>
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:
<TABLE>
<S> <C>
(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-
<PAGE>
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
</TABLE>
-29-
<PAGE>
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.
<TABLE>
<CAPTION>
EXHIBIT PAGE IN
NUMBER FORM 10-K
<S> <C>
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-
<PAGE>
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-
<PAGE>
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
</TABLE>
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-
<PAGE>
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
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/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-
<PAGE>
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-
<PAGE>
Signature Title Date
Director
N. Johnson Tilghman
Director
Sydnor M. White, Jr.
/s/ J. Blount Williams Director 1/28/97
J. Blount Williams
</TABLE>
-35-
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE NUMBER IN
SEQUENTIAL
NUMBERING
EXHIBIT DESCRIPTION SYSTEM
<S> <C> <C>
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
</TABLE>
-36-
<PAGE>
TRIANGLE BANCORP
ANNUAL REPORT
1996
<PAGE>
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
<PAGE>
(Full page photo appears here)
<PAGE>
(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
<PAGE>
Selected Consolidated Financial Information
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
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%
</TABLE>
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
(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
(Coopers & Lybrand Letterhead)
Report of Independent Accountants
The Board of Directors and Shareholders
Triangle Bancorp, Inc.
Raleigh, North Carolina
We have audited the accompanying 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. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Triangle Bancorp,
Inc. and subsidiary as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
Raleigh, North Carolina
January 20, 1997
Triangle Bancorp, Inc. and Subsidiary 19
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
(in thousands, except share data)
<S> <C> <C>
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
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Deposits:
Noninterest-bearing demand $139,905 $126,377
Interest-bearing demand 83,961 88,956
Savings and money market accounts 181,659 149,500
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
Commitments and contingencies (Notes 12 and 13)
Shareholders' equity:
Common stock; no par value; 20,000,000 shares authorized;
10,468,036 shares and 10,416,078 shares issued and
outstanding in 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
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands, except per share data)
<S> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
on Securities Total
Common Stock Undivided Available Shareholders'
Shares Amount Profits for Sale Equity
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993, as previously
reported 9,281,438 $54,260 $ 7,190 $ - $61,450
Adjustments for pooling-of-interests 577,500 3,389 465 - 3,854
Balance, December 31, 1993 9,858,938 57,649 7,655 - 65,304
Adjustment to beginning balance for change in
accounting principle, net of income taxes of $172 - - - 348 348
Shares issued under stock plans 249,888 1,610 - - 1,610
Common shares issued to the public 85,834 515 - - 515
Cash dividends paid ($.07 per share) - - (713) - (713)
Change in unrealized gain (loss), net
of income taxes of $1,674 - - - (2,940) (2,940)
Net income - - 4,182 - 4,182
Balance, December 31, 1994 10,194,660 59,774 11,124 (2,592) 68,306
Shares issued under stock plans 62,013 418 - - 418
Common shares issued to the public 175,000 1,300 - - 1,300
Repurchased shares (15,000) (188) - - (188)
Cash payments for fractional shares (595) (7) - - (7)
Cash dividends paid ($.17 per share) - - (1,761) - (1,761)
Change in unrealized gain (loss), net
of income taxes of $1,886 - - - 3,481 3,481
Net income - - 7,858 - 7,858
Balance, December 31, 1995 10,416,078 61,297 17,221 889 79,407
Shares issued under stock plans 71,069 527 - - 527
Repurchased shares (18,900) (277) - - (277)
Cash payments for fractional shares (211) (3) - - (3)
Cash dividends paid ($.31 per share) - - (3,277) - (3,277)
Change in unrealized gain (loss), net of income
taxes of $459 - - - (782) (782)
Net income - - 11,301 - 11,301
Balance December 31, 1996 10,468,036 $61,544 $25,245 $ 107 $86,896
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 11,301 $ 7,858 $ 4,182
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 3,242 2,482 2,263
Writedown of fixed assets - 1,358 118
Accretion of discount on securities, net of
amortization of premiums 304 185 728
Provision for loan losses 2,100 428 1,250
Loss (gain) on sales of securities 15 (87) 1,627
Loss on market valuation of loans held for sale - - 402
Loss (gain) on sale of premises and equipment 239 (146) -
Gain on sale of mortgage servicing portfolio - (529) -
Gain on sale of branch (558) - -
Loans held for sale:
Originations (21,798) (20,422) (51,011)
Sales 22,882 17,876 58,195
Provision (benefit) for deferred taxes (200) 693 1,497
Gain on sales of foreclosed assets (14) (66) (51)
Changes in assets and liabilities:
Interest receivable (1,192) (1,309) (1,177)
Other assets 219 544 (757)
Interest payable 233 2,257 749
Other liabilities (396) (889) (446)
Net cash provided by operating activities 16,377 10,233 17,569
Cash flows from investing activities:
Increase in intangible assets - - (1,101)
Proceeds from maturity and principal paydowns of
securities available for sale 21,437 20,067 27,385
Proceeds from maturity and principal paydowns of
securities held to maturity 24,918 9,454 7,073
Proceeds from sales of securities available for sale 40,011 35,824 47,057
Proceeds from sales of securities held to maturity - - 10,953
Purchase of securities available for sale (85,517) (54,173) (71,468)
Purchase of securities held to maturity (41,248) (31,793) (32,753)
Net increase in loans (82,173) (73,718) (69,901)
Net capital expenditures, premises and equipment (6,823) (5,212) (2,619)
Proceeds from sales of foreclosed assets 307 382 928
Proceeds from sale of premises and equipment 475 218 -
Proceeds from sale of mortgage servicing portfolio - 1,467 -
Net cash acquired in acquisitions and divestitures 47,955 32,164 -
Net cash used in investing activities (80,658) (65,320) (84,446)
</TABLE>
(Continued)
23
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposit accounts $ 81,652 $ 23,692 $52,705
Net increase (decrease) in short-term debt (33,458) 33,010 5,568
Net increase (decrease) in other borrowings 10,000 (12,500) (206)
Proceeds from common stock issuance - 1,300 515
Repurchase of stock (277) (188) -
Cash payments for fractional shares (3) (7) -
Shares issued under stock plans 527 418 1,610
Cash dividends paid (3,277) (1,761) (713)
Net cash provided by financing activities 55,164 43,964 59,479
Net decrease in cash and cash
equivalents (9,117) (11,123) (7,398)
Cash and cash equivalents at beginning of year 45,622 56,745 64,143
Cash and cash equivalents at end of year $ 36,505 $ 45,622 $56,745
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 32,271 $ 24,791 $19,086
Income taxes $ 6,254 $ 2,596 $ 2,069
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Triangle Bancorp, Inc. (the "Company") is a bank holding company
incorporated in November 1991 under the laws of the State of
North Carolina.
Triangle Bank, the wholly-owned subsidiary of the Company (the "Bank"), was
organized and incorporated under the laws of the State of North Carolina on
January 4, 1988. The Bank has two wholly-owned subsidiaries, Triangle Bank
Leasing Corp. ("Leasing"), (currently inactive) and Triangle Investment
Services, ("TIS") which provides discount brokerage services.
The consolidated financial statements have been restated to include the accounts
and operations of companies acquired and accounted for as poolings of interests
as discussed in Note 2.
The accounting and reporting policies of the Company, the Bank and its
subsidiaries follow generally accepted accounting principles and general
practices within the financial services industry. Following is a summary of the
more significant policies.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the
Bank and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Securities
The Company classifies its securities into three types as follows:
(a) Securities Held to Maturity - Debt securities that the Company has the
positive intent and ability to hold to maturity which are reported at
amortized cost,
(b) Trading Securities - Debt and equity securities that are bought and held
principally for the purpose of selling in the near term which are reported
at fair value, with unrealized gains and losses included in earnings, or
(c) Securities Available for Sale - Debt and equity securities not classified as
either Securities Held to Maturity or Trading Securities which are reported
at fair value, with unrealized gains and losses reported as a separate
component of shareholders' equity.
The classification of securities is generally determined at the date of
purchase. Gains and losses on sales of securities, computed based on specific
identification of adjusted cost of each security, are included in other income
at the time of the sales. Premiums and discounts on debt securities are
recognized in interest income on the interest method over the period to
maturity.
25
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loans Held for Sale
Loans held for sale are carried at the lower of cost or estimated market value,
determined on an aggregate basis. Net unrealized losses are recognized in a
valuation allowance by charges to income. Prior to 1995 the Company serviced the
loans sold, paying the buyer an agreed upon yield which was normally less than
the interest rate paid by the borrowers, the difference being retained by the
Company as a service fee. These service fees are included in other service
charges, commissions and fees in the consolidated statements of income. During
December 1995, the Company sold its mortgage servicing portfolio, which amounted
to approximately $135,000,000 and recognized a gain of approximately $529,000 on
the sale.
Loans and Allowance for Loan Losses
Loans are stated at the amount of unpaid principal, reduced by an allowance for
loan losses, unearned discounts and net deferred loan origination fees and
costs. Interest on loans is calculated by using the simple interest method on
daily balances of the principal amount outstanding. Deferred loan fees and costs
are amortized to interest income over the contractual life of the loan using a
method that approximates the level yield method.
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 and interest when due according to the contractual terms of the loan
agreement. Uncollateralized loans are measured for impairment based on the
present value of expected future cash flows discounted at the original
contractual interest rate, while all collateral-dependent loans are measured for
impairment based on the fair value of the collateral. During 1996 and 1995 there
were no loans material to the consolidated financial statements that were
impaired as defined.
The Company uses several factors in determining if a loan is impaired. The
internal asset classification procedures include a thorough review of
significant loans and lending relationships and include the accumulation of
related data. This data includes loan payment status, borrowers' financial data
and borrowers' operating factors such as cash flows, operating income or loss,
etc.
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions and trends that may affect the
borrowers' ability to pay.
26
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Recognition on Impaired and Nonaccrual Loans
Loans, including impaired loans, are generally classified as nonaccrual if they
are past due as to maturity or payment of principal or interest for a period of
more than 90 days, unless such loans are well-secured and in the process of
collection. Loans that are on a current payment status or past due less than 90
days may also be classified as nonaccrual if repayment in full of principal
and/or interest is in doubt.
Loans may be returned to accrual status when all principal and interest amounts
contractually due (including arrearages) are reasonably assured of repayment
within an acceptable period of time, and there is a sustained period of
repayment performance (generally a minimum of six months) by the borrower, in
accordance with the contractual terms of interest and principal.
While a loan is classified as nonaccrual and the future collectibility of the
recorded loan balance is doubtful, collections of interest and principal are
generally applied as a reduction to the principal outstanding, except in the
case of loans with scheduled amortizations where the payment is generally
applied to the oldest payment due. When the future collectibility of the
recorded loan balance is expected, interest income may be recognized on a cash
basis. In the case where a nonaccrual loan had been partially charged-off,
recognition of interest on a cash basis is limited to that which would have been
recognized on the recorded loan balance at the contractual interest rate.
Receipts in excess of that amount are recorded as recoveries to the allowance
for loan losses until prior charge-offs have been fully recovered.
Foreclosed Assets
Assets acquired as a result of foreclosure are valued at the lower of the
recorded investment in the loan or fair value less estimated costs to sell. The
recorded investment is the sum of the outstanding principal loan balance and
foreclosure costs associated with the loan. Any excess of the recorded
investment over the fair value of the property received is charged to the
allowance for loan losses. Any subsequent write-downs are charged against other
expenses.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed by the straight-line
method based on estimated service lives of assets. Useful lives range from 10 to
40 years for substantially all premises and from 3 to 20 years for equipment and
fixtures. The cost of leasehold improvements is being amortized using the
straight-line method over the terms of the related leases. Repairs and
maintenance are charged to expense as incurred. Upon disposition, the asset and
related accumulated depreciation or amortization are relieved and any gains or
losses are reflected in operations.
27
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Intangible Assets
Intangible assets are composed primarily of goodwill and core deposit premiums.
Amortization of goodwill and core deposit premiums is computed using the
straight-line method based on the estimated useful lives of assets. Useful lives
range from 10 to 15 years for the core deposit premiums and range from 15 to 25
years for goodwill.
The Company evaluates intangible assets for potential impairment by analyzing
the operating results, trends and prospects of the Company. The Company also
takes into consideration recent acquisition patterns within the banking industry
and any other events or circumstances which might indicate potential impairment.
Income Taxes
The Company files a consolidated Federal income tax return. State income tax
returns are filed for each corporation.
Deferred tax asset and liability balances are determined by application to
temporary differences of the tax rate expected to be in effect when taxes will
become payable or receivable. Temporary differences are differences between the
tax basis of assets and liabilities and their reported amounts in the financial
statements that will result in taxable or deductible amounts in future years.
The effect on deferred taxes of a change in tax rates is recognized in income in
the period that includes the enactment date.
Net Income Per Common Share
Primary and fully diluted net income per common share is computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalents of dilutive stock options. The weighted average numbers of
shares were as follows:
1996 1995 1994
Primary 10,777,645 10,591,266 10,182,078
Fully diluted 10,830,206 10,703,510 10,185,583
Cash Flow
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks and Federal funds sold. Generally, Federal funds
are purchased and sold for one-day periods.
Reclassifications
Certain items included in the 1995 and 1994 financial statements have been
reclassified to conform to the 1996 presentation. These reclassifications have
no effect on the net income or shareholders' equity previously reported.
28
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
New Accounting Pronouncement
Effective January 1, 1997, the Company will adopt the applicable provisions of
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities". The
impact of adopting this statement is not expected to be material to the
Company's consolidated financial statements.
Use of Estimates in the Preparation of the Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. MERGERS AND ACQUISITIONS
On October 24, 1996, the Company completed the merger of Granville United Bank
("Granville") with and into the Bank through the issuance of 1.75 shares of the
Company's common stock for each share of the outstanding common stock of
Granville, or 752,289 shares. The merger was accounted for as a pooling of
interests.
Separate results of the pooled entities for the years ended December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
Company Granville Combined
(In thousands)
<S> <C> <C> <C>
1995:
Total income $ 65,977 $ 4,330 $ 70,307
Net interest income 33,309 1,792 35,101
Net income 7,388 470 7,858
1994:
Total income $ 53,468 $ 2,755 $ 56,223
Net interest income 29,316 1,285 30,601
Net income 3,841 341 4,182
</TABLE>
Granville, prior to its merger with the Company, reported total income of
$3,408,000, net interest income of $1,554,000 and net income of $470,000 for the
nine months ended September 30, 1996.
29
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
2. MERGERS AND ACQUISITIONS (Continued)
In February 1995, the Bank acquired two branches with approximately $17,000,000
in deposits and paid a premium of approximately $550,000. In November 1995, the
Bank acquired three branches from NationsBank, N. A., which included
approximately $40,000,000 in deposits and $18,000,000 in loans. As part of the
acquisition, the Bank paid a core deposit premium of approximately $3,338,000.
In January 1996, the Bank acquired four branches from Raleigh Federal Savings
Bank, which included approximately $55,000,000 in deposits. As part of the
acquisition, the Bank paid a core deposit premium of approximately $3,500,000.
During May 1996, the Bank completed a branch swap transaction which included
divesting of net deposits of $3,700,000. A gain was recognized on the sale of
the deposits of $558,000 and a core deposit premium was paid of $286,000. These
acquisitions were accounted for as purchases and, accordingly, the results of
operations of the branches have been included in the consolidated financial
statements from the dates of acquisition. The proforma effects of these
transactions were immaterial.
3. SECURITIES
The amortized cost and estimated market value of securities at December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(in thousands)
<S> <C> <C> <C> <C>
1996:
Available for sale:
U.S. Treasury securities $ 116,703 $ 481 $ 292 $ 116,892
U.S. Agency obligations 4,715 - 67 4,648
Mortgage-backed securities 4,036 - 64 3,972
Obligations of states
and political subdivisions 14,369 80 108 14,341
Collateralized mortgage obligations 2,145 - 37 2,108
Other investments 4,125 - - 4,125
$ 146,093 $ 561 $ 568 $ 146,086
Held to maturity:
U.S. Agency obligations $ 72,134 $ 680 $ 231 $ 72,583
Mortgage-backed securities 8,711 5 152 8,564
Obligations of states
and political subdivisions 12,663 296 41 12,918
Collateralized mortgage obligations 3,050 - 25 3,025
Other investments 554 23 - 577
$ 97,112 $ 1,004 $ 449 $ 97,667
</TABLE>
30
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
3. SECURITIES (Continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
(in thousands)
<S> <C> <C> <C> <C>
1995:
Available for sale:
U.S. Treasury securities $ 89,928 $1,260 $ 80 $ 91,108
U.S. Agency obligations 21,627 130 191 21,566
Mortgage-backed securities 6,471 10 10 6,471
Obligations of states and
political subdivisions 2,587 17 8 2,596
Collateralized mortgage obligations 2,766 - 51 2,715
Other investments 3,448 - - 3,448
$126,827 $1,417 $340 $127,904
Held to maturity:
U.S. Agency obligations $ 49,047 $3,257 $114 $ 52,190
Mortgage-backed securities 13,598 34 103 13,529
Obligations of states and political
subdivisions 8,934 359 7 9,286
Collateralized mortgage obligations 3,068 15 16 3,067
Other investments 1,638 42 - 1,680
$ 76,285 $3,707 $240 $ 79,752
</TABLE>
The amortized cost and estimated market value of securities at December 31, 1996
by contractual maturities are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
(in thousands)
<S> <C> <C>
Available for sale:
Due in one year or less $ 37,602 $ 37,659
Due after one year through five years 84,150 84,216
Due after five years through ten years 1,732 1,711
Due after ten years 22,609 22,500
$146,093 $146,086
Held to maturity:
Due in one year or less $ 29,075 $ 29,072
Due after one year through five years 47,849 48,156
Due after five years through ten years 10,572 10,829
Due after ten years 9,616 9,610
$ 97,112 $ 97,667
</TABLE>
31
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
3. SECURITIES (Continued)
Gross realized gains and losses on sales of securities for the years ended
December 31, 1996, 1995 and 1994 are summarized below:
1996 1995 1994
Gross realized gains $119 $309 $356
Gross realized losses $134 $222 $1,983
In connection with the Company's merger transactions, the acquired entities sold
certain held to maturity securities in late 1995 as part of a plan to
restructure their portfolios so as to comply with the investment policies of the
Company. These securities had an amortized cost of $12,016,000 and the Company
realized losses totaling $1,063,000 on the sales. The Company also transferred
securities with an amortized cost of $17,398,000 from the available for sale
category to the held to maturity category during the year ended December 31,
1995.
During 1996, the Company, upon evaluation of the Granville investment portfolio,
transferred securities with an amortized cost of $4,557,000 and an estimated
market value of $4,400,000 from the available for sale category to the held to
maturity category.
On December 29, 1995, the Company transferred securities between categories
under a one-time amnesty provision from SFAS No. 115.
Securities with a carrying value of $15,982,000 and a market value of
$16,236,000 were transferred from the held to maturity category to the available
for sale category. The carrying values of these securities were adjusted to
market upon transfer. Securities with a carrying value of $12,295,000 and a
market value of $12,532,000 were transferred from the available for sale
category to the held to maturity category.
Securities with an amortized cost of approximately $59,008,000 and $59,896,000
as of December 31, 1996 and 1995, respectively, were pledged to secure public
deposits and for other banking purposes.
The Company maintains two Interest Rate Floor contracts, one at 4% with a
notional amount of $8,000,000 and one at 4.25% with a notional amount of
$4,000,000. The contracts extend to September 1997.
32
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
4. LOANS AND ALLOWANCE FOR LOAN LOSSES
Major classifications of loans as of December 31, 1996 and 1995, are summarized
as follows:
<TABLE>
<CAPTION>
1996 1995
(in thousands)
<S> <C> <C>
Commercial $144,885 $141,515
Real estate:
Construction and land development 47,005 37,586
Residential, 1-4 families 264,174 182,878
Residential, 5 or more families 3,466 5,692
Farmland 7,326 9,339
Nonfarm, nonresidential 90,031 96,411
Agricultural production 10,674 12,964
Installment 76,170 72,850
Other 6,100 9,368
Net deferred loan fees (398) (211)
649,433 568,392
Less allowance for loan losses 9,715 8,685
$639,718 $559,707
</TABLE>
A summary of the allowance for loan losses for the years ended December 31,
1996, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Balance, beginning of year $8,685 $9,261 $10,912
Provision charged against income 2,100 428 1,250
Loans charged off, net of recoveries (972) (1,004) (2,999)
Allowance on purchased (sold) loans (98) - 98
Balance, end of year $9,715 $8,685 $ 9,261
</TABLE>
Nonperforming assets at December 31, 1996 and 1995, consist of the following:
<TABLE>
<CAPTION>
1996 1995
(in thousands)
<S> <C> <C>
Loans past due ninety days or more $2,107 $1,033
Nonaccrual loans 1,666 1,533
Foreclosed assets (included in other assets) 507 499
$4,280 $3,065
</TABLE>
33
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
5. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
(in thousands)
<S> <C> <C>
Premises $13,174 $ 7,378
Equipment and fixtures 11,461 11,453
Leasehold improvements 550 588
25,185 19,419
Less accumulated depreciation and amortization 8,315 8,915
16,870 10,504
Construction in process 684 2,867
Land 2,627 2,183
$20,181 $15,554
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets at December 31, 1996 and 1995 and the related amortization
expense for the years ended December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995
(in thousands)
<S> <C> <C>
Intangible assets:
Core deposit premiums $13,662 $ 9,842
Goodwill 1,433 1,327
15,095 11,169
Less accumulated amortization 3,441 2,045
$11,654 $ 9,124
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Amortization expense:
Core deposit premiums $1,314 $ 629 $365
Goodwill 82 87 79
Purchased mortgage servicing rights - 338 283
$1,396 $1,054 $727
</TABLE>
34
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
7. SHORT-TERM DEBT AND OTHER BORROWINGS
Short-term debt of $15,962,000 and $49,421,000 outstanding at December 31, 1996
and 1995, respectively, consists of securities sold under agreements to
repurchase ("repurchase agreements"), Federal funds purchased and Federal Home
Loan Bank ("FHLB") advances. These amounts included $12,062,000 and $14,921,000
of repurchase agreements at December 31, 1996 and 1995, respectively, $3,900,000
and $15,000,000 of Federal funds purchased at December 31, 1996 and 1995,
respectively, and $19,500,000 of FHLB advances at December 31, 1995. The
weighted average interest rate on such outstanding borrowings was 5.20% and
5.50% at December 31, 1996 and 1995, respectively. The maximum amount
outstanding at the end of any month during 1996 and 1995 was approximately
$71,735,000 and $49,942,000 , respectively.
The Company has pledged certain securities to collateralize the repurchase
agreements. These agreements generally mature and are renewed daily.
Other borrowings at December 31, 1996 consists of advances from the FHLB of
$10,000,000. Two $5,000,000 advances are maintained with interest rates of 5.86%
and 6.14% and due dates of January 1998 and January 1999, respectively. The
Company has pledged certain loans secured by one to four family residential
mortgages as collateral for these advances.
8. INCOME TAXES
The components of income tax expense for the years ended December 31, 1996, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Current expense $6,380 $3,469 $ 711
Deferred (benefit) expense (200) 693 1,497
$6,180 $4,162 $2,208
</TABLE>
The reconciliation of expected income tax at the statutory Federal rate (35% in
1996 and 1995 and 34% in 1994) with income tax expense for the years ended
December 31, 1996, 1995 and 1994 , is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Expected income tax expense at statutory rate $6,120 $4,200 $2,173
Increase (decrease) in income tax expense
resulting from:
State taxes, net of federal tax benefit 462 323
Benefit of net operating loss carryforward (229) (217) (34)
Tax exempt interest (320) (156) (138)
Other, net 147 12 207
Income tax expense $6,180 $4,162 $2,208
</TABLE>
35
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
8. INCOME TAXES (Continued)
The components of net deferred tax assets at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
(in thousands)
<S> <C> <C>
Allowance for loan losses $2,559 $1,821
Accumulated depreciation 1,631 2,050
Deferred compensation 190 213
Net operating loss carryforwards 2,038 1,861
Other 157 430
Unrealized securities (gains) losses 125 (356)
$6,700 $6,019
</TABLE>
The Company has federal net operating loss carryforwards of approximately
$6,000,000, which expire in years 2003 through 2008. Use of the net operating
loss carryforwards is limited to approximately $600,000 each year.
9. EMPLOYEE BENEFIT PLAN
The Company maintains a 401(k) plan for employees 21 years of age or over with
at least three months of service, which covers substantially all employees.
Under the plan, employees may contribute from 2% to 15% of compensation, subject
to an annual maximum as determined under the Internal Revenue Code. Employees
may elect for up to 25% of their contributions to be invested in the Company's
common stock. The Company matches, in contributions of the Company's common
stock, 100% of the employee's first 2% of contributions and 50% of the next 4%
of contributions. The Company contributed approximately $455,000, $370,000 and
$363,000 to the plan in 1996, 1995 and 1994, respectively.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
10. COMMON STOCK
On May 23, 1996, the shareholders of the Company approved an amendment to the
Company's articles of incorporation to increase the authorized shares of its
common stock to 20,000,000.
The Company has a Long-Term Incentive Plan which allows the Board of Directors
to award any combination of stock options, restricted stock and cash. During
1995, the Company issued 2,000 shares of restricted stock.
The Company also has a qualified incentive stock option plan for the benefit of
certain of the Company's key officers and employees. Additionally, the Company
has a non-qualified stock option plan for directors and certain officers. The
Company may grant options under these plans for up to 1,194,513 shares of common
stock. Options under these plans are exercisable at no less than fair market
value at the date of grant and are subject to a prorated five-year vesting
requirement. The options are exercisable as they vest and expire no later than
ten years after that date.
36
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
10. COMMON STOCK (Continued)
On January 1, 1996 the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123). As
permitted by SFAS 123, the Company has chosen to continue to apply APB Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its Plans. Accordingly, no compensation cost
has been recognized for options granted under the Plan. Had compensation cost
for the Company's Plan been determined based on the fair value at the grant
dates for awards under the Plan consistent with the method of SFAS 123, the
impact on the Bank's net income and net income per share would not have been
material.
A summary of the status of the Bank's Plans as of December 31, 1996, 1995 and
1994, and changes during the years ending on those dates is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 753,695 $ 7.92 688,768 $7.44 552,350 $7.67
Pooling adjustment - - - - 70,380 6.86
Granted 93,980 14.96 115,387 9.65 178,081 6.90
Exercised (55,144) 6.18 (30,013) 4.38 (56,280) 4.84
Forfeited (31,665) 11.80 (20,447) 6.63 (55,763) 9.93
Outstanding at end of year 760,866 $ 8.76 753,695 $7.92 688,768 $7.44
</TABLE>
The following table summarizes information about the Plan's stock options at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted -
Average
Remaining Weighted - Weighted -
Number Contractual Average Number Average
Outstanding Term Exercise Exercisable Exercise
Range of Exercise Prices at 12/31/96 (in years) Price at 12/31/96 Price
<S> <C> <C> <C> <C> <C>
4.00 - 5.99 49,043 4.35 $5.54 44,963 $ 5.55
6.00 - 7.00 352,433 4.74 6.47 257,205 6.57
7.01 - 8.00 59,790 6.76 7.71 33,520 7.73
8.01 - 9.00 64,536 5.43 8.33 40,457 8.27
9.01 - 10.00 102,600 8.10 9.73 22,120 9.75
10.01 - 17.00 88,244 9.20 14.84 740 12.24
17.01 - 19.00 44,220 3.17 18.18 44,220 18.18
760,866 5.81 $8.76 443,225 $ 8.04
</TABLE>
At December 31, 1996, the Company had outstanding warrants to purchase 12,000
shares of its common stock at a purchase price of $9.17 per share. While these
warrants are currently exercisable, none have been, and they expire on December
31, 2000.
37
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
11. REGULATORY RESTRICTIONS
The Bank, as a North Carolina banking corporation, may pay dividends only out of
undivided profits as determined pursuant to North Carolina General Statutes
Section 53-87. However, regulatory authorities may limit payment of dividends by
any bank when it is determined that such a limitation is in the public interest
and is necessary to ensure the financial soundness of the bank.
Under regulations of the Federal Reserve, banking affiliates are required to
maintain certain minimum average reserve balances which include both cash on
hand and deposits with the Federal Reserve. These deposits are included in cash
and cash equivalents in the accompanying balance sheets. At December 31, 1996
and 1995, the Bank was required to maintain such balances of approximately
$6,400,000 and $10,100,000, respectively.
The Bank is subject to various regulatory capital requirements administered by
the federal and state banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Management believes, as of
December 31, 1996, that the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 1996 and 1995, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum amounts and ratios, as set forth in the table below. There are
no conditions or events since that notification that management believes have
changed the Bank's category.
A summary of the Company's required and actual capital components follows
(amounts in thousands):
<TABLE>
<CAPTION>
To Be Well Capitalized
Under Prompt
For Capital Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital ( to Risk Weighted Assets) $83,696 12.2% $54,910 8.0% $68,637 10.0%
Tier I Capital ( to Risk Weighted Assets) 75,261 11.0 27,455 4.0 41,182 6.0
Tier I Capital (to Average Assets) 75,261 8.2 36,547 4.0 45,684 5.0
As of December 31, 1995:
Total Capital ( to Risk Weighted Assets) $74,995 12.1% $49,472 8.0% $61,841 10.0%
Tier I Capital ( to Risk Weighted Assets 67,415 10.9 24,736 4.0 37,104 6.0
Tier I Capital ( to Average Assets) 67,415 8.7 30,939 4.0 38,674 5.0
</TABLE>
38
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
12. LEASE OBLIGATIONS
The Company leases a portion of its facilities under various operating leases.
Rental expense related to such leases amounted to approximately $1,100,000,
$825,000 and $827,000 in 1996, 1995 and 1994, respectively.
A summary of noncancelable, long-term lease commitments at December 31, 1996
follows:
1997 $ 951,000
1998 932,000
1999 923,000
2000 772,000
2001 676,000
Thereafter 2,882,000
$7,136,000
13. COMMITMENTS AND CONTINGENCIES
The Company is party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit, lines of credit and
standby letters of credit. These instruments involve elements of credit risk in
excess of amounts recognized in the accompanying financial statements.
The Company's risk of loss in the event of nonperformance by the other party to
the commitment to extend credit, line of credit and standby letter of credit is
represented by the contractual amount of these instruments. The Company uses the
same credit policies in making commitments under such instruments as it does for
on-balance sheet instruments. The amount of collateral obtained, if any, is
based on management's credit evaluation of the counterparty. Collateral held
varies, but may include accounts receivable, inventory, real estate and time
deposits with financial institutions. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
As of December 31, 1996 and 1995, outstanding financial instruments whose
contract amounts represent credit risk were as follows:
1996 1995
(in thousands)
Unfunded loans and lines of credit $123,375 $107,276
Standby letters of credit $ 3,629 $ 1,629
The Company's lending is concentrated primarily in eastern North Carolina.
Credit has been extended to certain of the Company's customers through multiple
lending transactions.
39
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
13. COMMITMENTS AND CONTINGENCIES (Continued)
Various legal proceedings against the Company and its subsidiaries have arisen
from time to time in the normal course of business. Management believes
liabilities arising from these proceedings, if any, will have no material
adverse effect on the financial positions or results of operations of the
Company or its subsidiaries.
14. RELATED PARTY TRANSACTIONS
In the normal course of business certain directors and executive officers of the
Company, including their immediate families and companies in which they have an
interest, were loan customers.
Activity in these loans is summarized as follows :
1996 1995
(in thousands)
Balance, beginning of year $ 4,827 $11,604
Loans made 2,705 3,344
Payment received (3,100) (4,244)
Changes in composition (424) (5,877)
Balance, end of year $ 4,008 $ 4,827
15. PARENT COMPANY FINANCIAL DATA
The Company's principal asset is its investment in the Bank. Condensed financial
statements for the parent company as of December 31, 1996 and 1995 and for the
years ended December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Condensed Balance Sheets
Cash $ 368 $ 331
Investment in wholly-owned subsidiary 86,296 79,115
Other assets 365 56
Total assets $87,029 $79,502
Other liabilities $ 133 $ 95
Shareholders' equity 86,896 79,407
Total liabilities and shareholders' equity $87,029 $79,502
Condensed Statements of Income
Dividends from wholly-owned subsidiary $ 3,447 $ 588 $ 967
Miscellaneous expenses 109 236 274
Income before equity in earnings of wholly-owned subsidiary 3,338 352 693
Equity in undistributed earnings of wholly-owned subsidiary 7,963 7,506 3,489
Net income $11,301 $ 7,858 $4,182
</TABLE>
40
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
15. PARENT COMPANY FINANCIAL DATA (Continued)
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows 1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $11,301 $ 7,858 $ 4,182
Equity in undistributed earnings of wholly-owned
subsidiary (7,963) (7,506) (3,489)
Decrease (increase) in other assets (309) 378 (361)
Increase (decrease) in other liabilities 38 (44) 84
Net cash provided by operating activities 3,067 686 416
Cash flows used in investing activities -
Investment in subsidiary - (1,300) (743)
Cash flows from financing activities:
Common shares issued to the public - 1,300 515
Shares issued under stock plans 527 418 1,610
Dividends (3,277) (1,761) (713)
Cash issued for fractional shares (3) (7) -
Repurchased shares (277) (188) -
Net cash provided by (used in) financing
activities (3,030) (238) 1,412
Net increase (decrease) in cash 37 (852) 1,085
Cash at beginning of year 331 1,183 98
Cash at end of year $ 368 $ 331 $ 1,183
Non-cash transactions:
Change in unrealized gain (loss) on securities
available for sale, net $ (782) $ 3,481 $(2,940)
</TABLE>
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS No. 107"), requires the disclosure of
estimated fair values for financial instruments. Quoted market prices, if
available, are utilized as an estimate of the fair value of financial
instruments. Because no quoted market prices exist for a significant part of the
Company's financial instruments, the fair value of such instruments has been
derived based on management's assumptions with respect to future economic
conditions, the amount and timing of future cash flows and estimated discount
rates. Different assumptions could significantly affect these estimates.
Accordingly, the net realizable value could be materially different from the
estimates presented below. In addition, these estimates are only indicative of
individual financial instruments' values and should not be considered an
indication of the fair value of the Company taken as a whole.
Cash and due from banks, Federal funds sold and interest-bearing deposits in
banks are equal to the fair value due to the nature of the financial
instruments. The fair value of securities is estimated based upon bid quotations
received from various securities dealers. Loans held for sale are considered
short term assets that are carried at market value at December 31, 1996 and
1995. The fair value of the Company's loans is determined by discounting the
scheduled cash flows through the loan's estimated maturity using estimated
market discount rates that most reflect the credit and interest rate risk
inherent in the loan. The estimate of maturity is based upon the stated average
maturity of management's estimates of prepayments considering current economic
conditions and prevailing interest rates.
41
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
16. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The fair value of deposits with no stated maturities, such as
noninterest-bearing deposits, interest checking, money market and savings
accounts, are equal to the amount payable as required by SFAS No. 107. The fair
value of time deposits, such as certificates of deposit and Individual
Retirement Accounts, are based on the discounted contractual cash flows. The
discount rate is estimated using rates currently offered for deposits of similar
maturities.
Short-term debt includes repurchase agreements and Federal funds purchased,
which reprice daily or monthly to allow for their market value to equal their
carrying value. The fair value of FHLB advances in short-term debt was
determined using discounted contractual cash flows. Other borrowings at December
31, 1996 consists of debt with maturities ranging from one to two years. The
fair values of these liabilities are estimated using the discounted values of
the contractual cash flows. The discount rate is estimated using the rates
currently in effect for similar borrowings.
The fair value of off-balance sheet financial instruments has not been
considered in determining on balance sheet fair value. The fair value of
unfunded loans and lines of credit and standby letters of credit approximates
the stated value since they are either short term in nature or subject to
immediate repricing.
The following table presents information for financial assets and liabilities as
of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
Carrying Fair Carrying Fair
Value Value Value Value
(in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 34,615 $ 34,615 $ 41,679 $ 41,679
Federal funds sold 1,011 1,011 2,815 2,815
Interest-bearing deposits in banks 879 879 1,128 1,149
Securities 243,198 243,753 204,189 207,656
Loans held for sale 2,413 2,413 3,497 3,497
Loans, less allowance for loan losses 639,718 640,851 559,707 561,172
Interest receivable 8,813 8,813 7,619 7,619
Total financial assets $930,647 $932,335 $ 820,634 $825,587
Financial liabilities:
Deposits $847,764 $850,327 $714,590 $715,467
Short-term debt 15,962 15,962 49,421 49,421
Other borrowings 10,000 10,000 - -
Interest payable 6,593 6,593 6,254 6,254
Total financial liabilities $880,319 $882,882 $770,265 $771,142
</TABLE>
The Company's remaining assets and liabilities are not considered financial
instruments.
42
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized unaudited quarterly financial data for the years ended December 31,
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996
Fourth Third Second First
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $18,961 $18,935 $17,998 $16,972
Interest expense 8,392 8,566 8,122 7,530
Provision for loan losses 765 300 723 312
Noninterest income 1,813 2,104 2,529 2,048
Noninterest expense 7,369 7,557 7,098 7,145
Income tax expense 1,317 1,694 1,683 1,486
Net income $ 2,931 $ 2,922 $ 2,901 $ 2,547
Primary earnings per share $ .27 $ .27 $ .27 $ .24
Fully diluted earnings per share $ .27 $ .27 $ .27 $ .24
</TABLE>
<TABLE>
<CAPTION>
1995
Fourth Third Second First
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $16,516 $15,976 $15,264 $14,485
Interest expense 7,217 7,292 6,710 5,921
Provision for loan losses 158 38 92 140
Noninterest income 2,575 1,962 1,803 1,726
Noninterest expense 8,093 6,854 7,077 8,695
Income tax expense 1,306 1,312 1,048 496
Net income $ 2,317 $ 2,442 $ 2,140 $ 959
Primary earnings per share $ .22 $ .23 $ .20 $ .09
Fully diluted earnings per share $ .22 $ .23 $ .20 $ .09
</TABLE>
43
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
18. OTHER INVESTING AND FINANCING ACTIVITIES
Excluded from the consolidated statements of cash flows was the effect of the
following noncash activities:
<TABLE>
<CAPTION>
1996 1995 1994
(in thousands)
<S> <C> <C> <C>
Change in unrealized gain (loss) on securities
available for sale, net $ (782) $ 3,481 $ 2,592
Transfers to securities available for sale $44,332 $110,391
Transfers to securities held to maturity $4,557 $22,149 $ 11,150
Loans transferred from held for sale to mortgage
loans $ 3,921
</TABLE>
The Company acquired five branches and divested of one branch in 1996
and acquired three branches in 1995. In conjunction with these transactions,
assets acquired and liabilities assumed were as follows (in thousands):
1996 1995
(in thousands)
Deposits $52,095 $55,257
Loans 54 (18,683)
Premium paid on deposits and goodwill (3,926) (3,888)
Premises and equipment (365) (552)
Other assets (45) (40)
Other liabilities 142 70
Net cash acquired $47,955 $32,164
44
<PAGE>
TRIANGLE BANK
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
</TABLE>
45
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
</TABLE>
(1) Executive Committee Members
(2) Triangle Bank Board only
Triangle Bancorp, Inc. and Subsidiary 46
<PAGE>
(Full page photo appears here)
<PAGE>
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
EXHIBIT 3(A)
STATE OF (Seal of North Carolina
NORTH appears here) Department of The
CAROLINA Secretary of State
To all whom these presents shall come, Greetings: I, Rufus L. Edmisten,
Secretary of State of the State of North Carolina, do hereby certify the
following and hereto attached to be a true copy of
ARTICLES OF AMENDMENT
OF
TRIANGLE BANCORP, INC.
the original of which was filed in this office on the 26th day of May, 1995.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal at the City of Raleigh, this 26th day of
May, 1995.
(Seal of North Carolina
appears here) (Signature of Rufus L. Edmisten
appears here)
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
TRIANGLE BANCORP, INC.
The undersigned corporation hereby executes these Articles of Amendment
for the purpose of amending its Amended and Restated Articles of Incorporation:
1. The name of the corporation is Triangle Bancorp, Inc.
2. The text of the amendment to the Amended and Restated Articles of
Incorporation was adopted on the 23rd day of May, 1995 and approved by the
shareholders of the corporation, as required by N.C.G.S. ss. 55.
3. The Amended and Restated Articles of Incorporation of the
corporation are amended by deleting the text of Article II and inserting in lieu
thereof the following new Article II:
"The aggregate number of shares which the Corporation is
authorized to issue is 20,000,000 shares. The shares shall
be all of one class, designated as common stock."
IN WITNESS THEREOF, these Articles of Amendment are signed by the
President of the corporation this the 26th day of May, 1995.
Triangle Bancorp, Inc.
By: (Signature of Michael S. Patterson
appears here)
____________________________________________
Michael S. Patterson
President
Prepared by and return to:
Mr. Alexander M. Donaldson
For the firm of
Ward and Smith, P.A.
Suite 2400, Two Hannover Square
Fayetteville Street Mall
Raleigh, North Carolina 27601
<PAGE>
STATE OF (Seal of North Carolina
NORTH appears here) Department of The
CAROLINA Secretary of State
To all whom these presents shall come, Greetings:
I, Rufus L. Edmisten, Secretary of State of the State of North Carolina, do
hereby certify the following and hereto attached to be a true copy of
ARTICLES OF AMENDMENT
OF
TRIANGLE BANCORP, INC.
the original of which was filed in this office on the 23rd day of
December, 1993.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal at the City of Raleigh, this 23rd day of
December, 1993.
(Seal of North Carolina
appears here)
(Signature of Rufus L. Edmisten
appears here)
Secretary of State
<PAGE>
ARTICLES OF MERGER
OF
ATLANTIC COMMUNITY BANCORP, INC.
INTO
TRIANGLE BANCORP, INC.
Triangle Bancorp, Inc. (the "Surviving Corporation"), a corporation
organized under the laws of the State of North Carolina, hereby submits these
Articles of Merger for the purpose of merging Atlantic Community Bancorp, Inc.
(the "Merging Corporation"), a corporation organized under the laws of the State
of North Carolina, into the Surviving Corporation:
I. The Plan of Merger dated October 31, 1994 attached hereto and
incorporated herein by reference was duly approved in the manner prescribed by
law.
II. Shareholder approval was obtained as required by Chapter 55 of the
North Carolina General Statutes.
III. These Articles of Merger shall be effective as of 5:00 p.m. on the
31st day of March, 1995.
IN WITNESS WHEREOF, these Articles of Merger are signed by the
President of the Surviving Corporation as of the 29th day of March, 1995.
TRIANGLE BANCORP, INC.
By: (Signature of Michael S. Patterson
appears here)
_________________________________________
Michael S. Patterson, President
Prepared by and return to:
Alexander M. Donaldson
For the firm of
Ward and Smith, P.A.
Suite 2400
Two Hannover Square
Fayetteville Street Mall
Raleigh, North Carolina 27601
Telephone: (919) 836-1800
<PAGE>
PLAN OF MERGER
1.1. Names of Merging Corporations. The names of the corporations
proposed to be merged are ATLANTIC COMMUNITY BANCORP, INC. ("Atlantic") and
TRIANGLE BANCORP, INC. ("Triangle").
1.2. Nature of Transaction. Subject to the provisions of this
Agreement, at the "Effective Time" (as defined in Paragraph 1.7. below),
Atlantic shall be merged into and with Triangle (the "Merger").
1.3. Effect of Merger; Surviving Corporation. At the Effective Time and
by reason of the Merger, the separate corporate existence of Atlantic shall
cease while the corporate existence of Triangle as the surviving corporation in
the Merger shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the
Merger. The duration of the corporate existence of Triangle as the surviving
corporation shall be perpetual and unlimited. Except as otherwise provided
herein, the Merger shall have all of the effects set out in Section 55-11-06 of
the North Carolina General Statutes.
1.4. Assets and Liabilities of Atlantic. At the Effective Time and by
reason of the Merger, and in accordance with N.C. GEN. STAT. ss.55-11-06, all of
the property, assets and rights of every kind and character of Atlantic
(including without limitation all real, personal or mixed property, all debts
due on whatever account, all other choses in action and all and every other
interest of or belonging to or due to Atlantic, whether tangible or intangible)
shall be transferred to and vest in Triangle, and Triangle shall succeed to all
the rights, privileges, immunities, powers, purposes and franchises of a public
or private nature (including all trust and fiduciary properties, powers and
rights) of Atlantic, all without any conveyance, assignment or further act or
deed; and Triangle shall become responsible for all of the liabilities, duties
and obligations of every kind, nature and description (including, but not
limited to, Atlantic's obligations, if any, under its 12.5% subordinated
debentures due December 31, 2,000 (the "Debentures") which will be automatically
and expressly assumed in accordance with the terms of such debentures, and its
duties as trustee or fiduciary) of Atlantic as of the Effective Time.
1.5. Conversion and Exchange of Stock.
a. Conversion of Atlantic Stock. Except as provided herein, at the
Effective Time all rights of Atlantic's shareholders with respect to all then
outstanding shares of common stock of Atlantic ("Atlantic Stock") shall cease to
exist and the holders of shares of Atlantic Stock shall cease to be, and shall
have no
<PAGE>
further rights as, shareholders of Atlantic, but shall become and be
shareholders of Triangle. As consideration for and to effectuate the Merger (and
except as otherwise provided herein), each such outstanding share of Atlantic
Stock shall be converted, without any action on the part of the holder of such
share, Triangle or Atlantic, into a number of newly issued shares of common
stock of Triangle ("Triangle Stock") determined in accordance with the "Exchange
Ratio" (as defined below).
b. Conversion of Atlantic Warrants. At the Effective Time, each warrant
previously granted by Atlantic to purchase shares of Atlantic Stock (the
"Warrants") and which is outstanding on the date of this Agreement automatically
shall be converted into a warrant to purchase a number of shares of Triangle
Stock equal to the number of shares of Atlantic Stock originally covered by the
warrant multiplied by the Exchange Ratio (as defined below). The purchase or
exercise price of each share of Triangle Stock under each such warrant shall be
equal to the per share purchase or exercise price of Atlantic Stock previously
covered by such warrant divided by the Exchange Ratio (and rounded up to the
nearest cent). All other terms of each such Atlantic Warrant shall apply to the
purchase of Triangle Stock thereunder and shall be unaffected by the Merger or
conversion, including but not limited to Sections 8.2 and 8.3 of the Warrants.
For purposes of Paragraphs 1.5.a. and 1.5.b., the "Exchange Ratio"
shall equal six-tenths (0.6) of one share of Triangle Stock for each share of
Atlantic Stock. Notwithstanding anything contained herein to the contrary, the
Exchange Ratio shall be reduced by appropriate method to the extent that (i) any
cash dividends or other distributions are paid or made by Atlantic between the
date of this Agreement and the Effective Time in excess of regular quarterly
dividends of $0.02 per share, (ii) the aggregate amount of fees paid by Atlantic
to Legg Mason Wood Walker, Inc. ("Legg Mason") for delivery of a "Fairness
Opinion" or for any other services provided to Atlantic by Legg Mason from
January 1, 1994 to the Effective Time shall exceed $50,000 (together with
reimbursement for out-of-pocket expenses not to exceed $5,000.00), and (iii) the
aggregate amount of fees and expenses paid by Atlantic to other individuals or
entities for accounting, legal or other services provided to Atlantic by such
entities in connection with the Merger exceeds $40,000.
c. Exchange and Payment Procedures. Following the Effective Time,
certificates representing shares of Atlantic Stock outstanding at the Effective
Time (herein sometimes referred to as "Old Certificates") shall evidence only
the right of the registered holder thereof to receive, and may be exchanged
for, (i) certificates evidencing the number of whole shares of Triangle Stock to
which such holders shall have become entitled ("New Certificates"), plus cash
for any fractional share interests as provided herein, or (ii) in the case of
shares as to which rights of dissent and appraisal are properly exercised (as
provided
<PAGE>
below), cash as provided in Article 13 of the North Carolina Business
Corporation Act.
Following the Effective Time there shall be no further transfers of
Atlantic Stock on the stock transfer books of Atlantic or the registration of
any transfer of an Old Certificate by any holder thereof, and the surrender of
each Old Certificate as provided herein shall be made by or on behalf of its
holder of record as of the Effective Time.
As promptly as practicable following the Effective Time, Triangle shall
send or cause to be sent to each former shareholder of Atlantic of record
immediately prior to the Effective Time written instructions and transmittal
materials (a "Transmittal Letter") for use in surrendering Old Certificates to
the Transfer Agent. Upon the proper surrender and delivery to First-Citizens
Bank & Trust Company, in its capacity as the transfer agent of Triangle Stock
(the "Transfer Agent") (in accordance with Triangle's above instructions and
accompanied by a properly completed Transmittal Letter) by a former shareholder
of Atlantic of his or her Old Certificate(s), and in exchange therefor, the
Transfer Agent shall issue, register in the name of and deliver to such
shareholder the New Certificate(s) to which such shareholder is entitled
pursuant to Paragraph 1.5.a. above.
d. Treatment of Fractional Shares. No scrip or certificates
representing fractional shares of Triangle Stock will be issued to any former
shareholder of Atlantic, and, except as provided below, no such shareholder will
have any right to vote or receive any dividend or other distribution on, or any
other right with respect to, any fraction of a share of Triangle Stock resulting
from the above exchange. In the event the exchange of shares results in the
creation of fractional shares, in lieu of the issuance of fractional shares of
Triangle Stock, Triangle will deliver cash to the Transfer Agent in an amount
equal to the aggregate Market Value (as defined below) of all such fractional
shares, and in such event the Transfer Agent shall divide such cash among and
remit it (without interest) to the former shareholders of Atlantic in accordance
with their respective interests.
For purposes of this Paragraph 1.5.d., "Market Value" shall mean the
average of the closing price of Triangle Stock on the Nasdaq National Market
during the period of ten consecutive trading days ending on either March 9, 1995
or the business day immediately preceding the Effective Date, whichever yields
the greater amount.
e. Surrender of Certificates. Subject to Paragraph 1.5.h. below, no
Triangle Stock certificate or cash shall be delivered to any former shareholder
of Atlantic unless and until such shareholder shall have properly surrendered to
the Transfer Agent the Old Certificate(s) formerly representing his or her
shares of Atlantic Stock, together with a properly completed Transmittal Letter
in such form as shall be provided to the
<PAGE>
shareholder by Triangle for that purpose. Further, until such Old Certificates)
are so surrendered, no dividend or other distribution payable to holders of
record of Triangle Stock as of any date subsequent to the Effective Time shall
be delivered to the holder of such Old Certificate(s). However, subject to prior
escheatment under applicable law, upon the proper surrender of such Old
Certificate(s) the Transfer Agent shall pay to the registered holder of the
shares of Triangle Stock represented by such Old Certificate(s) the amount of
any such dividends, or distributions which have accrued but remain unpaid with
respect to such shares of Triangle Stock. Neither Atlantic, Triangle nor the
Transfer Agent shall have any obligation to pay any interest on any such
dividends, interest or distributions for any period prior to such payment.
f. Antidilutive Adjustments. If, following October 31, 1994, Triangle
shall change the number of outstanding shares of Triangle Stock as a result of a
dividend payable in shares of Triangle Stock, a stock split, a reclassification
or other subdivision or combination of outstanding shares, and if the record
date of such event occurs prior to the Effective Time, then an appropriate and
proportionate adjustment will be made in the number of shares of Triangle Stock
to be issued in exchange for each of the shares of Atlantic Stock.
g. Dissenters. Any shareholder of Atlantic who has and properly
exercises the right of dissent and appraisal with respect to the Merger as
provided in Article 13 of the North Carolina Business Corporation Act
("Dissenters Rights") shall be entitled to receive payment of the fair value of
his or her shares of Atlantic Stock in the manner and pursuant to the procedures
provided therein. Shares of Atlantic Stock held by persons who exercise
Dissenters Rights shall not be converted into Triangle Stock as provided in
Paragraph 1.5.a. above. However, if any shareholder of Atlantic who exercises
Dissenters Rights shall fail to perfect his or her right to receive cash as
provided above, or effectively shall waive or lose such right, then each of his
or her shares of Atlantic Stock, at Triangle's sole option, shall be deemed to
have been converted into the right to receive Triangle Stock as of the Effective
Time as provided in Paragraph 1 5.a. above. Any shares of Triangle Stock
authorized to be issued pursuant to this Agreement but not exchanged for shares
of Atlantic Stock because of the exercise of Dissenters Rights may (i) be sold
by the Transfer Agent at public auction or by private sale, or through a dealer
or by any other reasonable method, at its election, for the best available
price, and the net proceeds of any such sale shall be retained by Triangle or
(ii) cancelled upon the books of Triangle.
h. Lost Certificates. Any shareholder of Atlantic whose certificate
evidencing shares of Atlantic Stock has been lost, destroyed, stolen or
otherwise is missing shall be entitled to receive a certificate representing the
shares of Triangle Stock to which he or she is entitled in accordance with and
upon compliance with conditions imposed by the Transfer Agent or
<PAGE>
Triangle (including without limitation a requirement that the shareholder
provide a lost instruments indemnity or surety bond in form, substance and
amount satisfactory to the Transfer Agent and Triangle).
i. Outstanding Trianqle Stock. The status of the shares of
Triangle Stock which are outstanding immediately prior to the Effective Time
shall not be affected by the Merger.
1.6. Articles, Bylaws and Management. The Articles of Incorporation and
Bylaws of Triangle in effect at the Effective Time shall be the Articles of
Incorporation and Bylaws of Triangle as the surviving corporation. The officers
and the directors of Triangle in office at the Effective Time shall continue to
hold such offices until removed as provided by law or until the election or
appointment of their respective successors.
1.7. Closing; Effective Time. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Triangle, in Raleigh, North Carolina, or at such other place as Triangle
shall designate, on March 31, 1995 or on such other date mutually agreed upon by
the parties hereto (the "Closing Date"). At the Closing, Triangle and Atlantic
shall take such actions (including without limitation the delivery of certain
closing documents and the execution of Articles of Merger under North Carolina
law) as are required herein and as otherwise shall be required by law to
consummate the Merger and cause it to become effective.
Subject to the terms and conditions set forth herein (including without
limitation the receipt of all required approvals of governmental and regulatory
authorities), the Merger shall become effective on the date and at the time (the
"Effective Time") specified in Articles of Merger filed with the North Carolina
Secretary of State in accordance with law; provided, however, that the Effective
Time shall in no event be more than ten days following the Closing Date. If the
Articles of Merger do not designate a specific time as the Effective Time, then
the Effective Time shall be that date and time when the Articles of Merger are
filed with the North Carolina Secretary of State.
<PAGE>
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
TRIANGLE BANCORP, INC.
The undersigned corporation hereby submits these Articles of Amendment
for the purpose of amending its Articles of Incorporation:
1. The name of the corporation is Triangle Bancorp, Inc.
2. The text of the amendment to the Articles of Incorporation adopted
on the 23rd day of November, 1993 and approved by the shareholders of the
corporation, as required by Chapter 55 of the North Carolina General Statutes,
is as follows:
3. The Articles of Incorporation of the corporation hereby are amended
by deleting Article II thereof and inserting in lieu thereof the following new
Article II:
"Article II--The aggregate number of shares which the corporation is
authorized to issue is 10,000,000 shares. These shares shall be all
of one class, designated as common stock."
4. These Articles of Amendment shall be effective as of 11:59 p.m. on
the 28th day of December, 1993.
This the 21st day of December, 1993.
TRIANGLE BANCORP, INC.
By: (Signature of Michael S. Patterson
appears here)
____________________________________
Michael S. Patterson, President
Prepared by and return to:
Alexander M. Donaldson
For the firm of
Ward and Smith, P.A.
Suite 2400
Two Hannover Square
Fayetteville Street Mall
Post Office Box 2091
Raleigh, North Carolina 27602-2091
Telephone: (919) 836-1800
<PAGE>
STATE OF (Seal of North Carolina
NORTH appears here) Department of The
CAROLINA Secretary of State
To all whom these presents shall come, Greetings:
I, Rufus L. Edmisten, Secretary of State of the State of North
Carolina, do hereby certify the following and hereto attached to be a true copy
of
ARTICLES OF AMENDMENT
OF
TRIANGLE BANCORP, INC.
the original of which was filed in this office on the 7th day of
June, 1993.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal at the City of Raleigh, this 7th day of
June, 1993.
(Seal of North Carolina
appears here)
(Signature of Rufus L. Edmisten
appears here)
Secretary of State
<PAGE>
ARTICLES OF AMENDMENT
OF
TRIANGLE BANCORP,INC.
The undersigned corporation hereby submits the Articles of Amendment
for the purpose of amending its Articles of Incorporation:
1. The name of the corporation is Triangle Bancorp, Inc.
2. The following amendments to the Articles of Incorporation of the
corporation were adopted by its shareholders on the 11th day of May, 1993, in
the manner prescribed by law:
The Articles of Incorporation shall be amended by adding new
Articles X and XI to read as follows:
Article X. A Director may be removed from office with cause by the
affirmative vote of seventy-five percent (75%) of all eligible
votes present in person or by proxy at a meeting of shareholders at
which a quorum is present. A Director may be removed from office
without cause by the affirmative vote of seventy-five percent (75%)
of all eligible votes present in person or by proxy at a meeting of
shareholders at which a quorum is present provided that removal
without cause is recommended to the shareholders by the Board of
Directors pursuant to a vote of not less than seventy-five percent
(75%) of the Directors then in office. If a Director is elected by a
separate voting group, only the members of that voting group may
participate in the vote to remove him. The entire Board of Directors
may not be removed except pursuant to the removal of individual
Directors in accordance with the foregoing provisions.
For purposes of this Article, "cause" is defined as personal
dishonesty, incompetence, mental or physical incapacity, breach of
fiduciary duty involving personal profit, a failure to perform
stated duties, or a violation of any law, rule or regulation (other
than a traffic violation or similar routine offense) (based on a
conviction for such offense or an opinion of counsel to the
Corporation to such effect).
Article XI. These Articles may not be amended except pursuant to the
affirmative vote of seventy-five percent (75%) of all eligible votes
present in person or by proxy at a meeting of shareholders at which
a quorum is present, and, if applicable, the affirmative vote of
seventy-five percent (75%) of all eligible votes in any voting group
present in person or by proxy
<PAGE>
at a meeting of shareholders at which a quorum of such voting group
is present with respect to which voting group the amendment would
create dissenters' rights or under the circumstances set forth in
North Carolina General Statutes 55-10-04.
3. These articles will become effective upon filing.
This the 3rd day of June, 1993.
TRIANGLE BANCORP, INC.
By: (Signature of Michael S. Patterson
appears here)
____________________________________
Michael S. Patterson, President
<PAGE>
STATE OF (Seal of North Carolina
NORTH appears here) Department of the
CAROLINA Secretary of State
To all whom these presents shall come, Greetings:
I, Rufus L. Edmisten, Secretary of State of the State of North Carolina, do
hereby certify the following and hereto attached ( 7 sheets) to be a true copy
of
ARTICLES OF RESTATEMENT
OF
TRIANGLE BANCORP, INC.
the original of which was filed in this office on the 25th day of March, 1992.
In Witness Whereof, I have hereunto set my hand and affixed my official
Seal.
Done in Office, at Raleigh, this the 25th day Of March in the Year of our
Lord 1992.
(Seal of North Carolina
appears here)
(Signature of Rufus L. Edmisten
appears here)
Secretary of State
<PAGE>
ARTICLES OF RESTATEMENT
OF
TRIANGLE BANCORP, INC.
The undersigned corporation hereby submits these Articles of
Restatement for the purpose of integrating into one document its original
articles of incorporation and all amendments thereto and also for the purpose of
amending its articles of incorporation:
1. The name of the corporation is Triangle Bancorp, Inc.
2. Attached hereto as an exhibit are the amended and restated articles
of incorporation, which contain an amendment to the articles of incorporation
requiring shareholder approval.
3. The amended and restated articles of incorporation of the
corporation were adopted by its shareholders on the 17th day of March, 1992, in
the manner prescribed by law.
4. These articles will become effective upon filing.
This the 25th day of March, 1992.
TRIANGLE BANCORP, INC.
By: (Signature of Michael S. Patterson
appears here)
____________________________________
Michael S. Patterson, President
and Chief Executive Officer
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
TRIANGLE BANCORP, INC.
The undersigned hereby submits these Articles of Incorporation for the
purpose of forming a business corporation under and by virtue of the laws of the
State of North Carolina:
ARTICLE I
The name of the corporation is TRIANGLE BANCORP, INC.
ARTICLE II
The aggregate number of shares which the corporation is authorized to
issue is 6,000,000 shares. These shares shall be all of one class, designated as
common stock.
ARTICLE III
The minimum amount of consideration to be received by the corporation
for its shares before it shall commence business is One Hundred Dollars
($100.00) in cash or property of equivalent value.
ARTICLE IV
The provisions of Article 9, "The North Carolina Shareholder Protection
Act" and Article 9A, "The North Carolina Control Share Acquisition Act" of the
North Carolina Business Corporation Act shall not be applicable to the
corporation.
ARTICLE V
The number of directors constituting the initial board of directors
shall be 25; and, the names and addresses of the persons who are to serve as
directors until the first meeting of shareholders or until their successors are
elected and qualified are:
NAME ADDRESS
Carole S. Anders 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
William C. Burkhardt 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
David T. Clancy 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
<PAGE>
NAME ADDRESS
Thomas B. Dameron, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
N. Leo Daughtry 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Robert L. Guthrie 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
John B. Harris, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
K. Neal Hunt 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Jeanette W. Hyde 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Earl Johnson, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
O. A. Keller, III 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Edythe P. Lumsden 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Matt H. Nowell 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Michael S. Patterson 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
William D. Poe, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
2
<PAGE>
NAME ADDRESS
Patrick H. Pope 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
William R. Pope 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Henry M. Shaw, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Steven F. Techet 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
N. Johnson Tilghman 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
George C. Turner 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
John E. Weems 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Sydnor M. White 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
J. Blount Williams 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
Robert W. Wynne, III 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27609
ARTICLE VI
No director of the corporation shall have personal liability arising
out of an action whether by or in the right of the corporation or otherwise for
monetary damages for breach of any duty as a director; provided, however, that
the foregoing shall not limit or eliminate the personal liability of a director
with respect to (i) acts or omissions occurring prior to the date of the
effectiveness of this Article, (ii) acts or omissions that such director at the
time of such breach knew or believed were clearly
3
<PAGE>
in conflict with the best interests of the corporation, (iii) any liability
under Section 55-8-33 of the North Carolina General Statutes or any successor
provision, or (iv) any transaction from which such director derived an improper
personal benefit. As used in this Article, the term "improper personal benefit"
does not include a director's reasonable compensation or other reasonable
incidental benefits for or on account of his or her service as a director,
officer, employee, independent contractor, attorney, or consultant of the
corporation.
Furthermore, notwithstanding the foregoing provision, in the event that
Section 55-2-02 or any other provision of the North Carolina General Statutes is
amended or enacted to permit further limitation or elimination of the personal
liability of a director, the personal liability of the corporation's directors
shall be limited or eliminated to the fullest extent permitted by the applicable
law.
This Article shall not affect a provision permitted under the North
Carolina General Statutes and the Articles of Incorporation, Bylaws or contract
or resolution of the corporation indemnifying or agreeing to indemnify a
director against personal liability. Any repeal or modification of this Article
shall not adversely affect any limitation hereunder on the personal liability of
a director with respect to acts or omissions occurring prior to such repeal or
modification.
ARTICLE VII
The address of the initial registered office of the corporation in the
State of North Carolina is 4800 Six Forks Road, P.O. Box 31828, Raleigh, Wake
County, North Carolina, 27609; and, the name of its initial registered agent at
such address is Debra L. Lee.
ARTICLE VIII
The name and address of the incorporator are:
NAME ADDRESS
Petree Stockton & Robinson 1001 West Fourth Street
Winston-Salem, NC 27101
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<PAGE>
ARTICLE IX
(a) Except as set forth in paragraph (b) of this Article IX, the
affirmative vote or consent of the holders of not less than 80% of the
outstanding shares of stock of the corporation entitled to vote on a particular
matter shall be required:
(1) to adopt any agreement for, or to approve, the merger or
consolidation of the corporation or any affiliate (as hereinafter
defined) with or into any other person (as hereinafter defined);
(2) to authorize any sale, transfer, or exchange to any other
person of all or substantially all of the assets of the corporation
or any affiliate; or
(3) to authorize the issuance or transfer by the corporation or any
affiliate of any voting securities of the corporation or any
affiliate in exchange or payment for the securities or assets of
any other person, if such authorization is otherwise required by
law or by agreement between the corporation and any national
securities exchange or by any other agreement to which the
corporation or any affiliate is a party.
(b) The provisions of paragraph (a) of this Article IX shall not apply,
and the provisions of North Carolina law otherwise applicable shall apply, to
(1) any transactions described therein if the Board of Directors by resolution
shall have approved the transaction by two-thirds vote of all directors then in
office; or (2) any transaction described therein if such other person is a
corporation of which a majority of the outstanding shares of all classes of
stock entitled to vote in elections of directors is owned of record or
beneficially by the corporation or its affiliates.
(c) The affirmative vote or consent of the holders of not less than 80%
of the outstanding shares of stock of the corporation entitled to vote on the
dissolution of the corporation shall be required for the adoption of any plan
for the dissolution of the corporation if the Board of Directors shall not have,
by resolution adopted by two-thirds vote of all directors then in office,
recommended to the shareholders the adoption of such plan for dissolution of the
corporation. If the Board of Directors by such vote shall have so recommended to
the shareholders such plan for dissolution of the corporation, the provisions of
North Carolina law otherwise applicable shall apply.
(d) In evaluating the merits of any transaction described in paragraph
(a) of this Article IX, or any offer of a person to make a tender or exchange
offer for any equity security of the
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<PAGE>
corporation, the Board of Directors shall, in connection with the exercise of
its judgment in determining what is in the best interest of the corporation and
its shareholders, give due consideration to all relevant factors, including,
without limitation, the social and economic effects on the employees,
depositors, customers, suppliers, and other constituents of the corporation and
its affiliates, and on the communities in which the corporation and its
affiliates operate or are located.
(e) For the purposes of this Article IX,
(1) an "affiliate" is any person who directly, or indirectly,
through one or more intermediaries, controls, or is controlled by,
or is under common control with, the person specified;
(2) "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting
securities, by contract, or otherwise; and
(3) a "person" is any individual, corporation, partnership, trust,
estate or other entity.
This the 25th day of March, 1992.
TRIANGLE BANCORP, INC.
By: (Signature of Michael S. Patterson
appears here)
____________________________________
Michael S. Patterson, President
and Chief Executive Officer
6
<PAGE>
STATE OF (Seal of North Carolina
NORTH appears here) Department of the
CAROLINA Secretary of State
To all whom these presents shall come, Greetings:
I, Rufus L. Edmisten, Secretary of State of the State of North Carolina, do
hereby certify the following and hereto attached ( 5 sheets) to be a true copy
of
ARTICLES OF INCORPORATION
OF
TRIANGLE BANCORP, INC.
the original of which was filed in this office on the 26th day of November,
1991.
In Witness Whereof, I have hereunto set my hand and affixed my official
Seal.
Done in Office, at Raleigh, this the 27th day of November in the Year of our
Lord 1991.
(Seal of North Carolina
appears here)
(Signature of Rufus L. Edmisten
appears here)
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
TRIANGLE BANCORP, INC.
The undersigned hereby submits these Articles of Incorporation for the purpose
of forming a business corporation under and by virtue of the laws of the
State of North Carolina:
ARTICLE I
The name of the corporation is TRIANGLE BANCORP, INC.
ARTICLE II
The aggregate number of shares which the corporation is authorized to issue
is 6,000,000 shares. These shares shall be all of one class, designated as
common stock.
ARTICLE III
The minimum amount of consideration to be received by the corporation for its
shares before it shall commence business is One Hundred Dollars ($100.00) in
cash or property of equivalent value.
ARTICLE IV
The provisions of Article 9, "The North Carolina Shareholder Protection Act"
and Article 9A, "The North Carolina Control Share Acquisition Act" of the
North Carolina Business Corporation Act shall not be applicable to the
corporation.
ARTICLE V
The number of directors constituting the initial board of directors shall be
25; and, the names and addresses of the persons who are to serve as directors
until the first meeting of shareholders or until their successors are elected
and qualified are:
NAME ADDRESS
Carole S. Anders 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
William C. Burkhardt 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
David T. Clancy 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
<PAGE>
NAME ADDRESS
Thomas B. Dameron, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
N. Leo Daughtry 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Robert L. Guthrie 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
John B. Harris, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
K. Neal Hunt 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Jeanette W. Hyde 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Earl Johnson, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
O. A. Keller, III 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Edythe P. Lumsden 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Matt H. Nowell 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Michael S. Patterson 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
William D. Poe, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
2
<PAGE>
NAME ADDRESS
Patrick H. Pope 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
William R. Pope 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Henry M. Shaw, Jr. 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Steven F. Techet 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
N. Johnson Tilghman 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
George C. Turner 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
John E. Weems 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Sydnor M. White 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
J. Blount Williams 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
Robert W. Wynne, III 4800 Six Forks Road
Post Office Box 31828
Raleigh, NC 27622
ARTICLE VI
No director of the corporation shall have personal liability arising
out of an action whether by or in the right of the corporation or otherwise for
monetary damages for breach of any duty as a director; provided, however, that
the foregoing shall not limit or eliminate the personal liability of a director
with respect to (i) acts or omissions occurring prior to the date of the
effectiveness of this Article, (ii) acts or omissions that such director at the
time of such breach knew or believed were clearly
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<PAGE>
in conflict with the best interests of the corporation, (iii) any liability
under Section 55-8-33 of the North Carolina General Statutes or any successor
provision, or (iv) any transaction from which such director derived an improper
personal benefit. As used in this Article, the term "improper personal benefit"
does not include a director's reasonable compensation or other reasonable
incidental benefits for or on account of his or her service as a director,
officer, employee, independent contractor, attorney, or consultant of the
corporation.
Furthermore, notwithstanding the foregoing provision, in the event that
Section 55-2-02 or any other provision of the North Carolina General Statutes is
amended or enacted to permit further limitation or elimination of the personal
liability of a director, the personal liability of the corporation's directors
shall be limited or eliminated to the fullest extent permitted by the applicable
law.
This Article shall not affect a provision permitted under the North
Carolina General Statutes and the Articles of Incorporation, Bylaws or contract
or resolution of the corporation indemnifying or agreeing to indemnify a
director against personal liability. Any repeal or modification of this Article
shall not adversely affect any limitation hereunder on the personal liability of
a director with respect to acts or omissions occurring prior to such repeal or
modification.
ARTICLE VII
The address of the initial registered office of the corporation in the
State of North Carolina is 4800 Six Forks Road, P.O. Box 31828, Raleigh, Wake
County, North Carolina, 27622; and, the name of its initial registered agent at
such address is Debra L. Lee.
ARTICLE VIII
The name and address of the incorporator are:
NAME ADDRESS
Petree Stockton & Robinson 1001 West Fourth Street
Winston-Salem, NC 27101
ARTICLE IX
These Articles will be effective upon filing.
4
<PAGE>
This the 25th day of November, 1991.
PETREE STOCKTON & ROBINSON, a North
Carolina General Partnership
By: (Signature of Elizabeth L. Moore
appears here)
_____________________________________
Elizabeth L. Moore, Partner Incorporator
5
<PAGE>
<PAGE>
TRIANGLE BANCORP, INC.
1988 INCENTIVE STOCK OPTION PLAN
Triangle Bancorp, Inc., a bank holding company organized and existing under the
laws of the State of North Carolina (herein referred to as the "Company"),
hereby adopts the following Stock Option Plan (the "Plan") for certain
individuals performing services for the Company or any of its subsidiaries.
1. PURPOSE. This Plan is intended to advance the interests of the
Company by allowing officers and other key employees of the Company or any of
its subsidiaries who have substantial responsibility for the direction and
management of the Company or any of its subsidiaries to acquire a proprietary
interest in the Company as an additional incentive to promote the Company's
success, and by encouraging such individuals to continue to provide their
services to the Company or any of its subsidiaries. These aims will be
effectuated by the granting of certain stock options issued under the Plan and
designated by the Committee (defined hereinafter) pursuant to Section 3(b)
hereof will qualify as Incentive Stock Options (hereinafter called "ISO's").
Under Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), and the terms of the Plan shall be interpreted in accordance with this
intention. Options granted under this Plan are referred to hereinafter as
"Options".
2. PLAN. The Plan shall be administered by the Compensation Committee
(the "Committee") of the Board of Directors ("the Board") of the Company, which
shall consist of not less than three members. Subject to the provisions of the
Plan, the Committee shall have full authority, in its description, to (a)
determine the employees (from the class of employees eligible under Section 3
hereof to receive Options under the Plan) to whom Options shall be granted; (b)
determine the time or times at which Options shall be granted; (c) determine the
option price of the shares subject to each Option, which price shall be not less
than the minimum specified in accordance with Section 5 hereof; (d) determine
(subject to Sections 7 and 9 hereof) the time or times when each Option shall
become exercisable and the duration of the exercise; and (e) interpret the Plan
and prescribe, amend, and rescind rules and regulations relating to it. The
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive. The Committee may consult with counsel and other
professional advisors, who may be counsel or advisors to the Company, and shall
not incur any liability for any action taken in good faith in reliance upon the
advice of such counsel or advisors.
3. ELIGIBILITY. (a) Options may be granted by the Committee only to
persons who are officers or other key employees of the Company or a subsidiary
of the Company who perform services of major importance in the management,
operation, and development of the business of the Company or of any subsidiary
of the Company, and the Committee shall determine the number of shares to be
allocated to each Option. In determining the eligibility of an employee to
receive an Option as well as in determining the number of shares to be optioned
to any individual, the Committee shall consider the position and
responsibilities of the individual being considered, the nature and value to the
Company of such individual's services and accomplishments, the person's present
and potential contributions to the success of the Company, and such other
factors as the Committee may deem relevant. A person receiving an Option
pursuant to this Plan shall sometimes be referred to hereinafter as an
"Optionee".
<PAGE>
(b) At the time each Option is granted to an employee under
this Plan, the Committee shall determine whether such Option is to be designated
as an ISO. No Option granted to any employee who at the time of such grant owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any of its subsidiaries may be designated as an ISO,
unless at the time of such grant the option price is fixed at not less than 110%
of the fair market value of the Shares (defined hereinafter) subject to the
Option, and exercise of such Option is prohibited by its terms after the
expiration of five years from the date such Option is to the Plan. There will be
reserved for use upon the exercise of Options to be granted from time to time
under the Plan (subject granted.
(c) No individual shall be given the opportunity under this
Plan to exercise Options for Shares valued (at the time of the granting of the
Option) in excess of $100,000 in any calendar year, unless and except to the
extent that said Options shall have first become exercisable in a preceding
year. No Option shall be granted hereunder for the purchase of Shares in such a
manner as would cause the foregoing restriction to be violated.
4. SHARES OF STOCK SUBJECT to the provisions of Section 6 hereof) an
aggregate of 860,244 Shares of the no par value common stock (the "Shares") of
the Company, which, as the Committee shall from time to time determine, may be
in whole or in part either authorized but unissued Shares, or issued Shares
which shall have been reacquired by the Company. Any Shares subject to an Option
under the Plan, which Option for any reason expires or is terminated unexercised
as to such Shares, may again be subjected to an Option under the Plan.
5. OPTION PRICE. The purchase Price under each Option issued shall be
determined by the Committee at the time the Option is granted, but in no event
shall such purchase price be less than 100% (110%, in the case of an ISO granted
to an employee described in Section 3(b) hereof) of the fair market value of the
Company's Shares on the date of the grant. If the shares are traded in the
over-the-counter market, such fair market value shall be deemed to be the mean
between the asked and the bid prices on such day as reported by NASDAQ. If the
stock is traded on an exchange, such fair market value shall be deemed to be the
mean of the high and low prices at which it is quoted or traded on such day on
the exchange on which it generally has the greatest trading volume. In all
cases, any determination hereunder by the Committee as to the fair market value
of the Shares for which Options are granted shall be made in good faith and
shall be determinative for all purposes of this Plan.
6. ADJUSTMENT FOR DILUTION, ETC. In the event that there is (a) a
subdivision or consolidation of the Company's common stock or any other capital
adjustment of the Company's common stock, (b) the payment by the Company, of a
stock dividend, or (c) any other increase or decrease in the outstanding common
stock of the Company effected without receipt of consideration by the Company,
then the number of Shares then covered by each outstanding Option granted
hereunder shall be adjusted proportionately with no adjustment in the total
purchase price of the Shares then so covered by such Option, and the number of
Shares reserved for the purpose of the Plan shall be adjusted by the same
proportion. All such adjustments shall be made by the Committee, whose
determination upon the same shall be final and binding upon the Optionees. No
fractional Shares shall be issued and any fractional Shares resulting from the
computations pursuant to this Section 6 shall be eliminated from the respective
Option. No adjustment shall be made for cash dividends or the issuance to
stockholders of rights to subscribe for additional Shares or other securities.
2
<PAGE>
7. DURATION AND EXERCISE OF OPTIONS. (a) All Options issued under the
Plan shall be for such period as the Committee shall determine, but for not more
than ten years (five years, in the case of any employee described in Section
3(b) hereof) from the date of the grant thereof. The period of the Option, once
it is granted, may be reduced only as outlined in Section 9 hereof; provided,
however, that the Committee may, where the Company is involved in a merger,
consolidation, dissolution, or liquidation, accelerate the expiration date and
the dates on which any part of the Option may be exercisable for all the Shares
covered thereby, but the effectiveness of such acceleration, and the exercise of
the Option pursuant thereto in excess of the number of Shares for which it would
have been exercisable in the absence of such acceleration, shall be conditioned
upon the consummation of the merger, consolidation, dissolution, or liquidation.
Except as provided in Section 9 or subsection (b) below, no Option may be
exercised after termination of the Optionee's employment with the Company, and
in no event may an Option be exercised after the expiration of its term.
(b) Except as otherwise modified by the Committee, or as
otherwise expressly provided for herein, Options granted under this Plan shall
become exercisable as they vest in accordance with this Section 7. An employee
may, within three months after termination of his employment, exercise his
option with respect to the vested portion of the Shares subject to the Option,
determined in accordance with and based on the whole number of years of the
Optionee's continued employment with the Company or any subsidiary of the
Company from the date the Option is granted through the date of Optionee's
termination of employment, determined in accordance with the following schedule:
Years of Percentage of
Continued Employment Shares Vested
1 20%
2 40%
3 60%
4 80%
5 100%
In the event an Optionee terminates employment within the five-year period
described above, all Shares not vested in accordance with the Schedule described
above shall be forfeited, and the Optionee shall have no right to exercise his
Option with respect to any such forfeited Shares. In each case, such limitations
shall be calculated, in the case of any resulting fraction, to the nearest low
whole number of Shares. Notwithstanding the foregoing, the Committee may, in its
sole discretion, (i) prescribe longer time periods and additional requirements
with respect to the exercise of an Option, (ii) different vesting schedules with
respect to any Option, and (iii) terminate in whole or in part such portion of
any Option as has not yet become exercisable at the time of termination of it
determines that the Optionee is not performing satisfactorily the duties to
which he was assigned on the date the Option was granted or duties of at least
equal responsibility. Except as provided herein or in Section 9 hereof, no
Option may be exercised unless the Optionee is at the time of such exercise in
the employ of the Company or of a subsidiary of the Company, and shall have been
continuously so employed since the grant of his Option. Absence or leave
approved by the management of the Company shall not be considered an
interruption of employment for any purpose under the Plan.
3
<PAGE>
(c) Subject to limitations contained herein as to the time for
exercise of an Option and the amount of Shares subject to such Option, and
notwithstanding subsection (b) above, each Option shall be exercisable in whole
or in part or in installments at such time or times and in such manner as the
Committee may prescribe and specify in granting the Option to the Optionee,
which manner may differ from the exercise periods otherwise prescribed in
subsection (b) above. No Shares shall be delivered pursuant to any exercise of
an Option until the requirements of such laws and regulations as may be deemed
by the Committee to be applicable to them have been satisfied, and further until
receipt by the Company of the full option price in cash for the Shares for which
an Option is exercised. In order to facilitate the accumulation of funds to
enable employees to exercise their Options, each Optionee shall have the right,
if he or she so elects, to direct the Company or subsidiary of the Company to
withhold from his or her compensation regular amounts to be applied toward the
exercise of the Options. Funds credited to the Stock Option accounts will be
under the control of the Company until applied to the payment of the option
price at the direction of the employee or returned to the employee in the event
the amount is not used for purchase of Shares under Option, and all funds
received or held by the Company under the Plan may be used for any corporate
purpose, and no interest shall be payable to the participant on account of any
amounts so held. Such amounts may be withdrawn by the employee at any time, in
whole or in part, for any reason.
(d) No Optionee or his legal representative, legatees, or
distributees, as the case may be, will be, or will be deemed to be, a holder of
any Shares subject to an Option unless and until certificates for such Shares
are issued to him or them under the terms of the Plan. Except as otherwise
provided herein, no adjustment shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is issued.
8. ASSIGNABILITY. Each Option granted under this Plan shall be
transferable only by will or by the laws of descent and distribution and shall
be exercisable, during an Optionee's lifetime, only by the Optionee to whom the
Option is granted. Except as permitted by the preceding sentence, no Option
granted under the Plan or any of the rights and privileges thereby conferred
shall be transferred, assigned, pledged, or hypothecated in any way (whether by
operation of law or otherwise), and no such Option, right, or privilege shall be
subject to execution, attachment, or similar process. Upon any attempt so to
transfer, assign, pledge, hypothecate, or otherwise dispose of the Option or any
right or privilege conferred thereby, contrary to the provisions hereof, or upon
the levy of any attachment or similar process upon such Option, right, or
privilege, the Option and such rights and privileges shall immediately become
null and void.
9. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH, OR DISABILITY. (a)
Notwithstanding anything in this Plan to the contrary, in the event an
Optionee's employment shall be terminated by reason of the Optionee's retirement
at his Retirement Date (defined hereinafter), the Optionee shall have the right
to exercise such Option or Options held by him, to the extent that such Options
have not previously expired or been exercised, at any time within three months
after such retirement; upon such retirement, all Options held by such Optionee
which have not been theretofore exercised by him or otherwise expired shall be
immediately exercisable in full, notwithstanding Section 7(b) or (c) hereof.
(b) In the event that an Optionee shall die while employed by
the Company or any subsidiary of the Company , or shall die within three months
after retirement on or after his Retirement Date, any Option or Options granted
to him under this Plan which have not previously expired or been exercised shall
be exercisable by the estate of the Optionee (or by any person who acquired such
Option by bequest or inheritance from the Optionee) in full notwithstanding
Section 7(b) or (c) hereof, any
4
<PAGE>
time within one year after the death of the Optionee. References herein to the
Optionee shall be deemed to include any person entitled to exercise the Option
after the death of the Optionee under the terms of this Section 9(b).
(c) In the event of an Optionee's termination of employment by reason
of the Optionee's disability, the Optionee shall have the right, notwithstanding
Section 7(b) or (c) hereof, to exercise all Options held by him to the extent
that such Options have not previously expired or been exercised, at any time
within one year after such termination; upon such disability, all Options held
by such Optionee which have not been theretofore exercised by him or otherwise
expired shall be immediately exercisable in full, notwithstanding Section 7(b)
or (c) hereof. The term "disability" shall, for the purposes of this Plan, be
defined in the same manner as such term is defined in Section 105(d)(4) of the
Code.
(d) For the purposes of this Plan, "Retirement Date" shall mean, any date
an employee is otherwise entitled to retire under any of the Company's or its
subsidiaries' retirement plans, or if no such retirement plans exist, then the
date on which the Optionee attains age 65.
10. LISTING AND REGISTRATION OF SHARES. Each Option shall be subject to
the requirement that if at any time the Committee shall determine, in its
description, that the listing, registration, or qualification of the Shares
covered thereby upon any securities exchange or any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Option
or the issue or purchase of Shares thereunder, such Option may not be exercised
in whole or in part unless and until such listing, registration, qualification,
consent, or approval shall have been effected or basined free of any conditions
not acceptable to the Committee. The Company shall not be required to issue or
deliver any certificate for Shares of its stock purchased upon the exercise of
any part of an Option before (i) the admission of such Shares to listing on any
stock exchange in which the stock of the Company may then be listed, (ii)
completion of any registration or other qualification of such governmental
regulatory body that the Company shall, in its sole discretion, determine is
necessary or advisable, and (iii) the Committee shall have been advised by
counsel that all applicable legal requirements have been complied with and
satisfied.
11. EXPIRATION AND TERMINATION OF THE PLAN. Options may be granted
under the Plan at any time or from time to time so long as the total number of
Shares at any one time optioned and/or purchased under this Plan does not exceed
460,244 Shares. The Plan may be abandoned or terminated at any time by the Board
except with respect to any Options then outstanding under the Plan. No Option
shall be granted pursuant to the Plan after ten years from effective date of the
Plan.
12. AMENDMENT OF PLAN. The Board may at any time and from time to time
modify and amend the Plan (including the form of any option agreement to be
executed pursuant hereto) in any respects; provided, however, that no such
amendment shall: (a) increase (except in accordance with Section 6 hereof) the
maximum number of Shares for which Options may be granted under the Plan either
in the aggregate or to any individual; (b) reduce (except in accordance with
Section 6 hereof) the minimum option prices which may be established under the
Plan; (c) extend the period or periods during which Options may be granted or
exercised; (d) change the provisions relating to the determination of
individuals to whom Options shall be granted and the number of Shares to be
covered by such Options; or (e) change the provisions relating to adjustments to
be made upon changes in capitalization. The termination or any modification or
amendment of the Plan
5
<PAGE>
shall not, without the consent if the Optionee, affect such Optionee's rights
under an Option theretofore granted to him.
13. APPLICABILITY OF PLAN TO OUTSTANDING STOCK OPTIONS. This Plan shall
not affect the terms and conditions of any non-qualified stock options
heretofore granted to any individual by the Company or any of its predecessors
under any other plan or agreement relating to non-qualified stock options, nor
shall it affect any of the rights of any individual to whom such a non-qualified
stock option was granted.
14. EFFECTIVE DATE OF PLAN. This Plan shall become effective upon
adoption by the Board, subject to approval by the shareholders of the Company
(or any of its predecessors). This Plan shall not become effective unless such
shareholder approval shall be obtained within twelve months before or after the
adoption of the Plan by the Board.
* Amended by the Shareholders on May 23, 1995
* Amended By the Board of Directors Compensation Committee on
January 25, 1994.
* Amended by the Shareholders as of December 16, 1993.
STATE OF NORTH CAROLINA
COUNTY OF WAKE
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (hereinafter referred to as this
"Agreement") is entered into as of June 18, 1996, by and among TRIANGLE BANCORP,
INC., a North Carolina corporation ("Triangle"), TRIANGLE BANK, a banking
corporation organized under the laws of North Carolina (the "Bank"), and Steven
R. Ogburn (the "Officer").
WHEREAS, the Officer has heretofore been employed by Triangle
and the Bank as Executive Vice President; and
WHEREAS, the services of the Officer, the Officer's experience and
knowledge of the affairs of Triangle and the Bank and reputation and contacts in
the industry are extremely valuable to Triangle and the Bank; and
WHEREAS, Triangle and the Bank wish to attract and retain such
well-qualified executives and it is in the best interest of Triangle and the
Bank and of the Officer to secure the continued services of the Officer
notwithstanding any change of control of Triangle or the Bank; and
WHEREAS, Triangle and the Bank consider the establishment and
maintenance of a sound and vital management team to be part of their overall
corporate strategy and to be essential to protecting and enhancing the best
interest of Triangle, the Bank and Triangle's shareholders; and
WHEREAS, the parties desire to enter into this Agreement to provide the
Officer with security in the event of a change of control of Triangle or the
Bank to ensure the continued loyalty of the Officer during any change of control
in order to maximize
<PAGE>
shareholder value as well as the continued safe and sound operation
of Triangle and the Bank.
WHEREAS, the Officer, Triangle and the Bank acknowledge and agree that
this Agreement is not an employment agreement but is limited to circumstances
giving rise to a change of control of Triangle or the Bank as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants, and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Term. The initial term of this Agreement shall be for the period
commencing upon the effective date of this Agreement and ending two (2) calendar
years from the effective date of this Agreement. At each anniversary date of
this Agreement (i.e., June 18, 1998), the term automatically shall be extended
for an additional two (2) years on the same terms and conditions set forth
herein, unless Triangle and the Bank shall give written notice to the Officer of
their intention not to extend this Agreement for an additional two (2) years,
which notice shall be given at least thirteen (13) months prior to the next
anniversary date.
2. Change of Control.
(a) In the event of a termination of the Officer's employment
in connection with, or within twenty-four (24) months after, a "Change of
Control" (as defined in Subparagraph (e) below) of Triangle or the Bank, for
reasons other than for "cause" (as defined in Subparagraph (b) below), the
Officer shall be entitled to receive the sum set forth in Subparagraph (d)
below. Said sum
- 2 -
<PAGE>
shall be payable as provided in Subparagraph (f) below, provided, however, that
the Officer is employed on a full-time basis by the Bank at the effective time
of the "Change of Control", except as provided in Subparagraph (j) below.
(b) For purposes of this Agreement, termination for "cause"
shall include termination because of the Officer's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, or regulation other than traffic violations or similar offenses, or
final cease-and-desist order.
(c) The Officer shall have the right to terminate this
Agreement upon the occurrence of any of the following events (the "Termination
Events") within twenty-four (24) months following a Change of Control of
Triangle or the Bank:
(i) Officer is assigned any duties and/or
responsibilities that are inconsistent with
his duties or responsibilities at the time of
the Change of Control;
(ii) Officer's annual base salary is reduced
below the amount in effect as of the effective
date of a Change of Control;
(iii) Officer's life insurance, medical or hospitalization
insurance, disability insurance, stock option plans, stock
purchase plans, deferred compensation plans, management
retention plans, retirement plans, or similar plans or
benefits being provided by the Bank to the Officer as of the
effective date of the Change of Control are reduced in their
level, scope, or coverage, or any such insurance, plans, or
benefits are eliminated, unless such reduction or elimination
applies proportionately to all salaried employees of the Bank
who participated in such benefits prior to such Change of
Control; or
- 3 -
<PAGE>
(iv) Officer is transferred to a location which is more than
fifty (50) miles from her current principal work location,
without the Officer's express written consent.
A Termination Event shall be deemed to have occurred on the date such
action or event is implemented or takes effect.
(d) In the event that the Officer terminates this Agreement
pursuant to this Paragraph 2, the Bank will be obligated (1) to pay or cause to
be paid to the Officer an amount equal to two (2) times (i) the Officer's 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
(2) years, and (2) to continue for a period of two (2) years after such
termination all benefits the Officer was receiving and entitled to at such
termination date under Triangle's and the Bank's benefit programs and plans,
including, but not limited to, medical, disability, life and accident insurance
coverage, automobile allowance, professional qualification allowance, and club
dues (or, at the Officer's election, the Bank will pay the dollar equivalent of
such benefits).
(e) For the purposes of this Agreement, the term Change
of Control shall mean any of the following events:
(i) After the effective date of this Agreement, any
"person" (as such term is defined Section 7(j)(8)(A)
of the Change in Bank Control Act of 1978), directly
or indirectly, acquires beneficial ownership of
voting stock, or acquires irrevocable proxies or any
combination of voting stock and irrevocable proxies,
representing fifty percent (50%) or more of any class
of voting securities of Triangle or the Bank, or
acquires control of in any manner the
- 4 -
<PAGE>
election of a majority of the directors of Triangle
or the Bank;
(ii) Triangle or the Bank consolidates or merges with
or into another corporation, association, or entity,
or is otherwise reorganized, where Triangle or the
Bank is not the surviving corporation in such
transaction and the holders of the voting securities
of Triangle or the Bank immediately prior to such
acquisition own less than a majority of the voting
securities of the surviving entity immediately after
the transaction; or
(iii) All or substantially all of the assets of
Triangle or the Bank are sold or otherwise
transferred to or are acquired by any other
corporation, association, or other person, entity, or
group.
Notwithstanding the other provisions of this Paragraph 2, a transaction
or event shall not be considered a Change of Control if, prior to the
consummation or occurrence of such transaction or event, the Officer, Triangle
and the Bank agree in writing that the same shall not be treated as a Change of
Control for purposes of this Agreement.
(f) Amounts payable pursuant to this Paragraph 2
shall be paid, at the option of the Officer, either in one lump sum or in
twenty-four (24) equal monthly payments.
(g) Following a Termination Event which gives rise
to the Officer's rights hereunder, the Officer shall have two (2)
years from the date of occurrence of the Termination Event to
terminate this Agreement pursuant to this Paragraph 2. Any such
termination shall be deemed to have occurred only upon delivery to
the Bank or any successor thereto, of written notice of termination
which describes the Change of Control and Termination Event. If
- 5 -
<PAGE>
the Officer does not so terminate this Agreement within such two-year period,
the Officer shall thereafter have no further rights hereunder with respect to
that Termination Event, but shall retain rights, if any, hereunder with respect
to any other Termination Event as to which such period has not expired.
(h) It is the intent of the parties hereto that all
payments made pursuant to this Agreement be deductible by the Bank for federal
income tax purposes and not result in the imposition of an excise tax on the
Officer. Notwithstanding anything contained in this Agreement to the contrary,
any payments to be made to or for the benefit of the Officer which are deemed to
be "parachute payments" as that term is defined in Section 280G(b)(2) of the
Internal Revenue Code, as amended (the "Code"), shall be modified or reduced to
the extent deemed to be necessary by the Bank's Board of Directors to avoid the
imposition of an excise tax on the Officer under Section 4999 of the Code or the
disallowance of a deduction to the Bank under Section 280G(a) of the Code.
(i) In the event any dispute shall arise between
the Officer and the Bank as to the terms or interpretation of this Agreement,
including this Paragraph 2, whether instituted by formal legal proceedings or
otherwise, including any action taken by the Officer to enforce the terms of
this Paragraph 2 or in defending against any action taken by Triangle or the
Bank, the Bank shall reimburse the Officer for all costs and expenses,
proceedings or actions, in the event the Officer prevails in any such action.
(j) It is further agreed that the payment agreed in
this Paragraph 2 to be paid by the Bank to the Officer shall be due
and paid to the Officer should a Change of Control (as defined
- 6 -
<PAGE>
above) be agreed to by Triangle and/or the Bank or be consummated within six (6)
months of the Officer's involuntary termination of employment with the Bank for
reasons other than for "cause" as such term is defined in Subparagraph 2(b)
hereof.
3. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon any corporate or other successor of Triangle or
the Bank which shall acquire, directly or indirectly, by conversion, merger,
consolidation, purchase, or otherwise, all or substantially all of the assets of
Triangle or the Bank.
4. Modification; Waiver; Amendments. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by the Officer, Triangle and the
Bank, except as herein otherwise provided. No waiver by any party hereto, at any
time, of any breach by any party hereto, or compliance with, any condition or
provision of this Agreement to be performed by such party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No amendments or additions to this Agreement shall be
binding unless in writing and signed by the parties, except as herein otherwise
provided.
5. Applicable Law. This Agreement shall be governed in
all respects whether as to validity, construction, capacity,
performance, or otherwise, by the laws of North Carolina, except to
the extent that federal law shall be deemed to apply.
6. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any
- 7 -
<PAGE>
provisions shall not affect the validity or enforceability of the
other provision hereof.
IN TESTIMONY WHEREOF, Triangle and the Bank have caused this Agreement
to be executed under seal and in such form as to be binding, all by authority of
their Board of Directors first duly given, and the individual party hereto has
set said party's hand hereto and has adopted as said party's seal the
typewritten word "SEAL" appearing beside said party's name, this the day and
year first above written.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
TRIANGLE BANK
By: /s/ Michael S. Patterson
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
/s/ Debra L. Lee (SEAL)
Debra L. Lee
- 8 -
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF WAKE
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (hereinafter referred to as this
"Agreement") is entered into as of June 18, 1996, by and among TRIANGLE BANCORP,
INC., a North Carolina corporation ("Triangle"), TRIANGLE BANK, a banking
corporation organized under the laws of North Carolina (the "Bank"), and Debra
L. Lee (the "Officer").
WHEREAS, the Officer has heretofore been employed by Triangle
and the Bank as Executive Vice President; and
WHEREAS, the services of the Officer, the Officer's experience and
knowledge of the affairs of Triangle and the Bank and reputation and contacts in
the industry are extremely valuable to Triangle and the Bank; and
WHEREAS, Triangle and the Bank wish to attract and retain such
well-qualified executives and it is in the best interest of Triangle and the
Bank and of the Officer to secure the continued services of the Officer
notwithstanding any change of control of Triangle or the Bank; and
WHEREAS, Triangle and the Bank consider the establishment and
maintenance of a sound and vital management team to be part of their overall
corporate strategy and to be essential to protecting and enhancing the best
interest of Triangle, the Bank and Triangle's shareholders; and
WHEREAS, the parties desire to enter into this Agreement to provide the
Officer with security in the event of a change of control of Triangle or the
Bank to ensure the continued loyalty of the Officer during any change of control
in order to maximize
<PAGE>
shareholder value as well as the continued safe and sound operation
of Triangle and the Bank.
WHEREAS, the Officer, Triangle and the Bank acknowledge and agree that
this Agreement is not an employment agreement but is limited to circumstances
giving rise to a change of control of Triangle or the Bank as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and mutual
promises, covenants, and conditions hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereby do agree as follows:
1. Term. The initial term of this Agreement shall be for the period
commencing upon the effective date of this Agreement and ending two (2) calendar
years from the effective date of this Agreement. At each anniversary date of
this Agreement (i.e., June 18, 1998), the term automatically shall be extended
for an additional two (2) years on the same terms and conditions set forth
herein, unless Triangle and the Bank shall give written notice to the Officer of
their intention not to extend this Agreement for an additional two (2) years,
which notice shall be given at least thirteen (13) months prior to the next
anniversary date.
2. Change of Control.
(a) In the event of a termination of the Officer's employment
in connection with, or within twenty-four (24) months after, a "Change of
Control" (as defined in Subparagraph (e) below) of Triangle or the Bank, for
reasons other than for "cause" (as defined in Subparagraph (b) below), the
Officer shall be entitled to receive the sum set forth in Subparagraph (d)
below. Said sum
- 2 -
<PAGE>
shall be payable as provided in Subparagraph (f) below, provided, however, that
the Officer is employed on a full-time basis by the Bank at the effective time
of the "Change of Control", except as provided in Subparagraph (j) below.
(b) For purposes of this Agreement, termination for "cause"
shall include termination because of the Officer's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, or regulation other than traffic violations or similar offenses, or
final cease-and-desist order.
(c) The Officer shall have the right to terminate this
Agreement upon the occurrence of any of the following events (the "Termination
Events") within twenty-four (24) months following a Change of Control of
Triangle or the Bank:
(i) Officer is assigned any duties and/or
responsibilities that are inconsistent with
his duties or responsibilities at the time of
the Change of Control;
(ii) Officer's annual base salary is reduced
below the amount in effect as of the effective
date of a Change of Control;
(iii) Officer's life insurance, medical or hospitalization
insurance, disability insurance, stock option plans, stock
purchase plans, deferred compensation plans, management
retention plans, retirement plans, or similar plans or
benefits being provided by the Bank to the Officer as of the
effective date of the Change of Control are reduced in their
level, scope, or coverage, or any such insurance, plans, or
benefits are eliminated, unless such reduction or elimination
applies proportionately to all salaried employees of the Bank
who participated in such benefits prior to such Change of
Control; or
- 3 -
<PAGE>
(iv) Officer is transferred to a location which is more than
fifty (50) miles from her current principal work location,
without the Officer's express written consent.
A Termination Event shall be deemed to have occurred on the date such
action or event is implemented or takes effect.
(d) In the event that the Officer terminates this Agreement
pursuant to this Paragraph 2, the Bank will be obligated (1) to pay or cause to
be paid to the Officer an amount equal to two (2) times (i) the Officer's 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
(2) years, and (2) to continue for a period of two (2) years after such
termination all benefits the Officer was receiving and entitled to at such
termination date under Triangle's and the Bank's benefit programs and plans,
including, but not limited to, medical, disability, life and accident insurance
coverage, automobile allowance, professional qualification allowance, and club
dues (or, at the Officer's election, the Bank will pay the dollar equivalent of
such benefits).
(e) For the purposes of this Agreement, the term Change
of Control shall mean any of the following events:
(i) After the effective date of this Agreement, any
"person" (as such term is defined Section 7(j)(8)(A)
of the Change in Bank Control Act of 1978), directly
or indirectly, acquires beneficial ownership of
voting stock, or acquires irrevocable proxies or any
combination of voting stock and irrevocable proxies,
representing fifty percent (50%) or more of any class
of voting securities of Triangle or the Bank, or
acquires control of in any manner the
- 4 -
<PAGE>
election of a majority of the directors of Triangle
or the Bank;
(ii) Triangle or the Bank consolidates or merges with
or into another corporation, association, or entity,
or is otherwise reorganized, where Triangle or the
Bank is not the surviving corporation in such
transaction and the holders of the voting securities
of Triangle or the Bank immediately prior to such
acquisition own less than a majority of the voting
securities of the surviving entity immediately after
the transaction; or
(iii) All or substantially all of the assets of
Triangle or the Bank are sold or otherwise
transferred to or are acquired by any other
corporation, association, or other person, entity, or
group.
Notwithstanding the other provisions of this Paragraph 2, a transaction
or event shall not be considered a Change of Control if, prior to the
consummation or occurrence of such transaction or event, the Officer, Triangle
and the Bank agree in writing that the same shall not be treated as a Change of
Control for purposes of this Agreement.
(f) Amounts payable pursuant to this Paragraph 2
shall be paid, at the option of the Officer, either in one lump sum or in
twenty-four (24) equal monthly payments.
(g) Following a Termination Event which gives rise
to the Officer's rights hereunder, the Officer shall have two (2)
years from the date of occurrence of the Termination Event to
terminate this Agreement pursuant to this Paragraph 2. Any such
termination shall be deemed to have occurred only upon delivery to
the Bank or any successor thereto, of written notice of termination
which describes the Change of Control and Termination Event. If
- 5 -
<PAGE>
the Officer does not so terminate this Agreement within such two-year period,
the Officer shall thereafter have no further rights hereunder with respect to
that Termination Event, but shall retain rights, if any, hereunder with respect
to any other Termination Event as to which such period has not expired.
(h) It is the intent of the parties hereto that all
payments made pursuant to this Agreement be deductible by the Bank for federal
income tax purposes and not result in the imposition of an excise tax on the
Officer. Notwithstanding anything contained in this Agreement to the contrary,
any payments to be made to or for the benefit of the Officer which are deemed to
be "parachute payments" as that term is defined in Section 280G(b)(2) of the
Internal Revenue Code, as amended (the "Code"), shall be modified or reduced to
the extent deemed to be necessary by the Bank's Board of Directors to avoid the
imposition of an excise tax on the Officer under Section 4999 of the Code or the
disallowance of a deduction to the Bank under Section 280G(a) of the Code.
(i) In the event any dispute shall arise between
the Officer and the Bank as to the terms or interpretation of this Agreement,
including this Paragraph 2, whether instituted by formal legal proceedings or
otherwise, including any action taken by the Officer to enforce the terms of
this Paragraph 2 or in defending against any action taken by Triangle or the
Bank, the Bank shall reimburse the Officer for all costs and expenses,
proceedings or actions, in the event the Officer prevails in any such action.
(j) It is further agreed that the payment agreed in
this Paragraph 2 to be paid by the Bank to the Officer shall be due
and paid to the Officer should a Change of Control (as defined
- 6 -
<PAGE>
above) be agreed to by Triangle and/or the Bank or be consummated within six (6)
months of the Officer's involuntary termination of employment with the Bank for
reasons other than for "cause" as such term is defined in Subparagraph 2(b)
hereof.
3. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon any corporate or other successor of Triangle or
the Bank which shall acquire, directly or indirectly, by conversion, merger,
consolidation, purchase, or otherwise, all or substantially all of the assets of
Triangle or the Bank.
4. Modification; Waiver; Amendments. No provision of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by the Officer, Triangle and the
Bank, except as herein otherwise provided. No waiver by any party hereto, at any
time, of any breach by any party hereto, or compliance with, any condition or
provision of this Agreement to be performed by such party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No amendments or additions to this Agreement shall be
binding unless in writing and signed by the parties, except as herein otherwise
provided.
5. Applicable Law. This Agreement shall be governed in
all respects whether as to validity, construction, capacity,
performance, or otherwise, by the laws of North Carolina, except to
the extent that federal law shall be deemed to apply.
6. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any
- 7 -
<PAGE>
provisions shall not affect the validity or enforceability of the
other provision hereof.
IN TESTIMONY WHEREOF, Triangle and the Bank have caused this Agreement
to be executed under seal and in such form as to be binding, all by authority of
their Board of Directors first duly given, and the individual party hereto has
set said party's hand hereto and has adopted as said party's seal the
typewritten word "SEAL" appearing beside said party's name, this the day and
year first above written.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
TRIANGLE BANK
By: /s/ Michael S. Patterson
Michael S. Patterson
President
ATTEST:
/s/ Susan C. Gilbert
Susan C. Gilbert, Secretary
(CORPORATE SEAL)
/s/ Steven R. Ogburn (SEAL)
Steven R. Ogburn
- 8 -
<PAGE>
EXHIBIT 21
Subsidiaries of Triangle Bancorp, Inc.
Triangle Bank
(owned 100% by Triangle Bancorp, Inc.)
Triangle Investment Services, Inc.
(owned 100% by Triangle Bank)
Triangle Bank Leasing Co.
(owned by 100% by Triangle Bank)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Triangle Bancorp, Inc. on Form S-8 (File Nos. 33-82020, 33-82022, 333-17511,
and 333-23131) of our report dated January 20, 1997, on our audits of the
consolidated financial statements of Triangle Bancorp, Inc. as of December
31, 1996 and 1995, and for each of the three years in the period ended December
31, 1996, which report is included in this Annual Report on Form 10-K.
(Sig of Coopers & Lybrand L.L.P.)
Raleigh, North Carolina
March 18, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 34,615
<INT-BEARING-DEPOSITS> 879
<FED-FUNDS-SOLD> 1,011
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 146,086
<INVESTMENTS-CARRYING> 97,112
<INVESTMENTS-MARKET> 97,667
<LOANS> 649,433
<ALLOWANCE> 9,715
<TOTAL-ASSETS> 971,105
<DEPOSITS> 847,764
<SHORT-TERM> 15,962
<LIABILITIES-OTHER> 10,483
<LONG-TERM> 10,000
0
0
<COMMON> 61,544
<OTHER-SE> 25,352
<TOTAL-LIABILITIES-AND-EQUITY> 971,105
<INTEREST-LOAN> 59,179
<INTEREST-INVEST> 13,405
<INTEREST-OTHER> 282
<INTEREST-TOTAL> 72,866
<INTEREST-DEPOSIT> 30,738
<INTEREST-EXPENSE> 32,610
<INTEREST-INCOME-NET> 40,256
<LOAN-LOSSES> 2,100
<SECURITIES-GAINS> (15)
<EXPENSE-OTHER> 29,169
<INCOME-PRETAX> 17,481
<INCOME-PRE-EXTRAORDINARY> 17,481
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,301
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.04
<YIELD-ACTUAL> 4.76
<LOANS-NON> 1,666
<LOANS-PAST> 2,107
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 8,685
<CHARGE-OFFS> 1,746
<RECOVERIES> 774
<ALLOWANCE-CLOSE> 9,715
<ALLOWANCE-DOMESTIC> 9,715
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,554
</TABLE>
MANAGEMENT REPORT ON FINANCIAL STATEMENTS, ASSESSMENT OF THE
INTERNAL CONTROL STRUCTURE OVER FINANCIAL REPORTING, AND
COMPLIANCE WITH LOANS AND REGULATIONS
Board of Directors
Triangle Bank
CONSOLIDATED FINANCIAL STATEMENTS
Triangle Bank (the "Bank") is responsible for the preparation, integrity and
fair presentation of its published financial statements as of December 31, 1996,
and the year then ended. The financial statements have been prepared in
accordance with generally accepted accounting principals and, as such, include
amounts, some of which are based on judgments and estimates of management.
INTERNAL CONTROL STRUCTURE OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining an effective internal
control structure over financial reporting. The system contains monitoring
mechanisms, and actions are taken to correct deficiencies identified.
There are inherent limitations in the effectiveness of any system of internal
control, including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even an effective internal control system
can provide only reasonable assurance with respect to financial statement
preparation. Further, because of changes in conditions, the effectiveness of an
internal control system may vary over time.
Management assessed its internal control structure over financial reporting as
of December 31, 1996. This assessment was based on criteria for effective
internal control over financial reporting described in "Internal
Control--Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management
believes that Triangle Bank maintained an effective internal control structure
over financial reporting as of December 31, 1996.
COMPLIANCE WITH LAWS AND REGULATIONS
Management is also responsible for compliance with the federal and state laws
and regulations concerning dividend restrictions and federal laws and
regulations concerning loans to insiders designated by the FDIC as safety and
soundness laws and regulations.
Management assessed its compliance with the designated laws and regulations
relating to safety and soundness. Based on this assessment, management believes
that Triangle Bank complied, in all significant respects, with the designated
laws and regulations relating to safety and soundness for the year ended
December 31, 1996.
/s/ Michael S. Patterson /s/ Debra L. Lee
Michael S. Patterson Debra L. Lee
Chief Executive Officer Chief Financial Officer
Exhibit 99(b)
(Coopers & Lybrand letterhead)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Triangle Bancorp, Inc.
We have examined management's assertion that Triangle Bank maintained an
effective internal control structure over financial reporting as of December
31, 1996, included in the accompanying Management Report on Financial
Statements, Assessment of the Internal Control Structure over Financial
Reporting, and Compliance with Laws and Regulations.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
obtaining an understanding of the internal control structure over financial
reporting, testing, and evaluating the design and operating effectiveness
of the internal control structure, and such other procedures as we considered
necessary in the circumstances. We believe that our examination provides a
reasonable basis for our opinion.
Because inherent limitations in any internal control structure, errors and
irregularities may occur and not be detected. Also, projections of any
evaluation of the internal control structure over financial reporting to
future periods are subject to the risk that the internal control structure
may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, management's assertion that Triangle Bank maintained an
effective internal control structure over financial reporting as of December
31, 1996, is fairly stated in all material respects, based upon criteria
for effective internal control over financial reporting described in Internal
Control-Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
(Sig of Coopers & Lybrand L.L.P.)
March 13, 1997
Raleigh, North Carolina
<PAGE>
