SOURCE: Yadkin Valley Financial Corporation

April 27, 2007 17:48 ET

Yadkin Valley Financial Corporation Announces First Quarter 2007 Diluted Earnings per Share of $0.36, an Increase of 33.3% Over the First Quarter 2006

ELKIN, NC -- (MARKET WIRE) -- April 27, 2007 -- Yadkin Valley Financial Corporation, Elkin, NC (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, reports earnings of $3.912 million for the quarter ended March 31, 2007, an increase of 33.6% as compared with earnings of $2.928 million for the same quarter of 2006. Diluted earnings per share were $0.36 and $0.27 for the quarters ended March 31, 2007 and 2006, respectively, an increase of 33.3%. Return on equity increased to 12.5% for the quarter ended March 31, 2007 from 10.0% for the quarter ended March 31, 2006, and return on tangible equity increased to 17.8% from 14.8% for the same periods.

Total assets grew by $15.2 million (1.3%) for the quarter ended March 31, 2007. Deposit growth of $17.7 million (1.9%) over the last three months was invested in interest bearing deposits, securities available for sale and loans held for sale. The net interest margin declined to 4.32% for the quarter ended March 31, 2007 from 4.55% for 2006. The decline was due to the following three factors: a nonrecurring reduction to first quarter 2006 interest expense from an accelerated amortization of the premium on a borrowing that was called early by the lender (15 basis points), an increase in lower yielding loans held for sale as a percentage of total loans in 2007 (2 basis points), and general margin compression from stable short-term rates and an inverted yield curve in 2007 (6 basis points). Adjusting the net interest margin to exclude the effects of both the borrowing that was called in 2006 and the mortgage loans held for sale, the bank's net interest margins were 4.41% and 4.47%, respectively, for the quarters ended March 31, 2007 and 2006.

During the first quarter of 2007, the bank recorded a gain from bank-owned life insurance death proceeds ($482,000, tax-exempt, in miscellaneous income), a write-down of an investment in a trust company ($50,000, net of tax, in other expense) and various nonrecurring expenses ($91,000, net of tax, in other expense).

Commenting on the results, Bill Long, President and CEO, stated,

"Our first quarter earnings of $0.36 per share reflect a strong increase of $0.09 per share or 33.3% over first quarter '06. Our performance ratios continued to grow during the quarter ended March 31, 2007, as ROAA reached an impressive 1.46% for the quarter (annualized); ROAE climbed to 12.53% (annualized) and ROTE (annualized) grew to 17.84%.

"I want to note that both first quarter '06 and first quarter '07 had net positive non-recurring items that increased earnings. When we reduce the positive effect of these items in each quarter, per share earnings is still increased by 32%.

"Noninterest income grew to 0.38% of average assets during first quarter from 0.33% in the first quarter of '06. Noninterest expense as a percent of average assets decreased from 0.81% in the first quarter '06 to 0.76% in the first quarter '07.

"Asset quality remained strong, and although we had a small increase (0.06%) in nonperforming loans to total loans over year-end '06, we actually had a decrease from first quarter '06 to first quarter '07 from 0.44% to 0.27%. Allowance for loan losses to total loans increased over year end. However, net chargeoffs annualized for the first quarter '07 were only 0.02% of gross loans.

"Sidus really has done well in this down mortgage market. We are very proud of their hard work in 2006 to prepare for this great start in '07.

"We are excited about the April 16, 2007 opening of our Pfafftown office which makes us the first full-service bank to open in this rapidly growing area. Sherri Williams and her staff are setting a rapid growth pace in this, our first office in Forsyth County. Our Yadkinville office is on track to move into their permanent facility this summer, and the relocation of our Shadowline office in Boone is through the design phase and ready for bid."

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, acquired on October 1, 2004 and 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 March 31,
                                                     2007          2006

   Interest income                               $    17,976   $    15,036
   Interest expense                                    7,759         5,241
                                                 -----------   -----------
      Net interest income                             10,217         9,795
   Provision for loan losses                             300           565
                                                 -----------   -----------
      Net interest income after provision for
       loan loss                                       9,917         9,230
                                                 -----------   -----------
   Noninterest  Income:
   Service charges on deposit accounts                   980           897
   Other service fees                                    842           770
   Net gain on sales of mortgage loans                 1,411         1,164
   Net gain on sales of investment securities              -            12
   Income on investment in bank owned life
    insurance                                            217           145
   Mortgage banking income                                79            79
   Other income                                          549            76
                                                 -----------   -----------
      Total noninterest income                         4,078         3,143
                                                 -----------   -----------
   Noninterest Expense:
   Salaries and employee benefits                      4,839         4,565
   Occupancy and equipment expense                     1,015           954
   Printing and supplies                                 143           162
   Data processing                                       101           112
   Amortization of core deposit intangible               197           208
   Other expense                                       1,969         1,922
                                                 -----------   -----------
      Total noninterest expense                        8,264         7,923
                                                 -----------   -----------
   Income before income taxes                          5,731         4,450
   Income taxes                                        1,819         1,522
                                                 -----------   -----------
   Net income                                    $     3,912   $     2,928
                                                 ===========   ===========
   Income per share:
      Basic                                      $      0.37   $      0.27
      Diluted                                    $      0.36   $      0.27

   Average shares outstanding - basic                 10,614        10,670
   Average shares outstanding - diluted               10,822        10,812



                                                    As of         As of
                                                  March 31,    December 31,
                                                    2007           2006 *
Assets
   Cash and due from banks                       $    28,141   $    42,387
   Federal funds sold and interest-bearing
    deposits                                          21,504         1,669
   Securities available for sale                     134,342       127,520
   Gross loans held for investment                   808,234       814,910
   Allowance for loan losses                         (11,092)      (10,829)
   Loans held for sale                                52,096        42,351
   Accrued interest receivable                         5,865         5,796
   Premises and equipment, net                        27,242        27,098
   Federal Home Loan Bank stock                        2,782         3,633
   Investment in bank-owned life insurance            22,218        22,797
   Goodwill                                           32,697        32,697
   Core deposit intangible                             4,840         5,038
   Other assets                                        6,223         4,834
                                                 -----------   -----------
      Total Assets                               $ 1,135,092   $ 1,119,901
                                                 ===========   ===========


Liabilities and Stockholders' Equity
   Non-interest bearing deposits                 $   155,912   $   151,812
   NOW, savings, and money market                    233,774       233,032
   Time deposits over $100,000                       232,567       228,554
   Other time deposits                               303,245       294,450
   Borrowed funds                                     73,506        79,063
   Accrued interest payable                            3,138         2,975
   Other liabilities                                   5,970         5,615
                                                 -----------   -----------
      Total Liabilities                            1,008,112       995,502
   Stockholders' equity                              126,980       124,399
                                                 -----------   -----------
      Total Liabilities and Stockholders' Equity $ 1,135,092   $ 1,119,901
                                                 ===========   ===========

   Shares outstanding at end of period                10,605        10,611


 - Note: Derived from audited financial statements




Yadkin Valley Financial Corporation
(unaudited)

                                     For the Three Months Ended
                            Mar 31,  Dec  31,  Sep 30,   Jun 30,  Mar 31,
                             2007      2006      2006     2006      2006
Per Share Data:
Basic Earnings per Share  $   0.37  $   0.36  $   0.34  $   0.32  $   0.27
Diluted Earnings per
 Share                    $   0.36  $   0.35  $   0.34  $   0.32  $   0.27
Book Value per Share      $  11.97  $  11.72  $  11.46  $  11.19  $  11.04
Tangible Book Value per
 Share                    $   8.43  $   8.17  $   7.94  $   7.66  $   7.49
Cash Dividends per Share  $   0.12  $   0.12  $   0.12  $   0.12  $   0.11

Selected Performance
 Ratios:
Return on Average Assets
 (annualized)                 1.46%     1.39%     1.36%     1.30%     1.18%
Return on Average Equity
 (annualized)                12.53%    12.28%    12.10%    11.49%    10.06%
Return on Tangible Equity
 (annualized)                17.84%    17.67%    17.66%    16.79%    14.82%
Net Interest Margin
 (annualized)                 4.32%     4.34%     4.43%     4.47%     4.55%
Net Interest Spread
 (annualized)                 3.64%     3.71%     3.79%     3.91%     4.09%
Noninterest Income as a %
 of Revenue                  29.14%    27.76%    28.47%    26.33%    26.61%
Noninterest Income as a %
 of Average Assets            0.38%     0.35%     0.37%     0.33%     0.33%
Noninterest Expense as a
 % of Average Assets          0.76%     0.74%     0.77%     0.75%     0.81%
Net Noninterest income as
 a % of Average Assets       -0.39%    -0.39%    -0.40%    -0.42%    -0.48%
Efficiency Ratio             55.19%    54.83%    55.35%    55.14%    59.37%

Asset Quality:
Nonperforming Loans
 (000’s)                     2,361     1,830     5,184     3,113     3,478
Nonperforming
 Assets (000’s)              3,220     2,404     5,311     3,482     3,765
Nonperforming Loans to
 Total Loans                  0.27%     0.21%     0.63%     0.38%     0.44%
Nonperforming Assets to
 Total Assets                 0.28%     0.21%     0.49%     0.32%     0.36%
Allowance for Loan Losses
 to Total Loans               1.29%     1.26%     1.29%     1.25%     1.27%
Allowance for Loan Losses
 to Nonperforming Loans       4.70      5.92      2.05      3.30      2.87
Net Charge-offs to
 Average Loans
 (annualized)                 0.02%     0.15%     0.09%     0.12%     0.03%

Capital Ratios*:
Equity to Total Assets       11.19%    11.11%    11.11%    11.03%    11.33%
Tangible Equity to Total
 Tangible Assets(1)           8.13%     8.01%     7.97%     7.82%     7.98%
Tier 1 leverage ratio         8.36%     8.16%     8.18%     8.17%     8.31%
Tier 1 risk-based ratio       9.40%     9.20%     9.38%     9.36%     9.49%
Total risk-based capital
 ratio                       10.59%    10.37%    10.57%    10.52%    10.66%

*Capital Ratios are for Yadkin Valley Bank and Trust Company

(1) This ratio is a non-GAAP measure that management feels may be useful to
    investors





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

(Unaudited)
Quarter Ended:         March 31, 2007               March 31, 2006
                ----------------------------- -----------------------------
                  Average            Yield/     Average            Yield/
                  Balance   Interest   Rate     Balance   Interest   Rate
                ----------- -------- -------  ----------- -------- -------
INTEREST
 EARNING ASSETS
Federal funds
 sold           $     2,352 $     40    6.90% $     2,346 $     26    4.49%
Interest
 bearing
 deposits             1,889       13    2.79%       3,868       39    4.09%
Investment
 securities (1)     129,935    1,640    5.12%     117,085    1,277    4.42%
Total loans
 (1,2)              839,988   16,445    7.94%     763,573   13,847    7.35%
                ----------- --------          ----------- --------
Total average
 earning assets
 (1)                974,164   18,138    7.55%     886,872   15,189    6.95%
                            --------                      --------
Noninterest
 earning assets     112,099                       120,958
                -----------                   -----------
Total average
 assets         $ 1,086,263                   $ 1,007,830
                ===========                   ===========

INTEREST
 BEARING
 LIABILITIES
NOW and money
 market         $   187,540 $  1,091    2.20% $   201,580 $    900    1.81%
Savings              36,745       90    0.99%      40,681      100    1.00%
Time
 certificates       522,512    6,102    4.74%     425,745    3,922    3.74%
                ----------- --------          ----------- --------
Total interest
 bearing
 deposits           746,797    7,211    3.92%     668,006    4,922    2.99%
Repurchase
 agreements
 sold                36,095      298    3.35%      29,015      199    2.78%
Borrowed funds       21,543      250    4.71%      45,917      120    1.06%
                ----------- --------          ----------- --------
Total interest
 bearing
 liabilities        804,435    7,782    3.91%     742,938    5,241    2.86%
                ----------- --------          ----------- --------

Noninterest
 bearing
 deposits           147,045                       140,412
Stockholders'
 equity             126,588                       118,041
Other
 liabilities          8,195                         8,515
                -----------                   -----------
Total average
 liabilities
 and
 stockholders'
 equity         $ 1,086,263                   $ 1,007,830
                ===========                   ===========

NET INTEREST
 INCOME/
 YIELD (3,4)                $ 10,356    4.32%             $  9,948    4.55%
                            ========                      ========

INTEREST SPREAD
 (5)                                    3.64%                         4.09%

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