SOURCE: Yadkin Valley Financial Corporation

Yadkin Valley Financial Corporation

October 22, 2009 07:30 ET

Yadkin Valley Financial Corporation Announces Third Quarter 2009 Results

ELKIN, NC--(Marketwire - October 22, 2009) - Yadkin Valley Financial Corporation (NASDAQ: YAVY)

Third Quarter Financial Highlights:

--  Tier 1, tier 1 risk based capital, and total risk based capital ratios
    of 7.83%, 9.31%, and 10.53%, respectively for the bank holding company as
    reported to the Federal Reserve
--  Provision for loan losses of $18.3 million, an increase of $1.8
    million compared to the second quarter 2009
--  Loan loss reserves increased to 3.21% of total gross loans or 3.30% of
    total loans held for investment, compared to 2.62% of total gross loans or
    2.82% of total loans held for investment in the second quarter 2009
--  Nonperforming loans increased to 2.70% of total gross loans from 1.82%
    in the second quarter 2009
--  Nonperforming assets increased to 2.68% of total assets from 1.84% in
    the second quarter 2009
--  Net charge-offs increased to $10.3 million or 2.39% of average loans
    on an annualized basis, compared to $1.1 million or 0.27% on an annualized
    basis in the second quarter 2009
--  Net interest margin was 3.82%, an increase of six basis points
    compared to 3.76% in the second quarter
--  Net loss of $68.7 million or $4.26 per diluted share (including
    preferred dividends), which includes a non-cash goodwill impairment charge
    of $61.6 million
--  Excluding the goodwill impairment charge, the third quarter net loss
    was $7.1 million or $0.44 per diluted share
    

Yadkin Valley Financial Corporation (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, announced financial results for the third quarter ended September 30, 2009. The Company reported a net loss to common shareholders of $68.7 million or $4.26 per diluted share. The net loss primarily reflects a goodwill impairment charge of $61.6 million to write off the majority of the Company's goodwill which has accumulated with each acquisition beginning in 2002. This charge is a non-cash accounting transaction that will not impact cash flows, liquidity, tangible capital ratios, and the Company's ability to conduct business and is primarily due to the current state of the financial markets and Yadkin Valley's stock price performance during 2009. The remaining goodwill of $4.9 million at September 30, 2009 is related to the acquisition of Sidus Financial, LLC, the Company's mortgage subsidiary. Excluding the impact of the goodwill impairment charge, the net loss for the third quarter of 2009 was $7.1 million or $0.44 per diluted share. This compares to a net loss of $7.1 million or $0.46 per diluted share in the second quarter of 2009.

Bill Long, President and CEO commented, "Our third quarter results were most significantly impacted by the $61.6 million goodwill impairment charge. As time progressed and bank stock valuations did not recover, we were compelled to evaluate our goodwill under the assumption that our share price would not recover from this unprecedented economic environment as quickly as we had originally anticipated. Accordingly, the goodwill impairment charge was necessary given the prolonged downturn in the economy.

"As we had anticipated, net charge-offs during the third quarter increased compared to the first half of 2009, and our elevated level of provision for loan losses was primarily due to an increase in recent charge-off activity. We continued to conservatively examine our loan portfolio during the third quarter, with a particular emphasis on real estate loans, and recorded write-downs on our nonperforming loans to net realizable values. The majority of the net charge-off activity that occurred during the third quarter was related to residential construction loans, and included the charge-off of one loan related to the lumber industry. We expect fourth quarter net charge-off activity to be similar to third quarter levels as we continue to aggressively work through our problem assets so that we can return to our focus on growth by early 2010.

"We are confident that the steps we are taking today to manage and work through our problem assets will allow us to emerge from the current credit cycle well-positioned to take advantage of the unique opportunities available across our markets. We are well-capitalized for regulatory purposes both at the bank and holding company level, and will continue to evaluate a number of capital raising options which would increase our already strong regulatory capital levels, support our growth initiatives, and absorb loan losses."

Third Quarter 2009 Financial Highlights

Asset Quality

Nonperforming loans increased by $13.7 million to $45.7 million, or 2.70% of total gross loans, compared to $32.0 million, or 1.82% of total gross loans, as of the second quarter of 2009. The majority of the increase was due to the addition of $24.7 million in nonaccrual loans, which were primarily commercial real estate and land development loans, seven of which were in excess of $1.0 million. These increases were partially offset by $5.1 million in loans charged-off, $3.9 million in loans transferred to other real estate owned, and $700,000 in loans moved out of nonaccrual status at the end of the third quarter.

                                         Nonperforming Loan Analysis
                                            (Dollars in thousands)

                                    Third Quarter 2009  Second Quarter 2009
                                    ------------------- -------------------
                                                 % of                % of
                                    Oustanding  Total   Oustanding  Total
Loan Type                            Balance    Loans    Balance    Loans
                                    ---------- -------  ---------- -------
Construction/land development       $    7,611    0.45%      7,567    0.43%
Residential construction                15,550    0.92%      8,415    0.48%
HELOC                                    1,425    0.08%      1,229    0.07%
1-4 Family residential                   6,784    0.40%      2,754    0.16%
Multifamily residential                      -    0.00%          -    0.00%
Commercial real estate                   9,115    0.54%      8,177    0.46%
Commercial & industrial                  4,390    0.26%      3,583    0.20%
Consumer & other                           810    0.05%        282    0.02%
                                    ---------- -------  ---------- -------
Total                               $   45,685    2.70% $   32,008    1.82%
                                    ---------- -------  ---------- -------

Other real estate owned (OREO) totaled $9.4 million at the end of the third quarter, up from $7.8 million in the second quarter. The increase in OREO was primarily due to the addition of 15 properties, primarily commercial construction projects, commercial real estate, and 1-4 family residences totaling $4.7 million, offset by sales of $1.8 million and write-downs of $1.2 million. Total nonperforming assets were $55.1 million, or 2.68% of total assets, up from $39.8 million, or 1.84% of total assets, as of June 30, 2009.

During the third quarter of 2009, the provision for loan losses increased $1.8 million to $18.3 million compared to the second quarter. The allowance for loan losses increased to $54.3 million, an increase of $8.1 million compared to $46.2 million in the second quarter. Net charge-offs totaled 2.39% of average loans on an annualized basis compared to 0.27% on an annualized basis during the second quarter. Loan loss reserves as a percentage of total gross loans increased to 3.21%, up from 2.62% in the second quarter, and 3.30% of total loans held for investment, up from 2.82% in the second quarter. Loan loss reserves were 1.19 times nonperforming loans, a decrease from 1.44 times in the second quarter.

Out of the $54.3 million in total allowance for loans losses at September 30, 2009, the specific allowance for impaired loans accounted for $11.4 million, down from $12.0 million at the end of the second quarter. The remaining general allowance, $42.9 million, was attributed to unimpaired loans and was up from $34.2 million at the end of the second quarter. This increase in the general allowance was driven primarily by increased recent charge-offs.

Net Interest Income and Net Interest Margin

Net interest income totaled $18.4 million, an increase of $800,000 compared to the second quarter of 2009. The increase in net interest income is due to a 3% increase in average earning assets and a six basis point improvement in the net interest margin to 3.82% from 3.76% in the second quarter as deposits and borrowings repriced lower to a slightly greater extent than interest earning assets. The net interest margin was positively impacted by adjustments to 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 2.93%, an increase of three basis points compared to the second quarter.

Non-Interest Income

Non-interest income decreased 39% to $4.6 million, compared to $7.6 million in the second quarter of 2009. The sequential decrease in non-interest income was primarily due to a 43% decrease in gains on mortgage loan sales related to a decrease in mortgage refinance activity as mortgage rates increased during the quarter. Also impacting non-interest income was a $1.2 million loss on the write-down and sale of other real estate owned.

Non-Interest Expense

Non-interest expense increased by $58.7 million to $77.7 million, compared to $19.0 million in the second quarter of 2009. The increase was primarily due to the non-cash goodwill impairment charge of $61.6 million. Excluding the goodwill impairment charge, non-interest expense decreased 15% due to a decrease of merger-related expenses of $1.9 million and a decrease in FDIC expense of $800,000 due to industry wide one-time assessments recorded in the second quarter.

Balance Sheet and Capital

Compared to the second quarter of 2009, total gross loans and deposits decreased 4% and 2%, respectively, while loans held for investment remained relatively flat. Loan growth within the Company's Yadkin region, primarily in the commercial real estate and commercial and industrial portfolios, slightly offset a modest decrease in loan balances within the American Community region, while loan growth remained flat within the Company's remaining regions due to continued slow loan demand from quality loan applicants. The decrease in total gross loans was primarily attributable to a lower level of loans held for sale due to a decreased amount of mortgage refinance activity at Sidus as mortgage rates increased slightly during the quarter. The decrease in total deposits was related to runoff of higher cost CDs combined with the continued focus on lower cost deposit gathering as part of the Company's strategy to reduce liability costs and improve the funding mix and net interest margin.

The Company remains well-capitalized for regulatory purposes. As of September 30, 2009, the Company's Tier 1, tier 1 risk based capital, and total risk based capital ratios were 7.83%, 9.31% and 10.53%, respectively.

Conference Call

Yadkin Valley Financial Corporation will host a conference call at 10:00 a.m. EDT to discuss financial results, business highlights, and outlook. The call may be accessed by dialing 888-256-9119 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?mediaid=39293&c=YAVY&mediakey=565D0C649398A72B1B53DCAC8577A3FD&e=0 (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 October 29 by dialing 888-203-1112 and entering access code 8422505.

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, NC. 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) changes in the U.S. legal and regulatory framework; and (5) 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
                                        ----------------------------------
                                         Sept. 30,    June 30,   Sept. 30,
                                           2009        2009        2008
                                        ----------  ----------  ----------

INTEREST INCOME:
Interest and fees on loans              $   24,731  $   23,936  $   17,552
Interest on federal funds sold                  19           1           8
Interest and dividends on securities:
Taxable                                      1,311       1,363       1,335
Non-taxable                                    566         513         382
Interest-bearing deposits                       10          10         161
                                        ----------  ----------  ----------
TOTAL INTEREST INCOME                       26,637      25,823      19,438
                                        ----------  ----------  ----------
INTEREST EXPENSE:
Time deposits of $100,000 or more            4,517       3,734       2,951
Other interest bearing deposits              3,005       3,753       4,594
Borrowed funds                                 734         782       1,268
                                        ----------  ----------  ----------
TOTAL INTEREST EXPENSE                       8,256       8,269       8,813
                                        ----------  ----------  ----------
NET INTEREST INCOME                         18,381      17,554      10,625
PROVISION FOR LOAN LOSSES                   18,286      16,457       1,334
                                        ----------  ----------  ----------
NET INTEREST INCOME AFTER PROVISION FOR
 LOAN LOSSES                                    96       1,097       9,291
                                        ----------  ----------  ----------

NONINTEREST INCOME:
Service charges on deposit accounts          1,577       1,535       1,172
Other service fees                           1,189       1,365         858
Net gain on sales of mortgage loans          2,751       4,802       1,872
Net loss on sales of investment
 securities                                      -           -        (966)
Income on investment in bank owned life
 insurance                                     235         234         238
Mortgage banking income (loss)                   7        (207)        (11)
Other income (loss)                         (1,124)       (122)       (105)
                                        ----------  ----------  ----------
TOTAL NONINTEREST INCOME                     4,635       7,607       3,058
                                        ----------  ----------  ----------

NONINTEREST EXPENSES:
Salaries and employee benefits               7,762       8,299       5,136
Occupancy and equipment expense              1,858       1,842       1,307
Printing and supplies                          345         272         176
Data processing                                349         427         217
Communications expense                         372         330         272
Advertising and marketing expense              357         213         376
Amortization of core deposit intangible        327         350         229
FDIC assessment expense                        973       1,797         199
Loss on other than temporary impairment
 of securities                                 175           -           -
Goodwill impairment                         61,566           -           -
Other expense                                3,621       5,524       1,849
                                        ----------  ----------  ----------
TOTAL NONINTEREST EXPENSE                   77,705      19,054       9,761
                                        ----------  ----------  ----------

INCOME (LOSS) BEFORE INCOME TAXES          (72,974)    (10,350)      2,588
INCOME TAX (BENEFIT)                        (4,716)     (3,795)        795
                                        ----------  ----------  ----------
NET INCOME (LOSS)                       $  (68,259) $   (6,555) $    1,793
Preferred stock dividend                       440         528           -
                                        ----------  ----------  ----------
NET INCOME (LOSS) TO COMMON
 SHAREHOLDERS                           $  (68,699) $   (7,083) $    1,793
                                        ==========  ==========  ==========
INCOME (LOSS) PER COMMON SHARE:
Basic                                   $    (4.26) $    (0.46) $     0.16
Diluted                                 $    (4.26) $    (0.46) $     0.15

CASH DIVIDENDS PER COMMON SHARE         $        -  $     0.06  $     0.13

AVERAGE SHARES OUTSTANDING:
Basic                                   16,129,632  15,322,043  11,525,277
Diluted                                 16,129,632  15,324,914  11,582,742





Yadkin Valley Financial Corporation
Consolidated Statements of Income (Loss)
(unaudited)
($ in thousands except share and per share data)

                                             For the Nine Months Ended
                                        -----------------------------------
                                         Sept. 30,   Sept. 30,   Sept. 30,
                                           2009        2008        2007
                                        ----------  ----------  -----------
INTEREST INCOME:
Interest and fees on loans              $   64,695  $   50,989  $    50,694
Interest on federal funds sold                  22          45          268
Interest and dividends on securities:
Taxable                                      3,849       3,985        3,895
Non-taxable                                  1,463       1,123          887
Interest-bearing deposits                       31         301          110
                                        ----------  ----------  -----------
TOTAL INTEREST INCOME                       70,060      56,443       55,854
                                        ----------  ----------  -----------
INTEREST EXPENSE:
Time deposits of $100,000 or more           11,351       8,633        8,858
Other time and savings deposits             10,718      14,105       14,123
Borrowed funds                               2,141       3,350        1,520
                                        ----------  ----------  -----------
TOTAL INTEREST EXPENSE                      24,210      26,088       24,501
                                        ----------  ----------  -----------
NET INTEREST INCOME                         45,849      30,355       31,353
PROVISION FOR LOAN LOSSES                   45,293       3,492          800
                                        ----------  ----------  -----------
NET INTEREST INCOME AFTER PROVISION FOR
 LOAN LOSSES                                   556      26,863       30,553
                                        ----------  ----------  -----------

NON-INTEREST INCOME:
Service charges on deposit accounts          4,159       3,246        2,938
Other service fees                           3,619       2,599        2,719
Net gain on sales of mortgage loans         10,751       5,429        4,394
Net loss on sales of investment
 securities                                      -        (972)          45
Income on investment in bank owned life
 insurance                                     701         706          785
Mortgage banking income (loss)                (507)         67          276
Other income (loss)                         (1,206)        (41)         590
                                        ----------  ----------  -----------
TOTAL NON-INTEREST INCOME                   17,517      11,034       11,748
                                        ----------  ----------  -----------

NON-INTEREST EXPENSES:
Salaries and employee benefits              21,688      15,052       14,453
Occupancy and equipment expense              5,028       3,578        2,987
Printing and supplies                          849         557          409
Data processing                                909         600          315
Communications expense                       1,024         758          934
Advertising and marketing expense              946         712          372
Amortization of core deposit intangible        902         652          589
FDIC assessment expense                      3,433         443          134
Loss on other than temporary impairment
 of securities                                 355           -            -
Goodwill impairment                         61,566           -            -
Other expense                               11,852       6,204        4,771
                                        ----------  ----------  -----------
TOTAL NON-INTEREST EXPENSE                 108,552      28,556       24,964
                                        ----------  ----------  -----------

INCOME (LOSS) BEFORE INCOME TAXES          (90,478)      9,341       17,337
INCOME TAX (BENEFIT)                       (11,505)      2,907        5,716
                                        ----------  ----------  -----------
NET INCOME (LOSS)                       $  (78,973) $    6,434  $    11,621
Preferred stock dividend                     1,681           -            -
                                        ----------  ----------  -----------
NET INCOME (LOSS) TO COMMON
 SHAREHOLDERS                           $  (80,654) $    6,434  $    11,621
                                        ==========  ==========  ===========

INCOME (LOSS) PER COMMON SHARE:
Basic                                   $    (5.62) $     0.57  $      1.10
Diluted                                 $    (5.62) $     0.57  $      1.08

CASH DIVIDENDS PER COMMON SHARE         $        -  $     0.39  $      0.38

AVERAGE SHARES OUTSTANDING:
Basic                                   14,356,544  11,198,506   10,603,937
Diluted                                 14,356,544  11,275,946   10,782,365





Yadkin Valley Financial Corporation
Consolidated Balance Sheets
Unaudited
($ in thousands except share and per share data)

                                                      As of
                                        ----------------------------------
                                        Sept. 30,    Dec. 31,   Sept. 30,
                                           2009        2008*       2008
                                        ----------  ----------  ----------
ASSETS
CASH AND CASH EQUIVALENTS
 Cash and due from banks                $   70,702  $   22,554  $   26,574
 Federal funds sold                              1          58          32
 Interest-bearing deposits                   2,984       3,411      12,515
                                        ----------  ----------  ----------
  TOTAL CASH AND CASH EQUIVALENTS           73,687      26,023      39,121
                                        ----------  ----------  ----------

SECURITIES AVAILABLE FOR SALE              191,423     137,813     140,709

GROSS LOANS                              1,646,326   1,187,569   1,118,619
 Less: Allowance for loan losses           (54,270)    (22,355)    (16,526)
                                        ----------  ----------  ----------
  NET LOANS                              1,592,056   1,165,214   1,102,093
                                        ----------  ----------  ----------

LOANS HELD FOR SALE                         46,911      49,929      44,841
ACCRUED INTEREST RECEIVABLE                  7,649       5,442       6,284
PREMISES AND EQUIPMENT, NET                 44,272      33,900      32,948
FORECLOSED REAL ESTATE                       9,366       4,018       3,001
FEDERAL HOME LOAN BANK STOCK, AT COST       10,539       7,877       7,689
INVESTMENT IN BANK-OWNED LIFE INSURANCE     24,308      23,607      23,386
GOODWILL                                     4,944      53,503      54,149
CORE DEPOSIT INTANGIBLE                      6,525       4,660       4,886
OTHER ASSETS                                39,992      12,302      10,273

                                        ----------  ----------  ----------
 TOTAL ASSETS                           $2,051,672  $1,524,288  $1,469,380
                                        ==========  ==========  ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
 Non-interest bearing demand deposits   $  205,674  $  153,573  $  157,549
 NOW, savings and money market accounts    413,694     283,891     278,827
 Time certificates:
  Over $100,000                            549,493     333,375     285,162
  Other                                    577,884     384,203     386,357
                                        ----------  ----------  ----------
  TOTAL DEPOSITS                         1,746,745   1,155,042   1,107,895
                                        ----------  ----------  ----------

SHORT-TERM BORROWINGS                       57,264     169,112     153,123
LONG-TERM BORROWINGS                        79,002      38,850      45,086
ACCRUED INTEREST PAYABLE                     3,389       3,555       3,370
OTHER LIABILITIES                           16,163       8,085       7,249

                                        ----------  ----------  ----------
 TOTAL LIABILITIES                       1,902,563   1,374,644   1,316,723
                                        ----------  ----------  ----------

SHAREHOLDERS' EQUITY
 COMMON STOCK                               16,130      11,537      11,533
 PREFERRED STOCK                            46,018           -           -
 SURPLUS                                   118,136      88,030      87,989
 RETAINED EARNINGS (ACCUMULATED
  DEFICIT)                                 (34,242)     48,070      52,139
 ACCUMULATED OTHER COMPREHENSIVE INCOME      3,067       2,007         995
                                        ----------  ----------  ----------
 TOTAL SHAREHOLDERS' EQUITY                149,109     149,644     152,656
                                        ----------  ----------  ----------

 TOTAL LIABILITIES AND SHAREHOLDERS'
  EQUITY                                $2,051,672  $1,524,288  $1,469,380
                                        ==========  ==========  ==========

 * Note: Derived from audited financial statements




Yadkin Valley Financial Corporation
(unaudited)

                                  At or For the Three Months Ended
                          ------------------------------------------------
                          Sept. 30, June 30,  March 31, Dec. 31,  Sept. 30,
                            2009      2009      2009      2008      2008
                          --------  --------  --------  --------  --------

Per Share Data:
Basic Earnings (Loss) per
 Share                    $  (4.26) $  (0.46) $  (0.40) $  (0.22) $   0.16
Diluted Earnings (Loss)
 per Share                   (4.26)    (0.46)    (0.40)    (0.22)     0.15
Book Value per Share          6.39     10.48     12.63     12.97     13.24
Tangible Book Value per
 Share                        5.68      5.93      7.61      7.93      8.12
Cash Dividends per Share      0.06      0.06      0.06      0.13      0.13

Selected Performance
 Ratios:
Return on Average Assets
 (annualized)               -12.62%    -1.27%    -1.07%    -0.69%     0.49%
Return on Average Equity
 (annualized)              -125.93%   -12.81%    -9.25%    -6.64%     4.66%
Return on Tangible Equity
 (annualized)              -191.86%   -18.93%   -13.62%   -10.79%     7.61%
Net Interest Margin
 (annualized)                 3.82%     3.76%     2.87%     2.94%     3.33%
Net Interest Spread
 (annualized)                 3.60%     3.45%     2.53%     2.57%     2.90%
Noninterest Income as a %
 of Revenue                  97.98%    87.40%   113.72%    68.88%    24.76%
Noninterest Income as a %
 of Average Assets            0.22%     0.37%     0.34%     0.30%     0.21%
Noninterest Expense as a
 % of Average Assets          3.62%     0.92%     0.75%     0.73%     0.68%
Net Noninterest income as
 a % of Average Assets       -3.41%    -0.55%    -0.42%    -0.42%    -0.47%
Efficiency Ratio (3)         67.37%    73.44%    75.38%    73.32%    68.64%

Asset Quality:
Nonperforming Loans
 (000s)                   $ 45,685  $ 32,008  $ 17,420  $ 13,647  $  9,667
Nonperforming
 Assets (000s)              55,051    39,777    21,738    17,665    12,668
Nonperforming Loans to
 Total Loans                  2.70%     1.82%     1.28%     1.10%     0.83%
Nonperforming Assets to
 Total Assets                 2.68%     1.84%     1.33%     1.16%     0.86%
Allowance for Loan Losses
 to Total Loans Held For
 Investment                   3.30%     2.82%     2.61%     1.88%     1.48%
Allowance for Loan Losses
 to Nonperforming Loans     119.00%   144.00%   177.00%   164.00%   171.00%
Net Charge-offs/Recoveries
 to Average Loans
 (annualized)                 2.39%     0.27%     0.63%     0.60%     0.24%

Capital Ratios:
Equity to Total Assets        7.27%     9.43%    11.00%     9.82%    10.39%
Tangible Equity to
 Tangible Assets (2)          6.75%     6.24%     7.73%     6.24%     6.64%
Tier 1 leverage ratio (1)     7.49%     7.87%     8.65%     8.12%     8.36%
Tier 1 risk-based ratio (1)   8.91%     8.67%     9.71%     9.01%     9.40%
Total risk-based capital
 ratio (1)                   10.18%     9.92%    10.97%    10.26%    10.65%

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 loss on goodwill
    impairment of $61,565,768 in the third quarter



Yadkin Valley Financial Corporation
(unaudited)

                                                      For the Nine Months
                                                        Ended Sept. 30,
                                                    ----------------------
                                                     2009    2008    2007
                                                    ------  ------  ------

Selected Performance Ratios:
Return on Average Assets (annualized)                -5.42%   0.64%   1.40%
Return on Average Equity (annualized)               -51.04%   5.87%  12.08%
Return on Tangible Equity (annualized)              -75.12%   8.64%  17.04%
Net Interest Margin                                   3.54%   3.39%   4.26%
Net Interest Spread                                   3.24%   2.89%   3.55%
Noninterest Income as a % of Revenue                 96.92%  29.12%  27.77%
Noninterest Income as a % of Average Assets           0.90%   0.82%   1.06%
Noninterest Expense as a % of Average Assets          5.57%   2.12%   2.25%
Net Noninterest income as a % of Average Assets      -4.67%  -1.30%  -1.19%
Efficiency Ratio (1)                                 71.86%  66.44%  55.90%

Asset Quality:
Net Charge-offs to Average Loans (annualized)         1.14%   0.13%   0.06%

(1) The Efficiency ratio was calculated excluding the loss on goodwill
    impairment of $61,565,768 in the third quarter




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

                                  Three Months Ended Sept. 30,
                      ----------------------------------------------------
                                2009                       2008
                      -------------------------  -------------------------
                        Average           Yield/   Average           Yield/
                        Balance  Interest  Rate    Balance  Interest  Rate
                      ---------- -------- -----  ---------- -------- -----
INTEREST EARNING ASSETS
Total loans (1,2)     $1,705,489 $ 24,812  5.77% $1,137,645 $ 17,589  6.13%
Federal funds sold        38,883       20  0.20%      1,659        8  1.91%
Investment securities    193,878    2,252  4.61%    139,266    1,885  5.37%
Interest-bearing
 deposits                 17,951       10  0.22%     13,642      161  4.68%
                      ---------- --------        ---------- --------
Total average earning
 assets (1)            1,956,201   26,932  5.50%  1,292,212   19,643  6.03%
                                 --------                   --------
Noninterest earning
 assets                  189,567                    147,891
                      ----------                 ----------
Total average assets  $2,145,768                 $1,440,103
                      ==========                 ==========

INTEREST BEARING LIABILITIES
Time deposits         $1,170,356 $  6,735  2.28% $  651,635 $  6,501  3.96%
Other deposits           416,963      786  0.75%    288,335    1,044  1.44%
Borrowed funds           140,934      734  2.07%    178,080    1,268  2.82%
                      ---------- --------        ---------- --------
Total interest
 bearing liabilities   1,728,253    8,255  1.90%  1,118,050    8,813  3.13%

Noninterest bearing
 deposits                198,101                    159,238
Other liabilities          4,363                     10,302
                      ----------                 ----------
Total average
 liabilities             202,464                  1,287,590
                      ----------                 ----------

Shareholders' equity     215,051                    152,513

Total average
 liabilities and      ----------                 ----------
 shareholders' equity $2,145,768                 $1,440,103
                      ==========                 ==========

NET INTEREST INCOME/             --------                   --------
 YIELD (3,4)                     $ 18,677  3.82%            $ 10,830  3.33%
                                 ========                   ========

INTEREST SPREAD (5)                        3.60%                      2.90%

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.




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

                                  Nine Months Ended Sept. 30,
                      ----------------------------------------------------
                                2009                       2008
                      -------------------------  -------------------------
                        Average           Yield/   Average           Yield/
                        Balance  Interest  Rate    Balance  Interest  Rate
                      ---------- -------- -----  ---------- -------- -----
INTEREST EARNING ASSETS
Total loans (1,2)     $1,563,466 $ 64,813  5.54% $1,057,970 $ 51,104  6.43%
Federal funds sold        15,946       22  0.18%      4,294       45  1.40%
Investment securities    172,597    5,957  4.61%    142,817    5,603  5.23%
Interest-bearing
 deposits                 10,190       31  0.41%     11,095      300  3.60%
                      ---------- --------        ---------- --------
Total average earning
 assets (1)            1,762,199   70,823  5.37%  1,216,176   57,052  6.25%
                                 --------                   --------
Noninterest earning
 assets                  185,963                    129,706
                      ----------                 ----------
Total average assets  $1,948,162                 $1,345,882
                      ==========                 ==========

INTEREST BEARING LIABILITIES
Time deposits         $  999,200 $ 19,711  2.61% $  619,681 $ 19,572  4.21%
Other deposits           378,292    2,358  0.83%    269,385    3,165  1.57%
Borrowed funds           139,645    2,141  2.05%    144,163    3,350  3.10%
                      ---------- --------        ---------- --------
Total interest
 bearing liabilities   1,517,137   24,210  2.13%  1,033,229   26,087  3.36%

Noninterest bearing
 deposits                178,193                    155,585
Other liabilities         45,972                     10,934
                      ----------                 ----------
Total average
 liabilities           1,741,302                  1,199,748
                      ----------                 ----------

Shareholders' equity     206,860                    146,134

Total average
 liabilities and      ----------                 ----------
 shareholders' equity $1,948,162                 $1,345,882
                      ==========                 ==========

NET INTEREST INCOME/             --------                   --------
 YIELD (3,4)                     $ 46,613  3.54%            $ 30,965  3.39%
                                 ========                   ========

INTEREST SPREAD (5)                        3.24%                      2.89%

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 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