SOURCE: Yadkin Valley Bank

Yadkin Valley Bank

April 28, 2011 07:00 ET

Yadkin Valley Financial Corporation Announces First Quarter 2011 Results With New Management Team Focused on Strategic Planning Progress

ELKIN, NC--(Marketwire - Apr 28, 2011) - Yadkin Valley Financial Corporation (NASDAQ: YAVY)

First Quarter Highlights:

--  The Board of Directors has now fully enacted its strategic succession
    plan, resulting in a newly formed Management team.
--  Management is executing the strategic plan for the Company according to
    policies developed by both Management and the Board. Part of this plan
    is a controlled balance sheet management strategy, which has resulted
    in the reduction of assets by $69.7 million compared to the fourth
    quarter of 2010.
--  Net interest margin increased 10 basis points to 3.07% for the first
    quarter, compared to 2.97% in the fourth quarter of 2010.
--  Net charge-offs decreased to $6.8 million or 1.71% of average loans on
    an annualized basis, down significantly compared to $13.3 million, or
    3.08% on an annualized basis, in the fourth quarter of 2010.
--  Lower cost non-interest bearing deposits increased 3% and NOW, savings
    and money market deposits increased 7% compared to the fourth quarter
    of 2010, improving the funding mix.
--  The allowance for loan losses decreased to 2.31% of loans held for
    investment, compared to 2.36% in the fourth quarter of 2010.

Yadkin Valley Financial Corporation (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, announced financial results for the first quarter ended March 31, 2011. Net loss available to common shareholders was $1.6 million, or $0.10 per diluted share, compared to a net loss of $9,000 or $0.00 per share in the fourth quarter of 2010, and net income of $143,000, or $0.01 per share in the first quarter of 2010.

Joe Towell, President and CEO of Yadkin Valley Financial, commented, "Beginning in the first quarter of 2011 and continuing throughout this year, the Management team has five main areas of focus as we enact our strategic plan for the Company. These are, in order of importance, asset quality, net interest margin, expense reduction, the securities portfolio, and managed loan growth. With the capital implications that underpin all of these areas, we are putting our efforts toward progress and positive outcomes in these categories.

"In the first quarter of 2011, we saw some positive momentum in our loan portfolio. Net charge-offs were $6.8 million, which is a substantial decrease from last quarter. We are continuing to make progress in quickly and effectively risk grading the portfolio, reserving for impaired loans, and recognizing charge-offs, particularly by recognizing market adjustments on collateral dependent loans. We are also beginning to see some upgrade opportunities, particularly in our commercial and industrial loans, as sales and revenues begin to return for those customers. While it is too early to declare a trend, we are encouraged by this movement, as well as the resolution of several problem credits.

"Following a period of liquidity building that began in the first three quarters of 2010, we are pleased with the improvement in our net interest margin during the first quarter of 2011. Part of our strategic plan includes a renewed focus on acquiring core deposits, which should continue to have a positive impact on our net interest margin. Additionally, our cost of funding and cost of deposits have decreased 21 basis points over the past two linked quarters.

"As part of our strategic plan, we continue to execute our capital management strategy. We are pursuing a private placement offering of common stock, which is receiving an abundance of support from directors and management. We believe this effort, combined with our controlled balance sheet shrinkage and expense management plan, represents a prudent strategy for managing the Company in this challenging operating environment."

First Quarter 2011 Financial Highlights

Asset Quality

Nonperforming loans, which include loans in nonaccrual status, increased by $6.0 million, to $71.4 million, or 4.50% of total gross loans at March 31, 2011, compared to $65.4 million, or 3.96% of total gross loans at December 31, 2010. The increase in nonperforming loans was predominantly related to construction/land development and commercial real estate loans, as workout scenarios continue to be carried out in those loan categories. Although nonperforming levels continue to be elevated, 54% of our nonperforming loans are held at fair market value due to losses already recognized on these loans. Troubled debt restructured loans (TDRs) also continue to negatively impact our nonperforming loan total, as our restructured loans are in the midst of rehabilitation. Total TDRs were $39.4 million at March 31, 2011. We anticipate that TDRs will continue to increase as recently issued accounting guidance on this topic is implemented in the third quarter of 2011. Net charge-offs totaled $6.8 million, or 1.71% of average loans on an annualized basis.

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

                                   March 31, 2011       December 31, 2010
                                --------------------- --------------------
                                             % of                   % of
                               Outstanding   Total    Outstanding   Total
Loan Type                        Balance     Loans      Balance     Loans
                                ---------- ---------  ---------- ---------
Construction/land development   $   15,943      1.01% $   13,919      0.84%
Residential construction            12,058      0.76%     11,915      0.72%
HELOC                                3,537      0.22%      3,068      0.18%
1-4 Family residential               8,627      0.54%      7,889      0.48%
Commercial real estate              26,791      1.69%     24,562      1.49%
Commercial & industrial              3,821      0.24%      3,420      0.21%
Consumer & other                       591      0.04%        627      0.04%
                                ---------- ---------  ---------- ---------
Total                           $   71,368      4.50% $   65,400      3.96%
                                ---------- ---------  ---------- ---------

OREO totaled $27.5 million at March 31, 2011, an increase of $1.9 million compared to $25.6 million at December 31, 2010. The increase in OREO was due to the addition of 16 properties totaling $4.4 million, offset by sales of 13 properties totaling $2.5 million. Our Special Assets team is experiencing good traction in our residential OREO portfolio, as the market begins to move in that segment, but the bank-owned land and lots portfolio continues to be resistant to sale at this time. Total nonperforming assets were $98.8 million, or 4.43% of total assets, an increase from $91.0 million, or 3.95% of total assets as of December 31, 2010.

During the first quarter of 2011, the provision for loan losses was $4.9 million, a decrease of $1.4 million from the fourth quarter of 2010. The allowance for loan losses was $35.9 million, a decrease of $1.9 million compared to $37.8 million at December 31, 2010. This decrease was driven by a decrease in the overall loan portfolio and some improving credit metrics.

As a percentage of total loans held for investment, the allowance for loan losses was 2.31% in the first quarter of 2011, down from 2.36% in the fourth quarter of 2010. Out of the $35.9 million in total allowance for loan losses at March 31, 2011, the specific allowance for impaired loans accounted for $6.5 million, up slightly from $6.3 million at the end of the fourth quarter. The remaining general allowance, $29.4 million, attributed to unimpaired loans, was down from $31.5 million at the end of the fourth quarter of 2010 due to a $40.5 million decrease in classified, non-impaired loans, as well as a 3% decrease in total loans held for investment. The allowance for loan losses as a percentage of criticized, non-impaired (internal risk grades 5, 6, and immaterial 7) loans increased to 6.66%, up from 6.36% in the fourth quarter, and as a percentage of non-criticized loans, increased to 1.21% up from 1.19%.

Net Interest Income and Net Interest Margin

Net interest income totaled $15.7 million, a decrease of $266,000, or 1.7%, compared to the fourth quarter of 2010. Although total net interest income decreased as a result of decreases in interest earning assets such as loans, we experienced an increase in net interest margin to 3.07%, up 10 basis points from the fourth quarter of 2010. The NIM increase can be attributed to our controlled balance sheet management and the decrease in our deposit costs to realign with the market. Excluding the adjustment of assets and liabilities to their fair market values as part of purchase accounting treatment relating to the merger with American Community Bank, net interest margin was 3.01%, an increase of 10 basis points compared to 2.91% in the fourth quarter of 2010.

Non-Interest Income

Non-interest income decreased $2.5 million or 35%, to $4.8 million from $7.3 million in the fourth quarter of 2010. The decrease in non-interest income was primarily related to a decrease in gains on sale of mortgage loans as mortgage activity slowed during the first quarter of 2011. In addition, gains on sale of securities also decreased $1.2 million from the prior quarter.

Non-Interest Expense

Non-interest expense decreased $66,000, or 0.4%, to $16.9 million, compared to $17.0 million in the fourth quarter of 2010. The modest decrease in non- interest expense was primarily related to additional cost savings realized from our expense reduction plan initiated in the last half of 2010. This expense reduction is part of management's strategic plan as we continue to focus on profitability and operational efficiency.

Balance Sheet and Capital

Compared to the fourth quarter of 2010, total assets decreased $69.7 million, or 3%. The decrease in total assets was primarily related to a decrease in total deposits of $60.6 million, or 3%, compared to the fourth quarter of 2010. This deposit decrease is mostly due to a decrease in our CDs, which is a decrease we anticipated as we returned to more traditional deposit pricing after the 2010 effort to build liquidity. Brokered CDs and CDARs remain a relatively small portion of the Company's funding sources, as these deposits represented 5% of total deposits at March 31, 2011, a slight decrease from the level at December 31, 2010.

Gross loans also decreased in the first quarter by $47.8 million, or 3%. Total gross loans are decreasing as we migrate the portfolio away from large real estate and construction loans, and toward more targeted small business and commercial and industrial lending.

The Bank remains well-capitalized for regulatory purposes. As of March 31, 2011, the Bank's leverage ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio were 7.07%, 9.39%, and 10.65%, respectively. For capital adequacy purposes, leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio must be in excess of 5.00%, 6.00%, and 10.00%, respectively, to be considered well-capitalized.

Conference Call

Yadkin Valley Financial Corporation will host a conference call at 10:00 a.m. EDT on Thursday, April 28, 2011 to discuss financial results, business highlights, and outlook. The call may be accessed by dialing 877-359-3650 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=47611&c=YAVY&mediakey=083AD267BEF7411643B71259A1741F10&e=0. A replay of the call will be available until May 9, 2011 by dialing 800-642-1687 or 706-645-9291 and entering access code 62645029.

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 38 branches throughout its three regions in North Carolina and South Carolina. The Western Region (formerly Yadkin Valley Bank division and High Country Bank division) serves Avery, Watauga, Ashe, Forsyth, Surry, Wilkes, and Yadkin Counties. The Central Region (formerly the Iredell branches of Piedmont Bank division and Cardinal State Bank division) serves Durham, Orange, Granville, and Iredell Counties. The Southern Region (formerly American Community Bank division and the Mecklenburg branches of the Piedmont division) 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 four 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) 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; (2) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (3) 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; (4) the risk that the preliminary financial information reported herein and our current preliminary analysis will be different when our review is finalized; (5) changes in deposit rates, the net interest margin, and funding sources; (6) changes in the U.S. legal and regulatory framework, including the effect of recent financial reform legislation on the banking industry; and (7) 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
Consolidated Balance Sheets (Unaudited)

                  (Amounts in thousands except share and per share data)
                 March 31, December 31, September 30, June 30,   March 31,
                   2011      2010 (a)      2010        2010        2010
                ----------  ----------  ----------  ----------  ----------
Assets:
Cash and due
 from banks     $   31,537  $   31,967  $   32,112  $   30,178  $   27,002
Federal funds
 sold                   50          31       2,427       6,123           8
Interest-earning
 deposits
 with banks        188,003     197,782     108,665     184,592     208,727
U.S. government
 agencies           24,262      14,551      21,966      25,274      39,756
Mortgage-backed
 securities        208,037     209,706     193,358     126,004      72,810
State and
 municipal
 securities         68,090      72,621      73,235      55,868      59,574
Common and
 preferred
 stocks              1,140       1,124       1,159       1,134       1,056
                ----------  ----------  ----------  ----------  ----------
    Total
     investment
     securities    301,529     298,002     289,718     208,280     173,196
Construction
 loans             261,083     300,877     321,905     333,015     344,138
Commercial,
 financial and
 other loans       216,056     222,667     219,660     231,105     265,286
Residential
 mortgages         181,057     174,536     172,286     177,887     169,267
Commercial
 real estate
 loans             646,657     650,696     674,806     648,423     625,394
Installment
 loans              40,546      42,443      44,070      49,544      47,112
Revolving 1-4
 family loans      207,308     209,319     208,660     207,801     204,834
                ----------  ----------  ----------  ----------  ----------
    Total Loans  1,552,707   1,600,538   1,641,387   1,647,775   1,656,031
Allowance for
 loan losses       (35,860)    (37,752)    (44,735)    (44,306)    (45,399)
                ----------  ----------  ----------  ----------  ----------
    Net loans    1,516,847   1,562,786   1,596,652   1,603,469   1,610,632
Loans held for
 sale               32,880      50,419      76,199      49,542      24,308
Accrued interest
 receivable          7,515       7,947       8,176       7,520       7,866
Bank premises
 and equipment      46,245      45,970      45,368      44,434      44,075
Foreclosed
 real estate        27,461      25,582      22,480      18,195      16,656
Non-marketable
 equity
 securities at
 cost                9,416       9,416       9,784      10,539      10,539
Investment in
 bank-owned life
 insurance          25,441      25,278      25,103      24,852      24,660
Goodwill             4,944       4,944       4,944       4,944       4,944
Core deposit
 intangible          4,602       4,907       5,212       5,527       5,852
Other assets        34,421      35,563      43,949      41,986      44,647
                ----------  ----------  ----------  ----------  ----------

    Total
     assets     $2,230,891  $2,300,594  $2,270,789  $2,240,181  $2,203,112
                ==========  ==========  ==========  ==========  ==========

Liabilities and
 shareholders'
 equity:
Deposits:
Non-interest
 bearing        $  222,457  $  216,161  $  205,856  $  210,940  $  211,272
NOW, savings
 and money
 market
 accounts          631,791     589,790     467,731     468,773     455,189
Time
 certificates:
  $100,000 or
   more            443,312     477,030     531,892     516,146     529,253
  Other            662,246     737,425     776,012     757,579     713,351
                ----------  ----------  ----------  ----------  ----------
    Total
     deposits    1,959,806   2,020,406   1,981,491   1,953,438   1,909,065

Borrowings         109,452     116,768     119,274     118,621     126,600
Accrued
 expenses and
 other
 liabilities        15,125      15,963      19,364      15,409      14,511
                ----------  ----------  ----------  ----------  ----------
    Total
     liabilities 2,084,383   2,153,137   2,120,129   2,087,468   2,050,176

Total
 shareholders'
 equity            146,508     147,457     150,660     152,713     152,936
                ----------  ----------  ----------  ----------  ----------

Total
 liabilities and
 shareholders'
 equity         $2,230,891  $2,300,594  $2,270,789  $2,240,181  $2,203,112
                ==========  ==========  ==========  ==========  ==========

Period End
 Shares
 Outstanding    16,292,640  16,147,640  16,144,640  16,144,640  16,134,640


 (a) Derived from audited consolidated financial statements





Yadkin Valley Financial Corporation
Consolidated Income Statements (Unaudited)

                                    Three Months Ended
                  (Amounts in thousands except share and per share data)
                March 31, December 31, September 30,  June 30,   March 31,
                  2011      2010 (a)      2010         2010        2010
                ----------  ----------  ----------  ----------  ----------

Interest and
 fees on loans  $   21,349  $   22,500  $   22,921  $   22,458  $   22,958
Interest on
 securities          2,108       2,241       2,096       1,661       1,771
Interest on
 federal funds
 sold                    6           7           1           2           -
Interest-bearing
 deposits              115          88         110         126          61
                ----------  ----------  ----------  ----------  ----------
  Total
   interest
   income           23,578      24,836      25,128      24,247      24,790
                ----------  ----------  ----------  ----------  ----------

Time deposits
 of $100,000
 or more             2,938       3,136       3,503       3,274       3,361
Other deposits       4,380       5,084       4,699       4,781       4,055
Borrowed funds         570         660         617         595         567
                ----------  ----------  ----------  ----------  ----------
  Total interest
   expense           7,888       8,880       8,819       8,650       7,983
                ----------  ----------  ----------  ----------  ----------

    Net interest
     income         15,690      15,956      16,309      15,597      16,807
Provision for
 loan losses         4,867       6,277       7,879       5,809       4,384
                ----------  ----------  ----------  ----------  ----------
Net interest
 income after
 provision for
 loan losses        10,823       9,679       8,430       9,788      12,423
                ----------  ----------  ----------  ----------  ----------

Non-interest
 income
  Service charges
   on deposit
   accounts          1,345       1,498       1,539       1,486       1,437
  Other service
   fees                962       1,253         985         917         841
  Net gain on
   sales of
   mortgage
   loans             1,899       3,128       2,683       1,876       1,334
  Income on
   investment
   in bank
   owned life
   insurance           163         175         251         192         207
  Mortgage
   banking
   operations          207         (66)         53          60          56
  Gains on sale
   of securities        93       1,291           1         844          44
  Other than
   temporary
   impairment of
   investments         (20)       (101)       (115)        (61)       (205)
  Other                142         154         175         140          66
                ----------  ----------  ----------  ----------  ----------
    Total
     non-interest
     income          4,791       7,332       5,572       5,454       3,780
                ----------  ----------  ----------  ----------  ----------

Non-interest
 expense
  Salaries and
   employee
   benefits          7,870       7,686       8,248       6,941       6,663
  Occupancy and
   equipment         2,170       2,160       2,298       1,957       1,966
  Printing and
   supplies            181         175         169         259         274
  Data processing      373         376         380         384         313
  Communication
   expense             445         453         445         436         459
  Advertising
   and marketing       171         252         362         204         178
  Amortization
   of core
   deposit
   intangible          305         305         315         325         334
  FDIC
   assessment
   expense           1,350       1,126       1,122       1,288         830
  Attorney fees         92         170         222         148          75
  Loan
   collection
   expense             433         342         307         289         272
  Net cost of
   operation of
   other real
   estate owned        794         639         586         402         796
  Other              2,725       3,291       2,918       2,347       2,372
                ----------  ----------  ----------  ----------  ----------
    Total
     non-interest
     expense        16,909      16,975      17,372      14,980      14,532
                ----------  ----------  ----------  ----------  ----------

Income (loss)
 before income
 taxes              (1,295)         36      (3,370)        262       1,671
Provision for
 income taxes
 (benefit)            (509)       (823)     (1,299)        (23)        757
                ----------  ----------  ----------  ----------  ----------

Net income
 (loss)               (786)        859      (2,071)        285         914
                ----------  ----------  ----------  ----------  ----------
    Preferred
     stock
     dividend
     and
     amortization
     of preferred
     stock
     discount          771         868         771         771         771
                ----------  ----------  ----------  ----------  ----------
Net income
 (loss)
 available to
 common
 shareholders   $   (1,557) $       (9) $   (2,842) $     (486) $      143
                ==========  ==========  ==========  ==========  ==========

    Basic       $    (0.10) $        -  $    (0.18) $    (0.03) $     0.01
    Diluted     $    (0.10) $        -  $    (0.18) $    (0.03) $     0.01

Weighted
 average
 number of
 shares
 outstanding
    Basic       16,130,529  16,129,640  16,129,640  16,129,640  16,129,640
    Diluted     16,130,529  16,129,640  16,129,640  16,129,640  16,129,640

 (a) Derived from audited consolidated financial statements




Yadkin Valley Financial Corporation
(unaudited)

                                     At or For the Three Months Ended
                               -------------------------------------------
                                March  December  September  June     March
                                 31,      31,      30,       30,      31,
                                2011     2010     2010      2010     2010
                               -------  -------  -------  -------  -------

Per Share Data:
Basic Earnings (Loss) per
 Share                         $ (0.10)    0.00  $ (0.18) $ (0.03) $  0.01
Diluted Earnings (Loss) per
 Share                           (0.10)    0.00    (0.18)   (0.03)    0.01
Book Value per Share              6.11     6.24     6.44     6.58     6.61

Selected Performance Ratios:
Return on Average Assets
 (annualized)                    -0.28%    0.00%   -0.51%   -0.09%    0.03%
Return on Average Equity
 (annualized)                    -4.27%   -0.02%   -7.37%   -1.26%    0.38%
Net Interest Margin
 (annualized)                     3.07%    2.97%    3.12%    3.12%    3.47%
Net Interest Spread
 (annualized)                     2.88%    2.77%    2.91%    2.84%    3.25%
Non-interest Income as a % of
 Revenue(6)                      30.69%   43.10%   39.80%   34.76%   23.33%
Non-interest Income as a % of
 Average Assets                   0.21%    0.32%    0.25%    0.25%    0.18%
Non-interest Expense as a % of
 Average Assets                   0.75%    0.73%    0.77%    0.67%    0.68%

Asset Quality:
Loans 30-89 days past due
 (000's) (4)                   $23,756  $25,353  $37,682  $16,163  $14,297
Loans over 90 days past due
 still accruing (000's)              -        -        -        -        -
Nonperforming Loans (000's)     71,368   65,400   63,094   50,853   52,870
Other Real Estate Owned
 (000's)                        27,461   25,582   22,480   18,195   16,656
Nonperforming Assets (000's)    98,829   90,983   85,574   69,048   69,526
Troubled debt restructurings
 (000's) (5)                    14,998   17,153   14,733    8,184    5,267
Nonperforming Loans to Total
 Loans                            4.50%    3.96%    3.67%    3.00%    3.15%
Nonperforming Assets to Total
 Assets                           4.43%    3.95%    3.77%    3.08%    3.16%
Allowance for Loan Losses to
 Total Loans                      2.26%    2.29%    2.60%    2.61%    2.70%
Allowance for Loan Losses to
 Total Loans Held for
 Investment                       2.31%    2.36%    2.73%    2.69%    2.74%
Allowance for Loan Losses to
 Nonperforming Loans             50.25%   57.72%   70.90%   87.12%   86.00%
Net Charge-offs/Recoveries to
 Average Loans (annualized)       1.71%    3.08%    1.75%    1.64%    1.83%

Capital Ratios:
Equity to Total Assets            6.57%    6.41%    6.63%    6.82%    6.94%
Tier 1 leverage ratio(1)          7.07%    7.04%    7.40%    7.53%    7.76%
Tier 1 risk-based ratio(1)        9.39%    9.23%    9.10%    9.39%    9.26%
Total risk-based capital
 ratio(1)                        10.65%   10.49%   10.36%   10.65%   10.52%

Non-GAAP disclosures(2):
Tangible Book Value per Share     5.53     5.63     5.82     5.93     5.94
Return on Tangible Equity
 (annualized) (3)                -4.57%   -0.02%   -7.89%   -1.36%    0.41%
Tangible Equity to Tangible
 Assets (3)                       6.17%    6.01%    6.22%    6.38%    6.48%
Efficiency Ratio                 79.86%   70.63%   76.96%   68.75%   68.00%



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) Management uses these non-GAAP financial measures because it believes
    it is useful for evaluating our operations and performance over periods
    of time, as well as in managing and evaluating our business and in
    discussions about our operations and performance. Management believes
    these non-GAAP financial measures provides users of our financial
    information with a meaningful measure for assessing our financial
    results and credit trends, as well as comparison to financial results
    for prior periods.  These non-GAAP financial measures should not be
    considered as a substitute for operating results determined in
    accordance with GAAP and may not be comparable to other similarly
    titled financial measures used by other companies.
(3) Tangible Equity is the difference of shareholders' 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
(4) Past due numbers exclude loans classified as nonperforming.
(5) Troubled debt restructured loans exclude loans classified as
    nonperforming.
(6) Ratio is calculated by taking non-interest income as a percentage of
    net interest income after provision for loan losses plus total
    non-interest income.




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


                                Three Months Ended March 31,
                  ---------------------------------------------------------
                            2011                           2010
                  --------------------------     --------------------------
                                   (Dollars in Thousands)

                   Average            Yield/      Average            Yield/
                   Balance   Interest Rate        Balance   Interest Rate
                  ---------- -------- -----      ---------- -------- -----
INTEREST EARNING
 ASSETS
Total loans (1,2) $1,602,393 $ 21,391  5.41%     $1,683,199 $ 23,002  5.54%
Federal funds
 sold                  9,769        6  0.25%            632        -  0.00%
Investment
 securities          296,220    2,375  3.25%        180,026    2,018  4.55%
Interest-bearing
 deposits            207,707      115  0.22%        134,627       61  0.18%
                  ---------- --------            ---------- --------
Total average
 earning assets
 (1)               2,116,089   23,887  4.58% (6)  1,998,484   25,081  5.09%
                             --------                       --------
Noninterest
 earning assets      148,253                        140,599
                  ----------                     ----------
Total average
 assets           $2,264,342                     $2,139,083
                  ==========                     ==========

INTEREST BEARING
 LIABILITIES
Time deposits     $1,167,137 $  6,114  2.12%     $1,199,572 $  6,592  2.23%
Other deposits       605,139    1,204  0.81%        441,155      823  0.76%
Borrowed funds       111,065      570  2.08%        121,564      568  1.89%
                  ---------- --------            ---------- --------
Total interest
 bearing
 liabilities       1,883,341    7,888  1.70% (7)  1,762,291    7,983  1.84%

Noninterest
 bearing deposits    218,444                        205,848
Other liabilities     14,618                         16,971
                  ----------                     ----------
Total average
 liabilities       2,116,403                      1,985,110
                  ----------                     ----------

Shareholders'
 equity              147,939                        153,973

Total average
 liabilities and
 shareholders'    ----------                     ----------
 equity           $2,264,342                     $2,139,083
                  ==========                     ==========

NET INTEREST
 INCOME/
 YIELD (3,4)                 --------                       --------
                             $ 15,999  3.07%                $ 17,098  3.47%
                             ========                       ========

INTEREST SPREAD (5)                    2.88%                          3.25%

(1) Yields related to securities and loans exempt from Federal income taxes
    are stated on a fully tax-equivalent basis, assuming a Federal income
    tax rate of 35%, reduced by the nondeductible portion of interest
    expense.
(2) The loan average includes loans on which accrual of interest has been
    discontinued.
(3) Net interest income is the difference between income from earning
    assets and interest expense.
(4) Net interest yield is net interest income divided by total average
    earning assets.
(5) Interest spread is the difference between the average interest rate
    received on earning assets and the average rate paid on interest
    bearing liabilities.
(6) Interest income for 2011 and 2010 includes $176,000 and $571,000,
    respectively, of accretion for purchase accounting adjustments related
    to loans acquired in the merger with American Community.
(7) Interest expense for 2011 and 2010 includes $116,000 and $405,000,
    respectively, of accretion for purchase accounting adjustments related
    to deposits and borrowings acquired in the merger with American
    Community.

Contact Information

  • For additional information contact:

    Joseph H. Towell
    President and Chief Executive Officer
    (704) 768-1133
    Email Contact

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