SOURCE: Yadkin Valley Financial Corporation

January 26, 2007 15:47 ET

Yadkin Valley Financial Corporation Announces Fourth Quarter 2006 Diluted Earnings per Share of $0.35, an Increase of 29.6% Over the Fourth Quarter 2005

ELKIN, NC -- (MARKET WIRE) -- January 26, 2007 --Yadkin Valley Financial Corporation, Elkin, NC (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, reports earnings of $3,806,769 for the quarter ended December 31, 2006, an increase of 28.9% as compared with earnings of $2,953,256 for the same quarter of 2005. Diluted earnings per share were $0.35 and $0.27 for the quarters ended December 31, 2006 and 2005, respectively, an increase of 29.6%. Return on equity increased to 12.3% for the quarter ended December 31, 2006 from 10.0% for the quarter ended December 31, 2005, and return on tangible equity increased to 17.7% from 14.8% for the same periods.

Earnings for the year ended December 31, 2006 were $13,791,897, a 23.6% increase over the 2005 earnings of $11,158,464. Diluted earnings per share were $1.28 and $1.03, respectively, for the years ended December 31, 2006 and 2005, a 24.3% increase. Return on equity increased to 11.5% for the year ended December 31, 2006 from 9.8% for the year ended December 31, 2005, and return on tangible equity increased to 16.8% from 14.7% for the same periods.

Total assets grew by $95.6 million (9.3%) for the year ended December 31, 2006. Deposit growth of $93.5 million (11.5%) over the last twelve months was used to fund $76.0 million (10.4%) growth in net loans held for investment with the remainder being invested in securities and loans held for sale. The net interest margin expanded to 4.45% for the year ended December 31, 2006 from 4.10% for 2005 as the prime rate increased throughout 2005 and during the first six months of 2006. During the fourth quarter, the Bank's net interest margin, excluding the net interest effect of the mortgage subsidiary's loans held for sale, ranged from 4.37% to 4.40%.

Commenting on the results, Bill Long, President and CEO, stated, "Our fourth quarter earnings of 35 cents per share reflects a strong increase of 8 cents per share over the fourth quarter of 2005 and an increase of 2 cents per share over the third quarter of 2006. Return on assets of 1.39% and our return on equity of 12.28% for the fourth quarter of 2006 continued to improve toward our goals of 1.5% and 15% respectively. We are very pleased that our return on tangible equity increased almost 300 basis points to 17.67% for the fourth quarter of 2006 over the fourth quarter of 2005. Margin expansion, growth in noninterest income and strong loan growth were the catalysts for our strong 2006 performance. Our current markets continue to expand, and we are looking forward to our first entry into Forsyth County with the Pfafftown office scheduled to open on April 1, 2007.

"Our stock price continued to improve during the fourth quarter and increased by 31% from December 31, 2005 to December 31, 2006. Our highest closing price for the year was $19.95 on December 20, 2006. Ryan Beck & Company initiated our first independent research coverage on October 3, 2006 and has set a one year target price of $20.00 per share.

"The combination of (1) increased profits in all three banking regions, (2) strong mortgage performance in a down market, (3) continued growth and consolidation in our brokerage subsidiary, (4) ongoing projects to enhance efficiency in our operations area and (5) a strong management group helped to make our record 2006 performance a reality. In addition we continued to improve our efficiency ratio by 466 basis points from the fourth quarter of 2005 to the fourth quarter of 2006.

"Our quality continues to remain strong in all our markets. Comparing year end 2006 with year end 2005 (dollars in thousands):

--  Nonperforming loans decreased $1,396 or 43%
--  Nonperforming assets decreased $1,558 or 39%
--  Nonperforming loans to total loans decreased 50%
--  Nonperforming assets to total assets decreased 46%
--  Loan loss reserve increased to $10,829
--  Net charge-offs to average loans was 0.10%
    
"I am very proud of this board and employee group. Our Bank had a record year in 2006, and we look forward to continuing this performance trend in 2007. "

Yadkin Valley Bank and Trust Company is a full service community bank providing services in twenty-three branches throughout its three regions in North Carolina. The Yadkin Valley Bank region serves Ashe, 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 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 December 31,
                                          2006                2005

     Net interest income                $10,379              $9,329
     Provision for loan losses              525                 462
     Other income                         3,787               3,395
     Other expenses                       8,053               7,868
     Income taxes                         1,781               1,441
     Net income                           3,807               2,953
     Income per share:
        Basic                             $0.36               $0.28
        Diluted                           $0.35               $0.27

                                       For the Year Ended December 31,
                                          2006                2005

     Net interest income                $40,877             $34,665
     Provision for loan losses            2,165               1,724
     Other income                        14,345              13,243
     Other expenses                      32,093              29,627
     Income taxes                         7,172               5,399
     Net income                          13,792              11,158
     Income per share:
        Basic                             $1.30               $1.04
        Diluted                           $1.28               $1.03


                                                    As of December 31,
                                                  2006             2005 *
Assets
   Cash and due from banks                  $     42,387     $     37,691
   Federal funds sold and interest-bearing
    deposits                                       1,669           17,803
   Securities available for sale                 127,521          113,716
   Gross loans held for investment               814,910          737,530
   Allowance for loan losses                     (10,829)          (9,474)
   Loans held for sale                            42,351           31,427
   Accrued interest receivable                     5,796            4,803
   Premises and equipment, net                    27,098           27,373
   Federal Home Loan Bank stock                    4,344            4,298
   Investment in bank-owned life insurance        22,797           16,598
   Goodwill                                       32,697           32,136
   Core deposit intangible                         5,038            5,851
   Other assets                                    4,123            4,543
      Total Assets                            $1,119,902       $1,024,295

Liabilities and Stockholders’ Equity
   Non-interest bearing deposits            $    151,812     $    135,912
   NOW, savings, and money market                233,032          251,423
   Time deposits over $100,000                   228,554          170,574
   Other time deposits                           294,450          256,444
   Borrowed funds                                 79,062           85,990
   Accrued interest payable                        2,975            1,816
   Other liabilities                               5,618            5,813
      Total Liabilities                          995,503          907,972
   Stockholders’ equity                          124,399          116,323
      Total Liabilities and Stockholders’
       Equity                                 $1,119,902       $1,024,295

   Shares outstanding                             10,611           10,680
   * Note: Derived from audited financial statements



Yadkin Valley Financial Corporation
(unaudited)

                                     For the Three Months Ended

                           Dec 31,    Sep 30,   Jun 30,   Mar 31,  Dec 31,
                            2006       2006      2006      2006     2005


Per Share Data:
Basic Earnings per Share  $   0.36  $   0.34  $   0.32  $   0.27  $   0.28
Diluted Earnings per
 Share                    $   0.35  $   0.34  $   0.32  $   0.27  $   0.27
 Book Value per Share     $  11.72  $  11.46  $  11.19  $  11.04  $  10.89
Tangible Book Value per
 Share                    $   8.17  $   7.94  $   7.66  $   7.49  $   7.33
Cash Dividends per Share  $   0.12  $   0.12  $   0.12  $   0.11  $   0.11
Selected Performance
 Ratios:
Return on Average Assets
 (annualized)                 1.39%     1.36%     1.30%     1.18%     1.17%
Return on Average Equity
 (annualized)                12.28%    12.10%    11.49%    10.06%    10.03%
Return on Tangible Equity
 (annualized)                17.67%    17.66%    16.79%    14.82%    14.82%
Net Interest Margin
 (annualized)                 4.34%     4.43%     4.47%     4.55%     4.26%
Net Interest Spread
 (annualized)                 3.71%     3.79%     3.91%     4.09%     3.81%
Noninterest Income as a %
 of Revenue                  27.76%    28.47%    26.33%    26.61%    27.69%
Noninterest Income as a %
 of Average Assets            0.35%     0.37%     0.33%     0.33%     0.34%
Noninterest Expense as a
 % of  Average Assets         0.74%     0.77%     0.75%     0.81%     0.78%
Efficiency Ratio             54.83%    55.35%    55.14%    59.37%    59.49%

Asset Quality:
Nonperforming Loans
 (000’s)                     1,830     5,184     3,113     3,478     3,199
Nonperforming
 Assets(000’s)               2,404     5,311     3,482     3,765     3,962
Nonperforming Loans to
 Total Loans                  0.21%     0.63%     0.38%     0.44%     0.42%
Nonperforming Assets to
 Total Assets                 0.21%     0.49%     0.32%     0.36%     0.39%
Allowance for Loan Losses
 to Total Loans               1.26%     1.29%     1.25%     1.27%     1.23%
Allowance for Loan Losses
 to Nonperforming Loans       5.92      2.05      3.30      2.87      2.96
Net Charge-offs to
 Average Loans
 (annualized)                 0.15%     0.09%     0.12%     0.03%     0.15%

Capital Ratios:
Equity to Total Assets       11.11%    11.11%    11.03%    11.33%    11.36%
Tangible Equity to Total
 Tangible Assets              8.01%     7.97%     7.82%     7.98%     7.94%
Tier 1 leverage ratio        *8.20%     8.18%     8.17%     8.31%     8.19%
Tier 1 risk-based ratio      *9.39%     9.38%     9.36%     9.49%     9.38%
Total risk-based capital
 ratio                      *10.58%    10.57%    10.52%    10.66%    10.51%

* Note:  December 31, 2006 regulatory capital ratios are estimated pending
  completion of FFIEC Call Report.



Yadkin Valley Financial Corporation
(unaudited)

                                                       For the Year Ended
                                                           December 31,
                                                        2006   2005   2004

Selected Performance Ratios:
Return on Average Assets                                1.31%  1.14%  1.07%
Return on Average Equity                               11.52%  9.79%  9.20%
Return on Tangible Equity                              16.80% 14.65% 13.54%
Net Interest Margin                                     4.45%  4.10%  3.94%
Net Interest Spread                                     3.88%  3.71%  3.67%
Noninterest Income as a % of Revenue                   27.04% 28.68% 24.25%
Noninterest Income as a % of Average Assets             1.36%  1.35%  1.04%
Noninterest Expense as a % of  Average Assets           3.05%  3.02%  2.71%
Efficiency Ratio                                       56.16% 59.32% 57.72%

Asset Quality:
Net Charge-offs to Average Loans                        0.10%  0.12%  0.18%



                   Average Balance Sheets and Net Interest Income Analysis
                                  (Dollars in Thousands)
(Unaudited)
Year Ended:             December  31, 2006          December 31, 2005
                    --------------------------- ---------------------------
                      Average            Yield    Average            Yield
                      Balance   Interest Rate     Balance   Interest Rate
                    ----------- -------- -----  ----------- -------- -----
INTEREST EARNING
 ASSETS
Federal funds sold  $     3,799 $    191  5.03% $     4,766 $    163  3.42%
Interest bearing
 deposits                 2,047       92  4.49%       2,978       84  2.82%
Investment
 securities (1)         124,632    5,726  4.59%     111,911    4,671  4.17%
Total loans (1,2)       803,336   61,930  7.71%     740,719   48,932  6.61%
                    ----------- --------        ----------- --------
Total average
 earning assets (1)     933,814   67,939  7.28%     880,374   53,850  6.26%
                                --------                    --------
Noninterest earning
 assets                 118,240                     122,221
                    -----------                 -----------
Total average
 assets             $ 1,052,054                 $   982,595
                    ===========                 ===========

INTEREST BEARING
 LIABILITIES
NOW and money
 market             $   192,516 $  3,791  1.97% $   208,083 $  3,218  1.55%
Savings                  39,370      393  1.00%      42,880      454  1.06%
Time certificates       468,108   19,662  4.20%     376,888   11,968  3.18%
                    ----------- --------        ----------- --------
Total interest
 bearing deposits       699,994   23,846  3.41%     627,851   15,640  2.49%
Repurchase
 agreements sold         30,655      878  2.86%      34,984      757  2.16%
Borrowed funds           47,263    1,705  3.61%      66,694    2,189  3.28%
                    ----------- --------        ----------- --------
Total interest
 bearing
 liabilities            777,912   26,429  3.40%     729,529   18,586  2.55%
                    ----------- --------        ----------- --------

Noninterest bearing
 deposits               145,453                     131,395
Stockholders'
 equity                 122,942                     114,033
Other liabilities         5,747                       7,638
                    -----------                 -----------
Total average
 liabilities and
 stockholders'
 equity             $ 1,052,054                 $   982,595
                    ===========                 ===========

NET INTEREST
 INCOME/
 YIELD (3,4)                    $ 41,510  4.45%             $ 35,264  4.10%
                                ========                    ========

INTEREST SPREAD (5)                       3.88%                       3.71%

1. Yields related to securities and loans exempt from both 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