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Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2009
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 001-33130
Triangle Capital Corporation
(Exact name of registrant as specified in its charter)
     
Maryland
(State or other jurisdiction of
incorporation or organization)
  06-1798488
(I.R.S. Employer
Identification No.)
     
3700 Glenwood Avenue, Suite 530
Raleigh, North Carolina

(Address of principal executive offices)
  27612
(Zip Code)
Registrant’s telephone number, including area code: (919) 719-4770
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o  Non-accelerated filer þ
(Do not check if a smaller reporting company)
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ
The number of shares outstanding of the registrant’s Common Stock (par value $0.001 per share) on November 1, 2009 was 9,908,511.
 
 

 


 

TRIANGLE CAPITAL CORPORATION
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
             
        Page
 
           
 
  PART I — FINANCIAL INFORMATION        
  Financial Statements        
 
      3  
 
      4  
 
      5  
 
      6  
 
      7  
 
  Consolidated Schedule of Investments as of December 31, 2008     12  
 
  Notes to Unaudited Financial Statements     17  
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     25  
  Quantitative and Qualitative Disclosures about Market Risk     34  
  Controls and Procedures     35  
 
           
 
  PART II — OTHER INFORMATION        
  Legal Proceedings     36  
  Risk Factors     36  
  Unregistered Sales of Equity Securities and Use of Proceeds     36  
  Defaults Upon Senior Securities     36  
  Submission of Matters to a Vote of Security Holders     37  
  Other Information     37  
  Exhibits     38  
        39  
Exhibits
           
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2

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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
TRIANGLE CAPITAL CORPORATION
Consolidated Balance Sheets
                 
    September 30,   December 31,
    2009   2008
     
    (Unaudited)        
Assets
               
Investments at fair value:
               
Non—Control / Non—Affiliate investments (cost of $135,212,872 and $138,413,589 at September 30, 2009 and December 31, 2008, respectively)
  $ 127,517,222     $ 135,712,877  
Affiliate investments (cost of $55,100,201 and $30,484,491 at September 30, 2009 and December 31, 2008, respectively)
    49,780,689       33,894,556  
Control investments (cost of $11,558,825 and $11,253,458 at September 30, 2009 and December 31, 2008, respectively)
    11,093,125       12,497,858  
     
Total investments at fair value
    188,391,036       182,105,291  
Cash and cash equivalents
    33,414,295       27,193,287  
Interest and fees receivable
    365,532       679,828  
Prepaid expenses and other current assets
    276,297       95,325  
Deferred financing fees
    3,470,600       3,545,410  
Property and equipment, net
    34,503       48,020  
     
Total assets
  $ 225,952,263     $ 213,667,161  
     
 
               
Liabilities
               
Accounts payable and accrued liabilities
  $ 1,450,875     $ 1,608,909  
Interest payable
    570,519       1,881,761  
Deferred revenue
    112,500        
Dividends payable
    4,029,456       2,766,945  
Taxes payable
    24,899       30,436  
Deferred income taxes
    437,827       843,947  
SBA guaranteed debentures payable
    115,110,000       115,110,000  
     
Total liabilities
    121,736,076       122,241,998  
 
               
Net Assets
               
Common stock, $0.001 par value per share (150,000,000 shares authorized, 9,827,942 and 6,917,363 shares issued and outstanding as of September 30, 2009 and December 31, 2008, respectively)
    9,828       6,917  
Additional paid-in capital
    115,370,671       87,836,786  
Investment income in excess of distributions
    1,902,083       2,115,157  
Accumulated realized gains on investments
    852,293       356,495  
Net unrealized appreciation (depreciation) of investments
    (13,918,688 )     1,109,808  
     
Total net assets
    104,216,187       91,425,163  
     
 
               
Total liabilities and net assets
  $ 225,952,263     $ 213,667,161  
     
 
               
Net asset value per share
  $ 10.60     $ 13.22  
     
See accompanying notes.

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Table of Contents

TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Operations
                                 
    Three Months   Three Months   Nine Months   Nine Months
    Ended   Ended   Ended   Ended
    September 30,   September 30,   September 30,   September 30,
    2009   2008   2009   2008
     
 
                               
Investment income:
                               
Loan interest, fee and dividend income:
                               
Non—Control / Non—Affiliate investments
  $ 3,850,305     $ 3,447,176     $ 12,252,053     $ 8,166,903  
Affiliate investments
    1,374,819       936,965       3,215,690       2,572,546  
Control investments
    232,575       315,408       713,553       1,194,603  
     
Total loan interest, fee and dividend income
    5,457,699       4,699,549       16,181,296       11,934,052  
 
                               
Paid—in—kind interest income:
                               
Non—Control / Non—Affiliate investments
    711,882       840,543       2,322,402       1,709,348  
Affiliate investments
    600,532       175,491       978,568       489,005  
Control investments
    122,738       96,393       286,816       356,700  
     
Total paid—in—kind interest income
    1,435,152       1,112,427       3,587,786       2,555,053  
 
                               
Interest income from cash and cash equivalent investments
    203,792       57,661       408,464       264,607  
     
Total investment income
    7,096,643       5,869,637       20,177,546       14,753,712  
     
 
                               
Expenses:
                               
Interest expense
    1,749,593       1,125,469       5,137,159       2,586,279  
Amortization of deferred financing fees
    90,500       64,596       268,810       160,765  
General and administrative expenses
    1,538,693       1,467,866       4,766,841       4,338,825  
     
Total expenses
    3,378,786       2,657,931       10,172,810       7,085,869  
     
Net investment income
    3,717,857       3,211,706       10,004,736       7,667,843  
 
                               
Net realized gains on investments — Non-Control/Non-Affiliate
          51,089       848,164       51,089  
Net unrealized appreciation (depreciation) of investments
    (4,504,933 )     (736,636 )     (15,028,496 )     (1,376,704 )
     
Total net gain (loss) on investments before income taxes
    (4,504,933 )     (685,547 )     (14,180,332 )     (1,325,615 )
Income tax benefit (expense)
    8,417       (49,813 )     (38,277 )     (251,984 )
     
Net increase (decrease) in net assets resulting from operations
  $ (778,659 )   $ 2,476,346     $ (4,213,873 )   $ 6,090,244  
     
 
                               
Net investment income per share — basic and diluted
  $ 0.41     $ 0.46     $ 1.25     $ 1.12  
     
Net increase (decrease) in net assets resulting from operations per share — basic and diluted
  $ (0.09 )   $ 0.36     $ (0.53 )   $ 0.89  
     
Dividends declared per common share
  $ 0.41     $ 0.35     $ 1.21     $ 0.66  
     
Distributions of capital gains declared per common share
  $     $     $ 0.05     $  
     
Weighted average number of shares outstanding — basic and diluted
    9,129,192       6,917,363       8,024,933       6,864,341  
     
See accompanying notes.

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TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Changes in Net Assets
                                                         
                            Investment             Net        
                            Income     Accumulated     Unrealized        
    Common Stock     Additional     in Excess of     Realized     Appreciation     Total  
    Number     Par     Paid In     (Less Than)     Losses on     (Depreciation) of     Net  
    of Shares     Value     Capital     Distributions     Investments     Investments     Assets  
     
 
                                                       
Balance, January 1, 2008
    6,803,863     $ 6,804     $ 86,949,189     $ 1,738,797     $ (618,620 )   $ 5,396,183     $ 93,472,353  
Net investment income
                      7,667,843                   7,667,843  
Stock-based compensation
                172,189                         172,189  
Realized gain on investments
                            51,089       33,167       84,256  
Net unrealized losses on investments
                                  (1,409,871 )     (1,409,871 )
Income tax expense
                      (251,984 )                 (251,984 )
Dividends declared
                      (4,565,459 )                 (4.565.459 )
Issuance of restricted stock
    113,500       113       (113 )                        
                 
Balance, September 30, 2008
    6,917,363     $ 6,917     $ 87,121,265     $ 4,589,197     $ (567,531 )   $ 4,019,479     $ 95,169,327  
                 
                                                         
                                            Net        
                            Investment     Accumulated     Unrealized        
    Common Stock     Additional     Income     Realized     Appreciation     Total  
    Number     Par     Paid In     in Excess of     Gains on     (Depreciation) of     Net  
    of Shares     Value     Capital     Distributions     Investments     Investments     Assets  
     
 
                                                       
Balance, January 1, 2009
    6,917,363     $ 6,917     $ 87,836,786     $ 2,115,157     $ 356,495     $ 1,109,808     $ 91,425,163  
Net investment income
                      10,004,736                   10,004,736  
Net realized gains on investments
                            848,164       (557,316 )     290,848  
Stock-based compensation
                512,448                         512,448  
Net unrealized losses on investments
                                  (14,471,180 )     (14,471,180 )
Income tax expense
                      (38,277 )                 (38,277 )
Dividends/distributions declared
                      (10,179,533 )     (352,366 )           (10,531,899 )
Public offerings of common stock
    2,775,000       2,775       27,088,473                         27,091,248  
Issuance of restricted stock
    144,812       145       (145 )                        
Common stock withheld for payroll taxes upon vesting of restricted stock
    (6,533 )     (6 )     (66,894 )                       (66,900 )
Forfeiture of restricted stock
    (2,700 )     (3 )     3                          
                 
Balance, September 30, 2009
    9,827,942     $ 9,828     $ 115,370,671     $ 1,902,083     $ 852,293     $ (13,918,688 )   $ 104,216,187  
                 
See accompanying notes.

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TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Statements of Cash Flows
                 
    Nine Months   Nine Months
    Ended   Ended
    September 30,   September 30,
    2009   2008
     
 
Cash flows from operating activities:
               
Net increase (decrease) in net assets resulting from operations
  $ (4,213,873 )   $ 6,090,244  
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
               
Purchases of portfolio investments
    (27,943,735 )     (73,645,254 )
Repayments received/sales of portfolio investments
    9,289,106       9,060,478  
Loan origination and other fees received
    540,000       1,401,996  
Net realized gain on investments
    (848,164 )     (51,089 )
Net unrealized depreciation of investments
    15,434,615       718,784  
Deferred income taxes
    (406,120 )     657,919  
Paid—in—kind interest accrued, net of payments received
    (2,008,357 )     (1,788,984 )
Amortization of deferred financing fees
    268,810       160,765  
Recognition of loan origination and other fees
    (443,135 )     (309,140 )
Accretion of loan discounts
    (306,075 )     (95,132 )
Depreciation expense
    16,711       11,110  
Stock-based compensation
    512,448       172,189  
Changes in operating assets and liabilities:
               
Interest and fees receivable
    314,296       36,671  
Prepaid expenses and other current assets
    (180,972 )     (65,890 )
Accounts payable and accrued liabilities
    (158,034 )     (27,296 )
Interest payable
    (1,311,242 )     (431,762 )
Deferred revenue
    112,500        
Taxes payable
    (5,537 )     (52,598 )
     
Net cash provided by (used in) operating activities
    (11,336,758 )     (58,156,989 )
     
 
               
Cash flows from investing activities:
               
Purchases of property and equipment
    (3,194 )     (25,030 )
     
Net cash used in investing activities
    (3,194 )     (25,030 )
     
 
               
Cash flows from financing activities:
               
Borrowings under SBA guaranteed debentures payable
          56,100,000  
Short-term borrowings
          5,100,000  
Financing fees paid
    (194,000 )     (2,268,025 )
Proceeds from common stock offerings, net of expenses
    27,091,248        
Common stock withheld for payroll taxes upon vesting of restricted stock
    (66,900 )      
Cash dividends paid
    (8,917,022 )     (6,606,618 )
Cash distributions paid
    (352,366 )      
     
Net cash provided by financing activities
    17,560,960       52,325,357  
     
Net increase (decrease) in cash and cash equivalents
    6,221,008       (5,856,662 )
Cash and cash equivalents, beginning of period
    27,193,287       21,787,750  
     
Cash and cash equivalents, end of period
  $ 33,414,295     $ 15,931,088  
     
 
               
Supplemental disclosure of cash flow information:
               
Cash paid for interest
  $ 6,448,401     $ 3,018,042  
     
See accompanying notes.

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TRIANGLE CAPITAL CORPORATION
Unaudited Consolidated Schedule of Investments
September 30, 2009
                                 
                            Fair  
Portfolio Company   Industry   Type of Investment (1) (2)   Principal Amount     Cost     Value (3)  
 
Non—Control / Non—Affiliate Investments:
                               
Ambient Air Corporation (“AA”) and Peaden-Hobbs Mechanical, LLC (“PHM”) (6%)*
  Specialty Trade Contractors   Subordinated Note-AA (12% Cash, 2% PIK, Due 03/11)   $ 3,230,822     $ 3,155,960     $ 3,155,960  
 
      Subordinated Note-AA (14% Cash, 4% PIK, Due 03/11)     1,975,985       1,955,882       1,955,882  
 
      Common Stock-PHM (128,571 shares)             128,571       99,000  
 
      Common Stock Warrants-AA (455 shares)             142,361       552,800  
 
                         
 
            5,206,807       5,382,774       5,763,642  
American De-Rosa Lamparts, LLC and Hallmark Lighting (4%)*
  Wholesale and Distribution   Subordinated Note (11.5% Cash, 3.75% PIK, Due 10/13)     8,364,145       8,238,410       3,887,000  
 
                         
 
            8,364,145       8,238,410       3,887,000  
American Direct Marketing Resources, LLC (4%)*
  Direct Marketing Services   Subordinated Note (12% Cash, 3% PIK, Due 03/15)     4,126,509       4,055,190       4,055,190  
 
                         
 
            4,126,509       4,055,190       4,055,190  
ARC Industries, LLC (3%)*
  Remediation Services   Subordinated Note (14% Cash, 5% PIK, Due 11/10)     2,626,094       2,613,976       2,613,976  
 
                         
 
            2,626,094       2,613,976       2,613,976  
Art Headquarters, LLC (2%)*
  Retail, Wholesale and Distribution   Subordinated Note (12% Cash, 2% PIK, Due 01/10)     2,181,822       2,175,656       2,175,656  
 
      Membership unit warrants (15% of units (150 units))             40,800       100,700  
 
                         
 
            2,181,822       2,216,456       2,276,356  
Assurance Operations Corporation (2%)*
  Auto Components / Metal Fabrication   Senior Note (6% Cash, Due 06/11)     2,484,000       2,034,000       2,034,000  
 
      Common Stock (300 shares)             300,000        
 
                         
 
            2,484,000       2,334,000       2,034,000  
CV Holdings, LLC (11%)*
  Specialty Healthcare Products   Subordinated Note (12% Cash, 4% PIK, Due 09/13)     11,107,737       10,234,391       10,234,391  
 
  Manufacturer   Royalty rights             874,400       859,000  
 
                         
 
            11,107,737       11,108,791       11,093,391  
Cyrus Networks, LLC (6%)*
  Data Center Services Provider   Senior Note (3.75% Cash, Due 07/13)     5,045,468       5,032,569       5,032,569  
 
      2nd Lien Note (7.5% Cash, Due 01/14)     1,196,809       1,196,809       1,196,809  
 
      Revolving Line of Credit (3.75% Cash)     455,659       455,659       455,659  
 
                         
 
            6,697,936       6,685,037       6,685,037  

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Table of Contents

                                 
                            Fair  
Portfolio Company   Industry   Type of Investment (1) (2)   Principal Amount     Cost     Value (3)  
 
Electronic Systems Protection, Inc. (4%)*
  Power Protection Systems   Subordinated Note (12% Cash, 2% PIK, Due 12/15)   $ 3,105,386     $ 3,080,576     $ 2,847,500  
 
  Manufacturing   Senior Note (4.07% Cash, Due 01/14)     904,624       904,624       904,624  
 
      Common Stock (500 shares)             285,000       73,900  
 
                         
 
            4,010,010       4,270,200       3,826,024  
Energy Hardware Holdings, LLC (0%)*
  Machined Parts Distribution   Voting Units (4,833 units)             4,833       510,700  
 
                           
 
                    4,833       510,700  
Fire Sprinkler Systems, Inc. (1%)*
  Specialty Trade Contractors   Subordinated Notes (11%-12.5% PIK, Due 04/11)     2,388,362       2,366,352       836,000  
 
      Common Stock (295 shares)             294,624        
 
                         
 
            2,388,362       2,660,976       836,000  
Frozen Specialties, Inc. (7%)*
  Frozen Foods Manufacturer   Subordinated Note (13% Cash, 5% PIK, Due 07/14)     7,565,777       7,421,219       7,421,219  
 
                         
 
            7,565,777       7,421,219       7,421,219  
Garden Fresh Restaurant Corp. (4%)*
  Restaurant   2nd Lien Note (8.1% Cash, Due 12/11)     3,000,000       3,000,000       3,000,000  
 
      Membership Units (5,000 units)             500,000       910,500  
 
                         
 
            3,000,000       3,500,000       3,910,500  
Gerli & Company (1%)*
  Specialty Woven Fabrics   Subordinated Note (12% Cash, 2% PIK, Due 08/11)     3,161,439       3,116,472       1,470,100  
 
  Manufacturer   Common Stock Warrants (56,559 shares)             83,414        
 
                         
 
            3,161,439       3,199,886       1,470,100  
Grindmaster-Cecilware Corp. (5%)*
  Food Services Equipment Manufacturer   Subordinated Note (11% Cash, 3% PIK, Due 03/15)     5,756,708       5,641,708       5,641,708  
 
                         
 
            5,756,708       5,641,708       5,641,708  
Inland Pipe Rehabilitation Holding Company LLC (12%)*
  Cleaning and Repair Services   Subordinated Note (14% Cash, Due 01/14)     8,109,091       7,252,427       7,252,427  
 
      Subordinated Note (18% Cash, Due 01/14)     3,750,000       3,685,356       3,685,356  
 
      Membership Interest Purchase Warrant (2.9%)             853,500       1,740,200  
 
                         
 
            11,859,091       11,791,283       12,677,983  
Jenkins Service, LLC (8%)*
  Restoration Services   Subordinated Note (10.25% Cash, 7.25% PIK, Due 04/14)     7,378,513       7,249,913       7,249,913  
 
      Convertible Note (10%, Due 04/18)     1,375,000       1,341,293       1,341,293  
 
                         
 
            8,753,513       8,591,206       8,591,206  
Library Systems & Services, LLC (2%)*
  Municipal Business Services   Subordinated Note (12% Cash, Due 03/11)     1,000,000       966,448       966,448  
 
      Common Stock Warrants (112 shares)             58,995       1,146,500  
 
                         
 
            1,000,000       1,025,443       2,112,948  

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Table of Contents

                                 
                            Fair  
Portfolio Company   Industry   Type of Investment (1) (2)   Principal Amount     Cost     Value (3)  
 
Novolyte Technologies, Inc. (7%)*
  Specialty Manufacturing   Subordinated Note (12% Cash, 4% PIK, Due 04/15)   $ 7,264,187     $ 7,120,456     $ 7,120,456  
 
      Preferred Units (600 units)             600,000       102,800  
 
      Common Units (22,960 units)             150,000        
 
                         
 
            7,264,187       7,870,456       7,223,256  
Syrgis Holdings, Inc. (3%)*
  Specialty Chemical Manufacturer   Senior Notes (7.75%-10.75% Cash, Due 08/12-02/14)     3,576,782       3,552,183       3,459,600  
 
      Common Units (2,114 units)             1,000,000        
 
                         
 
            3,576,782       4,552,183       3,459,600  
TrustHouse Services Group, Inc. (4%)*
  Food Management Services   Subordinated Note (12% Cash, 2% PIK, Due 09/15)     4,329,499       4,258,156       4,258,156  
 
      Class A Units (1,495 units)             475,000       405,100  
 
      Class B Units (79 units)             25,000        
 
                         
 
            4,329,499       4,758,156       4,663,256  
Tulsa Inspection Resources, Inc. (“TIR”) and Regent TIR Partners, LLC (“RTIR”) (5%)*
  Pipeline Inspection Services   Subordinated Note (14% Cash, Due 03/14)     5,000,000       4,609,295       4,609,295  
 
      Common Units — RTIR (11 units)             200,000       200,000  
 
      Common Stock Warrants - TIR (7 shares)             321,000       321,000  
 
                         
 
            5,000,000       5,130,295       5,130,295  
Twin-Star International, Inc. (5%)*
  Consumer Home Furnishings   Subordinated Note (12% Cash, 3% PIK, Due 04/14)     4,500,000       4,447,191       4,154,200  
 
  Manufacturer   Senior Note (5%, Due 04/13)     1,290,868       1,290,868       1,137,800  
 
                         
 
            5,790,868       5,738,059       5,292,000  
Wholesale Floors, Inc. (3%)*
  Commercial Services   Subordinated Note (12.5%Cash, 1.5% PIK, Due 06/14)     3,500,000       3,357,739       3,357,739  
 
      Membership Interest Purchase Warrant (4.0%)             132,800       52,300  
 
                         
 
            3,500,000       3,490,539       3,410,039  
Yellowstone Landscape Group, Inc. (12%)*
  Landscaping Services   Subordinated Note (12% Cash, 3% PIK, Due 04/14)     13,195,731       12,931,796       12,931,796  
 
                         
 
            13,195,731       12,931,796       12,931,796  
 
                         
Subtotal Non—Control / Non—Affiliate Investments
            132,947,017       135,212,872       127,517,222  
Affiliate Investments:
                               
Asset Point, LLC (5%)*
  Asset Management Software Provider   Subordinated Note (12% Cash, 7% PIK, Due 03/13)     5,322,055       5,246,127       5,246,127  
 
      Membership Units (10 units)             500,000       190,900  
 
                         
 
            5,322,055       5,746,127       5,437,027  

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Table of Contents

                                 
                            Fair  
Portfolio Company   Industry   Type of Investment (1) (2)   Principal Amount     Cost     Value (3)  
 
Axxiom Manufacturing, Inc. (2%)*
  Industrial Equipment   Subordinated Note (13% Cash, 3% PIK, Due 01/11)   $ 1,061,976     $ 1,048,432     $ 1,048,432  
 
  Manufacturer   Common Stock (34,100 shares)             200,000       599,200  
 
      Common Stock Warrant (1,000 shares)                   15,500  
 
                         
 
            1,061,976       1,248,432       1,663,132  
Brantley Transportation, LLC (“Brantley Transportation”) and Pine Street Holdings, LLC (“Pine Street”) (4) (1%)*
  Oil and Gas Services   Subordinated Note — Brantley Transportation (14% Cash, Due 12/12)     3,800,000       3,707,312       1,255,700  
      Common Unit Warrants — Brantley Transportation (4,560 common units)             33,600        
 
      Preferred Units — Pine Street (200 units)             200,000        
 
      Common Unit Warrants — Pine Street (2,220 units)                    
 
                         
 
            3,800,000       3,940,912       1,255,700  
Dyson Corporation (12%)*
  Custom Forging and Fastener   Subordinated Note (12% Cash, 3% PIK, Due 12/13)     10,555,889       10,381,448       10,381,448  
 
  Supplies   Class A Units (1,000,000 units)             1,000,000       1,783,100  
 
                         
 
            10,555,889       11,381,448       12,164,548  
Equisales, LLC (7%)*
  Energy Products and Services   Subordinated Note (13% Cash, 4% PIK, Due 04/12)     6,481,034       6,406,497       6,406,497  
 
      Class A Units (500,000 units)             500,000       1,088,700  
 
                         
 
            6,481,034       6,906,497       7,495,197  
FCL Graphics, Inc. (4%)*
  Commercial Printing Services   Senior Note (7.75% Cash, Due 5/12)     1,575,554       1,570,696       1,505,400  
 
      Senior Note (11.75% Cash, Due 5/13)     2,000,000       1,994,141       1,911,300  
 
      2nd Lien Note (20% Cash, Due 11/13)     3,403,754       3,393,919       798,000  
 
                         
 
            6,979,308       6,958,756       4,214,700  
Flint Acquisition Corporation (2%)*
  Specialty Chemical Manufacturer   Preferred Stock (9,875 shares)             308,333       2,226,000  
 
                         
 
                    308,333       2,226,000  
Genapure Corporation (1%)*
  Lab Testing Services   Genapure Common Stock (5,594 shares)             563,602       656,100  
 
                           
 
                    563,602       656,100  
Technology Crops International (5%)*
  Supply Chain Management Services   Subordinated Note (12% Cash, 5% PIK, Due 03/15)     5,006,250       4,906,250       4,906,250  
 
      Common Units (50 Units)             500,000       500,000  
 
                         
 
            5,006,250       5,406,250       5,406,250  

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                            Fair  
Portfolio Company   Industry   Type of Investment (1) (2)   Principal Amount     Cost     Value (3)  
 
Waste Recyclers Holdings, LLC (9%)*
  Environmental and Facilities Services   Subordinated Note (8% Cash, 7.5% PIK, Due 01/13)   $ 4,042,032     $ 3,969,335     $ 3,969,335  
 
      Subordinated Note (3% Cash, 12.5% PIK, Due 01/13)     5,562,424       5,489,726       4,709,700  
 
      Class A Preferred Units (300 Units)             2,251,100       583,000  
 
      Common Unit Purchase Warrant (1,170,083 Units)             748,900        
 
      Common Units (153,219 Units)             180,783        
 
                         
 
            9,604,456       12,639,844       9,262,035  
 
                         
Subtotal Affiliate Investments
            48,810,968       55,100,201       49,780,689  
Control Investments:
                               
Fischbein, LLC (11%)*
  Packaging and Materials Handling   Subordinated Note (12% Cash, 6.5% PIK, Due 05/13)     7,470,883       7,358,825       7,358,825  
 
  Equipment Manufacturer   Membership Units (4,200,000 units)             4,200,000       3,734,300  
 
                         
 
            7,470,883       11,558,825       11,093,125  
 
                         
Subtotal Control Investments
            7,470,883       11,558,825       11,093,125  
 
                         
Total Investments, September 30, 2009(181%)*
          $ 189,228,868     $ 201,871,898     $ 188,391,036  
 
                         
 
*   Value as a percent of net assets
 
(1)   All debt investments are income producing. Common stock, preferred stock and all warrants are non—income producing.
 
(2)   Disclosures of interest rates on subordinated notes include cash interest rates and paid—in—kind (“PIK”) interest rates.
 
(3)   All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.
 
(4)   Pine Street Holdings, LLC is the majority owner of Brantley Transportation, LLC and its sole business purpose is its ownership of Brantley Transportation, LLC.
See accompanying notes.

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TRIANGLE CAPITAL CORPORATION
Consolidated Schedule of Investments
December 31, 2008
                                 
        Type of Investment   Principal             Fair  
Portfolio Company   Industry   (1) (2)   Amount     Cost     Value (3)  
 
Non—Control / Non—Affiliate Investments:
                               
Ambient Air Corporation (“AA”) and Peaden-Hobbs Mechanical, LLC (“PHM”) (6%)*
  Specialty Trade Contractors   Subordinated Note-AA (12% Cash, 2% PIK, Due 03/11)   $ 3,182,231     $ 3,074,633     $ 3,074,633  
 
      Subordinated Note-AA (14% Cash, 4% PIK, Due 03/11)     1,917,045       1,888,343       1,888,343  
 
      Common Stock-PHM (126,634 shares)             126,634       126,634  
 
      Common Stock Warrants-AA (455 shares)             142,361       600,100  
 
                         
 
            5,099,276       5,231,971       5,689,710  
American De-Rosa Lamparts, LLC and Hallmark Lighting (8%)*
  Wholesale and Distribution   Subordinated Note (11.5% Cash, 3.75% PIK, Due 10/13)     8,208,166       8,064,571       6,894,500  
 
                         
 
            8,208,166       8,064,571       6,894,500  
American Direct Marketing Resources, LLC (4%)*
  Direct Marketing Services   Subordinated Note (12% Cash, 3% PIK, Due 03/15)     4,035,038       3,957,113       3,957,113  
 
                         
 
            4,035,038       3,957,113       3,957,113  
APO Newco, LLC (3%)*
  Commercial and Consumer   Subordinated Note (12% Cash, 2% PIK, Due 03/13)     1,993,336       1,907,664       1,907,664  
 
  Marketing Products   Unit purchase warrant (87,302 Class C units)             25,200       1,033,400  
 
                         
 
            1,993,336       1,932,864       2,941,064  
ARC Industries, LLC (3%)*
  Remediation Services   Subordinated Note (14% Cash, 5% PIK, Due 11/10)     2,528,587       2,508,276       2,508,276  
 
                         
 
            2,528,587       2,508,276       2,508,276  
Art Headquarters, LLC (3%)*
  Retail, Wholesale and Distribution   Subordinated Note (12% Cash, 2% PIK, Due 01/10)     2,333,488       2,309,951       2,309,951  
 
      Membership unit warrants (15% of units (150 units))             40,800        
 
                         
 
            2,333,488       2,350,751       2,309,951  
Assurance Operations Corporation (4%)*
  Auto Components / Metal Fabrication   Subordinated Note (12% Cash, 5% PIK, Due 03/12)     4,026,884       3,985,742       3,261,800  
 
      Common Stock (57 shares)             257,143        
 
                         
 
            4,026,884       4,242,885       3,261,800  
CV Holdings, LLC (12%)*
  Specialty Healthcare Products   Subordinated Note (12% Cash, 4% PIK, Due 09/13)     10,776,412       9,780,508       9,780,508  
 
  Manufacturer   Royalty rights             874,400       874,400  
 
                         
 
            10,776,412       10,654,908       10,654,908  
Cyrus Networks, LLC (8%)*
  Data Center Services Provider   Senior Note (5.83% Cash, Due 07/13)     5,539,867       5,524,881       5,524,881  
 
      2nd Lien Note (9.08% Cash, Due 01/14)     1,196,809       1,196,809       1,196,809  
 
      Revolving Line of Credit (5.83% Cash)     253,144       253,144       253,144  
 
                         
 
            6,989,820       6,974,834       6,974,834  

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Table of Contents

                                 
        Type of Investment   Principal             Fair  
Portfolio Company   Industry   (1) (2)   Amount     Cost     Value (3)  
 
DataPath, Inc. (0%)*
  Satellite Communication Manufacturer   Common Stock (210,263 shares)           $ 101,500     $  
 
                           
 
                    101,500        
Electronic Systems Protection, Inc. (5%)*
  Power Protection Systems   Subordinated Note (12% Cash, 2% PIK, Due 12/15)     3,059,267       3,032,533       3,032,533  
 
  Manufacturing   Senior Note (5.64% Cash, Due 01/14)     930,635       930,635       930,635  
 
      Common Stock (500 shares)             285,000       285,000  
 
                         
 
            3,989,902       4,248,168       4,248,168  
Energy Hardware Holdings, LLC (0%)*
  Machined Parts Distribution   Voting Units (4,833 units)             4,833       292,300  
 
                           
 
                    4,833       292,300  
FCL Graphics, Inc. (8%)*
  Commercial Printing Services   Senior Note (7.7% Cash, Due 5/12)     1,669,200       1,663,083       1,663,083  
 
      Senior Note (11.7% Cash, Due 5/13)     2,000,000       1,993,191       1,993,191  
 
      2nd Lien Note (10.5% Cash, 7.5% PIK, Due 11/13)     3,393,186       3,382,162       3,382,162  
 
                         
 
            7,062,386       7,038,436       7,038,436  
Fire Sprinkler Systems, Inc. (1%)*
  Specialty Trade Contractors   Subordinated Notes (11%-12.5% Cash, 2%-5% PIK, Due 04/11)     2,388,362       2,356,781       1,000,000  
 
      Common Stock (283 shares)             282,905       11,719  
 
                         
 
            2,388,362       2,639,686       1,011,719  
Garden Fresh Restaurant Corp. (4%)*
  Restaurant   2nd Lien Note (11% Cash, Due 12/11)     3,000,000       3,000,000       3,000,000  
 
      Membership Units (5,000 units)             500,000       583,600  
 
                         
 
            3,000,000       3,500,000       3,583,600  
Gerli & Company (2%)*
  Specialty Woven Fabrics   Subordinated Note (12% Cash, 2% PIK, Due 08/11)     3,161,439       3,092,786       1,865,000  
 
  Manufacturer   Common Stock Warrants (56,559 shares)             83,414        
 
                         
 
            3,161,439       3,176,200       1,865,000  
Inland Pipe Rehabilitation Holding Company LLC (10%)*
  Cleaning and Repair Services   Subordinated Note (12% Cash, 2% PIK, Due 01/14)     8,095,149       7,422,265       7,422,265  
 
      Membership Interest Purchase Warrant (2.5%)             563,300       1,407,300  
 
                         
 
            8,095,149       7,985,565       8,829,565  
Jenkins Service, LLC (10%)*
  Restoration Services   Subordinated Note (10.25% Cash, 7.25% PIK, Due 04/14)     8,411,172       8,266,277       8,266,277  
 
      Convertible Note (10% Cash, Due 04/18)     1,375,000       1,336,993       1,336,993  
 
                         
 
            9,786,172       9,603,270       9,603,270  

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Table of Contents

                                 
        Type of Investment   Principal             Fair  
Portfolio Company   Industry   (1) (2)   Amount     Cost     Value (3)  
 
Library Systems & Services, LLC (3%)*
  Municipal Business Services   Subordinated Note (12% Cash, Due 03/11)   $ 2,000,000     $ 1,948,573     $ 1,948,573  
 
      Common Stock Warrants (112 shares)             58,995       802,500  
 
                         
 
            2,000,000       2,007,568       2,751,073  
Novolyte Technologies, Inc. (8%)*
  Specialty Manufacturing   Subordinated Note (12% Cash, 4% PIK, Due 04/15)     7,048,222       6,880,696       6,880,696  
 
      Preferred Units (600 units)             600,000       600,000  
 
      Common Units (22,960 units)             150,000       150,000  
 
                         
 
            7,048,222       7,630,696       7,630,696  
Syrgis Holdings, Inc. (6%)*
  Specialty Chemical Manufacturer   Senior Note (7.6% Cash, Due 08/12-02/14)     4,632,500       4,602,773       4,602,773  
 
      Common Units (2,114 units)             1,000,000       532,700  
 
                         
 
            4,632,500       5,602,773       5,135,473  
TrustHouse Services Group, Inc. (5%)*
  Food Management Services   Subordinated Note (12% Cash, 2% PIK, Due 09/15)     4,264,494       4,186,542       4,186,542  
 
      Class A Units (1,495 units)             475,000       207,500  
 
      Class B Units (79 units)             25,000        
 
                         
 
            4,264,494       4,686,542       4,394,042  
Twin-Star International, Inc. (6%)*
  Consumer Home Furnishings   Subordinated Note (12% Cash 3% PIK, Due 04/14)     4,500,000       4,439,137       4,439,137  
 
  Manufacturer   Senior Note (8% Cash, Due 04/13)     1,301,921       1,301,921       1,301,921  
 
                         
 
            5,801,921       5,741,058       5,741,058  
Waste Recyclers Holdings, LLC (13%)*
  Environmental and Facilities Services   Subordinated Note (12% Cash, 3.5% PIK, Due 01/13)     9,106,995       8,935,266       8,935,266  
 
      Class A Preferred Units (300 Units)             2,251,100       2,251,100  
 
      Common Unit Purchase Warrant (1,170,083 Units)             748,900       748,900  
 
      Common Units (153,219 Units)             153,219       153,219  
 
                         
 
            9,106,995       12,088,485       12,088,485  
Wholesale Floors, Inc. (4%)*
  Commercial Services   Subordinated Note (12.5% Cash, 1.5% PIK, Due 06/14)     3,500,000       3,341,947       3,341,947  
 
      Membership Interest Purchase Warrant (4.0%)             132,800        
 
                         
 
            3,500,000       3,474,747       3,341,947  
Yellowstone Landscape Group, Inc. (14%)*
  Landscaping Services   Subordinated Note (12% Cash, 3% PIK, Due 04/14)     13,261,710       12,965,889       12,965,889  
 
                         
 
            13,261,710       12,965,889       12,965,889  
 
                         
Subtotal Non—Control / Non—Affiliate Investments
            133,090,259       138,413,589       135,712,877  

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        Type of Investment   Principal             Fair  
Portfolio Company   Industry   (1) (2)   Amount     Cost     Value (3)  
 
Affiliate Investments:
                               
Asset Point, LLC (6%)*
  Asset Management Software Provider   Subordinated Note (12% Cash, 3% PIK, Due 03/13)   $ 5,123,925     $ 5,035,428     $ 5,035,428  
 
      Membership Units (10 units)             500,000       371,400  
 
                         
 
            5,123,925       5,535,428       5,406,828  
Axxiom Manufacturing, Inc. (3%)*
  Industrial Equipment   Subordinated Note (12% Cash, 2% PIK, Due 01/11)     2,124,037       2,103,277       2,103,277  
 
  Manufacturer   Common Stock (34,100 shares)             200,000       408,900  
 
      Common Stock Warrant (1,000 shares)                   10,600  
 
                         
 
            2,124,037       2,303,277       2,522,777  
Brantley Transportation, LLC (“Brantley Transportation”) and Pine Street Holdings, LLC (“Pine Street”) (4) (4%)*
  Oil and Gas Services   Subordinated Note — Brantley Transportation (14% Cash, Due 12/12)     3,800,000       3,690,525       3,690,525  
      Common Unit Warrants — Brantley Transportation (4,560 common units)             33,600       41,800  
 
      Preferred Units — Pine Street (200 units)             200,000       139,200  
 
      Common Unit Warrants — Pine Street (2,220 units)                    
 
                         
 
            3,800,000       3,924,125       3,871,525  
Dyson Corporation (12%)*
  Custom Forging and Fastener   Subordinated Note (12% Cash, 3% PIK, Due 12/13)     10,318,750       10,123,339       10,123,339  
 
  Supplies   Class A Units (1,000,000 units)             1,000,000       964,700  
 
                         
 
            10,318,750       11,123,339       11,088,039  
Equisales, LLC (9%)*
  Energy Products and Services   Subordinated Note (12% Cash, 3% PIK, Due 04/12)     6,319,315       6,226,387       6,226,387  
 
      Class A Units (500,000 units)             500,000       2,322,400  
 
                         
 
            6,319,315       6,726,387       8,548,787  
Flint Acquisition Corporation (2%)*
  Specialty Chemical Manufacturer   Preferred Stock (9,875 shares)             308,333       1,984,500  
 
                         
 
                    308,333       1,984,500  
Genapure Corporation (1%)*
  Lab Testing Services   Genapure Common Stock (5,594 shares)             563,602       472,100  
 
                         
 
                    563,602       472,100  
 
                         
Subtotal Affiliate Investments
            27,686,027       30,484,491       33,894,556  

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        Type of Investment   Principal             Fair  
Portfolio Company   Industry   (1) (2)   Amount     Cost     Value (3)  
Control Investments:
                               
Fischbein, LLC (14%)*
  Packaging and Materials Handling   Subordinated Note (12% Cash, 4.5% PIK, Due 05/13)     7,184,066       7,053,458       7,053,458  
 
  Equipment Manufacturer   Membership Units (4,200,000 units)             4,200,000       5,444,400  
 
                         
 
            7,184,066       11,253,458       12,497,858  
 
                         
Subtotal Control Investments
            7,184,066       11,253,458       12,497,858  
 
                         
Total Investments, December 31, 2008 (199%)*
          $ 167,960,352     $ 180,151,538     $ 182,105,291  
 
                         
 
*   Value as a percent of net assets
 
(1)   All debt investments are income producing. Common stock, preferred stock and all warrants are non-income producing.
 
(2)   Disclosures of interest rates on subordinated notes include cash interest rates and paid-in-kind (“PIK”) interest rates.
 
(3)   All investments are restricted as to resale and were valued at fair value as determined in good faith by the Board of Directors.
 
(4)   Pine Street Holdings, LLC is the majority owner of Brantley Transportation, LLC and its sole business purpose is its ownership of Brantley Transportation, LLC.
See accompanying notes.

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TRIANGLE CAPITAL CORPORATION
Notes to Unaudited Financial Statements
1. ORGANIZATION, BASIS OF PRESENTATION AND BUSINESS
Organization
     Triangle Capital Corporation and its wholly owned subsidiary, Triangle Mezzanine Fund LLLP (the “Fund”) (collectively, the “Company”) operate as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). The Fund is a specialty finance limited liability limited partnership formed to make investments primarily in middle market companies located throughout the United States. The Fund’s term is ten years from the date of formation (August 14, 2002) unless terminated earlier or extended in accordance with provisions of the limited partnership agreement. On September 11, 2003, the Fund was licensed to operate as a Small Business Investment Company (“SBIC”) under the authority of the United States Small Business Administration (“SBA”). As an SBIC, the Fund is subject to a variety of regulations concerning, among other things, the size and nature of the companies in which it may invest and the structure of those investments.
     The Company currently operates as a closed—end, non—diversified investment company and has elected to be treated as a BDC under the 1940 Act. The Company is internally managed by its executive officers under the supervision of its board of directors. The Company does not pay management or advisory fees, but instead incurs the operating costs associated with employing executive management and investment and portfolio management professionals.
Basis of Presentation
     The financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries, including the Fund. The Fund does not consolidate portfolio company investments. The effects of all intercompany transactions between the Company and its subsidiaries have been eliminated in consolidation/combination.
     The accompanying unaudited financial statements are presented in conformity with United States generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the period ended December 31, 2008. Financial statements prepared on a GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.
     Management has evaluated subsequent events for recognition or disclosure through November 4, 2009, which was the date this Form 10-Q was filed with the Securities and Exchange Commission.
Public Offerings of Common Stock
     On April 23, 2009, the Company filed a prospectus supplement pursuant to which 1,200,000 shares of common stock were offered for sale at a price to the public of $10.75 per share. Pursuant to this offering, all shares were sold and delivered on April 27, 2009 resulting in net proceeds to the Company, after underwriting discounts and offering expenses, of approximately $11,700,000. On May 27, 2009, pursuant to the exercise of an overallotment option granted in connection with the offering, the underwriters involved purchased an additional 80,000 shares of the Company’s common stock at the same public offering price, less underwriting discounts and commissions, resulting in net proceeds to the Company of approximately $800,000.
     On August 7, 2009, the Company filed a prospectus supplement pursuant to which 1,300,000 shares of common stock were offered for sale at a price to the public of $10.42 per share. In addition, the underwriters involved were granted an overallotment option to purchase an additional 195,000 shares of the Company’s common stock at the same public offering price. Pursuant to this offering, all shares (including the overallotment option shares) were sold and delivered on August 12, 2009 resulting in net proceeds to the Company, after underwriting discounts and offering expenses, of approximately $14,600,000.

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New Accounting Standards
     In May 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 165, Subsequent Events, which was later codified as FASB ASC Topic 855, Subsequent Events (“ASC Topic 855”). ASC Topic 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC Topic 855 includes a new required disclosure of the date through which an entity has evaluated subsequent events and is effective for interim periods or fiscal years ending after June 15, 2009. The Company’s adoption of ASC Topic 855 did not have a material effect on its financial position or results of operations.
     In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162 (“SFAS 168”). The Codification will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 only impacted the Company’s disclosures by requiring Codification references.
2. INVESTMENTS
     Summaries of the composition of the Company’s investment portfolio at cost and fair value as a percentage of total investments are shown in the following tables:
                                 
            Percentage of Total           Percentage of Total
    Cost   Portfolio   Fair Value   Portfolio
September 30, 2009:
                               
Subordinated debt and 2nd lien notes
  $ 167,380,542       83 %   $ 153,498,784       82 %
Senior debt
    16,834,740       9       16,440,952       9  
Equity shares
    14,366,846       7       13,663,300       7  
Equity warrants
    2,415,370       1       3,929,000       2  
Royalty rights
    874,400             859,000        
     
 
  $ 201,871,898       100 %   $ 188,391,036       100 %
     
 
                               
December 31, 2008:
                               
Subordinated debt and 2nd lien notes
  $ 147,493,871       82 %   $ 143,015,291       79 %
Senior debt
    16,269,628       9       16,269,628       9  
Equity shares
    13,684,269       8       17,301,372       9  
Equity warrants
    1,829,370       1       4,644,600       3  
Royalty rights
    874,400             874,400        
     
 
  $ 180,151,538       100 %   $ 182,105,291       100 %
     
     During the three months ended September 30, 2009, the Company made three new investments totaling $18.8 million. During the nine months ended September 30, 2009, the Company made four new investment totaling $24.0 million and five investments in existing portfolio companies totaling approximately $4.0 million.
     During the three months ended September 30, 2008, the Company made two new investments totaling $16.2 million, one additional debt investment in an existing portfolio company of $0.2 million and one additional equity investment in an existing portfolio company of approximately $5,000. During the nine months ended September 30, 2008, the Company made ten new investments totaling $72.5 million, one additional debt investment in an existing portfolio company of $1.0 million and three additional equity investments in existing portfolio companies of approximately $0.1 million.
Valuation of Investments
     The Company has established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring basis in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures (formerly Statement of Financial Accounting Standards No. 157, Fair Value Measurements) (“ASC Topic 820”). Under ASC Topic 820, a financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy established by ASC Topic 820 are defined as follows:
     Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

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     Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
     Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.
     The Company’s investment portfolio is comprised of debt and equity of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its investments at fair value, as determined in good faith by the Board of Directors (Level 3 inputs, as further described below). Due to the inherent uncertainty in the valuation process, the Board of Directors’ estimate of fair value may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
     Debt and equity securities that are not publicly traded and for which a limited market does not exist are valued at fair value as determined in good faith by the Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon circumstances of each individual case. In general, fair value is the amount that the Company might reasonably expect to receive upon the current sale of the security.
     Management evaluates the investments in portfolio companies using the most recent portfolio company financial statements and forecasts. Management also consults with the portfolio company’s senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues.
     In making the good faith determination of the value of debt securities, the Company starts with the cost basis of the security, which includes the amortized original issue discount, and paid—in—kind (PIK) interest, if any. The Company also uses a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. The risk rating system covers both qualitative and quantitative aspects of the business and the securities held. In valuing debt securities, management utilizes an “income approach” model that considers factors including, but not limited to, (i) the portfolio investment’s current risk rating (discussed below), (ii) the portfolio company’s current trailing twelve months’ (“TTM”) results of operations as compared to the portfolio company’s TTM results of operations as of the date the investment was made and the portfolio company’s anticipated results for the next twelve months of operations, (iii) the portfolio company’s current leverage as compared to its leverage as of the date the investment was made, and (iv) current pricing and credit metrics for similar proposed and executed investment transactions. In valuing equity securities of private companies, the Company considers valuation methodologies consistent with industry practice, including (i) valuation using a valuation model based on original transaction multiples and the portfolio company’s recent financial performance, (ii) valuation of the securities based on recent sales in comparable transactions, and (iii) a review of similar companies that are publicly traded and the market multiple of their equity securities.
     The following table presents the Company’s financial instruments carried at fair value as of September 30, 2009 and December 31, 2008, on the consolidated balance sheet by ASC Topic 820 valuation hierarchy, as previously described:
                                 
    Fair Value at September 30, 2009
    Level 1   Level 2   Level 3   Total
     
 
                               
Portfolio company investments
  $   —     $   —     $ 188,391,036     $ 188,391,036  
     
 
  $     $     $ 188,391,036     $ 188,391,036  
     
                                 
    Fair Value at December 31, 2008
    Level 1   Level 2   Level 3   Total
     
 
                               
Portfolio company investments
  $   —     $   —     $ 182,105,291     $ 182,105,291  
     
 
  $     $     $ 182,105,291     $ 182,105,291  
     

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     The following table reconciles the beginning and ending balances of our portfolio company investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2009 and 2008:
                 
    Nine Months   Nine Months
    Ended   Ended
    September 30, 2009   September 30, 2008
 
Fair value of portfolio, beginning of period
  $ 182,105,291     $ 113,036,240  
New investments
    27,943,735       73,645,254  
Loan origination fees received
    (540,000 )     (1,351,996 )
Proceeds from sales of investments
    (1,888,384 )     (275,361 )
Principal repayments received
    (7,400,722 )     (8,785,117 )
Paid-in-kind interest earned
    3,587,786       2,555,053  
Paid-in-kind interest received
    (1,579,429 )     (766,069 )
Accretion of loan discounts
    306,075       95,132  
Accretion of deferred loan origination revenue
    443,135       278,515  
Realized gains on investments
    848,164       51,089  
Unrealized losses on investments
    (15,434,615 )     (718,784 )
     
Fair value of portfolio, end of period
  $ 188,391,036     $ 177,763,956  
     
     All realized and unrealized gains and losses, net of tax, are included in earnings (changes in net assets) and are reported on separate line items within the Company’s statements of operations. Net pre-tax unrealized decreases in the fair value of investments of approximately $4,580,000 and $15,509,000, respectively, during the three and nine months ended September 30, 2009 are related to portfolio company investments that are still held by the Company as of September 30, 2009. Net pre-tax unrealized decreases in the fair value of investments of approximately $480,000 and $851,000, respectively, during the three and nine months ended September 30, 2008 are related to portfolio company investments that were still held by the Company as of September 30, 2008.
     Duff & Phelps, LLC (“Duff & Phelps”), an independent valuation firm, provides third party valuation consulting services to the Company which consist of certain limited procedures that the Company identified and requested Duff & Phelps to perform (hereinafter referred to as the “procedures”). We generally request Duff & Phelps to perform the procedures on each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’ best interest, to request Duff & Phelps to perform the procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of our investment in the portfolio company is determined to be insignificant relative to our total investment portfolio.
     For the quarter ended March 31, 2009, the Company asked Duff & Phelps to perform the procedures on investments in seven portfolio companies comprising approximately 26% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of March 31, 2009. For the quarter ended June 30, 2009, the Company asked Duff & Phelps to perform the procedures on investments in six portfolio companies comprising approximately 20% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of June 30, 2009. For the quarter ended September 30, 2009, the Company asked Duff & Phelps to perform the procedures on investments in seven portfolio companies comprising approximately 24% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of September 30, 2009. Upon completion of the procedures, Duff & Phelps concluded that the fair value, as determined by the Board of Directors, of those investments subjected to the procedures did not appear to be unreasonable. The Board of Directors of Triangle Capital Corporation is ultimately and solely responsible for determining the fair value of the Company’s investments in good faith.
Warrants
     When originating a debt security, the Company will sometimes receive warrants or other equity—related securities from the borrower. The Company determines the cost basis of the warrants or other equity—related securities received based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and warrants or other equity—related securities received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the warrant or other equity instruments is treated as original issue discount and accreted into interest income over the life of the loan.

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Realized Gain or Loss and Unrealized Appreciation or Depreciation of Portfolio Investments
     Realized gains or losses are recorded upon the sale or liquidation of investments and calculated as the difference between the net proceeds from the sale or liquidation, if any, and the cost basis of the investment using the specific identification method. Unrealized appreciation or depreciation reflects the difference between the valuation of the investments and the cost basis of the investments.
Investment Classification
     In accordance with the provisions of the 1940 Act, the Company classifies investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that the Company is deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the 1940 Act, other than Control Investments. “Non—Control/Non—Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under the 1940 Act, the Company is deemed to control a company in which it has invested if the Company owns more than 25.0% of the voting securities of such company or has greater than 50.0% representation on its board. The Company is deemed to be an affiliate of a company in which the Company has invested if it owns between 5.0% and 25.0% of the voting securities of such company.
Investment Income
     Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes, until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex—dividend date.
Paid-in-Kind Interest
     The Company holds loans in its portfolio that contain a paid—in—kind (“PIK”) interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
     To maintain the Company’s status as a Regulated Investment Company (“RIC”), this non-cash source of income must be paid out to stockholders in the form of dividends, even though the Company has not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes, until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. The Company writes off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
Fee Income
     Loan origination, facility, commitment, consent and other advance fees received in connection with loan agreements are recorded as deferred income and recognized as income over the term of the loan. Loan prepayment penalties and loan amendment fees are recorded into income when received. Any previously deferred fees are immediately recorded into income upon prepayment of the related loan.
Concentration of Credit Risk
     The Company’s investees are generally lower middle—market companies in a variety of industries. At both September 30, 2009 and December 31, 2008, there were no individual investments greater than 10% of the fair value of the Company’s portfolio. Income, consisting of interest, dividends, fees, other investment income, and realization of gains or losses on equity interests, can fluctuate dramatically upon repayment of an investment or sale of an equity interest and in any given year can be highly concentrated among several investees.
     The Company’s investments carry a number of risks including, but not limited to: 1) investing in lower middle market companies which may have limited operating histories and, in many cases, have limited financial resources; 2) investing in senior subordinated debt which ranks equal to or lower than debt held by certain other investors; 3) holding investments that are not publicly traded and are subject to legal and other restrictions on resale and other risks common to investing in below investment grade debt and equity instruments.

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3. INCOME TAXES AND DISTRIBUTIONS OF INVESTMENT COMPANY TAXABLE INCOME
     The Company has elected to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and intends to make the required distributions to its stockholders as specified therein. In order to qualify as a RIC, the Company must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then the Company is generally required to pay income taxes only on the portion of its taxable income and gains it does not distribute (actually or constructively) and certain built-in gains. The Company met its minimum distribution requirements for 2008 and 2007 and continually monitors its distribution requirements for 2009 with the goal of ensuring compliance with the Code.
     The minimum distribution requirements applicable to RICs require the Company to distribute to its stockholders at least 90% of its investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% excise tax on such excess. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
     ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), the Company must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as 1) PIK interest income and 2) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in the Company’s ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even though the Company will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
     In addition, the Company has certain wholly owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which holds one or more of its portfolio investments that are listed on the Consolidated Schedule of Investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investments in the portfolio companies owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold certain portfolio companies that are organized as limited liability companies (“LLCs”) (or other forms of pass—through entities) and still satisfy the RIC tax requirement that at least 90% of the RIC’s gross revenue for income tax purposes must consist of investment income. Absent the Taxable Subsidiaries, a proportionate amount of any gross income of an LLC (or other pass—through entity) portfolio investment would flow through directly to the RIC. To the extent that such income did not consist of investment income, it could jeopardize the Company’s ability to qualify as a RIC and therefore cause the Company to incur significant amounts of federal income taxes. When LLCs (or other pass-through entities) are owned by the Taxable Subsidiaries, their income is taxed to the Taxable Subsidiaries and does not flow through to the RIC, thereby helping the Company preserve its RIC status and resultant tax advantages. The Taxable Subsidiaries are not consolidated for income tax purposes and may generate income tax expense as a result of their ownership of the portfolio companies. This income tax expense is reflected in the Company’s Statements of Operations.
     For federal income tax purposes, the cost of investments owned at September 30, 2009 was approximately $202.8 million.

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4. LONG—TERM DEBT
     At both September 30, 2009 and December 31, 2008, the Company has the following debentures outstanding guaranteed by the SBA:
                     
        Prioritized          
        Return          
Issuance/Pooling Date   Maturity Date   (Interest) Rate          
 
 
                   
September 22, 2004
  September 1, 2014     5.539 %   $ 8,700,000  
March 23, 2005
  March 1, 2015     5.893 %     13,600,000  
September 28, 2005
  September 1, 2015     5.796 %     9,500,000  
February 1, 2007
  March 1, 2017     6.231 %     4,000,000  
March 26, 2008
  March 1, 2018     6.191 %     6,410,000  
March 27, 2008
  September 1, 2018     6.580 %     4,840,000  
April 11, 2008
  September 1, 2018     6.442 %     9,400,000  
April 28, 2008
  September 1, 2018     6.442 %     15,160,000  
May 29, 2008
  September 1, 2018     6.442 %     5,000,000  
May 29, 2008
  September 1, 2018     6.442 %     5,000,000  
June 11, 2008
  September 1, 2018     6.442 %     5,000,000  
June 24, 2008
  September 1, 2018     6.442 %     2,500,000  
August 28, 2008
  September 1, 2018     6.442 %     1,000,000  
August 28, 2008
  September 1, 2018     6.442 %     2,000,000  
August 28, 2008
  September 1, 2018     6.442 %     1,000,000  
October 24, 2008
  March 1, 2019     5.337 %     4,000,000  
October 28, 2008
  March 1, 2019     5.337 %     4,000,000  
October 31, 2008
  March 1, 2019     5.337 %     4,000,000  
October 31, 2008
  March 1, 2019     5.337 %     4,000,000  
November 4, 2008
  March 1, 2019     5.337 %     4,000,000  
November 4, 2008
  March 1, 2019     5.337 %     2,000,000  
 
                   
 
                   
 
              $ 115,110,000  
 
                   
     Interest payments are payable semi—annually. There are no principal payments required on these issues prior to maturity. Debentures issued prior to September 2006 were subject to prepayment penalties during their first five years. Those pre-payment penalties no longer apply to debentures issued after September 1, 2006.
     Under the Small Business Investment Act and current SBA policy applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding, at any time, SBA guaranteed debentures up to three times the amount of its regulatory capital. As of September 30, 2009, the maximum statutory limit on the dollar amount of outstanding SBA guaranteed debentures issued by a single SBIC is $150.0 million. In June 2009, the Fund received a new leverage commitment from the SBA which increased the Fund’s ability to issue SBA guaranteed debentures up to the maximum statutory limit of $150.0 million. In addition to the one—time 1.0% fee on the total commitment from the SBA, the Company also pays a one—time 2.425% fee on the amount of each debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rates for all SBA guaranteed debentures as of September 30, 2009 and December 31, 2008 were 6.03% and 5.81%, respectively. The weighted average interest rate as of December 31, 2008 includes $93.1 million of pooled SBA-guaranteed debentures with a weighted average fixed interest rate of 6.19% and $22.0 million of unpooled SBA-guaranteed debentures with a weighted average interim interest rate of 4.19%. As of September 30, 2009, all SBA-guaranteed debentures have been pooled and assigned fixed rates.
5. EQUITY-BASED COMPENSATION
     The Company’s Board of Directors and stockholders have approved the Triangle Capital Corporation Amended and Restated 2007 Equity Incentive Plan (the “Plan”), under which there are 900,000 shares of the Company’s Common Stock authorized for issuance. The terms of equity-based awards granted under the Plan generally will vest ratably over one-year or four-year periods.
     The Company accounts for its equity-based compensation plan using the fair value method, as prescribed by FASB Accounting Standards Codification (“ASC”) Topic 718, “Stock Compensation” (formerly Statement of Accounting Standards No. 123R, “Share-Based Payment”). Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize this fair value to compensation expense over the requisite service period or vesting term.

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     On February 4, 2009, the Company’s Board of Directors granted 133,000 restricted shares of our common stock to certain employees. These restricted shares had a total grant date fair value of approximately $1.4 million, which will be expensed on a straight-line basis over each respective award’s vesting period. In addition, on May 6, 2009, the Company’s Board of directors granted 11,812 restricted shares of our common stock to its independent directors. These restricted shares had a total grant date fair value of approximately $0.1 million, which will be expensed on a straight-line basis over a one-year period ending May 6, 2010.
     In the three and nine months ended September 30, 2009, the Company recognized equity-based compensation expense of approximately $0.2 million and $0.5 million, respectively. In the three and nine months ended September 30, 2008, the Company recognized equity-based compensation expense of approximately $0.1 million and $0.2 million, respectively. Equity-based compensation expense is included in general and administrative expenses in the Company’s consolidated statements of operations. As of September 30, 2009, the Company has a total of 219,813 restricted shares outstanding.
     As of September 30, 2009, there was approximately $2.0 million of total unrecognized compensation cost, related to the Company’s non-vested restricted shares. This cost is expected to be recognized over a weighted-average period of approximately 2.9 years.
6. FINANCIAL HIGHLIGHTS
     The following is a schedule of financial highlights for the nine months ended September 30, 2009 and 2008:
                 
    Nine Months Ended September 30,
    2009   2008
     
Per share data:
               
Net asset value at beginning of period
  $ 13.22     $ 13.74  
 
               
Net investment income(1)
    1.25       1.12  
Net realized gains on investments(1)
    0.11       0.01  
Net unrealized appreciation (depreciation) on investments(1)
    (1.87 )     (0.20 )
     
Total increase (decrease) from investment operations(1)
    (0.51 )     0.93  
 
               
Cash dividends/distributions declared
    (1.26 )     (0.66 )
Common stock offerings(2)
    (0.65 )      
Stock-based compensation
    0.06       0.03  
Income tax provision(1)
          (0.04 )
Other(3)
    (0.26 )     (0.24 )
 
               
     
Net asset value at end of period
  $ 10.60     $ 13.76  
     
Market value at end of period(4)
  $ 12.34     $ 11.94  
     
 
               
Shares outstanding at end of period
    9,827,942       6,917,363  
Net assets at end of period
  $ 104,216,187     $ 95,169,327  
Average net assets
  $ 94,993,552     $ 94,934,623  
Ratio of operating expenses to average net assets (annualized)
    14.3 %     10.0 %
Ratio of net investment income to average net assets (annualized)
    14.0 %     10.8 %
Portfolio turnover ratio
    5.1 %     6.6 %
Total Return(5)
    33.3 %     1.6 %
 
(1)   Weighted average basic per share data.
 
(2)   Represents the dilutive effect of the Company’s public offerings of common stock at a price less than net asset value.
 
(3)   Represents the impact of the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
 
(4)   Represents the closing price of the Company’s common stock on the NASDAQ Global Market on the last day of the period.
 
(5)   Total return equals the change in the ending market value of the Company’s common stock during the period, plus dividends declared per share during the period, divided by the market value of the Company’s common stock on the first day of the period. Total return is not annualized.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
     The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements, including a brief discussion of our business, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with the Unaudited Financial Statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2008. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
     This Quarterly Report contains forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Some of the statements in this Quarterly Report constitute forward-looking statements because they relate to future events or our future performance or financial condition. Forward-looking statements may include, among other things, statements as to our future operating results, our business prospects and the prospects of our portfolio companies, the impact of the investments that we expect to make, the ability of our portfolio companies to achieve their objectives, our expected financings and investments, the adequacy of our cash resources and working capital, and the timing of cash flows, if any, from the operations of our portfolio companies. Words such as “expect,” “anticipate,” “target,” “goals,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “forecast,” “may,” “should,” “potential,” variations of such words, and similar expressions indicate a forward-looking statement, although not all forward-looking statements include these words. Readers are cautioned that the forward-looking statements contained in this Quarterly Report are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors discussed in Item 1A entitled “Risk Factors” in Part I of our 2008 Annual Report on Form 10-K. Other factors that could cause actual results to differ materially include changes in the economy, risks associated with possible disruption due to terrorism in our operations or the economy generally, and future changes in laws or regulations and conditions in our operating areas. These statements are based on our current expectations, estimates, forecasts, information and projections about the industry in which we operate and the beliefs and assumptions of our management as of the date of this Quarterly Report. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless we are required to do so by law. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
Overview of Our Business
     We are a Maryland corporation which has elected to be treated and operates as an internally managed business development company, or BDC, under the Investment Company Act of 1940, or 1940 Act. Our wholly owned subsidiary, Triangle Mezzanine Fund LLLP (the “Fund”) is licensed as a small business investment company, or SBIC, by the United States Small Business Administration, or SBA, and has also elected to be treated as a BDC under the 1940 Act. We and the Fund invest primarily in debt instruments, equity investments, warrants and other securities of lower middle market privately held companies located in the United States.
     Our business is to provide capital to lower middle market companies in the United States. We define lower middle market companies as those with annual revenues between $10.0 and $100.0 million. We focus on investments in companies with a history of generating revenues and positive cash flows, an established market position and a proven management team with a strong operating discipline. Our target portfolio company has annual revenues between $20.0 and $75.0 million and annual earnings before interest, taxes, depreciation and amortization, or EBITDA, between $2.0 and $20.0 million.
     We invest primarily in senior and subordinated debt securities secured by first and second lien security interests in portfolio company assets, coupled with equity interests. Our investments generally range from $5.0 to $15.0 million per portfolio company. In certain situations, we have partnered with other funds to provide larger financing commitments.
     We generate revenues in the form of interest income, primarily from our investments in debt securities, loan origination and other fees and dividend income. Fees generated in connection with our debt investments are recognized over the life of the loan using the effective interest method or, in some cases, recognized as earned. In addition, we generate revenue in the form of capital gains, if any, on warrants or other equity-related securities that we acquire from our portfolio companies. Our debt investments generally have a term of between three and seven years and typically bear interest at fixed rates between 11.0% and 16.0% per annum. Certain of our debt investments have a form of interest, referred to as paid-in-kind, or PIK, interest, that is not paid currently but that is accrued and added to the loan balance and paid at the end of the term. Cash interest on our debt investments is generally payable monthly;

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however, some of our debt investments pay cash interest on a quarterly basis. As of both September 30, 2009 and December 31, 2008, the weighted average yield on all of our outstanding debt investments (including PIK interest) was approximately 14.4%. The weighted average yield on all of our outstanding investments (including equity and equity-linked investments) was approximately 13.3% and 13.2% as of September 30, 2009 and December 31, 2008, respectively.
     The Fund is eligible to sell debentures guaranteed by the SBA in the capital markets at favorable interest rates and invest these funds in portfolio companies. We intend to continue to operate the Fund as an SBIC, subject to SBA approval, and to utilize the proceeds of the sale of the Fund’s SBA-guaranteed debentures, referred to herein as SBA leverage, to enhance returns to our stockholders.
Portfolio Composition
     The total value of our investment portfolio was $188.4 million as of September 30, 2009, as compared to $182.1 million as of December 31, 2008. As of September 30, 2009, we had investments in 36 portfolio companies with an aggregate cost of $201.9 million. As of December 31, 2008, we had investments in 34 portfolio companies with an aggregate cost of $180.2 million. As of both September 30, 2009 and December 31, 2008, none of our portfolio investments represented greater than 10% of the total fair value of our investment portfolio.
     As of September 30, 2009 and December 31, 2008, our investment portfolio consisted of the following investments:
                                 
            Percentage of Total           Percentage of Total
    Cost   Portfolio   Fair Value   Portfolio
     
September 30, 2009:
                               
Subordinated debt and 2nd lien notes
  $ 167,380,542       83 %   $ 153,498,784       82 %
Senior debt
    16,834,740       9       16,440,952       9  
Equity shares/membership interests
    14,366,846       7       13,663,300       7  
Equity warrants
    2,415,370       1       3,929,000       2  
Royalty rights
    874,400             859,000        
     
 
  $ 201,871,898       100 %   $ 188,391,036       100 %
     
 
                               
December 31, 2008:
                               
Subordinated debt and 2nd lien notes
  $ 147,493,871       82 %   $ 143,015,291       79 %
Senior debt
    16,269,628       9       16,269,628       9  
Equity shares/membership interests
    13,684,269       8       17,301,372       9  
Equity warrants
    1,829,370       1       4,644,600       3  
Royalty rights
    874,400             874,400        
     
 
  $ 180,151,538       100 %   $ 182,105,291       100 %
     
Investment Activity
     During the nine months ended September 30, 2009, we made four new investments totaling $24.0 million and five investments in existing portfolio companies totaling approximately $4.0 million. We sold investments in two portfolio companies for total proceeds of approximately $1.9 million, received a full repayment from one portfolio company totaling approximately $2.0 million, received partial repayments of loans from five portfolio companies totaling approximately $4.4 million and received payment in kind (PIK) interest repayments totaling approximately $1.6 million. In addition, we received normal principal repayments totaling approximately $1.0 million in the nine months ended September 30, 2009.
     During the nine months ended September 30, 2008, we made ten new investments totaling $72.5 million, one additional debt investment in an existing portfolio company of $1.0 million and three additional equity investments in existing portfolio companies of approximately $0.1 million. We also sold two investments in portfolio companies for approximately $0.3 million, resulting in realized gains totaling $0.1 million. We had two portfolio company loans repaid at par in the amount of $4.8 million. In addition, we received normal principal repayments, partial loan prepayments and PIK interest repayments totaling approximately $4.0 million in the nine months ended September 30, 2008.

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     Total portfolio investment activity for the nine months ended September 30, 2009 and 2008 was as follows:
                 
    Nine Months Ended   Nine Months Ended
    September 30, 2009   September 30, 2008
     
 
               
Fair value of portfolio, beginning of period
  $ 182,105,291     $ 113,036,240  
New investments
    27,943,735       73,645,254  
Loan origination fees received
    (540,000 )     (1,351,996 )
Proceeds from sales of investments
    (1,888,384 )     (275,361 )
Principal repayments received
    (7,400,722 )     (8,785,117 )
Paid-in-kind interest earned
    3,587,786       2,555,053  
Paid-in-kind interest received
    (1,579,429 )     (766,069 )
Accretion of loan discounts
    306,075       95,132  
Accretion of deferred loan origination revenue
    443,135       278,515  
Realized gains on investments
    848,164       51,089  
Unrealized losses on investments
    (15,434,615 )     (718,784 )
     
 
               
Fair value of portfolio, end of period
  $ 188,391,036     $ 177,763,956  
     
 
               
Weighted average yield on debt investments at end of period
    14.4 %     14.2 %
     
Weighted average yield on total investments at end of period
    13.3 %     13.0 %
     
Non-Accrual Assets
     As of September 30, 2009, the fair value of our non-accrual assets comprised 3.7% of the total fair value of our portfolio, and the cost of our non-accrual assets comprised 8.5% of the total cost of our portfolio. Our non-accrual assets as of September 30, 2009 are as follows:
     Gerli and Company
     In the third quarter of 2008, we recognized an unrealized loss of $0.3 million on our subordinated note investment in Gerli and Company (“Gerli”), which has a cost as of September 30, 2009 of approximately $3.1 million. This unrealized loss reduced the fair value of our investment in Gerli to $2.8 million as of September 30, 2008. During the third quarter of 2008, we continued to receive interest payments in accordance with our loan agreement. In November 2008, we placed our investment in Gerli on non-accrual status. As a result, under generally accepted accounting principles (“GAAP”), we no longer recognize interest income on our investment in Gerli for financial reporting purposes. Additionally, in the fourth quarter of 2008, we recognized an additional unrealized loss on our investment in Gerli of $0.9 million and in the nine months ended September 30, 2009, we recognized an additional unrealized loss on our investment in Gerli of $0.4 million. As of September 30, 2009, the fair value of our investment in Gerli is $1.5 million.
     Fire Sprinkler Systems, Inc.
     In 2008, we recognized an unrealized loss of $1.4 million on our subordinated note investment in Fire Sprinkler Systems, Inc. (“Fire Sprinkler Systems”), which has a cost as of September 30, 2009 of approximately $2.4 million. This unrealized loss reduced the fair value of our investment in Fire Sprinkler Systems to $1.0 million as of December 31, 2008. Through the first nine months of 2008, we continued to receive interest and principal payments in accordance with our loan agreement. In October 2008, we placed our investment in Fire Sprinkler Systems on non-accrual status. As a result, under GAAP, we no longer recognize interest income on our investment in Fire Sprinkler Systems for financial reporting purposes. In the first nine months of 2009, we recognized an additional unrealized loss on our investment in Fire Sprinkler Systems of $0.2 million. As of September 30, 2009, the fair value of our investment in Fire Sprinkler Systems is $0.8 million.
     American De-Rosa Lamparts, LLC and Hallmark Lighting
     In 2008, we recognized an unrealized loss of $1.2 million on our subordinated note investment in American De-Rosa Lamparts, LLC and Hallmark Lighting (collectively “ADL”), which had a cost as of September 30, 2009 of approximately $8.2 million. This unrealized loss reduced the fair value of our investment in ADL to $6.9 million as of December 31, 2008. In the nine months ended September 30, 2009, we recognized an additional unrealized loss on our investment in ADL of $3.2 million. As of September 30, 2009, the fair value of our investment in ADL was approximately $3.9 million. Through August 31, 2009, we continued to receive interest payments from ADL in accordance with the loan agreement. In September 2009, we received notification from ADL’s senior lender that ADL was blocked from making interest payments to us for a period of six months. As a result, we placed our investment

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in ADL on non-accrual status and under GAAP, we no longer recognize interest income on our investment in ADL for financial reporting purposes.
     FCL Graphics, Inc. 2nd Lien Note
     In the first six months of 2009, we recognized an unrealized loss of $1.7 million on our 2nd Lien note investment in FCL Graphics, Inc. (“FCL”). During the first eight months of 2009, we received cash interest on our 2nd lien note in FCL at the stated contractual rate (20% per annum as of September 30, 2009). In September 2009, FCL did not make the scheduled interest payments on its 2nd Lien notes. As a result, we have placed our 2nd Lien note in FCL on non-accrual status and therefore, under GAAP, we no longer recognize interest income on our 2nd Lien note investment in FCL for financial reporting purposes. We are currently in negotiations with FCL and FCL’s other lenders to amend the terms of our note. The terms of the proposed amendment provide for cash interest at a rate of LIBOR plus 250 basis points per annum and PIK interest at a rate of 8% per annum. In the third quarter of 2009, we recognized an additional unrealized loss on our 2nd Lien note investment in FCL of approximately $0.9 million, which has a cost as of September 30, 2009 of approximately $3.4 million. The fair value of our 2nd Lien note investment in FCL as of September 30, 2009 is approximately $0.8 million.
Results of Operations
Comparison of three months ended September 30, 2009 and September 30, 2008
Investment Income
     For the three months ended September 30, 2009, total investment income was $7.1 million, a 21% increase from $5.9 million of total investment income for the three months ended September 30, 2008. This increase was primarily attributable to a $1.1 million increase in total loan interest (including PIK interest), fee and dividend income due to net increase in our portfolio investments from September 30, 2008 to September 30, 2009. We recognized non-recurring fee income of $0.2 million for the three months ended September 30, 2009 as compared to $0.1 million for the three months ended September 30, 2008.
Expenses
     For the three months ended September 30, 2009, expenses increased by 27% to $3.4 million from $2.7 million for the three months ended September 30, 2008. The increase in expenses was primarily attributable to a $0.6 million increase in interest expense due to higher average balances of SBA-guaranteed debentures outstanding during the three months ended September 30, 2009 than in the comparable period in 2008.
Net Investment Income
     As a result of the $1.2 million increase in total investment income and the $0.7 million increase in expenses, net investment income for the three months ended September 30, 2009 was $3.7 million compared to net investment income of $3.2 million during the three months ended September 30, 2008.
Net Decrease in Net Assets Resulting From Operations
     We recognized no realized gains or losses on investments in the three months ended September 30, 2009. During the three months ended September 30, 2008, we recognized a realized gain on the sale of one investment totaling $0.1 million.
     During the three months ended September 30, 2009, we recorded net unrealized depreciation of investments in the amount of $4.5 million, comprised of unrealized depreciation on seventeen investments totaling $5.5 million and unrealized appreciation on nine investments totaling $1.0 million. In the three months ended September 30, 2008, we recorded net unrealized depreciation of investments in the amount of $0.7 million, comprised of unrealized appreciation on ten investments totaling $1.8 million and unrealized depreciation on ten investments totaling $2.5 million.
     As a result of these events, our net decrease in net assets resulting from operations during the three months ended September 30, 2009 was $0.8 million as compared to a net increase in net assets resulting from operations of $2.5 million for the three months ended September 30, 2008.
Comparison of nine months ended September 30, 2009 and September 30, 2008
Investment Income
     For the nine months ended September 30, 2009, total investment income was $20.2 million, a 37% increase from $14.8 million of

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total investment income for the nine months ended September 30, 2008. This increase was attributable to a $5.3 million increase in total loan interest (including PIK interest), fee and dividend income due to net increase in our portfolio investments from September 30, 2008 to September 30, 2009. We recognized non-recurring fee income of $0.5 million for the nine months ended September 30, 2009 as compared to $0.4 million for the nine months ended September 30, 2008.
Expenses
     For the nine months ended September 30, 2009, expenses increased by 44% to $10.2 million from $7.1 million for the nine months ended September 30, 2008. The increase in expenses was primarily attributable to a $2.6 million increase in interest expense and a $0.4 million increase in general and administrative expenses. The increase in interest expense is related to higher average balances of SBA-guaranteed debentures outstanding during the nine months ended September 30, 2009 than in the comparable period in 2008. In addition, we experienced an increase in general and administrative costs in 2009, primarily related to compensation costs (including stock-based compensation) and facility costs.
Net Investment Income
     As a result of the $5.4 million increase in total investment income and the $3.1 million increase in expenses, net investment income for the nine months ended September 30, 2009 was $10.0 million compared to net investment income of $7.7 million during the nine months ended September 30, 2008.
Net Decrease in Net Assets Resulting From Operations
     In the nine months ended September 30, 2009, we recorded net realized gains of $0.8 million, consisting primarily of i) a realized gain on the sale of one investment of $1.8 million and ii) a loss on the recapitalization of another investment of $0.9 million. During the nine months ended September 30, 2008, we recognized a realized gain on the sale of one investment totaling $0.1 million.
     In the nine months ended September 30, 2009, we recorded net unrealized depreciation of investments in the amount of $15.0 million, comprised of net unrealized depreciation reclassification adjustments totaling $0.6 million related to i) the sale of one investment and ii) the recapitalization of another investment noted above, as well as unrealized depreciation on seventeen investments totaling $17.8 million and unrealized appreciation on eleven investments totaling $3.3 million. In the nine months ended September 30, 2008, we recorded net unrealized depreciation of investments in the amount of $1.4 million, comprised of unrealized appreciation on ten investments totaling $4.0 million and unrealized depreciation on thirteen investments totaling $5.4 million.
      As a result of these events, our net decrease in net assets resulting from operations during the nine months ended September 30, 2009 was $4.2 million as compared to a net increase in net assets resulting from operations of $6.1 million for the nine months ended September 30, 2008.
Liquidity and Capital Resources
     We believe that our current cash and cash equivalents on hand, our available SBA leverage and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.
     In the future, depending on the valuation of the Fund’s assets pursuant to SBA guidelines, the Fund may be limited by provisions of the Small Business Investment Act of 1958, and SBA regulations governing SBICs, in making certain distributions to Triangle Capital Corporation that may be necessary to enable Triangle Capital Corporation to make the minimum required distributions to its stockholders and continue to qualify as a RIC.
Cash Flows
     For the nine months ended September 30, 2009, we experienced a net increase in cash and cash equivalents in the amount of $6.2 million. During that period, our operating activities used $11.3 million in cash, consisting primarily of purchases of investments totaling $27.9 million, offset by i) net investment income and ii) sales/repayments of portfolio investments of $9.3 million. In the nine months ended September 30, 2009, financing activities provided $17.6 million of cash, consisting of proceeds from our public stock offerings of $27.1 million, net of cash dividends and distributions to stockholders totaling $9.3 million. At September 30, 2009, we had $33.4 million of cash and cash equivalents on hand.
     For the nine months ended September 30, 2008, we experienced a net decrease in cash and cash equivalents in the amount of $5.9 million. During that period, our operating activities used $58.2 million in cash, consisting primarily of new portfolio investments of $73.6 million, offset by repayments of loans received and proceeds from sales of investments of $9.1 million. We generated $52.3 million of cash from financing activities, consisting of proceeds from borrowings under SBA guaranteed debentures payable of $56.1 million and short-term borrowings of $5.1 million, partially offset by financing fees paid to the SBA of $2.3 million and cash

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dividends paid of $6.6 million. At September 30, 2008, we had $15.9 million of cash and cash equivalents on hand.
Financing Transactions
     Due to the Fund’s status as a licensed SBIC, the Fund has the ability to issue debentures guaranteed by the SBA at favorable interest rates. Under the Small Business Investment Act and the SBA rules applicable to SBICs, an SBIC (or group of SBICs under common control) can have outstanding at any time debentures guaranteed by the SBA in an amount up to three times the amount of its regulatory capital, which generally is the amount raised from private investors. The maximum statutory limit on the dollar amount of outstanding debentures guaranteed by the SBA issued by a single SBIC is currently $150.0 million. Debentures guaranteed by the SBA have a maturity of ten years, with interest payable semi-annually. The principal amount of the debentures is not required to be paid before maturity but may be pre-paid at any time. Debentures issued prior to September 2006 were subject to pre-payment penalties during their first five years. Those pre-payment penalties no longer apply to debentures issued after September 1, 2006.
     In June 2009, the Fund received a new leverage commitment from the SBA which increased the Fund’s ability to issue SBA guaranteed debentures up to the maximum statutory limit of $150.0 million. As of September 30, 2009, the Fund has $115.1 million of SBA guaranteed debentures outstanding. In addition to the one—time 1.0% fee on the total commitment from the SBA, the Company also pays a one—time 2.425% fee on the amount of each debenture issued. These fees are capitalized as deferred financing costs and are amortized over the term of the debt agreements using the effective interest method. The weighted average interest rate for all SBA guaranteed debentures as of September 30, 2009 was 6.03%.
Distributions to Stockholders
     We have elected to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) and intend to make the required distributions to our stockholders as specified therein. In order to qualify as a RIC, we must meet certain minimum distribution, source-of-income and asset diversification requirements. If such requirements are met, then we are generally required to pay income taxes only on the portion of our taxable income and gains we do not distribute (actually or constructively) and certain built-in gains. We met our minimum distribution requirements for 2008 and 2007 and continually monitor our distribution requirements for 2009 with the goal of ensuring compliance with the Code.
     The minimum distribution requirements applicable to RICs require us to distribute to our stockholders at least 90% of our investment company taxable income (“ICTI”), as defined by the Code, each year. Depending on the level of ICTI earned in a tax year, we may choose to carry forward ICTI in excess of current year distributions into the next tax year and pay a 4% excise tax on such excess. Any such carryover ICTI must be distributed before the end that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.
     ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. We may be required to recognize ICTI in certain circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants), we must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in ICTI other amounts that we have not yet received in cash, such as 1) PIK interest income and 2) interest income from investments that have been classified as non-accrual for financial reporting purposes. Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included in our ICTI for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the minimum distribution requirements, even though we will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.
Current Market Conditions
     During 2008 and 2009, the debt and equity capital markets in the United States have been severely impacted by significant write-offs in the financial services sector relating to subprime mortgages and the re-pricing of credit risk in the broadly syndicated bank loan market, among other things. These events, along with the deterioration of the housing market, have led to an economic recession in the U.S and abroad, which could be long-term. Banks, investment companies and others in the financial services industry have continued to report significant write-downs in the fair value of their assets, which has led to the failure of a number of banks and investment companies, a number of distressed mergers and acquisitions, the government take-over of the nation’s two largest government-sponsored mortgage companies, and the passage of the $700 billion Emergency Economic Stabilization of 2008 in October 2008 and the American Recovery and Reinvestment Act of 2009 in February 2009. These events have significantly impacted the financial and credit markets and have reduced the availability of debt and equity capital for the market as a whole, and for financial firms in particular. While we have capacity to issue additional SBA guaranteed debentures as discussed above, we may not be able to access additional equity capital, which could result in the slowing of our origination activity during 2010 and beyond.

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     In the event that the United States economy remains in a recession, it is possible that the results of some of the middle market companies in which we invest could experience further deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults. There can be no assurance that the performance of certain of our portfolio companies will not be negatively impacted by challenging economic conditions which could have a negative impact on our future results.
Recent Developments
     On April 23, 2009, we filed a prospectus supplement pursuant to which 1,200,000 shares of common stock were offered for sale at a price to the public of $10.75 per share. Pursuant to this offering, all shares were sold and delivered on April 27, 2009 resulting in net proceeds to us, after underwriting discounts and offering expenses, of approximately $11,700,000. On May 27, 2009, pursuant to the exercise of an overallotment option granted in connection with the offering, the underwriters involved purchased an additional 80,000 shares of our common stock at the same public offering price, less underwriting discounts and commissions, resulting in net proceeds to us of approximately $800,000.
     On August 7, 2009, we filed a prospectus supplement pursuant to which 1,300,000 shares of common stock were offered for sale at a price to the public of $10.42 per share. In addition, the underwriters involved were granted an overallotment option to purchase an additional 195,000 shares of our common stock at the same public offering price. Pursuant to this offering, all shares (including the overallotment option shares) were sold and delivered on August 12, 2009 resulting in net proceeds to us, after underwriting discounts and offering expenses, of approximately $14,600,000.
Critical Accounting Policies and Use of Estimates
     The preparation of our financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods covered by such financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an on-going basis, we evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.
Investment Valuation
     The most significant estimate inherent in the preparation of our financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We have established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring (quarterly) basis. As discussed below, we have engaged an independent valuation firm to assist us in our valuation process.
     On January 1, 2008, we adopted FASB ASC Topic 820, Fair Value Measurements and Disclosures (formerly Statement of Financial Accounting Standards No. 157, Fair Value Measurements), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements.
     ASC Topic 820 clarifies that the exchange price is the price in an orderly transaction between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. ASC Topic 820 provides a consistent definition of fair value which focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. In addition, ASC Topic 820 provides a framework for measuring fair value and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels of valuation hierarchy established by ASC Topic 820 are defined as follows:
    Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
    Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
    Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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     A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our investment portfolio is comprised of debt and equity of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, we value all of our investments at fair value, as determined in good faith by our Board of Directors, using Level 3 inputs, as further described below. Due to the inherent uncertainty in the valuation process, our Board of Directors’ estimate of fair value may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.
     Debt and equity securities that are not publicly traded and for which a limited market does not exist are valued at fair value as determined in good faith by our Board of Directors. There is no single standard for determining fair value in good faith, as fair value depends upon circumstances of each individual case. In general, fair value is the amount that we might reasonably expect to receive upon the current sale of the security.
     We evaluate the investments in portfolio companies using the most recently available portfolio company financial statements and forecasts. We also consult with the portfolio company’s senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues. Additionally, we consider some or all of the following factors:
    financial standing of the issuer of the security;
 
    comparison of the business and financial plan of the issuer with actual results;
 
    the size of the security held as it relates to the liquidity of the market for such security;
 
    pending public offering of common stock by the issuer of the security;
 
    pending reorganization activity affecting the issuer, such as merger or debt restructuring;
 
    ability of the issuer to obtain needed financing;
 
    changes in the economy affecting the issuer;
 
    financial statements and reports from portfolio company senior management and ownership;
 
    the type of security, the security’s cost at the date of purchase and any contractual restrictions on the disposition of the security;
 
    discount from market value of unrestricted securities of the same class at the time of purchase;
 
    special reports prepared by analysts;
 
    information as to any transactions or offers with respect to the security and/or sales to third parties of similar securities;
 
    the issuer’s ability to make payments and the type of collateral;
 
    the current and forecasted earnings of the issuer;
 
    statistical ratios compared to lending standards and to other similar securities; and
 
    other pertinent factors.
     In making the good faith determination of the value of debt securities, we start with the cost basis of the security, which includes the amortized original issue discount, and paid—in—kind (PIK) interest, if any. We also use a risk rating system to estimate the probability of default on the debt securities and the probability of loss if there is a default. The risk rating system covers both qualitative and quantitative aspects of the business and the securities held. In valuing debt securities, we utilize an “income approach” model that considers factors including, but not limited to, (i) the portfolio investment’s current risk rating (discussed below), (ii) the portfolio company’s current trailing twelve months’ (“TTM”) results of operations as compared to the portfolio company’s TTM results of operations as of the date the investment was made and the portfolio company’s outlook for the next twelve months of operations, (iii) the portfolio company’s current leverage as compared to its leverage as of the date the investment was made, and (iv) current pricing and credit metrics for similar proposed and executed investment transactions. In valuing equity securities of private companies, we consider valuation methodologies consistent with industry practice, including (i) valuation using a valuation model based on original transaction multiples and the portfolio company’s recent financial performance, (ii) valuation of the securities based on recent sales in comparable transactions, and (iii) a review of similar companies that are publicly traded and the market multiple of their equity securities.
     Unrealized appreciation or depreciation on portfolio investments are recorded as increases or decreases in investments on the balance sheets and are separately reflected on the statements of operations in determining net increase or decrease in net assets resulting from operations.
     Duff & Phelps, LLC (“Duff & Phelps”), an independent valuation firm, provides third party valuation consulting services to us, which consist of certain limited procedures that we identified and requested Duff & Phelps to perform (hereinafter referred to as the “procedures”). We generally request Duff & Phelps to perform the procedures on each portfolio company at least once in every calendar year and for new portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain instances, we may determine that it is not cost-effective, and as a result is not in our stockholders’ best interest, to request Duff

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& Phelps to perform the procedures on one or more portfolio companies. Such instances include, but are not limited to, situations where the fair value of our investment in the portfolio company is determined to be insignificant relative to our total investment portfolio.
     For the quarter ended March 31, 2009, we asked Duff & Phelps to perform the procedures on investments in seven portfolio companies comprising approximately 26% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of March 31, 2009. For the quarter ended June 30, 2009, we asked Duff & Phelps to perform the procedures on investments in six portfolio companies comprising approximately 20% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of June 30, 2009. For the quarter ended September 30, 2009, we asked Duff & Phelps to perform the procedures on investments in seven portfolio companies comprising approximately 24% of the total investments at fair value (exclusive of the fair value of new investments made during the quarter) as of September 30, 2009. Upon completion of the procedures, Duff & Phelps concluded that the fair value, as determined by the Board of Directors, of those investments subjected to the procedures did not appear to be unreasonable. Our Board of Directors is ultimately and solely responsible for determining the fair value of our investments in good faith.
Revenue Recognition
Interest and Dividend Income
     Interest income, adjusted for amortization of premium and accretion of original issue discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected interest when it is determined that interest is no longer considered collectible. Dividend income is recorded on the ex-dividend date.
Fee Income
     Loan origination, facility, commitment, consent and other advance fees received by us on loan agreements or other investments are recorded as deferred income and recognized as income over the term of the loan.
Paid-in-Kind Interest (PIK)
     We currently hold, and we expect to hold in the future, some loans in our portfolio that contain a PIK interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan, rather than being paid to us in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.
     To maintain our status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends, even though we have not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes until all principal and interest has been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. We write off any previously accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible.
New Accounting Standards
     In May 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 165, Subsequent Events, which was later codified as FASB ASC Topic 855, Subsequent Events (“ASC Topic 855”). ASC Topic 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC Topic 855 includes a new required disclosure of the date through which an entity has evaluated subsequent events and is effective for interim periods or fiscal years ending after June 15, 2009. Our adoption of ASC Topic 855 did not have a material effect on our financial position or results of operations.
     In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162 (“SFAS 168”). The Codification will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of SFAS 168, the Codification will supersede all

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then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 only impacted our disclosures by requiring Codification references.
Off-Balance Sheet Arrangements
     We currently have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
     Beginning in late 2007, the United States entered a recession, which many believe could be prolonged. As the economy continued to deteriorate in 2008, spending by both consumers and businesses declined significantly, which has impacted the broader financial and credit markets and has reduced the availability of debt and equity capital for the market as a whole and financial firms in particular. This reduction in spending has had an adverse effect on a number of the industries in which some of our portfolio companies operate, and on certain of our portfolio companies as well.
     During 2009, we experienced write-downs in our portfolio, several of which were due to decline in the performance of those portfolio companies. As of September 30, 2009, the fair value of our non-accrual assets was approximately $7.0 million, which comprised approximately 3.7% of the total fair value of our portfolio, and the cost of our non-accrual assets was approximately $17.1 million, or 8.5% of the total cost of our portfolio. In addition to these non-accrual assets, as of September 30, 2009, we had, on a fair value basis, approximately $21.0 million of debt investments, or 11.1% of the total fair value of our portfolio, which were current with respect to scheduled principal and interest payments, but which were carried at less than cost. The cost of these assets as of September 30, 2009 was approximately $25.1 million, or 12.4% of the total cost of our portfolio.
     In the event that the current recession continues for a significant time or the economy deteriorates further, the financial position and results of operations of certain of the middle-market companies in our portfolio could be further affected adversely, which ultimately could lead to difficulty in our portfolio companies meeting debt service requirements and an increase in defaults. There can be no assurance that the performance of our portfolio companies will not be further impacted by economic conditions, which could have a negative impact on our future results.
     In addition, we are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our investment income is affected by fluctuations in various interest rates, including LIBOR and prime rates. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. As of September 30, 2009, we were not a party to any hedging arrangements.
     As of September 30, 2009, approximately 87.8%, or $161.8 million of our debt portfolio investments bore interest at fixed rates and approximately 12.2%, or $22.4 million of our debt portfolio investments bore interest at variable rates. A 200 basis point decrease in the interest rates on our variable-rate debt investments would decrease our investment income by approximately $0.4 million on an annual basis. All of our pooled SBA-guaranteed debentures bear interest at fixed rates.
     Because we currently borrow, and plan to borrow in the future, money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio.

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Item 4T. Controls and Procedures.
     Evaluation of Disclosure Controls and Procedures
     We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
     Changes in Internal Control Over Financial Reporting
     There were no changes in our internal control over financial reporting during the third quarter of 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
     Neither Triangle Capital Corporation nor any of its subsidiaries is a party to any material pending legal proceedings.
Item 1A. Risk Factors.
     The following risk factors should be considered in addition to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2008.
     Recent developments may increase the risks associated with our business and an investment in us.
     The U.S. economy and financial markets have been experiencing a high level of volatility, disruption and stress, which was exacerbated by the failure of several major financial institutions in the last few months of 2008. In addition, the U.S. economy has entered a recession, which is likely to be severe and prolonged. Similar conditions have occurred in the financial markets and economies of numerous other countries and could worsen, both in the U.S. and globally. These conditions have raised the level of many of the risks described in the accompanying prospectus and could have an adverse effect on our portfolio companies and on their results of operations, financial conditions, access to credit and capital. The stress in the credit market and upon banks has led other creditors to tighten credit and the terms of credit. In certain cases, senior lenders to our customers can block payments by our customers in respect of our loans to such customers. In turn, these could have adverse effects on our business, financial condition, results of operations, dividend payments, access to capital, valuation of our assets and our stock price.
     We are dependent upon our key investment personnel for our future success.
     We depend on the members of our senior management team, particularly executive officers Garland S. Tucker, III, Brent P.W. Burgess and Steven C. Lilly, for the identification, final selection, structuring, closing and monitoring of our investments. These executive officers have critical industry experience and relationships that we rely on to implement our business plan. If we lose the services of these individuals, we may not be able to operate our business as we expect, and our ability to compete could be harmed, which could cause our operating results to suffer. Effective February 21, 2009, Messrs. Tucker, Burgess and Lilly are no longer employed by us pursuant to an employment agreement. Rather, each is currently employed by us on an at-will basis.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
     Issuer Purchases of Equity Securities
     During the three months ended September 30, 2009, in connection with our Dividend Reinvestment Plan for our common stockholders, we directed the plan administrator to purchase 82,680 shares of our common stock for $961,400.01 in the open market in order to satisfy our obligations to deliver shares of common stock to our stockholders with respect to our dividend declared on June 16, 2009. The following chart summarizes repurchases of our common stock for the three months ended September 30, 2009.
                                 
                            Maximum Number (or  
                    Total Number of     Approximate Dollar  
                    Shares Purchased as     Value) of Shares  
                    Part of Publicly     that May Yet Be  
    Total Number of     Average Price Paid     Announced Plans or     Purchased Under the  
Period   Shares     per Share     Programs     Plans or Programs  
 
                               
July 1-31, 2009
    82,680 (1)   $ 11.6280              
August 1-31, 2009
                       
September 1-30, 2009
                       
 
                       
Total
    82,680     $ 11.6280              
 
                       
 
(1)   These shares were purchased in the open market pursuant to the terms of our Dividend Reinvestment Plan.
Item 3. Defaults Upon Senior Securities.
     Not applicable.

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Item 4. Submission of Matters to a Vote of Security Holders.
    Not applicable.
Item 5. Other Information.
     Not applicable.

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Item 6. Exhibits.
     
Number   Exhibit
3.1
  Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(3) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on December 29, 2006 and incorporated herein by reference).
 
3.2
  Certificate of Limited Partnership of Triangle Mezzanine Fund LLLP (Filed as Exhibit (a)(4) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on February 13, 2007 and incorporated herein by reference).
 
3.3
  Second Amended and Restated Agreement of Limited Partnership of Triangle Mezzanine Fund LLLP (Filed as Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2007 and incorporated herein by reference).
 
3.4
  Second Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.4 to the Registrant’s Annual Report of Form 10-K filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).
 
4.1
  Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-33130) filed with the Securities and Exchange Commission on February 14, 2007 and incorporated herein by reference).
 
4.2
  Triangle Capital Corporation Dividend Reinvestment Plan (Filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2008 and incorporated herein by reference).
 
4.3
  Agreement to Furnish Certain Instruments (Filed as Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).
 
31.1
  Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2
  Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
32.1
  Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2
  Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  TRIANGLE CAPITAL CORPORATION
 
 
Date: November 4, 2009  /s/ Garland S. Tucker, III    
  Garland S. Tucker, III   
  President, Chief Executive Officer and
Chairman of the Board of Directors 
 
 
     
Date: November 4, 2009  /s/ Steven C. Lilly    
  Steven C. Lilly   
  Chief Financial Officer and Director   
 
     
Date: November 4, 2009  /s/ C. Robert Knox, Jr.    
  C. Robert Knox, Jr.   
  Principal Accounting Officer   

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EXHIBIT INDEX
     
Number   Exhibit
3.1
  Articles of Amendment and Restatement of the Registrant (Filed as Exhibit (a)(3) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on December 29, 2006 and incorporated herein by reference).
 
3.2
  Certificate of Limited Partnership of Triangle Mezzanine Fund LLLP (Filed as Exhibit (a)(4) to the Registrant’s Registration Statement on Form N-2/N-5 (File No. 333-138418) filed with the Securities and Exchange Commission on February 13, 2007 and incorporated herein by reference).
 
3.3
  Second Amended and Restated Agreement of Limited Partnership of Triangle Mezzanine Fund LLLP (Filed as Exhibit 3.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2007 and incorporated herein by reference).
 
3.4
  Second Amended and Restated Bylaws of the Registrant (Filed as Exhibit 3.4 to the Registrant’s Annual Report of Form 10-K filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).
 
4.1
  Form of Common Stock Certificate (Filed as Exhibit (d) to the Registrant’s Amendment No. 1 to the Registration Statement on Form 8-A (File No. 001-33130) filed with the Securities and Exchange Commission on February 14, 2007 and incorporated herein by reference).
 
4.2
  Triangle Capital Corporation Dividend Reinvestment Plan (Filed as Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2008 and incorporated herein by reference).
 
4.3
  Agreement to Furnish Certain Instruments (Filed as Exhibit 4.19 to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2009 and incorporated herein by reference).
 
31.1
  Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2
  Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
32.1
  Chief Executive Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2
  Chief Financial Officer Certification pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.