SOURCE: Yadkin Valley Financial Corporation

Yadkin Valley Financial Corporation

January 28, 2010 07:30 ET

Yadkin Valley Financial Corporation Announces Fourth Quarter and Full Year 2009 Results

ELKIN, NC--(Marketwire - January 28, 2010) - Yadkin Valley Financial Corporation (NASDAQ: YAVY)

Fourth Quarter Financial Highlights:

--  Tier 1, total capital, and leverage ratios of 9.16%, 10.43%, and
    8.16%, respectively, for the bank
--  Provision for loan losses of $3.1 million, a decrease of $15.1
    million compared to the third quarter of 2009
--  Loan loss reserves decreased to 2.82% of total gross loans or 2.90%
    of total loans held for investment, compared to 3.21% of total gross loans
    or 3.30% of total loans held for investment in the third quarter of 2009
--  Loan loss reserves increased to 134% of nonperforming loans, compared
    to 116% of nonperforming loans in the third quarter of 2009
--  Nonperforming loans decreased to 2.10% of total gross loans from
    2.75% in the third quarter of 2009
--  Nonperforming assets decreased to 2.39% of total assets from 2.73% in
    the third quarter of 2009
--  Net charge-offs decreased to $8.8 million or 2.05% of average loans
    on an annualized basis, compared to $10.3 million or 2.39% of average loans
    on an annualized basis in the third quarter of 2009
--  Net interest margin was 3.83%, an increase of one basis point 
    compared to 3.82% in the third quarter
--  Net income available to common shareholders was $3.2 million (after
    preferred dividends), or $0.20 per diluted share
    

Full Year 2009 Highlights

--  Sidus Financial closed in excess of $1.5 billion in new mortgage
    loans during 2009, representing a record in production and profitability
--  Successfully closed and integrated the acquisition of American
    Community Bancshares, which added $544.9 million in total assets and
    further expanded the Company's footprint into the higher growth Charlotte
    markets
--  Total loans grew 41% at December 31, 2009 compared to December 31,
    2008; year-over-year loan growth excluding the American Community
    Bancshares acquisition was 6%
--  Total deposits increased 58% year-over-year; excluding the American
    Community Bancshares acquisition, deposits increased 20%
--  Net loss to common shareholders was $77.5 million (after preferred
    dividends), or $5.23 per diluted share
--  Excluding the goodwill impairment charge of $61.6 million recorded
    during the third quarter of 2009, the net loss to common shareholders was
    $16 million (after preferred dividends), or $1.08 per diluted share
    

Yadkin Valley Financial Corporation (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, announced financial results for the fourth quarter and full year ending December 31, 2009. Net income available to common shareholders for the fourth quarter of 2009 totaled $3.2 million or $0.20 per diluted share. This compares to a net loss of $69.0 million or $4.28 per diluted share in the third quarter of 2009 (excluding the $61.6 million goodwill impairment charge, the third quarter 2009 net loss was $7.4 million or $0.46 per diluted share), and a net loss of $2.6 million or $0.22 per diluted share in the fourth quarter of 2008.

The net loss available to common shareholders for the year ended December 31, 2009 was $77.5 million or $5.23 per diluted share. Full year 2009 results were significantly impacted by the $61.6 million goodwill impairment charge recorded during the third quarter of 2009. Excluding this charge, the net loss available to common shareholders was $16 million or $1.08 per diluted share. This compares to net income of $3.9 million, or $0.34 per diluted share, for the year ended December 31, 2008. The decrease in net income for the full year ended December 31, 2009 was further impacted by a $37.3 million increase in the provision for loan losses.

Bill Long, President and CEO, commented, "Our fourth quarter results reflect our diligent credit management efforts that have taken place throughout the current credit cycle. We have carefully and consistently assessed the amount of risk in our loan portfolio, and are comfortable with our risk grading process and methodology. We are also very encouraged by the positive trends we are seeing in our nonperforming assets. During the fourth quarter, new loans added to nonperforming status were lower than those charged off or otherwise reclassified. While we are not ready to declare the credit cycle over, we are encouraged by this trend. As we move into 2010, I believe our greatest challenge will be in reducing our foreclosed asset portfolio. I am confident that we have a strong real estate workout staff and process, which will be integral to an efficient reduction in our problem assets.

"Sidus' performance in 2009 also exceeded our expectations, as mortgage loan production and profitability were at record levels. The activity at Sidus during 2009 was driven largely by an increase in mortgage refinancing activity. During the fourth quarter, we also began marketing in the mid-Atlantic region of Pennsylvania, and we expect to focus on building a national market share during 2010 as we continue to add new markets. The pipeline for new business in the first quarter is encouraging, although it is down from first quarter 2009 levels.

"Our strong deposit growth during the fourth quarter was due to our continued focus on gathering money market, savings, and non-interest bearing deposits. In addition, we achieved this growth across the majority of our markets. We plan to continue our focus on lower cost deposit gathering in 2010, with a particular emphasis on small business accounts.

"On the asset side of the balance sheet, we are continuing to support the local economies across our markets by lending to small businesses and individuals. There are still attractive growth opportunities across our markets, even in the current economic downturn. However, we anticipate that our loan portfolio will remain relatively flat through the first half of 2010 as we expect modest growth to be offset by paydowns in loan balances. Lastly, we expect an improvement in our capital position as we carefully manage our credit costs, balance sheet growth, and liquidity during the first half of 2010."

Fourth Quarter 2009 Financial Highlights

Asset Quality

Nonperforming loans decreased by $10.3 million to $36.3 million, or 2.10% of total gross loans, compared to $46.6 million, or 2.75% of total gross loans, as of the third quarter of 2009. The majority of the decrease was due to total gross charge-offs of nonperforming loans of $8.1 million and transfers to OREO of $11.3 million, which combined more than offset the addition of $10.1 million to nonaccrual loans.

                                      Nonperforming Loan Analysis
                                         (Dollars in thousands)
                                -------------------------------------------

                                  December 31, 2009    September 30, 2009
                                --------------------- ---------------------
                                               % of                  % of
                                Outstanding   Total   Outstanding   Total
Loan Type                         Balance     Loans     Balance     Loans
                                ------------ -------  ------------ -------
Construction/land development   $      7,917    0.46% $      7,611    0.45%
Residential construction               9,254    0.54%       15,550    0.92%
HELOC                                  1,871    0.11%        1,425    0.08%
1-4 Family residential                 6,471    0.37%        7,708    0.45%
Commercial real estate                 6,622    0.38%        9,115    0.54%
Commercial & industrial                3,518    0.21%        4,390    0.26%
Consumer & other                         602    0.03%          810    0.05%
                                ------------ -------  ------------ -------
Total                           $     36,255    2.10% $     46,609    2.75%
                                ------------ -------  ------------ -------

Other real estate owned (OREO) totaled $14.3 million at the end of the fourth quarter, up from $9.4 million at the end of the third quarter. The increase in OREO was primarily due to the addition of 31 properties, predominantly 1-4 family residential properties, totaling $9.0 million, offset by sales of $3.9 million. Total nonperforming assets were $50.6 million or 2.39% of total assets, down from $55.1 million, or 2.68% of total assets as of September 30, 2009.

During the fourth quarter of 2009, the provision for loan losses decreased $15.1 million to $3.1 million compared to the third quarter. The allowance for loan losses was $48.6 million at December 31, 2009, a decrease of $5.7 million compared to $54.3 million in the third quarter. The decrease in the provision for loan losses and the allowance for loan losses was primarily due to an improvement in the Company's credit metrics and outlook. Net charge-offs totaled 2.05% of average loans on an annualized basis compared to 2.39% on an annualized basis during the third quarter. Loan loss reserves as a percentage of total gross loans decreased to 2.82% from 3.21% in the third quarter, and 2.90% of total loans held for investment from 3.30% in the third quarter. Loan loss reserves totaled 134% of nonperforming loans, an increase from 116% in the third quarter.

Out of the $48.6 million in total allowance for loan losses at December 31, 2009, the specific allowance for impaired loans accounted for $9.0 million, down from $11.4 million at the end of the third quarter. The remaining general allowance, $39.6 million, was attributed to unimpaired loans and was down from $42.9 million at the end of the third quarter.

Net Interest Income and Net Interest Margin

Net interest income totaled $17.9 million, a decrease of $519,000, or 3%, compared to the third quarter of 2009. The net interest margin increased slightly to 3.83% from 3.82%. The modest increase in the net interest margin was due to relative stability in earning asset yields and liability costs. In addition, $21.6 million in on-balance sheet liquidity was added during the fourth quarter of 2009 to lock in lower cost funding sources. The net interest margin continues to be positively impacted by adjusting assets and liabilities to their fair market values as part of purchase accounting treatment relating to the merger with American Community Bank. Excluding these fair market value adjustments, the core net interest margin was 3.43%, an increase of 50 basis points compared to the third quarter.

Non-Interest Income

Non-interest income increased 11.2% to $6.3 million, compared to $5.7 million in the third quarter of 2009. The sequential increase in non-interest income was primarily due to a 5% increase in other service fees, a 2% increase in net mortgage loan sale gains, and a $479,000 increase in mortgage banking income. During the quarter, mortgage loan production increased due to greater mortgage refinance activity, contributing to the increase in other service fees and mortgage loan gains.

Non-Interest Expense

Non-interest expense decreased by $64.2 million to $14.5 million, compared to $78.7 million in the third quarter of 2009. The decrease was primarily due to the non-cash goodwill impairment charge of $61.6 million recorded during the third quarter of 2009. Excluding the goodwill impairment charge, non-interest expense decreased $2.7 million, or 16%, due to a 12% decrease in salaries and employee benefits, a 36% decrease in FDIC assessment expenses, and a 19% decrease in other expenses. The decrease in salaries and employee benefits was primarily due to decreases in incentive compensation and commissions, as well as lower payroll taxes. The decrease in FDIC assessment expenses was due primarily to a special assessment that occurred in the third quarter. The decrease in other expenses was primarily due to lower professional fees.

Balance Sheet and Capital

Compared to the third quarter of 2009, total gross loans increased $32.9 million, or 2%. Loan growth was primarily due to increases in commercial and industrial loans, as well as commercial lines of credit and owner-occupied commercial real estate loans. Loan growth was primarily concentrated within the Piedmont and Cardinal markets.

Total deposits increased $75.0 million, or 4%, compared to the third quarter of 2009. Deposit growth was primarily related to an 8% increase in NOW, Savings, and Money Market balances, which occurred across the majority of the Company's markets. Brokered CDs and CDARs remain a relatively small portion of the Company's funding sources, as these deposits represented 8% of total deposits at December 31, 2009, compared to 7% at September 30, 2009.

The bank remains well-capitalized for regulatory purposes. As of December 31, 2009, the bank's Tier 1, total capital, and leverage ratios were 9.16%, 10.43% and 8.16%, respectively. For capital adequacy purposes, Tier 1, total capital, and leverage ratios must be at least 4.00%, 8.00% and 4.00%, respectively.

Conference Call

Yadkin Valley Financial Corporation will host a conference call at 10:00 a.m. EDT on Thursday, January 28, 2010 to discuss financial results, business highlights, and outlook. The call may be accessed by dialing 888-471-3828 at least 10 minutes prior to the call. A webcast of the call may also be accessed at http://investor.shareholder.com/media/eventdetail.cfm?eventid=77197&CompanyID=YAVY&e=1&mediaKey=C0BD0B7D7BA30A3E46A5C745FA0F7F34 (Due to its length, this URL may need to be copied and pasted into your Internet browser's address field. Remove the extra space if one exists.) A replay of the conference call will be available until February 4th by dialing 888-203-1112 and entering access code 1820554.

About Yadkin Valley Financial Corporation

Yadkin Valley Financial Corporation is the holding company for Yadkin Valley Bank and Trust Company, a full service community bank providing services in 42 branches throughout its five regions primarily in North Carolina. The Yadkin Valley Bank region serves Ashe, Forsyth, Surry, Wilkes, and Yadkin Counties. The Piedmont Bank region serves Iredell and Mecklenburg Counties. The High Country Bank region serves Avery and Watauga Counties. The Cardinal State Bank region serves Durham, Orange, and Granville Counties. The American Community Bank region serves Mecklenburg and Union Counties in North Carolina, and Cherokee and York Counties in South Carolina. The Bank provides mortgage lending services through its subsidiary, Sidus Financial, LLC, headquartered in Greenville, North Carolina and operates a loan production office in Wilmington, North Carolina. Securities brokerage services are provided by Main Street Investment Services, Inc., a Bank subsidiary with five offices located in the branch network. Yadkin Valley Financial Corporation's website is www.yadkinvalleybank.com. Yadkin Valley shares are traded on NASDAQ under the symbol YAVY.

FORWARD-LOOKING STATEMENTS

Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements include but are not limited to (1) statements regarding potential future economic recovery, (2) statements with respect to our plans, objectives, expectations and intentions and other statements that are not historical facts, and (3) other statements identified by words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," and "projects," as well as similar expressions. Such statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by our company or any person that the future events, plans, or expectations contemplated by our company will be achieved.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (2) the strength of the United States economy in general and the strength of the local economies in which we conduct operations may be different than expected resulting in, among other things, a deterioration in the credit quality or a reduced demand for credit, including the resultant effect on the company's loan portfolio and allowance for loan losses; (3) the rate of delinquencies and amounts of charge-offs, the level of allowance for loan loss, the rates of loan growth, or adverse changes in asset quality in our loan portfolio, which may result in increased credit risk-related losses and expenses; (4) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (5) changes in the U.S. legal and regulatory framework; and (6 ) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) could have a negative impact on the company. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.


Yadkin Valley Financial Corporation
Condensed Consolidated Statements of Income (Loss)
(unaudited)
($ in thousands except share and per
 share data)                                For the Three Months Ended
                                        ----------------------------------
                                          Dec 31,    Sept 30,     Dec 31,
                                           2009        2009        2008
                                        ----------  ----------  ----------

INTEREST INCOME:
Interest and fees on loans              $   23,627  $   24,731  $   16,470
Interest on federal funds sold                   4          19          11
Interest and dividends on securities:
Taxable                                      1,263       1,311       1,133
Non-taxable                                    576         566         394
Interest-bearing deposits                       13          10          75
                                        ----------  ----------  ----------
TOTAL INTEREST INCOME                       25,483      26,637      18,083
                                        ----------  ----------  ----------
INTEREST EXPENSE:
Time deposits of $100,000 or more            3,273       4,517       3,102
Other interest bearing deposits              3,642       3,005       4,421
Borrowed funds                                 706         734         925
                                        ----------  ----------  ----------
TOTAL INTEREST EXPENSE                       7,621       8,256       8,448
                                        ----------  ----------  ----------
NET INTEREST INCOME                         17,862      18,381       9,635
PROVISION FOR LOAN LOSSES                    3,146      18,286       7,617
                                        ----------  ----------  ----------
NET INTEREST INCOME AFTER PROVISION FOR
 LOAN LOSSES                                14,716          95       2,018
                                        ----------  ----------  ----------

NON-INTEREST INCOME:
Service charges on deposit accounts          1,572       1,577       1,148
Other service fees                           1,250       1,189         779
Net gain on sales of mortgage loans          2,812       2,751       2,250
Income on investment in bank-owned life
 insurance                                     145         235         221
Mortgage banking income                        486           7         123
Other than temporary impairment of
 securities                                    (17)       (175)        (43)
Other income                                    64          94         103
                                        ----------  ----------  ----------
TOTAL NON-INTEREST INCOME                    6,312       5,678       4,581
                                        ----------  ----------  ----------

NON-INTEREST EXPENSES:
Salaries and employee benefits               6,938       7,762       4,868
Occupancy and equipment expense              1,865       1,858       1,123
Printing and supplies                          273         345         333
Data processing                                489         349         186
Communications expense                         448         372         277
Advertising and marketing expense              414         357         854
Amortization of core deposit intangible        338         327         225
FDIC assessment expense                        619         973         420
Acquisition                                     (4)        292           -
Attorney                                       112         469         136
Loan collection expense                        637         370         139
Goodwill impairment                              -      61,566           -
Net loss on other real estate owned            189       1,218         114
Other expense                                2,165       2,490       2,157
                                        ----------  ----------  ----------
TOTAL NON-INTEREST EXPENSE                  14,483      78,748      10,832
                                        ----------  ----------  ----------

INCOME (LOSS) BEFORE INCOME TAXES            6,545     (72,975)     (4,233)
INCOME TAX (BENEFIT)                         2,630      (4,716)     (1,666)
                                        ----------  ----------  ----------
NET INCOME (LOSS)                       $    3,915  $  (68,259) $   (2,567)
Preferred stock dividend                       754         708           -
                                        ----------  ----------  ----------
NET INCOME (LOSS) TO COMMON
 SHAREHOLDERS                           $    3,161  $  (68,967) $   (2,567)
                                        ==========  ==========  ==========
INCOME (LOSS) PER COMMON SHARE:
Basic                                   $     0.20  $    (4.28) $    (0.22)
Diluted                                 $     0.20  $    (4.28) $    (0.22)
CASH DIVIDENDS PER COMMON SHARE         $        -  $        -  $     0.13
AVERAGE SHARES OUTSTANDING:
Basic                                   16,129,640  16,129,632  11,533,334
Diluted                                 16,129,640  16,129,632  11,533,334




Yadkin Valley Financial Corporation
Consolidated Statements of Income (Loss)
(unaudited)
($ in thousands except share and per share data)
                                                      For the
                                                Twelve Months Ended
                                        ----------------------------------
                                          Dec. 31     Dec. 31     Dec. 31
                                           2009        2008        2007
                                        ----------  ----------  -----------
INTEREST INCOME:
Interest and fees on loans              $   88,321  $   67,459  $    68,225
Interest on federal funds sold                  25          56          298
Interest and dividends on securities:
Taxable                                      5,112       5,118        5,286
Non-taxable                                  2,039       1,517        1,236
Interest-bearing deposits                       45         376          148
                                        ----------  ----------  -----------
TOTAL INTEREST INCOME                       95,542      74,526       75,193
                                        ----------  ----------  -----------
INTEREST EXPENSE:
Time deposits of $100,000 or more           11,354      11,735       11,984
Other time and savings deposits             17,630      18,526       19,008
Borrowed funds                               2,847       4,275        2,309
                                        ----------  ----------  -----------
TOTAL INTEREST EXPENSE                      31,831      34,536       33,301
                                        ----------  ----------  -----------
NET INTEREST INCOME                         63,711      39,990       41,892
PROVISION FOR LOAN LOSSES                   48,439      11,109        2,489
                                        ----------  ----------  -----------
NET INTEREST INCOME AFTER PROVISION FOR
 LOAN LOSSES                                15,272      28,881       39,403
                                        ----------  ----------  -----------

NON-INTEREST INCOME:
Service charges on deposit accounts          5,732       4,394        3,946
Other service fees                           4,868       3,378        3,561
Net gain on sales of mortgage loans         13,563       7,679        5,882
Net gain on sales of investment
 securities                                      -           -           45
Income on investment in bank-owned life
 insurance                                     846         928        1,045
Mortgage banking income (loss)                 (21)        190          451
Other than temporary impairment of
 securities                                   (372)     (1,016)           -
Other income                                   227         311          514
                                        ----------  ----------  -----------
TOTAL NON-INTEREST INCOME                   24,843      15,864       15,444
                                        ----------  ----------  -----------

NON-INTEREST EXPENSES:
Salaries and employee benefits              28,626      19,921       19,161
Occupancy and equipment expense              6,893       4,701        3,917
Printing and supplies                        1,122         889          550
Data processing                              1,397         786          399
Communications expense                       1,471       1,035        1,127
Advertising and marketing expense            1,361       1,299          550
Amortization of core deposit intangible      1,240         877          777
FDIC assessment expense                      4,052         862          188
Acquisition                                  2,590           -            -
Attorney                                     1,104         376          243
Loan collection expense                      1,232         213          126
Goodwill impairment                         61,566           -            -
Net loss on other real estate owned          1,558         363          287
Other expense                                9,836       8,315        5,634
                                        ----------  ----------  -----------
TOTAL NON-INTEREST EXPENSE                 124,048      39,637       32,959
                                        ----------  ----------  -----------

INCOME (LOSS) BEFORE INCOME TAXES          (83,933)      5,108       21,888
INCOME TAX (BENEFIT)                        (8,875)      1,241        7,200
                                        ----------  ----------  -----------
NET INCOME (LOSS)                       $  (75,058) $    3,867  $    14,688
Preferred stock dividend                     2,435           -            -
                                        ----------  ----------  -----------
NET INCOME (LOSS) TO COMMON
 SHAREHOLDERS                           $  (77,493) $    3,867  $    14,688
                                        ==========  ==========  ===========

INCOME (LOSS) PER COMMON SHARE:
Basic                                   $    (5.23) $     0.34  $      1.39
Diluted                                 $    (5.23) $     0.34  $      1.37
CASH DIVIDENDS PER COMMON SHARE         $     0.12  $     0.52  $      0.51
AVERAGE SHARES OUTSTANDING:
Basic                                   14,808,325  11,235,943   10,594,567
Diluted                                 14,808,325  11,306,472   10,712,667





Yadkin Valley Financial Corporation
Consolidated Balance Sheets
Unaudited
($ in thousands except share and per share data)
                                                     As of
                                     -------------------------------------
                                       Dec. 31,     Dec. 31,     Dec. 31,
                                         2009        2008*        2007*
                                     -----------  -----------  -----------
ASSETS
CASH AND CASH EQUIVALENTS
  Cash and due from banks            $    89,668  $    22,554  $    24,268
  Federal funds sold                          92           58            -
  Interest-bearing deposits                2,576        3,411        2,058
                                     -----------  -----------  -----------
    TOTAL CASH AND CASH EQUIVALENTS       92,336       26,023       26,326
                                     -----------  -----------  -----------

SECURITIES AVAILABLE FOR SALE            183,841      137,813      142,484

GROSS LOANS                            1,676,448    1,187,569      898,753
  Less: Allowance for loan losses        (48,625)     (22,355)     (12,446)
                                     -----------  -----------  -----------
    NET LOANS                          1,627,823    1,165,214      886,307
                                     -----------  -----------  -----------

LOANS HELD FOR SALE                       49,715       49,929       52,754
ACCRUED INTEREST RECEIVABLE                7,783        5,442        6,055
PREMISES AND EQUIPMENT, NET               43,642       33,900       26,780
FORECLOSED REAL ESTATE                    14,345        4,018          602
FEDERAL HOME LOAN BANK STOCK, AT
 COST                                     10,539        7,877        2,557
INVESTMENT IN BANK-OWNED LIFE
 INSURANCE                                24,454       23,607       22,683
GOODWILL                                   4,944       53,503       32,697
CORE DEPOSIT INTANGIBLE                    6,187        4,660        4,261
OTHER ASSETS                              48,003       12,302        7,571

                                     -----------  -----------  -----------
  TOTAL ASSETS                       $ 2,113,612  $ 1,524,288  $ 1,211,077
                                     ===========  ===========  ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
  Non-interest bearing demand
   deposits                          $   207,850  $   153,573  $   154,979
  NOW, savings and money market
   accounts                              445,508      283,891      232,888
  Time certificates:
    Over $100,000                        611,114      333,375      267,530
    Other                                557,280      384,203      308,045
                                     -----------  -----------  -----------
    TOTAL DEPOSITS                     1,821,752    1,155,042      963,442
                                     -----------  -----------  -----------

SHORT-TERM BORROWINGS                     44,467      169,112       66,425
LONG-TERM BORROWINGS                      79,001       38,850       37,774
ACCRUED INTEREST PAYABLE                   3,015        3,555        3,435
OTHER LIABILITIES                         13,111        8,085        6,732

                                     -----------  -----------  -----------
  TOTAL LIABILITIES                    1,961,346    1,374,644    1,077,808
                                     -----------  -----------  -----------

SHAREHOLDERS' EQUITY
  COMMON STOCK                            16,130       11,537       10,563
  PREFERRED STOCK                         46,152            -            -
  SURPLUS                                118,154       88,030       70,987
  RETAINED EARNINGS (ACCUMULATED
   DEFICIT)                              (31,080)      48,070       51,087
  ACCUMULATED OTHER COMPREHENSIVE
   INCOME                                  2,910        2,007          632
                                     -----------  -----------  -----------
  TOTAL SHAREHOLDERS' EQUITY             152,266      149,644      133,269
                                     -----------  -----------  -----------

  TOTAL LIABILITIES AND
   SHAREHOLDERS' EQUITY              $ 2,113,612  $ 1,524,288  $ 1,211,077
                                     ===========  ===========  ===========

(a) $1.00 par value, authorized 20,000,000 shares; issued 16,129,640 in
    2009 and 11,536,500 in 2008.
(b) 1,000,000 shares of authorized, no par value preferred stock of which
    49,312 shares are issued and outstanding in
    2009 and none in 2008.
(c) Includes ten-year warrants with an allocated fair value of $1.7
    million and $1.8 million at issuance to purchase up to
    385,900 shares and 273,534 shares of common stock, $1.00 par value,
    at an initial price of $13.99 per share and
    $7.30 per share, respectively
 *  Derived from audited consolidated financial statements





Yadkin Valley Financial Corporation
(unaudited)
                               At or For the Three Months Ended
                     -----------------------------------------------------
                      Dec. 31   Sept. 30   June 30,   March 31,  Dec. 31,
                       2009       2009       2009       2009       2008
                     ---------  ---------  ---------  ---------  ---------

     Per Share Data:
      Basic Earnings
    (Loss) per Share $    0.20  $   (4.28) $   (0.46) $   (0.40) $   (0.22)
    Diluted Earnings
    (Loss) per Share      0.20      (4.28)     (0.46)     (0.40)     (0.22)
Book Value per Share      6.58       6.39      10.48      12.63      12.97
  Cash Dividends per
               Share         -          -       0.06       0.06       0.13

Selected Performance
             Ratios:
   Return on Average
 Assets (annualized)      0.76%    -12.62%     -1.27%     -1.07%     -0.69%
   Return on Average
 Equity (annualized)     10.24%   -125.93%    -12.81%     -9.25%     -6.64%
 Net Interest Margin
        (annualized)      3.83%      3.82%      3.76%      2.87%      2.94%
 Net Interest Spread
        (annualized)      3.59%      3.60%      3.45%      2.53%      2.57%
 Non-interest Income
   as a % of Revenue     30.07%     97.98%     87.40%    113.72%     68.88%
 Non-interest Income
   as a % of Average
              Assets      0.31%      0.22%      0.37%      0.34%      0.30%
Non-interest Expense
   as a % of Average
              Assets      0.71%      3.62%      0.92%      0.75%      0.73%
    Net Non-interest
    income as a % of
      Average Assets     -0.40%     -3.41%     -0.55%     -0.42%     -0.42%

      Asset Quality:
 Nonperforming Loans
             (000's) $  36,256  $  45,685  $  32,008  $  17,420  $  13,647
Nonperforming Assets
             (000's)    50,601     55,051     39,777     21,738     17,665
 Nonperforming Loans
      to Total Loans      2.10%      2.75%      1.82%      1.28%      1.10%
Nonperforming Assets
     to Total Assets      2.39%      2.73%      1.84%      1.33%      1.16%
  Allowance for Loan
     Losses to Total
      Loans Held For
          Investment      2.90%      3.30%      2.82%      2.61%      1.88%
  Allowance for Loan
           Losses to
 Nonperforming Loans    134.00%    116.00%    144.00%    177.00%    164.00%
    Net Charge-offs/
       Recoveries to
       Average Loans
        (annualized)      2.05%      2.39%      0.27%      0.63%      0.60%

     Capital Ratios:
     Equity to Total
              Assets      5.02%      7.27%      9.43%     11.00%      9.82%
     Tier 1 leverage
           ratio (1)      8.16%      7.49%      7.87%      8.65%      8.12%
   Tier 1 risk-based
           ratio (1)      9.16%      8.91%      8.67%      9.71%      9.01%
    Total risk-based
   capital ratio (1)     10.43%     10.18%      9.92%     10.97%     10.26%

            Non-GAAP
        disclosures:
 Tangible Book Value
           per Share      5.89       5.68       5.93       7.61       7.93
  Return on Tangible
 Equity (annualized)     11.06%   -191.86%    -18.93%    -13.62%    -10.79%
  Tangible Equity to
 Tangible Assets (2)      4.52%      4.49%      6.24%      7.73%      6.24%
Efficiency Ratio (3)     57.08%     67.02%     73.44%     75.38%     73.32%

   Reconciliation of
    GAAP to Non-GAAP
         disclosures
Total Assets (000's) 2,113,612  2,051,672  2,158,360  1,637,083  1,524,288
            Goodwill     4,944      4,944     66,510     53,503     53,503
        Core Deposit
          Intangible     6,187      6,525      6,852      4,435      4,660
                     ---------  ---------  ---------  ---------  ---------
     Tangible Assets
          (Non-GAAP) 2,102,481  2,040,203  2,084,998  1,579,145  1,466,125

Total Equity (000's)   152,266    149,109    203,469    180,070    149,644
            Goodwill     4,944      4,944     66,510     53,503     53,503
        Core Deposit
          Intangible     6,187      6,525      6,852      4,435      4,660
                     ---------  ---------  ---------  ---------  ---------
     Tangible Equity
          (Non-GAAP)   141,135    137,640    130,107    122,132     91,481

      Average equity
             (000's)   151,783    206,860    202,766    182,448    145,184
Average Goodwill and
        Core Deposit
          Intangible    11,328     73,900     66,412     58,501     58,955
                     ---------  ---------  ---------  ---------  ---------
    Average tangible
   equity (Non-GAAP)   140,455    132,960    136,354    123,947     86,229

Non-interest expense
             (000's)    14,483     78,748     19,192     11,627     10,832
     Amortization of
         intangibles       338        327        350        225        225
 Goodwill impairment         -     61,566          -          -          -
                     ---------  ---------  ---------  ---------  ---------
            Adjusted
        non-interest
  expense (Non-GAAP)    14,145     16,855     18,842     11,402     10,607

Notes:
(1) Tier 1 leverage, Tier 1 risk-based, and Total risk-based ratios are
    ratios for the bank, Yadkin Valley Bank and Trust Company as reported
    on Consolidated Reports of Condition and Income for a Bank With
    Domestic Offices Only - FFIEC 041
(2) Tangible Equity is the difference of stockholders' equity less the sum
    of goodwill and core deposit intangible Tangible Assets are the
    difference of total assets less the sum of goodwill and core deposit
    intangible
(3) The Efficiency Ratio was calculated excluding the goodwill impairment
    charge of $61,565,768 recorded in the third quarter





Yadkin Valley Financial Corporation
(unaudited)

                                              For the Twelve Months
                                                   Ended Dec. 31
                                        ----------------------------------
                                          2009     2008     2007     2006
                                        -------  -------  -------  -------

           Selected Performance Ratios:
  Return on Average Assets (annualized)   -3.83%    0.28%    1.31%    1.31%
  Return on Average Equity (annualized)  -39.22%    2.66%   11.32%   11.52%
                    Net Interest Margin    3.59%    3.29%    4.20%    4.45%
                    Net Interest Spread    3.31%    2.84%    3.49%    3.88%
  Non-interest Income as a % of Revenue   62.28%   34.93%   28.15%   27.04%
  Non-interest Income as a % of Average
                                 Assets    1.29%    1.13%    1.37%    1.36%
Non-interest Expense as a % of  Average
                                 Assets    6.36%    2.85%    2.93%    3.05%
      Net Non-interest income as a % of
                         Average Assets   -5.07%   -1.73%   -1.56%   -1.69%

                         Asset Quality:
       Net Charge-offs to Average Loans
                           (annualized)    1.39%    0.26%    0.10%    0.10%

                  Non-GAAP disclosures:
 Return on Tangible Equity (annualized)  -54.03%    4.06%   15.90%   16.80%
                   Efficiency Ratio (1)  136.88%   68.19%   55.45%   56.16%

     Reconciliation of GAAP to Non-GAAP
                            disclosures
                 Average equity (000's) 191,363  145,184  129,722  119,749
      Average Goodwill and Core Deposit
                             Intangible  52,444   49,979   37,363   37,451
                                        -------  -------  -------  -------
     Average tangible equity (Non-GAAP) 138,919   95,205   92,359   82,298

           Non-interest expense (000's) 124,048   39,637   32,959   32,093
            Amortization of intangibles   1,240      877      777      813
                    Goodwill impairment  61,566        -        -        -
                                        -------  -------  -------  -------
          Adjusted non-interest expense
                             (Non-GAAP)  61,615   39,776   32,182   31,280

(1) The Efficiency Ratio was calculated excluding the goodwill impairment
    charge of $61,565,768 recorded in the third quarter






                    Yadkin Valley Financial Corporation
          Average Balance Sheets and Net Interest Income Analysis
                          (Dollars in Thousands)
                                (Unaudited)


                                Three Months Ended Dec. 31,
                  ---------------------------------------------------------
                             2009                           2008
                  --------------------------     --------------------------

                    Average           Yield/       Average           Yield/
                    Balance  Interest  Rate        Balance  Interest  Rate
                  ----------- -------- ----      ----------- -------- ----
INTEREST EARNING
 ASSETS
Total loans (1,2) $ 1,703,155 $ 23,711 5.52%     $ 1,179,459 $ 16,505 5.55%
Federal funds
 sold                   5,531        3 0.22%           4,609       11 0.95%
Investment
 securities           200,603    2,362 4.67%         137,010    1,700 4.92%
Interest-bearing
 deposits               2,920       14 1.90%           6,220       76 4.85%
                  ----------- --------           ----------- --------
Total average
 earning assets
 (1)                1,912,209   26,090 5.41% (6)   1,327,298   18,292 5.47%
                              --------                       --------
Noninterest
 earning assets       124,707                        149,763
                  -----------                    -----------
Total average
 assets           $ 2,036,916                    $ 1,477,061
                  ===========                    ===========

INTEREST BEARING
 LIABILITIES
Time deposits     $ 1,100,181 $  6,144 2.22%     $   701,426 $  6,638 3.75%
Other deposits        428,007      771 0.71%         281,571      886 1.25%
Borrowed funds        134,483      706 2.08%         175,592      925 2.09%
                  ----------- --------           ----------- --------
Total interest
 bearing
 liabilities        1,662,671    7,621 1.82% (7)   1,158,589    8,449 2.89%

Noninterest
 bearing deposits     219,690                        153,322
Other liabilities       2,772                         11,806
                  -----------                    -----------
Total average
 liabilities        1,885,133                      1,323,717
                  -----------                    -----------

Shareholders'
 equity               151,783                        153,344

Total average
 liabilities and
 shareholders'    -----------                    -----------
 equity           $ 2,036,916                    $ 1,477,061
                  ===========                    ===========

NET INTEREST
 INCOME/YIELD                 --------                       --------
 (3,4)                        $ 18,469 3.83%                 $  9,843 2.94%
                              ========                       ========

INTEREST SPREAD (5)                    3.59%                          2.57%

1. Yields related to securities and loans exempt from Federal income taxes
   are stated on a fully tax-equivalent basis, assuming a Federal income
   tax rate of 35%, reduced by the nondeductible portion of interest
   expense.
2. The loan average includes loans on which accrual of interest has been
   discontinued.
3. Net interest income is the difference between income from earning assets
   and interest expense.
4. Net interest yield is net interest income divided by total average
   earning assets.
5. Interest spread is the difference between the average interest rate
   received on earning assets and the average rate paid on interest bearing
   liabilities.
6. Interest income for 2009 includes $1,042 of accretion for purchase
   accounting adjustments related to loans acquired in the merger with
   American Community.
7. Interest expense for 2009 includes $839 of accretion for purchase
   accounting adjustments related to deposits and borrowings acquired in
   the merger with American Community.





                    Yadkin Valley Financial Corporation
          Average Balance Sheets and Net Interest Income Analysis
                          (Dollars in Thousands)
                                (Unaudited)


                                Twelve Months Ended Dec. 31,
                  ---------------------------------------------------------
                             2009                           2008
                  --------------------------     --------------------------

                    Average           Yield/       Average           Yield/
                    Balance  Interest  Rate        Balance  Interest  Rate
                  ----------- -------- ----      ----------- -------- ----
INTEREST EARNING
 ASSETS
Total loans (1,2) $ 1,596,094 $ 88,486 5.54%     $ 1,088,626 $ 67,609 6.21%
Federal funds
 sold                  13,090       25 0.19%           2,451       56 2.28%
Investment
 securities           189,333    8,051 4.25%         138,674    7,304 5.27%
Interest-bearing
 deposits               8,344       45 0.54%           9,885      376 3.80%
                  ----------- --------           ----------- --------
Total average
 earning assets
 (1)                1,806,861   96,607 5.35% (6)   1,239,636   75,345 6.08%
                              --------                       --------
Noninterest
 earning assets       150,434                        136,221
                  -----------                    -----------
Total average
 assets           $ 1,957,295                    $ 1,375,857
                  ===========                    ===========

INTEREST BEARING
 LIABILITIES
Time deposits     $ 1,024,653 $ 25,855 2.52%     $   640,282 $ 26,210 4.09%
Other deposits        377,951    3,129 0.83%         272,785    4,051 1.49%
Borrowed funds        161,099    2,847 1.77%         152,067    4,275 2.81%
                  ----------- --------           ----------- --------
Total interest
 bearing
 liabilities        1,563,703   31,831 2.04% (7)   1,065,134   34,536 3.24%

Noninterest
 bearing deposits     190,363                        155,503
Other liabilities      11,866                         10,036
                  -----------                    -----------
Total average
 liabilities        1,765,932                      1,230,673
                  -----------                    -----------

Shareholders'
 equity               191,363                        145,184

Total average
 liabilities and
 shareholders'    -----------                    -----------
 equity           $ 1,957,295                    $ 1,375,857
                  ===========                    ===========

NET INTEREST
 INCOME/YIELD
 (3,4)                        --------                       --------
                              $ 64,776 3.59%                 $ 40,809 3.29%
                              ========                       ========

INTEREST SPREAD (5)                    3.31%                          2.84%

1. Yields related to securities and loans exempt from Federal income taxes
   are stated on a fully tax-equivalent basis, assuming a Federal income
   tax rate of 35%, reduced by the nondeductible portion of interest
   expense.
2. The loan average includes loans on which accrual of interest has been
   discontinued.
3. Net interest income is the difference between income from earning assets
   and interest expense.
4. Net interest yield is net interest income divided by total average
   earning assets.
5. Interest spread is the difference between the average interest rate
   received on earning assets and the average rate paid on interest bearing
   liabilities.
6. Interest income for 2009 includes $6,036 of accretion for purchase
   accounting adjustments related to loans acquired in the merger with
   American Community.
7. Interest expense for 2009 includes $4,232 of accretion for purchase
   accounting adjustments related to deposits and borrowings acquired in
   the merger with American Community.

Contact Information

  • For additional information contact:

    William A. Long
    President and Chief Executive Officer
    (336) 526-6312

    Jan H. Hollar
    Executive Vice President and Chief Financial Officer
    (704) 768-1161
    Email Contact

    Megan R. Malanga
    Nvestcom Investor Relations
    (954) 781-4393
    Email Contact