U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number - 0-21346
TRIANGLE BANCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1764546
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Glenwood Avenue
Raleigh, North Carolina 27612
(Address of principal executive offices)
(Zip Code)
Telephone: (919) 881-0455
-------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |x| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 12,964,297
------------ ----------
Class Outstanding at November 10, 1997
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Consolidated Balance Sheets for September 30, 1997 and December 31,
1996, the Consolidated Statements of Income for the three and nine month
periods ended September 30, 1997 and 1996, and the Consolidated Statements
of Cash Flows for the nine month periods ended September 30, 1997 and 1996
have been included as Attachments to this report.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Highlights
During the third quarter of 1997, Triangle Bancorp, Inc. (the "Company")
completed its purchase of eight branches of United Carolina Bank and two
branches of Branch Bank & Trust located in south central and eastern North
Carolina (the "Branch Acquisition") with $195 million in deposits and $61
million in loans. This acquisition was accounted for using purchase
accounting.
On October 2, 1997 the Company completed its acquisition of Bank of
Mecklenburg ("Mecklenburg") which operates three branch offices in
Charlotte, North Carolina and had $271 million in total assets as of
September 30, 1997. On October 31, 1997, the Company completed its
acquisition of Coastal Leasing Company ("Coastal"), Greenville, North
Carolina, which had total assets of $13 million as of September 30, 1997.
These acquisitions will be accounted for using the pooling of interests
method of accounting. Since these acquisitions took place after September
30, 1997, they are not included in the attached financial information.
Continuing its growth strategy, on October 16, 1997, the Company announced
the signing of a definitive merger agreement to acquire all of the capital
stock of Guaranty State Bancorp ("Guaranty"), parent of Guaranty State
Bank, Durham, North Carolina. As of September 30, 1997, Guaranty had $104
million in total assets. Pending regulatory and Guaranty shareholder
approval, the acquisition is expected to be completed during the second
quarter of 1998. Including the Mecklenburg, Coastal and Guaranty
transactions, the Company will have over $1.6 billion in total assets.
In May 1997, the Company created a Delaware statutory business trust
subsidiary which issued corporation-obligated manditorily redeemable
capital securities ("Trust Securities") in the amount of $19.33 million to
eight qualified institutional buyers, and $619,000 in trust common
securities to the Company, both sales occurring on June 3, 1997. The Trust
Securities have a maturity of 30 years, pay dividends at the rate of
9.375% and may be treated as tier 1 capital by the Company. To fund the
trust, the Company sold to the trust $19.95 million of junior subordinated
notes with a yield and maturity identical to the Trust Securities. Holders
of the Trust Securities are entitled to receive preferential cumulative
cash distributions accumulating from the date of original issuance and
payable semi-annually in
<PAGE>
Part I, Item 2 (Continued)
arrears on the first day of June and December of each year. The proceeds
from the issuance of the junior subordinated debt are being used for
general corporate purposes.
Operating Results for the Three Months Ended September 30, 1997 and 1996
The Company's net income for the three months ended September 30, 1997 was
$3,415,000, compared to earnings of $2,922,000 for the same period in
1996, an increase of $493,000 or 17%. Earnings per share were $0.31
compared to $0.27 for the same period in 1996.
For the three months ended September 30, 1997 the annualized returns on
average assets and equity were 1.22% and 14.56%, respectively compared to
1.23% and 13.95% for the same period in 1996.
The quarterly results include after-tax, non-recurring expenses relating
to mergers and acquisitions of $194,000 and $82,000 for the quarters ended
September 30, 1997 and 1996, respectively. Excluding these charges,
earnings per share were $0.33 and $0.28, return on average assets was
1.29% and 1.26%, and return on average equity was 15.38% and 14.34% for
the quarters ended September 30, 1997 and 1996, respectively.
Core earnings for the period were positively impacted by an increase in
net interest income due to an increase in the volume of earning assets.
The net interest income for the three months ended September 30, 1997 was
$11,672,000 compared to $10,369,000 for the same period in 1996 an
increase of $1,303,000 or 13%. The net interest margin was 4.56% for the
three months ended September 30, 1997 compared to 4.77% for the three
month period ended September 30, 1996. The decrease in margin was due to a
decrease in the yield on earning assets as loan yields declined 12 basis
points and the mix of earning assets reflecting a higher volume of lower
yielding assets than the prior year quarter. The change in the mix of the
earning assets primarily reflects the receipt of funds related the Branch
Acquisition. The Company's strategy is to employ these funds into higher
yielding assets over time. The cost of interest bearing liabilities
increased slightly primarily as a result of the issuance of the Trust
Securities in June 1997.
For the three months ended September 30, 1997, a loan loss provision of
$1,040,000 was made compared to a provision of $300,000 for the same
period in 1996. The increase in provision was made to maintain the loan
loss reserve at appropriate levels due to growth in the loan portfolio.
Noninterest income for the three months ended September 30, 1997 was
$2,401,000 compared to $2,104,000 for the same period in 1996 an increase
of $297,000 or 14%. The increase of noninterest income is due to increases
in almost all categories of noninterest income including service charges
on deposit accounts of $108,000, commissions from the Bank's investment
services subsidiary of $75,000 and gains on asset sales of $90,000.
Noninterest expenses increased by $205,000 for the three months ended
September 30, 1997 compared to the same period in 1996 or 3%. Increases
were seen in advertising, office expenses and occupancy due to the general
growth of the Company. Amortization expense increased $220,000 due to the
deposit premium from the Branch Acquisition. Professional
<PAGE>
Part I, Item 2 (Continued)
fees increased due to legal fees associated with general corporate
litigation as well as an increase in outside services such as consulting.
The increases noted above were offset by a decrease in salary expense due
to an increase during the first quarter of 1997 in personnel costs
deferred required by SFAS 91 to more accurately reflect the cost of
originating loans as well as an increase in loan production. This resulted
in a decrease in salaries and employee benefits in 1997 compared to 1996.
A decrease was also seen in other expenses and Federal Deposit Insurance
Corporation (FDIC) deposit insurance expense. Other expenses declined for
the three months ended September 30, 1997 compared to the same period in
1996 due to a recovery of other real estate owned expenses in the third
quarter of 1997, a decline in deposit charge-offs in 1997 and a loss taken
in 1996 for a facility write down.
Operating Results for the Nine Months Ended September 30, 1997 and 1996
The Company's net income for the nine months ended September 30, 1997 was
$11,167,000, compared to $8,370,000 for the same period in 1996. This
represents an increase of $2,797,000 or 33%. Earnings per share were $1.02
compared to $0.78 for the same period in 1996.
For the nine months ended September 30, 1997 the annualized returns on
average assets and equity were 1.44% and 16.56%, respectively, compared to
1.23% and 13.66% for the same period in 1996.
The year to date results include after-tax, non-recurring gains for the
sale of certain branches of $1.3 million and $352,000 and after-tax,
non-recurring expenses relating to mergers and acquisitions of $252,000
and $115,000 for the year to date ended September 30, 1997 and 1996,
respectively. Excluding these charges, earnings per share were $0.92 and
$0.75, return on average assets was 1.31% and 1.19%, and return on average
equity was 15.05% and 13.27% for the nine months ended September 30, 1997
and 1996, respectively.
Core earnings for the nine month period ended September 30, 1997 were
positively impacted by an increase in net interest income due to an
increase in the volume of net earning assets which increased by $36
million. The net interest income for the nine months ended September 30,
1997 was $33,339,000 compared to $29,687,000 for the same period in 1996,
an increase of $3,652,000 or 12%. The net interest margin was 4.67% for
the nine months ended September 30, 1997 versus 4.75% for the same period
in 1996. The decrease in net margin was due to an increase in the volume
of interest bearing liabilities including the Trust Securities issued in
June 1997 as well the change in the mix of the earning assets reflecting
the receipt of funds related the Branch Acquisition.
For the nine months ended September 30, 1997, a loan loss provision of
$2,370,000 was made compared to a provision of $1,335,000 for the same
period in 1996. The increase in the provision was made to maintain the
loan loss reserve at an appropriate level due to loan growth.
Noninterest income for the nine months ended September 30, 1997 was
$8,502,000 compared to $6,680,000 for the same period in 1996, an increase
of $1,822,000 or 27%. The
<PAGE>
Part I, Item 2 (Continued)
sale of two branch offices in 1997 resulted in a gain of $2,000,000, an
increase of $1,442,000 over the gain on the branch sale in 1996. Increases
were also seen in gains on sales of assets, service charges on deposit
accounts and commissions from the Bank's investment services subsidiary as
the Company has grown and placed greater emphasis on fee income producing
activities.
Noninterest expenses for the nine months ended September 30, 1997
increased only $113,000, less than 1%, over the same period in 1996.
Increases were seen in professional fees over the same period in 1996 due
to general corporate litigation as well as an increase in outside service
fees. Merger expenses also increased in 1997 due to the Branch Acquisition
as well as the Mecklenburg acquisition.
Office expenses, advertising and public relations and occupancy expenses
increased due to the increase in the size of the bank. In September 1997,
the bank had 56 branches compared to 40 branches at September 30, 1996.
Amortization expense increased $220,000 due to the deposit premium from
the Branch Acquisition. The increases sighted above were offset by a
decrease in salary expenses due to an increase during the first quarter of
1997 in personnel costs deferred required by SFAS 91 to more accurately
reflect the cost of originating loans as well as loan production
increases. A decrease was also seen in furniture and equipment expense and
FDIC deposit insurance expense.
Financial Condition
Total assets increased $235 million or 24%, to $1.20 billion at September
30, 1997 versus $971 million at December 31, 1996. The asset growth was
due to internal growth as well as the purchase in August of $195 million
in deposits and $61 million in loans in the Branch Acquisition.
Specifically, loans increased $137 million, investments increased $65
million and intangible assets (deposit premium) increased $16 million.
These increases were funded by the purchased deposits as well as Federal
Home Loan Bank (FHLB) advances discussed below.
The Company continued to maintain strong loan loss reserves during the
period with the loan loss reserves at September 30, 1997 being 1.48% of
total loans and 181% of nonperforming loans. Nonperforming loans to total
loans plus other real estate owned were .82% on September 30, 1997
compared to .66% as of December 31, 1996. Net charge-offs were .19% for
the nine month period ended September 30, 1997 versus .001% in the same
period in 1996. Even though the Company has experienced increases in
nonperforming loans and net charge-offs, the amounts are well within
industry standards. The primary reason for the increase relates to
increasing bankruptcies on loans which are adequately collateralized. A
summary of certain information related to the loan loss reserves and
nonperforming assets as of September 30, 1997 follows:
<PAGE>
Part I, Item 2 (Continued)
RESERVE FOR LOAN LOSSES AND NONPERFORMING ASSETS
(Dollars in Thousands)
Analysis of Reserve for Loan Losses:
Beginning Balance, January 1, 1997 $ 9,715
Allowance on purchased loans 920
Deduct charge-offs:
Commercial financial and agricultural 1,406
Real estate, construction and land development 19
Installment loans to individuals 433
Credit card and related plans 314
-------
2,172
Add recoveries:
Commercial, financial and agricultural 650
Real estate 20
Installment loans to individuals 157
Credit card and related plans 33
-------
860
-------
Net charge-offs 1,312
Additions charged to operations 2,370
-------
Ending Balance, September, 30 1997 $11,693
=======
Ratio of net charge-offs to average loans outstanding
during the period 0.19%
Analysis of Nonperforming Assets:
Nonaccrual loans:
Commercial, financial and agricultural $ 865
Real estate, construction and land development 1,024
Installment loans to individuals 50
-------
1,939
Loans contractually past due 90 days or more
as to principal or interest 3,780
Foreclosed assets 728
-------
TOTAL $ 6,447
=======
<PAGE>
Part 1, Item 2 (Continued)
Financial Condition (Continued)
Total deposits were $1.03 billion as of September 30, 1997 compared to
$848 million at December 31, 1996, an increase of $179 million or 21%. As
stated above, the Company acquired $195 million in deposits in the Branch
Acquisition to account for this growth. Prior to this acquisition, through
deliberate pricing strategy, deposit growth had been limited and, in June
of 1997, the Company divested of $23.5 million in deposits with the sale
of two branch locations.
Short-term debt and other borrowings increased $27 million from December
31, 1996 to September 30, 1997. This increase was primarily represented by
a $20 million borrowing from the FHLB. Masternotes, a new borrowing
product offered by the Company beginning in February of 1997, had a
balance of $11.5 million as of September 30, 1997 while Federal funds
purchased decreased to $0 from $3.9 million at December 31, 1996.
Capital
The adequacy of capital is reviewed regularly, in light of current plans
and economic conditions, to ensure that sufficient capital is available
for current and future needs, to minimize the Company's cost of capital
and to assure compliance with regulatory requirements. In June 1997, the
Company formed a Delaware business trust subsidiary which issued $20
million in Trust Securities, all of which may be counted as Tier 1 capital
by the Company. The Company considers the Trust Securities, which bear
interest at the rate of 9.375% per annum and have a maturity of 30 years,
to be a relatively inexpensive source of capital. The Company's capital
ratios as of September 30, 1997 were as follows:
Actual Required Excess
Percent Percent Percent
------- ------- -------
Tier 1 Capital to Risk Based Assets 9.77% 4.00% 5.77%
Total Capital to Risk Based Assets 11.02% 8.00% 3.02%
Leverage Ratio 7.87% 4.00% 3.87%
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Triangle Bank has been named as a defendant in a lender liability suit
currently pending in state court in North Carolina in which the plaintiff
claims that Triangle Bank breached an oral commitment to make a $100,000
loan to the plaintiff. The plaintiff is asserting that he is entitled to
$5 million in damages and is seeking to have these damages trebled and an
award of attorney's fees. The suit is scheduled to go to trial in November
1997.
<PAGE>
Part II (Continued)
Item 2. Changes in Securities
There have been no changes in the rights of the holders of the common
stock of the Company.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
On September 17, 1997 a special shareholders meeting was held by the
Company to vote:
(i) to approve the acquisition of Mecklenburg; and (ii) on amending the
Company bylaws to increase the maximum number of directors from 26 to 28.
Both proposals passed.
The results of proposal (i), merger, were:
FOR: 6,465,906 AGAINST: 25,575 ABSTAIN: 1,332,428
The results of proposal (ii), directors, were:
FOR: 7,560,029 AGAINST: 187,380 ABSTAIN: 76,501
No other business was voted on at the meeting.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(19) Report furnished to security holders.
(27) Financial Data Schedule
b) Reports on Form 8-K
(i). On September 19, 1997, a Form 8-K was filed to announce the
rescission, effective October 3, 1997, of the Company's stock
repurchase program which was authorized on May 16, 1997.
<PAGE>
Part II Item 6 (Continued)
(ii). On October 17, 1997, a Form 8-K was filed to announce the
completion of the Company's acquisition of the Bank of
Mecklenburg on October 2, 1997.
(iii). On October 31, 1997, a Form 8-K was filed to provide
supplemental consolidated financial statements as of December
31, 1996 to reflect the Bank of Mecklenburg acquisition which
was accounted for as a pooling of interests.
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Cash and due from banks $ 38,835,756 $ 34,614,622
Federal funds sold 9,930,000 1,010,891
Interest-bearing deposits in banks 989,249 879,360
Securities available for sale 207,924,014 146,086,069
Securities held to maturity, market value;
$101,654,000 and $97,667,000 100,195,926 97,111,953
Loans held for sale -- 2,412,738
Loans, less allowance for losses of
$11,692,844 and $9,715,387 777,258,903 639,718,248
Premises and equipment, net 23,986,178 20,181,307
Interest receivable 11,840,200 8,812,952
Deferred income taxes 6,290,911 6,700,349
Intangible assets 27,711,469 11,654,033
Other assets 1,073,809 1,922,477
-------------- ------------
Total assets $1,206,036,415 $971,104,999
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 165,022,293 $139,904,711
Interest-bearing demand 97,386,246 83,961,295
Savings and money market 237,996,004 181,658,946
Large denomination certificates of deposit 74,366,539 61,684,287
Other time 451,982,728 380,554,636
-------------- ------------
Total deposits 1,026,753,810 847,763,875
Short-term debt 37,935,336 15,962,391
Other borrowings 15,000,000 10,000,000
Corporation-obligated manditorily redeemable capital 19,950,358 --
Interest payable 6,926,439 6,593,267
Other liabilities 5,575,033 3,889,128
-------------- ------------
Total other liabilities 85,387,166 36,444,786
-------------- ------------
Total liabilities 1,112,140,976 884,208,661
-------------- ------------
Commitments and contingencies*
SHAREHOLDERS' EQUITY
Common stock, no par value 20,000,000 60,172,408 61,544,172
authorized; 10,469,289 shares and
10,468,036 shares outstanding at September 30,
1997 and December 31, 1996, respectively
Undivided profits 32,952,761 25,245,470
Unrealized gain on securities available for sale 770,270 106,696
-------------- ------------
Total shareholders' equity 93,895,439 86,896,338
-------------- ------------
Total liabilities and shareholders' equity $1,206,036,415 $971,104,999
============== ============
</TABLE>
* Standby letters of credit outstanding at September 30, 1997 amounted to
$2,984,059
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
09/30/97 09/30/96 09/30/97 09/30/96
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 17,839,877 $15,409,498 $ 49,989,781 $43,796,237
Securities 3,547,795 3,493,045 10,773,581 9,967,924
Interest bearing deposits 15,090 2,765 22,717 16,346
Interest rate swap -- 11,299 -- 58,209
Federal funds sold 515,365 17,950 697,714 66,766
------------ ----------- ------------ -----------
Total interest income 21,918,127 18,934,557 61,483,793 53,905,482
INTEREST EXPENSE:
Large denomination certificates of deposit 967,418 915,297 2,920,415 2,595,202
Other deposits 8,049,807 7,164,594 22,862,145 20,029,071
Short-term debt 686,310 479,876 1,505,582 1,587,357
Other borrowed funds 542,054 5,608 857,115 6,327
------------ ----------- ------------ -----------
Total interest expense 10,245,589 8,565,375 28,145,257 24,217,957
------------ ----------- ------------ -----------
Net interest income 11,672,538 10,369,182 33,338,536 29,687,525
Provision for loan losses 1,040,000 300,000 2,370,000 1,335,000
------------ ----------- ------------ -----------
Net interest income after
provision for loan losses 10,632,538 10,069,182 30,968,536 28,352,525
NONINTEREST INCOME:
Service charges on deposit accounts 1,514,232 1,406,670 4,358,700 4,270,820
Other commissions and fees 479,493 439,873 1,319,896 1,367,034
Gain on sale of securities 61,133 18,664 33,824 6,596
Gain (loss) on sale of foreclosed assets (4,326) -- (29,292) 17,908
Gain on sale of branch -- -- 2,000,000 558,133
Gain on sale of loans 87,068 39,524 282,261 39,524
Triangle Investment Services 145,388 70,213 272,567 187,016
Other operating income 118,242 128,763 264,751 232,964
------------ ----------- ------------ -----------
Total noninterest income 2,401,230 2,103,707 8,502,707 6,679,995
NONINTEREST EXPENSES:
Salaries and employee benefits 3,050,398 3,411,243 9,053,736 10,027,548
Occupancy expense 678,847 703,405 2,048,793 1,995,578
Furniture and equipment expense 659,424 591,041 1,793,761 1,851,965
Professional fees 466,674 364,547 1,342,410 892,920
Federal deposit insurance expense 26,721 43,425 68,721 165,955
Advertising and public relations 257,836 226,575 740,716 656,365
Office expenses 434,618 182,773 1,035,036 603,820
Merger expenses 304,664 130,913 396,540 182,922
Amortization of intangible assets 557,881 357,436 1,262,207 1,044,187
Other operating expenses 1,324,872 1,546,004 4,171,405 4,379,139
------------ ----------- ------------ -----------
Total noninterest expenses 7,761,935 7,557,362 21,913,325 21,800,399
------------ ----------- ------------ -----------
Net income before income taxes 5,271,833 4,615,527 17,557,918 13,232,121
Income tax expense 1,856,371 1,693,779 6,391,371 4,862,466
------------ ----------- ------------ -----------
Net income $ 3,415,462 $ 2,921,748 $ 11,166,547 $ 8,369,655
============ =========== ============ ===========
Primary income per share data:
Net income $ 0.31 $ 0.27 $ 1.03 $ 0.78
Average common equivalent shares 10,917,274 10,765,357 10,892,630 10,788,865
Income per share data assuming full dilution:
Net income $ 0.31 $ 0.27 $ 1.02 $ 0.78
Average common equivalent shares 10,971,370 10,766,149 10,996,573 10,788,581
Cash dividends declared per share $ 0.12 $ 0.08 $ 0.33 $ 0.20
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income 11,166,547 8,369,654
Adjustments to reconcile net income to net cash provided (used) by
operations:
Depreciation and amortization 2,720,570 2,405,794
Write down of fixed assets --
Accretion of discount on investment securities,
net of amortization of premiums 111,576 244,064
Provision for loan losses 2,370,000 1,335,000
(Gain) on sale of investments (33,825) (6,596)
Loss on Fixed Assets 109,148
Gain on sale of loan servicing --
Gain on Sale of branch (2,000,000) (558,133)
Mortgage loans held for sale:
Origination's (948,368) (16,118,841)
Sales 3,361,106 18,535,699
Provision (benefit) for deferred taxes (28,819) 203,315
Gain on sale of foreclosed assets 29,292 (17,908)
Change in other assets and liabilities:
Interest receivable (2,421,645) (2,056,549)
Other assets 848,668 463,752
Interest payable (262,991) (747,574)
Other liabilities 1,637,598 (311,212)
------------ -----------
Net cash provided (used) by operating activities 16,658,857 11,740,465
------------ -----------
Cash flows from investing activities:
Net increase in interest bearing time deposits -- 49,322,996
Proceeds from maturity and principal paydown of securities AFS 19,846,678 12,963,230
Proceeds from maturities and principal paydown of securities HTM 29,134,855 15,960,000
Proceeds from sales of investment securities AFS 94,518,606 34,171,642
Proceeds from sales of investment securities HTM 988,185 --
Purchases of investment securities AFS (175,219,561) (62,870,094)
Purchases of investment securities HTM (33,166,601) (19,235,157)
Net increase in loans made to customers (78,565,588) (78,168,248)
Capital expenditures, bank premises and equipment (2,847,343) (4,812,388)
Proceeds from sale of foreclosed assets -- 364,704
Proceeds from sale of premises and equipment 224,871 --
Proceeds from sale of mortgage servicing portfolio -- --
Net cash acquired, in acquisition and divestitures 113,302,385 41,073,448
------------ -----------
Net cash used by investing activities (31,783,513) (11,229,867)
------------ -----------
Cash flows from financing activities:
Net increase or (decrease) in deposit accounts (12,462,640) 24,835,675
Net increase (decrease) in short-term debt 21,340,014 (14,739,739)
Net increase (decrease) in other borrowings 5,000,000
Proceeds net of cost from issuance of corporation-obligated,
manditorily redeemable securities 19,328,434
Repurchase of stock (2,244,449) (242,818)
Cash dividends paid (3,459,254) (2,229,035)
Shares issued under stock plans 872,683 356,182
------------ -----------
Net cash provided by financing activities 28,374,788 7,980,265
------------ -----------
Net increase (decrease) in cash and cash equivalents 13,250,132 8,490,863
------------ -----------
Cash and cash equivalents at beginning of period 36,504,873 45,621,821
------------ -----------
Cash and cash equivalents at end of period 49,755,005 54,112,684
------------ -----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
TRIANGLE BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
1. Financial statement presentation and management representation
The consolidated financial statements include the accounts and results of
operations of Triangle Bancorp, Inc., its wholly-owned subsidiaries,
Triangle Bank, Triangle Bank Leasing Corporation and Triangle Capital
Trust. Triangle Capital Trust was formed under Delaware law on May 28,
1997 as a statutory business trust to issue capital securities. Triangle
Bank has two wholly owned subsidiaries, Triangle Investment Services, Inc.
which provides discount brokerage services and Tricorp, Inc. which was
formed under Delaware law on August 25, 1997 and holds certain investment
securities. All significant intercompany transactions and accounts are
eliminated in consolidation.
The interim consolidated financial statements as of and for the three and
nine months ended September 30, 1997 and 1996 are unaudited. In the
opinion of management, the consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary to
present fairly, in all material respects, the consolidated financial
position as of September 30, 1997 and 1996, and the results of operations
and cash flows for the periods ended September 30, 1997 and 1996. For the
nine month periods ended September 30, 1997 and September 30, 1996,
$305,000 and $131,000, respectively, in pre-tax non-recurring expenses
relating to mergers and acquisitions. The results for the interim periods
are not necessarily indicative of what results will be for the year ended
December 31, 1997.
2. Capital Securities
On June 3, 1997, Triangle Capital Trust issued $20 million in 9.375%,
30-year capital securities. Interest is payable June 1 and December 1 of
each year beginning December 1, 1997. The proceeds of the issuance were
used to acquire 9.375%, 30-year junior subordinated debentures from the
Company. The proceeds of the issuance of the junior subordinated
debentures are being used for general corporate purposes including
financing branch purchases, other acquisitions, repurchase of outstanding
common stock of the Company and investments in or extensions of credit to
subsidiaries.
3. Earnings Per Share
The Company will adopt Statement of Financial Accounting Standards (SFAS)
No. 128 "Earnings Per Share" on December 31, 1997. SFAS No. 128 requires
the Company to change its method for computing, presenting and disclosing
earnings per share information. Upon adoption, all prior period data
presented will be restated to conform to the provisions of SFAS No. 128.
If the Company had adopted SFAS No. 128 for the period ended September 30,
1997, the following computation would have been presented on the
consolidated statements of income:
<PAGE>
3. Earnings Per Share (Continued)
Nine months ended Sept 30,
1997 1996
-------------------------
Basic income per common share:
Net income $11,166,547 $ 8,369,655
Weighted average shares:
Common shares outstanding 10,474,768 10,435,020
Basic income per common share $ 1.07 $ 0.80
-------------------------
Diluted income per common share:
Net income $11,166,547 $ 8,369,655
Weighted average shares:
Common shares outstanding 10,474,768 10,435,020
Dilutive effect of subordinated
debt options 4,907 4,213
Dilutive effect of stock options 412,955 349,632
-------------------------
Total shares 10,892,630 10,788,865
Diluted income per common share $ 1.03 $ 0.78
-------------------------
4. Reporting Comprehensive Income
In June 1997, SFAS 130, "Reporting Comprehensive Income" was issued and is
effective for fiscal years beginning after December 15, 1997. SFAS 130
establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general purpose financial statements. SFAS 130 requires the disclosure of
an amount that represents total comprehensive income and the components of
comprehensive income in the consolidated statement of income. The adoption
of SFAS 130 is not expected to have a material impact on the financial
statements of the Company.
<PAGE>
5. Disclosures about Segments of an Enterprise and Related Information
In June 1997, SFAS 131, "Disclosures about Segments of an Enterprise and
Related Information" was issued and is effective for financial statements
for periods beginning after December 15, 1997. SFAS 131 established
standards for determining an entity's operating segments and the type and
level of financial information to be disclosed in both the annual and
interim financial statements. It also established standards for related
disclosures about products and services, geographic areas and major
customers. The adoption of SFAS 131 is not expected to have a material
impact on the financial statements of the Company.
6. Subsequent Event
On October 2, 1997, the Company completed the acquisition of Bank of
Mecklenburg ("Mecklenburg") headquartered in Charlotte, North Carolina.
Mecklenburg is being operated as a wholly-owned subsidiary of the Company
and had 3 branch offices and $271 million in total assets as of September
30, 1997. The merger was accounted for as a pooling of interests and
accordingly, the Company's future historical consolidated financial
statements will be restated to reflect the accounts and results of
operations of Mecklenburg as if the merger had been effective as of the
earliest period presented. In connection with the acquisition, 1.0 shares
of the Company's stock were issued for each share of Mecklenburg's
outstanding stock or approximately 2.1 million shares.
The following unaudited pro forma data summarizes the combined results of
operations of the Company and Mecklenburg as if the acquisition had been
completed as of September 30, 1997.
Nine months
ended September Year ended December 31
30, 1997 1996 1995 1994
(In thousands, except per share data)
Total income $85,203 $99,861 $82,169 $63,882
Net interest income 37,666 45,637 39,455 34,410
Net income 13,012 13,220 9,114 5,184
Earnings per share:
Primary 1.00 1.02 .72 .42
Fully diluted .99 1.01 .71 .42
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIANGLE BANCORP, INC.
Date: November 14, 1997 /s/ Michael S. Patterson
------------------------------
Michael S. Patterson,
President and CEO
Date: November 14, 1997 /s/ Debra L. Lee
------------------------------
Debra L. Lee,
Chief Financial Officer
<PAGE>
TRIANGLE BANCORP, INC.
EXHIBIT TABLE
PAGE
(19) Report furnished to security holders
(27) Financial Data Schedule
Dear Shareholders
The third quarter of 1997 was an outstanding quarter for Triangle Bancorp. Net
income for the quarter was $3.4 million, an increase of 17% over the same period
in 1996. Earnings per share for the quarter were $.31, compared to $.27 for the
third quarter of 1996, an increase of 15%. Excluding certain non-recurring
charges, net income for the quarter was $3.6 million or $.33 per share.
For the nine months ended September 30, 1997, earnings were $11.2 million,
a 33% increase over the $8.4 million earned during the same period in 1996.
Earnings per share were $1.02 compared to $.78 for the same period in 1996.
Year-to-date results for 1997 and 1996 include after-tax, non-recurring items of
$1.0 million and $237,000, respectively, which represent gains from the sale of
certain branches net of non-recurring merger expenses. Excluding these items,
earnings for the nine months ended September 30, 1997 were $10.1 million, a 23%
increase over the $8.1 million earned during the same period in 1996.
We are pleased with the quarter and year-to-date results as earning assets
and net income growth have continued to be strong. Earnings have been fueled by
the growth in net interest income as both earning assets and costing liabilities
have grown approximately 26% since September 30, 1996. In addition, the Company
is operating efficiently as noninterest income is significantly above the prior
year level and noninterest expenses have grown less than one percent.
Total assets as of September 30, 1997 were $1.2 billion, an increase of
25%, while net loans grew by $138 million to $777 million and deposits grew to
$1.0 billion, an increase of 23%.
In September, your Board increased the quarterly cash dividend from $.11
per share to $.12 per share. This is the second time the quarterly cash dividend
has been increased this year and represents an increase of 71% over the $.07 per
share paid in the third quarter of 1996.
In August, we completed the acquisition of ten North Carolina offices of
another financial institution. This acquisition resulted in an increase in
deposits of $195 million and an increase in loans of $61 million. In addition,
both Triangle and Bank of Mecklenburg shareholders approved our merger, which
was consummated on October 2, 1997. With the completion of these transactions,
we have approximately $1.5 billion in assets and operate almost 60 banking
centers in North Carolina.
On September 2, we announced that we had reached an agreement in principle
to acquire Coastal Leasing Corporation of Greenville, NC, an equipment leasing
company with offices in Greenville, Greensboro, Raleigh, Wilmington and
Chesapeake, VA. This expansion of services to our small business customers
should be completed in October of this year.
These results could not have been achieved without you. We appreciate your
continued support and, as always, we encourage you to use the services of our
bank and to recommend us to others.
Sincerely,
Michael S. Patterson
President and CEO
Summary Balance Sheets
(In thousands)
9/30/97 9/30/96
Assets
Cash, Due from Banks,
and Federal Funds Sold $ 49,755 $ 54,113
Investments, Market Value
of $309,578 and $219,645 308,120 220,826
Loans Less Allowance of
$11,693 and $9,689 777,259 640,032
Other Assets 70,902 49,492
Total Assets $1,206,036 $ 964,463
Liabilities and
Shareholders' Equity
Demand Deposits $ 165,022 $ 134,739
Interest Bearing Deposits 861,732 701,214
Total Deposits 1,026,754 835,953
Other Borrowings 72,886 34,727
Other Liabilities 12,501 9,596
Total Other Liabilities 85,387 44,323
Total Liabilities 1,112,141 880,276
Shareholders' Equity
Common Stock; no par value;
20,000 shares authorized;
10,469 shares and 10,446
shares outstanding at
September 30, 1997 and
1996, respectively 60,172 61,411
Undivided Profits 32,953 23,361
Net Unrealized Loss on
Securities Available
for Sale 770 (585)
Total Shareholders' Equity 93,895 84,187
Total Liabilities and
Shareholders' Equity $1,206,036 $ 964,463
Summary Statements of Income and Expense
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Three For the nine
Months Ended Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
<S> <C> <C> <C> <C>
Interest Income $21,918 $18,934 $61,484 $53,905
Interest Expenses 10,246 8,565 28,145 24,218
Net Interest Income 11,672 10,369 33,339 29,687
Provision for Loan Losses 1,040 300 2,370 1,335
Net Interest Income
After Provision 10,632 10,069 30,969 28,352
Noninterest Income 2,401 2,104 8,502 6,680
Noninterest Expense 7,762 7,557 21,913 21,800
Net Income Before Income Taxes 5,271 4,616 17,558 13,233
Income Tax Expense 1,856 1,694 6,391 4,862
Net Income $ 3,415 $ 2,922 11,167 8,370
Primary Earnings per Share $ .31 $ .27 1.03 .78
Average Common and Common Equivalent Shares 10,917 10,774 10,893 10,789
Fully Diluted Earnings per Share $ .31 $ .27 1.02 .78
Average Common and Common Equivalent Shares
assuming full dilution 10,971 10,778 10,997 10,789
Significant Ratios
Return on Assets 1.22% 1.23% 1.44% 1.23%
Return on Equity 14.56% 13.95% 16.56% 13.66%
Efficiency Ratio 55.16% 60.59% 52.37% 59.94%
Net Charge Offs to Average Loans .17% .004% .19% .001%
Allowance for Loan Losses to Loans 1.48% 1.49% 1.48% 1.49%
Allowance for Loan Losses to
Nonperforming Assets 181% 271% 181% 271%
Closing Stock Price at Period End $30.00% $14.50%
</TABLE>
Triangle Bank Office Locations
Bailey
Battleboro
Benson
Carrboro
Cary (2)
Chapel Hill (2)
Clayton (2)
Creedmoor
Dunn (2)
Durham
Fairmont
Fayetteville (2)
Fremont
Fuquay-Varina
Garner
Goldsboro (3)
Greenville (2)
Hamlet
Havelock
Lillington
Lumberton (2)
Middlesex
Mount Olive
Nashville
New Bern (2)
Oxford (2)
Plymouth
Raleigh (4)
Red Oak
Rocky Mount
Roper
Sanford
Scotland Neck
Seaboard
Sharpsburg
Spring Hope
Tarboro (2)
Wallace
Whiteville (2)
Wilmington
Shareholder Information
Stock Transfer Agent and Registrar:
First Citizens Bank
Stock Transfer Department
2917 Highwoods Boulevard
Raleigh, North Carolina 27604
1-800-662-7130
Stock Listing:
The common stock of Triangle Bancorp is
traded on the NASDAQ National Market System
under the ticker symbol TRBC.
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. and Subsidiaries
Website: www.trianglebank.com
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 38,836
<INT-BEARING-DEPOSITS> 989
<FED-FUNDS-SOLD> 9,930
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 207,924
<INVESTMENTS-CARRYING> 100,196
<INVESTMENTS-MARKET> 101,654
<LOANS> 788,952
<ALLOWANCE> 11,693
<TOTAL-ASSETS> 1,206,036
<DEPOSITS> 1,026,754
<SHORT-TERM> 37,935
<LIABILITIES-OTHER> 12,501
<LONG-TERM> 34,950
0
0
<COMMON> 60,172
<OTHER-SE> 33,723
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<INTEREST-INVEST> 10,774
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<INTEREST-TOTAL> 61,484
<INTEREST-DEPOSIT> 25,783
<INTEREST-EXPENSE> 28,145
<INTEREST-INCOME-NET> 33,339
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<LOANS-PAST> 3,780
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