U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission file number - 000-21346
TRIANGLE BANCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1764546
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Glenwood Avenue
Raleigh, North Carolina 27612
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(Address of principal executive offices)
(Zip Code)
Telephone: (919) 881-0455
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(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 25,132,681
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Class Outstanding at May 5, 1999
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PART I - FINANCIAL INFORMATION
Part I, Item 2, Management's Discussion and Analyis, and Part II, Item 5, Other
Information, are being refiled to include "IMPACT OF YEAR 2000 ISSUE " with
Management's Discussion and Analysis and not as Other Information.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
GENERAL
The purpose of this discussion is to provide the reader with a concise
understanding of the performance and financial condition of Triangle
Bancorp, Inc. (the "Company"). The Company is a multibank holding
company incorporated in November 1991 under the laws of the State of
North Carolina, with four wholly-owned subsidiaries: Triangle Bank
("Triangle"); Bank of Mecklenburg ("Mecklenburg") (collectively, the
"Banks"); Coastal Leasing LLC ("Coastal"); and Triangle Capital Trust.
OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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The Company's net income for the three months ended March 31, 1999 was
$6,602,000 compared to $5,382,000 for the same period in 1998, an
increase of 23%. Diluted earnings per share were $0.26 for the three
months ended March 31, 1999 compared to $0.21 per share for the same
period in 1998. Excluding after-tax nonrecurring merger expenses in the
first quarter of 1998, net income was $5,586,000 and diluted earnings
per share were $.22.
For the three months ended March 31, 1999, the annualized returns on
average assets and equity were 1.27% and 16.08%, respectively, compared
to 1.09% and 14.00%, respectively, for the same period in 1998.
Excluding nonrecurring merger expenses in the first quarter of
1998, the annualized returns on average assets and equity were 1.14%
and 14.53%, respectively.
Net taxable equivalent interest income for the three months ended March
31, 1999 was $19,576,000 compared to $19,211,000 for the same period in
1998, an increase of $365,000. Average earning assets increased $104
million with loans increasing $109 million and investments declining by
$5 million. While the volume of earning assets increased, the taxable
equivalent yields declined due to the overall interest rate environment
including the reduction in the prime based lending rate and accelerated
mortgage prepayments on collateralized mortgage obligations in the
investment portfolio. Average costing liabilities increased by $75
million, with deposits growing $34 million, short-term debt increasing
$94 million and FHLB advances declining $54 million. The increase in
short-term debt is attributable to the Company being in a federal funds
purchased position for much of the first quarter of 1999 as compared to
1998. Also, reverse repurchase agreements were used as an alternative
to higher priced deposits to fund loan growth. The cost of liabilities
decreased when comparing the first quarter of 1999 to 1998, again due
to the overall interest rate environment. The net taxable equivalent
yield on interest earning assets decreased by 15 basis points to 4.08%
for the quarter ended March 31, 1999 to 4.23% for the quarter ended
March 31, 1998.
<PAGE>
For the three months ended March 31, 1999, a loan loss provision of
$1,315,000 was made compared to a provision of $1,451,000 for the same
period in 1998. Net charge-offs to average loans for the quarter ended
March 31, 1999 were .35% compared to .41% for the quarter ended March
31, 1998.
Noninterest income for the three months ended March 31, 1999 was
$4,773,000 compared to $3,847,000 for the same period in 1998, an
increase of $926,000 or 24%. An increase of $253,000 was seen in
securities gains over 1998. Service charges on deposit accounts
increased $147,000, with growth in activity charges and overdraft
charges. Investment commissions and fees increased $176,000 due to
increased volume at Triangle Investment Services. Other operating
income increased $272,000 primarily due to income on bank owned life
insurance purchased by the Company in the third quarter of 1998 and the
first quarter of 1999.
Recurring noninterest expenses decreased $271,000, or 2%, for the three
months ended March 31, 1999 compared to the same period in 1998. The
decrease is attributable to efficiencies achieved from two mergers in
1998, Guaranty State Bancorp in April and United Federal Savings Bank
in September. The primary areas of decreases were salaries and
benefits, office expenses and other operating expenses. Furniture and
equipment expense increased over 1998 due to the addition of a new main
frame computer and operations facility late in the first quarter of
1998.
FINANCIAL CONDITION
Total assets were $2.15 billion as of March 31, 1999, an increase of
$31 million from December 31, 1998. Net loans grew $48 million to $1.4
billion as of March 31, 1999 from December 31, 1998. The loan growth
was funded by decreases in investments and cash as well as deposit
growth. Additional bank owned life insurance was purchased in the first
quarter of 1999 increasing other assets by $20 million over the
December 31, 1998 balance.
The Company continued to maintain strong loan and lease loss reserves
during the period with a reserve balance of $19,682,000 at March 31,
1999. Nonperforming assets increased slightly to $13 million at March
31, 1999 from $12.7 million at December 31, 1998. The loan and lease
loss reserves at March 31, 1999 were 1.37% of gross loans and leases
and 176% of nonperforming and nonaccrual loans compared to 1.42% and
184%, respectively, at December 31, 1998. Management feels loan and
lease loss reserves are adequate. A summary of certain information
related to the loan and loss reserves and nonperforming assets as of
March 31, 1999 follows:
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RESERVE FOR LOAN AND LEASE LOSSES AND NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
ANALYSIS OF RESERVE FOR LOAN AND LEASE LOSSES:
Beginning balance, January 1, 1999 $19,584
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Deduct charge-offs:
Commercial financial and agricultural 947
Real estate, construction and land development 0
Installment loans to individuals 413
Credit card and related plans 0
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1,360
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Add recoveries:
Commercial, financial and agricultural 32
Real estate, construction and land development 4
Installment loans to individuals 107
Credit card and related plans 00
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143
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Net charge-offs 1,217
Additions charged to operations 1,315
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Ending balance, March 31, 1999 $19,682
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Ratio of net charge-offs to average loans and
leases outstanding during the period 0.35%
ANALYSIS OF NONPERFORMING ASSETS AT MARCH 31, 1999:
Nonaccrual loans:
Commercial, financial and agricultural $ 2,962
Real estate, construction and land development 1,662
Installment loans to individuals 84
Credit card and related plans 00
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4,708
Loans contractually past due 90 days or more
as to principal or interest 6,470
Foreclosed assets 1,857
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TOTAL $13,035
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<PAGE>
Total deposits were $1.7 billion at March 31, 1999, an increase of $56
million from December 31, 1998. Significant growth in time deposits
were offset somewhat by declines in noninterest bearing and interest
bearing demand deposits. The growth in time deposits greater than
$100,000 was the result of the Company implementing a program late in
the fourth quarter of 1998 of accepting a limited amount of brokered
deposits as an alternative to higher priced retail deposits.
Short-term debt declined $29 million from December 31, 1998 to March
31, 1999 with federal funds purchased decreasing $20 million,
masternotes decreasing $5.5 million and repurchase agreements
decreasing $3.5 million. Federal Home Loan Bank advances declined $5
million at March 31, 1999 due to a maturity during the quarter.
CAPITAL
The adequacy of capital is reviewed regularly by the Company's
management, in light of current plans and economic conditions, to
ensure that sufficient capital is available for current and future
needs, to minimize the Company's cost of capital and to assure
compliance with regulatory requirements. The Company's capital ratios
as of March 31, 1999 were as follows:
ACTUAL REQUIRED EXCESS
PERCENT PERCENT PERCENT
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Tier 1 Capital to Risked Based Assets 9.97% 4.00% 5.97%
Total Capital to Risked Based Assets 11.15% 8.00% 3.15%
Leverage Ratio 8.09% 4.00% 4.09%
IMPACT OF YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. As a
result, many automated applications may fail to function properly or
may cease to function unless corrected or replaced.
The Company is a "turnkey" institution; it does not write or develop
any of its own computer applications, but instead purchases or licenses
its applications from third party vendors. The Company has adopted a
plan which calls for the Company's applications to properly process
dates in the Year 2000 and beyond by April 30, 1999. As a "turnkey"
institution, the Company is in dialogue with all of its vendors as to
their preparedness for Year 2000. In addition, the Company has hired an
independent consultant to assist it in all phases of its Year 2000
plan.
<PAGE>
In 1998, the Company completed its assessment of its existing computer
systems and applications and had identified 30 mission critical
applications. As of March 31, 1999, the Company had completed
renovation, validation and implementation of all but four of its
mission critical and three of its non-mission critical applications.
Validation and implementation of all existing functions, both mission
critical and non-mission critical, are expected to be completed by May
31, 1999. Since its original assessment, the Company has added four new
applications, all of which have been scheduled for renovation and
validation which is expected to be completed by July 31, 1999. As
validation of a function occurs, the Company will develop a contingency
plan for each function. As of March 31, 1999 the Company had begun
contingency planning for all functions, which plan is to be completed
by June 30, 1999.
The Company has budgeted $1,000,000 for the Year 2000 plan, with
approximately $50,000 for 1997, $750,000 for 1998 and $200,000 for
1999. The Company spent approximately $40,000 and $614,000 in 1997 and
1998, respectively, on Year 2000 issues. The amount spent on Year 2000
issues in the quarter ended March 31, 1999 was $94,000. The Company
does not expect the costs of this process to be material to its
financial condition or results of operations.
Based on information now available, the Company anticipates its systems
will properly process dates in the year 2000 and beyond.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
Not applicable.
<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: May 20, 1999 /s/ Debra L. Lee
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Debra L. Lee,
EVP/Chief Financial Officer
