SOURCE: Yadkin Valley Financial Corproation

October 24, 2007 09:30 ET

Yadkin Valley Financial Corporation Announces Third Quarter 2007 Diluted Earnings per Share of $0.37, an Increase of 8.8% Over the Third Quarter 2006

ELKIN, NC--(Marketwire - October 24, 2007) - Yadkin Valley Financial Corporation, ("the Company") Elkin, NC (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company ("the Bank"), reports earnings of $3.92 million for the quarter ended September 30, 2007, an increase of 7.8% as compared with earnings of $3.64 million for the same quarter of 2006. Diluted earnings per share ("EPS") were $0.37 and $0.34 for the quarters ended September 30, 2007 and 2006, respectively, an increase of 8.8%. Return on equity ("ROE") was 11.9% for the quarter ended September 30, 2007, down from 12.1% for the quarter ended September 30, 2006, and return on tangible equity ("ROTE") decreased to 16.7% from 17.7% over the same periods.

Net income for the nine months ended September 30, 2007 was $11.6 million, a 16.4% increase over the prior year. Year-to-date diluted earnings per share were $1.08 and $0.93, respectively, for September 30, 2007 and 2006, an increase of 16.1%. ROE increased to 12.1% for the first nine months of 2007 from 11.3% a year ago, and ROTE increased to 17.0% in 2007 from 16.5% in 2006.

The increase in quarterly net income over the prior year was attributed primarily to an increase in net interest income $338,000, or 3.3%, a decrease in the provision for loan losses of $225,000, or 42.9%, and a decrease in noninterest expenses of $196,000, or 2.4%. These items more than offset the decline in noninterest income of $370,000, or 9.4%.

Third quarter net interest income increased as a result of the growth in average loans and average investments of $55.5 million and $15.1 million, respectively from the third quarter 2006 to the third quarter 2007. The increase was also attributed to the increase in the yield on earning assets from 7.40% to 7.55% for the same periods. Net interest margin declined from 4.43% in the third quarter of 2006 to 4.24% in 2007 as the cost of funds increased from 3.61% to 4.03%. The provision for loan losses decreased as loan performance remained strong and the allowance for loan losses to total loans increased by 3 basis points to 1.32% as compared to a year ago. Furthermore, the coverage of allowance for loan losses to non-performing loans increased to 668% on September 30, 2007, from 205% on September 30, 2006.

Noninterest expenses, primarily salaries and benefits, declined over the prior year despite asset and branch growth. Savings from a premium holiday declared by the employee health insurance carrier in August were recognized during the quarter and were shared by the bank ($112,000) and its employees ($47,000). Salaries and commissions expense recognized during the quarter increased only by $74,000, or 1.6% over the prior year. The accrual for annual employee bonuses decreased by $205,000 for the quarter as compared to the prior year. For the nine-month period ending September 30, 2007 the bonus accruals have averaged $7,800 per month less than the same period a year ago. The decrease in noninterest income for the quarter can be attributed to a decrease of $348,000, or 20.6% in net gains on sales of mortgage loans, as mortgage volume declined and margins tightened. Losses on sales of assets obtained from foreclosures totaled $64,000 during the quarter compared with no gains or losses in the prior year.

Loan growth accelerated during the third quarter. For the three and nine month periods ended September 30, 2007, gross loans held for investment increased by $35.1 million (17.1%, annualized) and $36.7 million (6.0%, annualized), respectively. Loan growth for the third quarter was concentrated in construction and land development, commercial real estate fixed rate, and commercial lines of credit. Deposit growth for the three and nine month periods ended September 30, 2007 has totaled $6.5 million (2.8%, annualized) and $41.2 million (6.1%, annualized), respectively.

Bill Long, President and CEO, said, "I am pleased to announce our continued growth in earnings for the three months ending on September 30, 2007. Comparing the third quarters of 2007 and 2006, basic quarterly earnings increased $0.03 to $0.37 per share, and year-to-date earnings increased to $0.16 to $1.10 per share. While quarterly noninterest income decreased from 2006 to 2007 due to a reduction in other service fees and net gains on sales of mortgage loans, we were also able to reduce non-interest expenses in salaries and employment benefits, occupancy and equipment expenses, printing and supplies, and amortization costs. This performance is a direct result of our employees' efforts to control expenses as planned according to branch and departmental budgets and as emphasized by management throughout the year.

"Gross loans held for investment increased 9.3% from September 2006 to September 2007 after a very slow start during the first four months of 2007. Deposits and assets rose 9.6% and 4.6%, respectively, from September 30, 2006 to September 30, 2007. Basic and diluted EPS, book value per share and tangible book value per share, all increased over the June 30, 2007 quarter as well as over the September 30, 2006 quarter. Credit quality seems to be an important topic in our industry, and we are extremely proud of our performance in this area. Below is a summary of key areas:

Quarter-to-Date                    September 30,  September 30,  Increase /
                                      2006           2007       (Decrease)
Nonperforming Loans (000's omitted)  5,184          1,682        (3,502)
Nonperforming Assets(000's omitted)  5,311          2,630        (2,681)
%Nonperforming Loans to Total Loans   0.63%          0.19%       (0.44%)
% Nonperforming Assets to Total
 Assets                               0.49%          0.23%       (0.26%)
% Allowance for Loan Loss to
 Total Loans                          1.29%          1.32%        0.03%

"Year to date net charge offs to average total loans at September 30, 2007 were 0.06%, annualized, as compared to 0.08% for the year-to-date period ended September 30, 2006. We believe our asset quality is outstanding, and my sincere thanks go to Jim Pearce, John Crysel and all of the employees, lenders and collectors for their hard work in producing and maintaining our high quality loan portfolio. Our mortgage lending subsidiary, Sidus Financial, LLC, is not originating subprime loans at this time after closing its Alternative Lending office in September 2007. Sidus holds two performing subprime loans totaling $160,000 in principal. The Alternative Lending office previously originated and sold loans that were approximately 1.6% of Sidus' total loan volume for 2007.

"The pending merger with Cardinal State Bank is the most important project we have going and I feel great about where we are. John Mallard and his group have hit the ground running and I feel sure this merger will become one of the most significant events in the 39-year history of our bank.

"The last quarter of '07 will be a challenge. Our goal this year has been to finish '07 with a double digit percentage increase in earnings. Our year-to-date net income at September 30, 2007 has increased approximately 16% over net income for the same period last year. While we continue to see pressure on margins for the remainder of 2007, we feel good about where we are and our ability to meet the challenges ahead."

Yadkin Valley Bank and Trust Company is a full service community bank providing services in twenty-four branches throughout its three regions in North Carolina. The Yadkin Valley Bank region serves Ashe, Forsyth, Surry, Wilkes, and Yadkin Counties and operates a loan production office in Wilmington, NC. The Piedmont Bank region serves Iredell and Mecklenburg Counties. The High Country Bank region serves Avery and Watauga Counties. The Bank provides mortgage lending services through its subsidiary, Sidus Financial, LLC, headquartered in Greenville, North Carolina. Securities brokerage services are provided by Main Street Investment Services, Inc., a Bank subsidiary with four offices located in the branch network.

This news release contains forward-looking statements. Such statements are subject to certain factors that may cause the Company's results to vary from those expected. These factors include changing economic and financial market conditions, competition, ability to execute our business plan, items already mentioned in this press release, and other factors described in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's judgment only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events and circumstances that arise after the date hereof.

Yadkin Valley Financial Corporation
        (Amounts in thousands except per share data)
        (unaudited)
                                        For the Three Months Ended
                                September 30,    June 30,    September 30,
                                     2007          2007           2006

Interest income                     $19,231       $18,647       $17,453
Interest expense                      8,504         8,238         7,064
                                    -------       -------       -------
  Net interest income                10,727        10,409        10,389
Provision for loan losses               300           200           525
                                    -------       -------       -------
  Net interest income after
   provision for loan loss           10,427        10,209         9,864
                                    -------       -------       -------
Noninterest  Income:
Service charges on deposit accounts   1,003           954           977
Other service fees                      863         1,014           971
Net gain on sales of mortgage loans   1,338         1,646         1,686
Net gain on sales of investment
 securities                              45             -             -
Income on investment in bank owned
 life Insurance                         255           314           159
Mortgage banking income                  63           133            50
Other income                            (11)           52            83
                                    -------       -------       -------
  Total noninterest income            3,556         4,113         3,926
                                    -------       -------       -------
Noninterest Expense:
Salaries and employee benefits        4,625         4,989         4,898
Occupancy and equipment expense         984           988         1,030
Printing and supplies                   127           139           170
Data processing                         105           110            98
Amortization of core deposit
 intangible                             194           197           201
Other expense                         1,981         2,260         1,815
                                    -------       -------       -------
  Total noninterest expense           8,016         8,683         8,212
                                    -------       -------       -------
Income before income taxes            5,967         5,639         5,578
Income taxes                          2,045         1,853         1,941
                                    -------       -------       -------
Net income                          $ 3,922       $ 3,786      $  3,637
                                    =======       =======      ========
Income per share:
     Basic                          $  0.37       $  0.36      $   0.34
     Diluted                        $  0.37       $  0.35      $   0.34

Average shares outstanding
 – basic                             10,584        10,614      10,635
Average shares outstanding
 – diluted                           10,721        10,792      10,783



                                    For the Nine Months Ended September 30,
                                            2007                2006

Interest income                           $55,854             $49,251
Interest expense                           24,501              18,754
                                          -------             -------
  Net interest income                      31,353              30,497
Provision for loan losses                     800               1,640
                                          -------             -------
  Net interest income after provision for
   loan loss                               30,553              28,857
                                          -------             -------
Noninterest  Income:
Service charges on deposit accounts         2,938               2,778
Other service fees                          2,719               2,539
Net gain on sales of mortgage loans         4,394               4,370
Net gain on sales of investment securities     45                  19
Income on investment in bank owned life
 insurance                                    785                 451
Mortgage banking income                       276                 178
Other income                                  590                 223
                                          -------             -------
  Total noninterest income                 11,747              10,558
                                          -------             -------
Noninterest Expense:
Salaries and employee benefits             14,453              14,022
Occupancy and equipment expense             2,987               2,901
Printing and supplies                         409                 464
Data processing                               315                 304
Amortization of core deposit intangible       589                 616
Other expense                               6,210               5,733
                                          -------             -------
  Total noninterest expense                24,963              24,040
                                          -------             -------
Income before income taxes                 17,337              15,375
Income taxes                                5,716               5,390
                                          -------             -------
Net income                                $11,621             $ 9,985
                                          =======             =======
Income per share:
     Basic                                $  1.10             $  0.94
     Diluted                              $  1.08             $  0.93

Average shares outstanding – basic         10,604              10,651
Average shares outstanding – diluted       10,782              10,791




                                                As of          As of
                                               Sept. 30,      Dec. 31,
                                                 2007           2006 *
Assets
    Cash and due from banks                 $   21,333     $     42,387
    Federal funds sold and interest-bearing
     deposits                                    1,784            1,669
    Securities available for sale              142,385          127,520
    Gross loans held for investment            851,614          814,910
    Allowance for loan losses                  (11,229)         (10,829)
    Loans held for sale                         36,050           42,351
    Accrued interest receivable                  6,413            5,796
    Premises and equipment, net                 26,749           27,098
    Federal Home Loan Bank stock                 2,782            3,633
    Investment in bank-owned life insurance     22,787           22,797
    Goodwill                                    32,697           32,697
    Core deposit intangible                      4,449            5,038
    Other assets                                 6,152            4,834
                                            ----------       ----------
       Total Assets                         $1,143,966       $1,119,901
                                            ==========       ==========

Liabilities and Stockholders' Equity
    Non-interest bearing deposits           $  153,046       $  151,812
    NOW, savings, and money market             229,371          233,032
    Time deposits over $100,000                253,575          228,554
    Other time deposits                        313,066          294,450
    Borrowed funds                              54,694           79,063
    Accrued interest payable                     3,436            2,975
    Other liabilities                            5,844            5,616
                                            ----------       ----------
       Total Liabilities                     1,013,032          995,502
    Stockholders' equity                       130,934          124,399
                                            ----------       ----------
       Total Liabilities and Stockholders'
        Equity                              $1,143,966       $1,119,901
                                            ==========       ==========

    Shares outstanding at end of period         10,573           10,610

    * Note: Derived from audited financial statements



Yadkin Valley Financial Corporation
(unaudited)

                                      For the Three Months Ended
                               Sept 30,  Jun 30,  Mar 31,  Dec 31, Sept 30,
                                 2007      2007     2007     2006    2006

Per Share Data:
Basic Earnings per Share       $  0.37  $  0.36  $  0.37  $  0.36  $  0.34
Diluted Earnings per Share     $  0.37  $  0.35  $  0.36  $  0.35  $  0.34
Book Value per Share           $ 12.38  $ 12.06  $ 11.97  $ 11.72  $ 11.46
Tangible Book Value per Share  $  8.87  $  8.54  $  8.43  $  8.17  $  7.94
Cash Dividends per Share       $  0.13  $  0.13  $  0.12  $  0.12  $  0.12

Selected Performance Ratios:
Return on Average Assets
 (annualized)                     1.38%    1.36%    1.46%    1.39%    1.36%
Return on Average Equity
 (annualized)                    11.94%   11.79%   12.53%   12.28%   12.10%
Return on Tangible Equity
 (annualized)                    16.72%   16.63%   17.84%   17.67%   17.66%
Net Interest Margin
 (annualized)                     4.24%    4.21%    4.32%    4.34%    4.43%
Net Interest Spread
 (annualized)                     3.52%    3.50%    3.64%    3.71%    3.79%
Noninterest Income as a % of
 Revenue                         25.43%   28.72%   29.14%   27.76%   28.47%
Noninterest Income as a % of
 Average Assets                   0.32%    0.37%    0.38%    0.35%    0.37%
Noninterest Expense as a % of
  Average Assets                  0.71%    0.78%    0.76%    0.74%    0.77%
Net Noninterest income as a %
 of Average Assets               -0.40%   -0.41%   -0.39%   -0.39%   -0.40%
Efficiency Ratio                 54.10%   57.77%   55.19%   54.83%   55.35%

Asset Quality:
Nonperforming Loans (000's)      1,682    2,639    2,361    1,830    5,184
Nonperforming Assets(000's)      2,630    3,317    3,220    2,404    5,311
Nonperforming Loans to Total
 Loans                            0.19%    0.31%    0.27%    0.21%    0.63%
Nonperforming Assets to Total
 Assets                           0.23%    0.29%    0.28%    0.21%    0.49%
Allowance for Loan Losses to
 Total Loans                      1.32%    1.32%    1.29%    1.26%    1.29%
Allowance for Loan Losses to
 Nonperforming Loans               668%     427%     470%     592%     205%
Net Charge-offs to Average
 Loans (annualized)               0.16%    0.01%    0.02%    0.15%    0.09%

Capital Ratios(1):
Equity to Total Assets           11.45%   11.32%   11.19%   11.11%   11.11%
Tangible Equity to Tangible
 Assets(2)                        8.47%    8.29%    8.13%    8.01%    7.97%
Tier 1 leverage ratio             8.53%    8.26%    8.36%    8.16%    8.18%
Tier 1 risk-based ratio           9.41%    9.48%    9.40%    9.20%    9.38%
Total risk-based capital ratio   10.54%   10.68%   10.59%   10.37%   10.57%

(1) Capital ratios are for Yadkin Valley Bank and Trust Company.
(2) The tangible equity to tangible assets ratio is a non-GAAP measure that
    management feels may be useful to investors.




                                               For the Nine Months Ended
                                              Sept 30,  Sept 30,  Sept 30,
                                                2007      2006      2005
Selected Performance Ratios:
Return on Average Assets (annualized)           1.40%     1.28%     1.13%
Return on Average Equity (annualized)          12.08%    11.25%     9.63%
Return on Tangible Equity (annualized)         17.04%    16.50%    14.44%
Net Interest Margin                             4.26%     4.48%     4.02%
Net Interest Spread                             3.55%     3.91%     3.66%
Noninterest Income as a % of Revenue           27.77%    26.79%    29.03%
Noninterest Income as a % of Average Assets     1.06%     1.01%     1.01%
Noninterest Expense as a % of  Average Assets   2.25%     2.31%     2.24%
Efficiency Ratio                               55.90%    56.41%    59.42%

Asset Quality:
Net Charge-offs to Average Loans (annualized)   0.06%     0.08%     0.11%





                    Average Balance Sheets and Net Interest Income Analysis
                                      (Dollars in Thousands)

(Unaudited)
Three Months Ended:       September 30, 2007         September 30, 2006
                      -------------------------- --------------------------
                        Average           Yield/   Average           Yield/
                        Balance   Interest Rate    Balance   Interest Rate
                      ----------- -------- ----  ----------- -------- ----
INTEREST EARNING
 ASSETS
Federal funds sold    $     7,571 $     99 5.19% $     5,212 $     70 5.33%
Interest bearing
 deposits                   3,977       47 4.69%       1,509       20 5.26%
Investment securities
 (1)                      142,941    1,852 5.14%     127,842    1,493 4.63%
Total loans (1,2)         865,254   17,409 7.98%     809,721   16,030 7.85%
                      ----------- --------       ----------- --------
Total average earning
 assets (1)             1,019,743   19,407 7.55%     944,284   17,613 7.40%
                                  --------                   --------
Noninterest earning
 assets                   108,592                    118,959
                      -----------                -----------
Total average assets  $ 1,128,335                $ 1,063,243
                      ===========                ===========

INTEREST BEARING
 LIABILITIES
NOW and money market  $   188,890 $  1,059 2.22% $   180,212 $    977 2.15%
Savings                    35,998       91 1.00%      39,039       98 1.00%
Time certificates         560,606    6,855 4.85%     485,723    5,349 4.37%
                      ----------- --------       ----------- --------
Total interest
 bearing deposits         785,494    8,005 4.04%     704,874    6,424 3.62%
Repurchase agreements
 sold                      34,183      296 3.44%      31,527      229 2.88%
Borrowed funds             17,545      203 4.59%      39,593      411 4.12%
                      ----------- --------       ----------- --------
Total interest
 bearing liabilities      837,222    8,504 4.03%     775,994    7,064 3.61%
                      ----------- --------       ----------- --------

Noninterest bearing
 deposits                 154,496                    150,493
Stockholders' equity      128,351                    119,231
Other liabilities           8,266                     17,525
                      -----------                -----------
Total average
 liabilities and
 stockholders' equity $ 1,128,335                $ 1,063,243
                      ===========                ===========

NET INTEREST INCOME/
 YIELD (3,4)                      $ 10,903 4.24%             $ 10,549 4.43%
                                  ========                   ========

INTEREST SPREAD (5)                        3.52%                      3.79%

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 34%, 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.





                    Average Balance Sheets and Net Interest Income Analysis
                                      (Dollars in Thousands)

(Unaudited)
Nine Months Ended:       September  30, 2007         September 30, 2006
                      -------------------------- --------------------------
                        Average           Yield/   Average           Yield/
                        Balance   Interest Rate    Balance   Interest Rate
                      ----------- -------- ----  ----------- -------- ----
INTEREST EARNING
 ASSETS
Federal funds sold    $     6,626 $    268 5.41% $     3,674 $    136 4.95%
Interest bearing
 deposits                   3,162       75 3.17%       2,270       71 4.18%
Investment securities
 (1)                      135,703    5,174 5.10%     122,725    4,173 4.55%
Total loans (1,2)         855,011   50,842 7.95%     794,979   45,342 7.63%
                      ----------- --------       ----------- --------
Total average earning
 assets (1)             1,000,502   56,360 7.53%     923,648   49,722 7.20%
                                  --------                   --------
Noninterest earning
 assets                   110,521                    118,669
                      -----------                -----------
Total average assets  $ 1,111,258                $ 1,042,317
                      ===========                ===========

INTEREST BEARING
 LIABILITIES
NOW and money market  $   187,946 $  3,118 2.22% $   187,234 $  2,792 1.99%
Savings                    36,445      273 1.00%      39,872      298 1.00%
Time certificates         545,262   19,590 4.80%     456,409   13,842 4.05%
                      ----------- --------       ----------- --------
Total interest
 bearing deposits         769,653   22,981 3.99%     683,515   16,932 3.31%
Repurchase agreements
 sold                      34,681      866 3.34%      30,573      650 2.84%
Borrowed funds             18,912      654 4.62%      47,673    1,172 3.29%
                      ----------- --------       ----------- --------
Total interest
 bearing liabilities      823,246   24,501 3.98%     761,761   18,754 3.29%
                      ----------- --------       ----------- --------

Noninterest bearing
 deposits                 152,976                    146,012
Stockholders' equity      128,579                    118,637
Other liabilities           6,457                     15,907
                      -----------                -----------
Total average
 liabilities and
 stockholders' equity $ 1,111,258                $ 1,042,317
                      ===========                ===========

NET INTEREST INCOME/
 YIELD (3,4)                      $ 31,859 4.26%             $ 30,968 4.48%
                                  ========                   ========

INTEREST SPREAD (5)                        3.55%                      3.91%

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 34%, 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.

Contact Information

  • For additional information contact:
    William A. Long
    President and CEO
    Edwin E. Laws
    CFO
    (336) 526-6312