SOURCE: Yadkin Valley Financial Corporation

February 26, 2008 11:23 ET

Yadkin Valley Financial Corporation Announces Diluted Earnings Per Share of $0.37 for the Fourth Quarter and $1.45 for the Year End December 31, 2007

ELKIN, NC--(Marketwire - February 26, 2008) - Yadkin Valley Financial Corporation (the "Company") (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company (the "Bank"), reports earnings of $3.93 million for the quarter ended December 31, 2007, an increase of 3.2% as compared with earnings of $3.81 million for the same quarter of 2006. Diluted earnings per share ("EPS") were $0.37 and $0.35 for the quarters ended December 31, 2007 and 2006, respectively, an increase of 5.7%. Return on equity ("ROE") was 11.7% for the quarter ended December 31, 2007, down from 12.3% for the quarter ended December 31, 2006, and return on tangible equity ("ROTE") decreased to 16.2% from 17.7% over the same periods.

Net income for the year ended December 31, 2007 was $15.5 million, a 12.7% increase over $13.8 million earned for the year ended December 31, 2006. Diluted earnings per share were $1.45 and $1.28, respectively, for years ended December 31, 2007 and 2006, an increase of 13.3%. ROE increased to 12.0% for the year ended December 31, 2007 from 11.5% a year ago, and ROTE remained at 16.8% for the year.

The increase in quarterly net income over the same period in the prior year was attributed primarily to a decrease in provision for loan losses of $236,000, or 45%, and an increase in net interest income of $168,000, or 1.6%. The decrease in noninterest income of $99,000, or 2.6%, was partially offset by a decrease in noninterest expenses of $58,000, or 0.7%.

Comparing the fourth quarters of 2007 and 2006, the net interest margin decreased to 4.03% from 4.34% due to the Company's sensitivity to declining interest rates. The prime rate was 7.25% at the end of 2007, after falling 100 basis points since mid-September 2007. The company's yield on earning assets decreased by 16 basis points, and the cost of interest bearing liabilities increased by 24 basis points. The increase in the cost of interest bearing liabilities was attributed to the issuance of $25 million in trust preferred securities and to growth in the average balances of certificates of deposit (CODs). On November 1, 2007 the Company issued trust preferred securities, which carry an interest rate of three-month LIBOR plus 132 basis points. The average balances of CODs grew by $63.0 million, or 12.5%, comparing the fourth quarters of 2006 and 2007. CODs maturing during the first three months of 2008 have an aggregate rate of 4.84% and total $199.9 million, or 35% of total CODs. These maturing CODs represent various terms ranging from seven days to three years. The Bank will have opportunities to replace these deposits with funding at lower interest rates in 2008. The impact of the additional cost of CODs during 2007 was mitigated by an increase in the portion of funding provided by noninterest bearing deposits, which increased by $10.1 million, or 6.8%, comparing the average balances for the fourth quarters of 2006 and 2007. We believe that loan performance remained strong with the ratio of nonperforming loans to total loans unchanged at 0.21%, comparing December 31, 2007 and 2006. The allowance for loan losses to total loans held for investment declined by 10 basis points to 1.23% at December 31, 2007 as compared at December 31, 2006.

The decrease in noninterest income was attributable to a charge of $215,000 from a write-down to market value of other real-estate owned, most of which was rental property acquired in a foreclosure during the third quarter of 2007.

Growth in average assets from the third to the fourth quarters of 2007 totaled $36 million (13.0%, annualized) and was concentrated in loans. Loans held for investment averaged $869 million during the fourth quarter of 2007, an increase of $36 million (17.2%, annualized) over the average loans of $833 for the third quarter of 2007. This growth in average loans from linked quarters was concentrated in construction and land development loans ($25 million) and in fixed rate commercial loans secured by real estate ($8 million). Average deposit liabilities for the fourth quarter of 2007 were $953 million, an increase of $13 million (5.7%, annualized) over the average deposits of $940 million for the prior quarter.

Total assets at December 31, 2007 were $1.211 billion, representing increases of $67 million (23.5%, annualized) for the fourth quarter and $91 million (8.1%) for the year. In a comparison of balances at years ended December 31, 2006 and 2007, gross loans held for investment increased by $84 million (10.3%) and deposits increased by $56 million (6.1%).

Bill Long, President and CEO, commented, "We are pleased to announce our earnings for the fourth quarter and year ended December 31, 2007. The year 2007 was a very challenging year for the banking industry. Yet, we saw net income rise 3.2% for the fourth quarter 2007 verses fourth quarter 2006, and 12.7% for the year 2007 over 2006. Diluted earnings per share grew 5.71%, to 37 cents per share, in the fourth quarter 2007 from 35 cents per share in the fourth quarter 2006. For the year ended December 31, 2007, diluted earnings per share finished at $1.45 verses $1.28 for 2006, an increase of 13.3%.

"We believe that banks reporting both double-digit earnings growth for the year 2007 and positive earnings growth for the fourth quarter of 2007 will begin to set themselves apart from their peers. Furthermore, we believe that these banks will be recognized for their ability to manage in difficult times. We are proud and thankful for our Company's performance in 2007 that continued our record of growth and profitability. We look forward to the opportunity to build on the value of our franchise in 2008 and the years ahead. In our opinion, banks that have taken the course of rapid asset growth with marginal profitability will have an increasingly difficult challenge in attracting the capital needed to sustain their growth rates without demonstrating their ability to provide returns on equity that investors expect.

"Credit quality remains at the forefront in our lending practices. We have performed well in comparison to our peers, as we ended the year 2007 with net charge-offs at 0.10% of average loans. Nonperforming loans rose only 7.7% in 2007 to $1,971,538 or 0.21% of total loans. Other real estate owned increased by merely $28,000 from year end 2006 to year end 2007. Our net interest margin ended at 4.03% for fourth quarter 2007 and 4.20% for the year 2007. Managers have done an excellent job in controlling expenses as reflected in our efficiency ratios of 54.12% and 55.26%, respectively, for the quarter and year ended December 31, 2007.

"We are excited about our pending merger with Cardinal State Bank and especially about adding its experienced and talented staff to our family at Yadkin Valley Bank and Trust Company. Cardinal provides full banking services in Durham and Hillsborough. The Cardinal shareholders' meeting is scheduled for March 19th, and we expect to complete the merger by the end of the first quarter of 2008.

"In summary, we believe that Yadkin Valley Bank and Trust Company is at the right place at the right time, and that 2008 will bring many opportunities for our bank to continue growing. We are well positioned for the many opportunities that lie ahead, and we look forward to serving our customers and working for our shareholders in 2008."

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
                                December 31,  September 30,  December 31,
                                    2007           2007          2006
Interest Income:
Interest and fees on loans        $17,532        $17,369       $16,550
Interest on federal funds sold         31             99            56
Interest on taxable securities      1,390          1,407         1,145
Interest on tax-exempt securities     348            309           283
Interest-bearing deposits              38             47            21
                                  -------        -------       -------
  Interest income                  19,339         19,231        18,055
Interest expense                    8,792          8,504         7,676
                                  -------        -------       -------
  Net interest income              10,547         10,727        10,379
Provision for loan losses             289            300           525
                                  -------        -------       -------
  Net interest income after
   provision for loan loss         10,258         10,427         9,854
                                  -------        -------       -------
Noninterest Income:
Service charges on deposit
 accounts                           1,008          1,003           980
Other service fees                    841            863           861
Net gain on sales of mortgage
 loans                              1,488          1,338         1,656
Net gain on sales of investment
 securities                             1             45          (104)
Income on investment in bank owned
 life Insurance                       260            255           248
Mortgage banking income               175             63            79
Bank-owned life insurance death
 benefit                               82              -             -
Other income                         (167)           (11)           68
                                  -------        -------       -------
  Total noninterest income          3,688          3,556         3,788
                                  -------        -------       -------
Noninterest Expense:
Salaries and employee benefits      4,708          4,625         4,672
Occupancy and equipment expense       930            984           999
Printing and supplies                 141            127           127
Data processing                        83            105           114
Communications expense                193            337           220
Amortization of core deposit
 intangible                           187            194           197
Other expense                       1,753          1,644         1,724
                                  -------        -------       -------
  Total noninterest expense         7,995          8,016         8,053
                                  -------        -------       -------
Income before income taxes          5,951          5,967         5,589
Income taxes                        2,024          2,045         1,782
                                  -------        -------       -------
Net income                        $ 3,927        $ 3,922       $ 3,807
                                  =======        =======       =======

Income per share:
     Basic                        $  0.37        $  0.37       $  0.36
     Diluted                      $  0.37        $  0.37       $  0.35

Average shares outstanding
 - basic                           10,570         10,584        10,608
Average shares outstanding
 - diluted                         10,650         10,721        10,788



Yadkin Valley Financial Corporation
(Amounts in thousands except per share data)
(unaudited)

                                            For the Twelve Months Ended
                                                   December 31,
                                            2007                   2006
Interest Income:
Interests and fees on loans               $68,225                $61,799
Interest on federal funds sold                298                    191
Interest on taxable securities              5,286                  4,093
Interest on tax-exempt securities           1,236                  1,131
Interest-bearing deposits                     148                     92
                                          -------                -------
  Interest income                          75,193                 67,306
Interest expense                           33,292                 26,429
                                          -------                -------
  Net interest income                      41,901                 40,877
Provision for loan losses                   1,089                  2,165
                                          -------                -------
  Net interest income after provision for
   loan loss                               40,812                 38,712
                                          -------                -------
Noninterest  Income:
Service charges on deposit accounts         3,946                  3,758
Other service fees                          3,560                  3,400
Net gain on sales of mortgage loans         5,883                  6,026
Net gain on sales of investment securities     45                    (85)
Income on investment in bank owned life
 insurance                                  1,127                    698
Mortgage banking income                       451                    257
Other income                                  424                    291
                                          -------                -------
  Total noninterest income                 15,436                 14,345
                                          -------                -------
Noninterest Expense:
Salaries and employee benefits             19,161                 18,693
Occupancy and equipment expense             3,917                  3,901
Printing and supplies                         550                    591
Data processing                               399                    418
Amortization of core deposit intangible       777                  1,031
Other expense                               8,155                  7,459
                                          -------                -------
  Total noninterest expense                32,959                 32,093
                                          -------                -------
Income before income taxes                 23,289                 20,964
Income taxes                                7,740                  7,172
                                          -------                -------
Net income                                $15,549                $13,792
                                          =======                =======
Income per share:
     Basic                                $  1.47                $  1.30
     Diluted                              $  1.45                $  1.28

Average shares outstanding - basic         10,570                 10,641
Average shares outstanding - diluted       10,713                 10,789



Yadkin Valley Financial Corporation
(Amounts in thousands except per share data)
(unaudited)

                                           As of Dec. 31,    As of Dec. 31,
                                                2007              2006 *
Assets
  Cash and due from banks                    $   24,268       $   42,387
  Federal funds sold and interest-bearing
   deposits                                       2,058            1,669
  Securities available for sale                 142,484          127,520
  Gross loans held for investment               898,753          814,910
  Allowance for loan losses                     (11,046)         (10,829)
  Loans held for sale                            52,754           42,351
  Accrued interest receivable                     6,055            5,796
  Premises and equipment, net                    26,780           27,098
  Federal Home Loan Bank stock                    2,557            3,633
  Investment in bank-owned life insurance        22,683           22,797
  Goodwill                                       32,697           32,697
  Core deposit intangible                         4,261            5,038
  Other assets                                    6,860            4,834
                                             ----------       ----------
    Total Assets                             $1,211,164       $1,119,901
                                             ==========       ==========
Liabilities and Stockholders' Equity
  Non-interest bearing deposits              $  154,979      $   151,812
  NOW, savings, and money market                232,888          233,032
  Time deposits over $100,000                   267,530          228,554
  Other time deposits                           308,045          294,450
  Borrowed funds                                103,425           79,063
  Accrued interest payable                        3,435            2,975
  Other liabilities                               6,801            5,616
                                             ----------       ----------
    Total Liabilities                         1,077,103          995,502
  Stockholders' equity                          134,061          124,399
                                             ----------       ----------
    Total Liabilities and Stockholders'
     Equity                                  $1,211,164       $1,119,901
                                             ==========       ==========
  Shares outstanding at end of period            10,563           10,611

  * Note: Derived from audited financial statements



Yadkin Valley Financial Corporation
(unaudited)

                                       For the Three Months Ended
                                Dec 31,  Sept 30, Jun 30,  Mar 31,  Dec 31,
                                  2007     2007     2007     2007     2006
Per Share Data:
Basic Earnings per Share       $  0.37  $  0.37  $  0.36  $  0.37  $  0.36
Diluted Earnings per Share     $  0.37  $  0.37  $  0.35  $  0.36  $  0.35
 Book Value per Share          $ 12.69  $ 12.38  $ 12.06  $ 11.97  $ 11.72
Tangible Book Value per Share  $  9.19  $  8.87  $  8.54  $  8.43  $  8.17
Cash Dividends per Share       $  0.13  $  0.13  $  0.13  $  0.12  $  0.12

Selected Performance Ratios:
Return on Average Assets
 (annualized)                     1.34%    1.38%    1.36%    1.46%    1.39%
Return on Average Equity
 (annualized)                    11.70%   11.94%   11.79%   12.53%   12.28%
Return on Tangible Equity
 (annualized)                    16.21%   16.72%   16.63%   17.84%   17.67%
Net Interest Margin
 (annualized)                     4.03%    4.24%    4.21%    4.32%    4.34%
Net Interest Spread
 (annualized)                     3.30%    3.52%    3.50%    3.64%    3.71%
Noninterest Income as a % of
 Revenue                         26.45%   25.43%   28.72%   29.14%   27.76%
Noninterest Income as a % of
 Average Assets                   0.32%    0.32%    0.37%    0.38%    0.35%
Noninterest Expense as a % of
 Average Assets                   0.69%    0.71%    0.78%    0.76%    0.74%
Net Noninterest income as a %
 of Average Assets               -0.37%   -0.40%   -0.41%   -0.39%   -0.39%
Efficiency Ratio                 54.12%   54.10%   57.77%   55.19%   54.83%

Asset Quality:
Nonperforming Loans (000's)      1,972    1,682    2,639    2,361    1,830
Nonperforming Assets(000's)      2,574    2,630    3,317    3,220    2,404
Nonperforming Loans to Total
 Loans                            0.21%    0.19%    0.31%    0.27%    0.21%
Nonperforming Assets to Total
 Assets                           0.21%    0.23%    0.29%    0.28%    0.21%
Allowance for Loan Losses to
 Total Loans Held For
 Investment                       1.23%    1.32%    1.32%    1.37%    1.33%
Allowance for Loan Losses to
 Nonperforming Loans               560%     668%     427%     470%     592%
Net Charge-offs to Average
 Loans (annualized)               0.08%    0.16%    0.01%    0.02%    0.15%

Capital Ratios(1):
Equity to Total Assets           11.07%   11.45%   11.32%   11.19%   11.11%
Tangible Equity to Tangible
 Assets(2)                        8.27%    8.47%    8.29%    8.13%    8.01%
Tier 1 leverage ratio             8.48%    8.53%    8.26%    8.36%    8.16%
Tier 1 risk-based ratio           9.24%    9.41%    9.48%    9.40%    9.20%
Total risk-based capital ratio   10.32%   10.54%   10.68%   10.59%   10.37%

(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.



Yadkin Valley Financial Corporation
(unaudited)

                                               For the Twelve Months Ended
                                                Dec 31,   Dec 31,   Dec 31,
                                                  2007      2006      2005
Selected Performance Ratios:
Return on Average Assets (annualized)             1.38%     1.31%     1.14%
Return on Average Equity (annualized)            11.99%    11.52%     9.79%
Return on Tangible Equity (annualized)           16.84%    16.80%    14.65%
Net Interest Margin                               4.20%     4.45%     4.10%
Net Interest Spread                               3.49%     3.88%     3.71%
Noninterest Income as a % of Revenue             27.44%    27.04%    28.68%
Noninterest Income as a % of Average Assets       1.37%     1.36%     1.35%
Noninterest Expense as a % of  Average Assets     2.93%     3.05%     3.02%
Efficiency Ratio                                 55.26%    56.16%    59.32%

Asset Quality:
Net Charge-offs to Average Loans (annualized)     0.10%     0.10%     0.12%



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

(Unaudited)
Three Months Ended:      December 31, 2007            December 31, 2006
                    ---------------------------  -------------------------
                      Average            Yield/    Average           Yield/
                      Balance  Interest   Rate     Balance  Interest  Rate
                    ---------- -------- -------  ---------- -------- -----
INTEREST EARNING
 ASSETS
Federal funds sold  $    3,493 $     31    3.52% $    4,210 $     55  5.18%
Interest bearing
 deposits                3,387       38    4.45%      1,422       21  5.86%
Investment
 securities (1)        144,191    1,892    5.21%    130,315    1,553  4.73%
Total loans (1,2)      905,455   17,570    7.70%    828,693   16,588  7.94%
                    ---------- --------          ---------- --------
Total average
 earning assets (1)  1,056,526   19,531    7.33%    964,640   18,217  7.49%
                               --------                     --------
Noninterest earning
 assets                108,609                      120,819
                    ----------                   ----------
Total average
 assets             $1,165,135                   $1,085,459
                    ==========                   ==========

INTEREST BEARING
 LIABILITIES
NOW and money
 market             $  193,008 $  1,078    2.22% $  186,521 $    999  2.12%
Savings                 35,281       70    0.79%     37,886       96  1.01%
Time certificates      565,841    6,863    4.81%    502,812    5,820  4.59%
                    ---------- --------          ---------- --------
Total interest
 bearing deposits      794,130    8,011    4.00%    727,219    6,915  3.77%
Repurchase
 agreements sold        40,490      357    3.50%     30,903      228  2.93%
Borrowed funds          31,072      424    5.41%     46,069      533  4.59%
                    ---------- --------          ---------- --------
Total interest
 bearing
 liabilities           865,692    8,792    4.03%    804,191    7,676  3.79%
                    ---------- --------          ---------- --------

Noninterest bearing
 deposits              159,218                      149,099
Stockholders'
 equity                133,166                      120,784
Other liabilities        7,059                       11,385
                    ----------                   ----------
Total average
 liabilities
 and stockholders'
 equity             $1,165,135                   $1,085,459
                    ==========                   ==========

NET INTEREST
 INCOME/YIELD (3,4)            $ 10,739    4.03%            $ 10,541  4.34%
                               ========                     ========

INTEREST SPREAD (5)                        3.30%                      3.71%

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)
Twelve Months Ended:      December 31, 2007           December 31, 2006
                    ---------------------------  -------------------------
                      Average            Yield/    Average           Yield/
                      Balance  Interest   Rate     Balance  Interest  Rate
                    ---------- -------- -------  ---------- -------- -----
INTEREST EARNING
 ASSETS
Federal funds sold  $    5,825 $    298    5.12% $    3,799 $    191  5.03%
Interest bearing
 deposits                3,213      148    4.61%      2,047       92  4.49%
Investment
 securities (1)        137,839    7,067    5.13%    124,632    5,726  4.59%
Total loans (1,2)      867,725   68,377    7.88%    803,336   61,930  7.71%
                    ---------- --------          ---------- --------
Total average
 earning assets (1)  1,014,602   75,890    7.48%    933,814   67,939  7.28%
                               --------                     --------
Noninterest earning
 assets                110,232                      118,240
                    ----------                   ----------
Total average
 assets             $1,124,834                   $1,052,054
                    ==========                   ==========

INTEREST BEARING
 LIABILITIES
NOW and money
 market             $  188,909 $  4,196    2.22% $  192,516 $  3,791  1.97%
Savings                 36,152      343    0.95%     39,370      393  1.00%
Time certificates      550,448   26,453    4.81%    468,108   19,662  4.20%
                    ---------- --------          ---------- --------
Total interest
 bearing deposits      775,509   30,992    4.00%    699,994   23,846  3.41%
Repurchase
 agreements sold        36,171    1,223    3.38%     30,655      878  2.86%
Borrowed funds          21,980    1,078    4.90%     47,263    1,705  3.61%
                    ---------- --------          ---------- --------
Total interest
 bearing liabilities   833,660   33,293    3.99%    777,912   26,429  3.40%
                    ---------- --------          ---------- --------

Noninterest bearing
 deposits              114,842                      145,453
Stockholders'
 equity                129,755                      122,942
Other liabilities       46,577                        5,747
                    ----------                   ----------
Total average
 liabilities and
 stockholders'
 equity             $1,124,834                   $1,052,054
                    ==========                   ==========

NET INTEREST
 INCOME/YIELD (3,4)            $ 42,597    4.20%            $ 41,510  4.45%
                               ========                     ========

INTEREST SPREAD (5)                        3.49%                      3.88%

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