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.
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.
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
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.
In addition, the Bank owns an approximate 13,100 square foot operations center in Selma, North Carolina.
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
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.
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
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.
TABLE 3 (continued)
ALLOCATION OF THE RESERVE FOR LOAN LOSSES At December 31,
(Dollars in Thousands)
TABLE 4
================================================================================ SECURITIES
TABLE 4 (cont'd)
=========================================================================== SECURITIES
WEIGHTED AVERAGE YIELDS* AT DECEMBER 31, 1996
TABLE 4 (CONT'D)
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SECURITIES (IN THOUSANDS)
TABLE 5
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LARGE TIME DEPOSIT MATURITIES
Analysis of Time Deposits of $100,000 or more at December 31, 1996 (In Thousands):
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TABLE 6
SHORT-TERM BORROWINGS (Dollars in Thousands)
TABLE 7
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============================================================================== (1) All ratios are computed on average daily balances, except dividend payout.
TABLE 8
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(2) Assumptions used include the maturity distribution units for non-maturity deposits and no pre-payments on loans.
ITEM 2.
ITEM 2. PROPERTIES
See Item 1. Description of Business-Properties.
ITEM 3.
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.
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.
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.
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.
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.
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.
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.
PART III
ITEM 10.
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.
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.
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.
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.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
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.
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.
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
INDEX TO EXHIBITS
TRIANGLE BANCORP
ANNUAL REPORT
Shareholder Information
Annual Meeting
The Annual Meeting of the shareholders of Triangle Bancorp, Inc. will be held on Monday, April 28, 1997, at the Greenville Hilton, 207 Southwest Greenville Boulevard, Greenville, NC at 3:00 p.m.
Common Stock
At December 31, 1996, the Company had 10,468,036 shares of common stock outstanding which was held by approximately 7,000 shareholders of record. The Company's stock is traded Over-the-Counter on the NASDAQ National Market under the ticker symbol TRBC.
Stock Transfer Agent and Registrar
First Citizens Bank Stock Transfer Department 2917 Highwoods Boulevard Raleigh, North Carolina 27604
Independent Accountants
Coopers & Lybrand L.L.P. Certified Public Accountants 150 Fayetteville Street Mall Suite 2300 Raleigh, North Carolina 27601
Quarterly Common Stock Prices and Dividends
The following table sets forth the range of high and low per share sales prices as reported by NASDAQ for the Company's common stock. The table also sets forth per share dividend information for the period indicated. See "Management's Discussion and Analysis of Financial Condition and Results of Operation" contained elsewhere in this report for a description of limitations on the ability of the Company to pay dividends.
Dividend Reinvestment and Stock Purchase Plan
Triangle Bancorp, Inc. has a Dividend Reinvestment and Stock Purchase Plan which allows shareholders to reinvest dividends and buy additional stock in any amount up to $2,000 per quarter after they have made their initial purchase of stock. For further information and an application, contact our Stock Transfer Agent.
About This Report
The 1996 Annual Report is presented using a summary format intended to provide information regarding Triangle Bancorp, Inc.'s financial position and results of operations in a concise manner that will be meaningful and useful to our shareholders. The audited financial statements and detailed analytical schedules are contained in the Triangle Bancorp, Inc. Annual Report on Form 10-K for the year ended December 31, 1996.
Form 10-K
A copy of Triangle Bancorp, Inc.'s Form 10-K Annual Report to the Securities and Exchange Commission for 1996 will be furnished, without charge, upon written request to:
Investor Relations Triangle Bancorp, Inc. P.O. Box 31828 Raleigh, North Carolina 27622
Equal Opportunity Employer
As an equal opportunity employer, Triangle Bancorp, Inc. pledges to recruit, hire, train and promote persons in all job classifications, without regard to race, color, religion, sex, national origin, age, disability or veteran status.
Market Makers
Dean Witter Reynolds Herzog, Heine, Geduld, Inc. Interstate/Johnson Lane Legg Mason Wood Walker, Inc. Raymond James & Associates, Inc. Robinson Humphrey Co., Inc. Sandler O'Neill & Partners Scott & Stringfellow Wedbush Morgan Securities, Inc. Wheat First Securities, Inc.
Triangle Bancorp, Inc.
Corporate Headquarters 4300 Glenwood Avenue Raleigh, NC 27612 (919) 881-0455
1996 1995 High Low Dividend High Low Dividend
First Quarter 16.00 13.88 .07 10.75 9.13 .03 Second Quarter 15.00 13.50 .08 10.75 9.00 .03 Third Quarter 15.25 13.50 .08 14.75 10.00 .05 Fourth Quarter 16.38 14.50 .10 15.25 11.75 .06
(Full page photo appears here)
(Bar graph appears here with the following plot points.) 92 93 94 95 96 $6.75 $7.50 $10.00 $14.25 $16.38 - ------------------------------------------------ ANNUAL STOCK PRICE
(Bar graph appears here with the following plot points.) 92 93 94 95 96 $471 $681 $742 $854 $971 - ------------------------------------------------ TOTAL ASSETS (in millions) (Bar graph appears here with the following plot points.) 92 93 94 95 96 $3 $4 $4 $8 $11 - ------------------------------------------------ NET INCOME (in millions) (Bar graph appears here with the following plot points.) 92 93 94 95 96 $0.38 $0.47 $0.41 $0.73 $1.04 - ------------------------------------------------ FULLY DILUTED EARNINGS PER SHARE
Selected Consolidated Financial Information - --------------------------------------------------------------------------------
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
Provision for Loan Losses
The provision for loan losses for 1996 was $2.1 million, a significant increase over the provision for 1995. This increase reflects the significant growth in the loan portfolio during 1996. The Company continues to maintain adequate levels of coverage for nonperforming assets as well as general reserves for the portfolio as described further in the loans section of this report.
The 1995 provision for loan losses of $428,000 was 66% lower than the 1994 provision of $1.3 million. The Company's loan loss reserve calculation continued to show adequate reserve levels in 1995 as the loan portfolio demonstrated improving quality and reductions in nonperforming assets.
Noninterest Income
Noninterest income for 1996 was $8.5 million versus $8.1 million for 1995, a 5% increase. This increase resulted primarily from an increase in service charges on deposit accounts as transaction deposit accounts increased significantly during 1996. Other service charges decreased since 1995 as the mortgage servicing portfolio was sold during late 1995. The gain on the sale of that portfolio of $529,000 was nearly matched by a gain of $558,000 on the sale of deposits of approximately $8 million during the second quarter of 1996. Finally, other operating income was reduced during 1996 as a result of the loss on the sale of certain fixed assets of acquired organizations.
Noninterest income increased $2.3 million or 41% in 1995 because of a decrease in losses on sales of securities of $1.7 million and a $529,000 gain on the sale of the mortgage servicing portfolio. In addition, the Company incurred a $402,000 market valuation loss on loans held for sale during 1994 that did not reoccur in 1995. Other service charges, commission and fees were down $250,000 due primarily to a decrease in origination income on mortgage loans.
Noninterest Expense
Noninterest expenses of $29.2 million for 1996 decreased from $30.7 million for 1995. This decrease is due to the reduction of merger expenses and other professional services. Absent the merger expenses, noninterest expenses increased by 2%. This small increase, relative to a 14% increase in assets, is primarily a result of increased intangible amortization expenses from the First Union transaction and increased facilities expenses as a new main office was purchased and 4 additional branch sites were acquired or constructed during 1996. These increases were offset by gaining the efficiencies of combining the operations of merged companies.
Noninterest expenses in 1995 were $30.7 million, an increase of $2 million or 7% over 1994. The increase was primarily in merger related expenses as they exceeded the 1994 level by $1.7 million. Other increases were seen in equipment (due to investment in technological improvements), amortization of intangible assets, professional fees, advertising and office expenses. Noninterest expenses that decreased included salaries and benefits, occupancy, Federal deposit insurance expense and other expenses. These decreases are due to efficiencies seen as a result of merging five institutions into one and a deposit insurance rate decrease during the year. (Bar graph appears here with the following plot points.)
Return on Average Assets (percent)
92 93 94 95 96 0.69 0.78 0.60 1.00 1.22
Triangle Bancorp, Inc. and Subsidiary 15
Income Taxes
The Company's income tax expense for 1996 was approximately 35% of income. This level is less than the expected combined state and federal statutory rates due to tax exempt securities, held as well as the adjustment of the deferred tax asset to reflect current tax rates.
During 1995 and 1994, the Company's income tax expense approximated the federal statutory rate. No state tax expense was recorded due to the use of net operating loss carryforwards, which were fully utilized in 1995.
Balance Sheet Analysis
The Company's total assets increased from $854 million in 1995 to $971 million in 1996, a 14% increase. This growth, reflected primarily in the loan and investment portfolios, was funded by additional deposits. The Company continued to have a strong ratio of average earning assets to total average assets of 91%.
Loans
The loan portfolio constitutes the Company's largest earning asset. During 1996, average net loans increased by $104 million over the 1995 level of $512 million. This increase was due to strong loan demand throughout the year in many of the Company's service areas.
Nonperforming assets at December 31, 1996 of $4.3 million increased by $1.2 million from December 31, 1995. Net charge-offs for 1996 were .16% of average loans versus .20% for 1995. As a percentage of gross loans and other real estate owned, nonperforming assets were .66% as of December 31, 1996 versus .54% at December 31, 1995. While nonperforming assets have increased slightly, these levels are considered to be relatively low compared to industry averages. The components of nonperforming assets are nonaccrual loans, loans over 90 days or more past due and other real estate owned.
The classification "nonaccrual" identifies those loans which management recognizes as collection problems, but which have not been identified as losses. Loans are placed on nonaccrual status when payments of interest and/or principal have remained delinquent for a period of 90 days or more or when management's evaluation indicates probable default prior to the 90 day delinquency period, unless the loan is both well secured and in the process of collection. The Company's credit policy does not allow new funds to be committed to borrowers who have credits in nonaccrual status.
A loan is considered impaired based on current information and events, if it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The measurement of impaired loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate, except that collateral-dependent loans are measured for impairment based on the fair value of the collateral. During 1996 and 1995, the Company did not have a significant investment in loans determined to be impaired.
There are no loans, other than those included in non-performing assets, that (i) represent or result from trends or uncertainties which management reasonably expects will (Bar graph appears here with the following plot points.)
Loans (in millions) 92 93 94 95 96 $275 $395 $468 $560 $640
materially impact future operating results, liquidity, or capital resources, or (ii) represent material credits about which management is aware of any information which causes management to have serious doubts as to the ability of such borrowers to comply with the loan repayment terms.
The adequacy of the allowance for loan losses is monitored by management through an internal loan review process. Among the factors determining the level of the allowance are loan growth, projected net charge-offs, the amount of non-performing and past due loans and current and anticipated economic conditions.
The allowance for loan losses at December 31, 1996 was 1.50% of gross loans (1.53% in 1995) and 227% of nonperforming assets (283% in 1995). While nonperforming assets have increased slightly during 1996 and the coverage ratios noted above have decreased during 1996, based on information currently available to management as described in the previous paragraph, the allowance for loan losses is believed to be adequate. However, future additions to the allowance may be necessary based on changes in economic conditions or the circumstances of individual borrowers which may impact borrowers' ability to repay their loans.
Securities, Federal Funds Sold and Interest Bearing Deposits
Securities, Federal funds sold and interest bearing deposits at the end of 1996 totaled $245 million, compared to $208 million at December 31, 1995. Securities available for sale increased $18 million and securities held to maturity increased $21 million. Approximately 80% of the portfolio represents US Treasury and Agency obligations, while municipal obligations represent approximately 11% of the portfolio.
Deposits
Deposits increased $133 million to $848 million at December 31, 1996, compared to $715 million at December 31, 1995. This growth was found in all categories of deposits except interest bearing demand. Approximately $55 million of this growth relates to the acquisition of the First Union deposits in early 1996. The remaining increase is a result of steady growth of the existing offices, including those opened during the year.
Other Borrowings
Short-term debt consists of Federal funds purchased and securities sold under agreement to repurchase such securities ("repurchase agreements") and decreased by 68% to $16 million at the end of 1996. This decrease is explained primarily by $20 million in short-term borrowings maintained at the end of 1995 in preparation for the First Union acquisition. The acquisition of the deposit liabilities provided adequate cash to repay this short-term borrowing in early 1996. The remainder of the decrease is reflected as an increase in long-term borrowings as Federal Home Loan Bank advances were obtained for greater than one year.
Capital
The Company's primary source of new capital is retained earnings. Management feels the Company has other funding sources if needed, including the ability to issue additional common stock or debt. The adequacy of capital is reviewed regularly, in light of
(Bar graph appears here with the following plot points.) Deposits (in millions)
92 93 94 95 96 $408 $584 $636 $715 $848
Triangle Bancorp, Inc. and Subsidiary 17
current plans and economic conditions, to ensure that sufficient capital is available for current and future needs, to minimize the Company's cost of capital and to assure compliance with regulatory requirements.
Current Federal regulations require that the Bank maintain a minimum ratio of total capital to risk weighted assets of 8%, with at least 4% being in the form of Tier I capital, as defined in the regulations. In addition, the Bank must maintain a leverage ratio of 4%. As of December 31, 1996, the Bank's capital exceeded the current capital requirements. The Bank currently expects to continue to exceed these minimums without altering current operations or strategy.
The Company recognizes the need to balance the retention of sufficient capital to support future growth, meet regulatory requirements and provide shareholders with a current cash return on their investment. As a result, for the years ended December 31, 1996 and 1995, cash dividends paid were 29% and 22% of earnings, respectively.
Asset and Liability Management
The largest component of the Company's earnings is net interest income, which can fluctuate widely when significant interest rate movements occur. Management is responsible for minimizing the Company's exposure to interest rate risk and assuring an adequate level of liquidity.
To mitigate the impact of interest rate movements, the balance sheet must be structured so that repricing opportunities exist for both assets and liabilities in generally equivalent amounts at approximately the same time intervals. Imbalances in these repricing opportunities at any point in time constitute interest rate sensitivity. Interest rate sensitivity management measures the potential exposure to fluctuating interest rates. The Company's objective in managing interest rate sensitivity is to achieve reasonable stability in the net interest margin throughout economic and interest rate cycles by maintaining the proper balance of rate sensitive assets and liabilities. The major factors that are used to manage interest rate risk include the mix of fixed and floating interest rates, pricing, and maturity patterns of all asset and liability accounts. Management regularly reviews the Company's sensitivity position and evaluates alternative sources and uses of funds.
The Company's interest sensitivity is monitored using computer simulation programs which analyze the effect of various rate environments on the Company's net interest margin. In modeling the interest sensitivity of the Company's balance sheet, assumptions must be made concerning the repricing of nonmaturing liabilities such as deposit transaction accounts. Management has concluded that the historical experience of the Company and the industry in general provide the best basis for determining the repricing characteristics of these accounts. Accordingly, management places a portion of transaction account balances as repricing immediately and the remainder in the one to five year time period. Using these assumptions, the Company's interest sensitivity within a one year time frame reflects a positive impact on net interest income in a rising interest rate environment. The Company has historically monitored its interest sensitivity within an acceptable range in both rising and falling interest rate environments and keeps its exposure to changing rates to a manageable level.
To ensure that sufficient funds are available for loan growth and deposit withdrawals, as well as to provide for general needs, the Company must maintain an adequate level of liquidity. Both assets and liabilities provide sources of liquidity. Asset liquidity comes from the Company's ability to convert short-term investments into cash and from the maturity and repayment of loans and investment securities. Liability liquidity (Bar graph appears here with the following plot points.) Net Charge-offs as % of Average Loans
92 93 94 95 96 0.63 0.27 0.68 0.20 0.16
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
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1996 and 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
The accompanying notes are an integral part of the financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
For the years ended December 31, 1996, 1995 and 1994
The accompanying notes are an integral part of the financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 1996, 1995 and 1994
The accompanying notes are an integral part of the financial statements.
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
(Continued)
TRIANGLE BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
For the years ended December 31, 1996, 1995 and 1994
The accompanying notes are an integral part of the financial statements.
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.
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.
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.
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.
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:
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.
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:
TRIANGLE BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements
3. SECURITIES (Continued)
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.
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.
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:
A summary of the allowance for loan losses for the years ended December 31, 1996, 1995 and 1994, is as follows:
Nonperforming assets at December 31, 1996 and 1995, consist of the following:
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:
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:
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:
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:
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:
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.
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:
The following table summarizes information about the Plan's stock options at December 31, 1996:
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.
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):
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.
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:
TRIANGLE BANCORP, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements
15. PARENT COMPANY FINANCIAL DATA (Continued)
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.
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:
The Company's remaining assets and liabilities are not considered financial instruments.
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:
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:
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
TRIANGLE BANK - --------------------------------------------------------------------------------
BOARD OF DIRECTORS - --------------------------------------------------------------------------------
(1) Executive Committee Members (2) Triangle Bank Board only
Triangle Bancorp, Inc. and Subsidiary 46
(Full page photo appears here)
Left to Right Front to Back
June Campbell, Credit Administration Sarah Wiggs, Check Imaging Scott Chandler, Data Processing Vivian Dobbin, Document Imaging Joan Franklin, Deposit Services Don Raper, Rocky Mount Max Ashworth, Fuquay-Varina Fran McAllister, Loan Operations Karen Singletary, Finance Joann Ricks, Scotland Neck/Seaboard Sondra Collins, Cameron Village Debbie Birkenmeyer, Administration Tim Barbour, Benson Kirk Whorf, Funds Management Dwight Scott, General Services