SOURCE: Yadkin Valley Financial Corporation

February 13, 2009 09:26 ET

Yadkin Valley Financial Corporation Announces Fourth Quarter and Full Year 2008 Results

ELKIN, NC--(Marketwire - February 13, 2009) - Yadkin Valley Financial Corporation (NASDAQ: YAVY)

Fourth Quarter Highlights:

--  Total loan growth of 25% (annualized) from the end of the third
    quarter
--  Received approval for $36 million in new capital under the U.S.
    Treasury Department's Capital Purchase Program
--  Tier 1, total capital, and leverage ratios of 9.15%, 10.34%, and
    8.25%, respectively for the bank holding company as reported to the Federal
    Reserve; tangible equity ratio of 6.38%
--  Loan loss reserves increased to 1.54% of total loans, compared to
    1.42% in the third quarter
--  Provision for loan losses of $4.4 million, an increase of $3.0 million
    compared to the third quarter
--  Nonperforming loans increased modestly to 1.01% of total loans from
    0.83% of total loans in the third quarter
--  Nonperforming assets increased to 1.09% of total assets from 0.86% in
    the third quarter
--  Net charge-offs of 0.60% of average loans (annualized), an increase
    from 0.24% (annualized) during the third quarter
--  Net interest margin of 3.02%, a decrease of 31 basis points compared
    to 3.33% during the third quarter
--  Net income of $217,000 or $0.02 per diluted share
--  Declared fourth quarter dividend of $0.13 per share
    

Full Year 2008 Highlights:

--  Successfully closed and integrated the acquisition of Cardinal State
    Bank, which added $218 million in total assets within the attractive Durham
    market
--  Sidus Financial, Yadkin Valley's mortgage subsidiary, closed in excess
    of $1.0 billion in new mortgage loans during 2008, a record level of
    originations
--  Total loans grew 30% at December 31, 2008 compared to December 31,
    2007; year-over-year loan growth excluding the Cardinal acquisition was 15%
--  Total deposits increased 20% on a year-over-year basis; excluding the
    Cardinal acquisition, deposits increased 2%
--  Net charge-offs of 0.26% of average loans, an increase from 0.10% at
    December 31, 2007
--  Net income of $6.7 million, or $0.59 per diluted share
    

Yadkin Valley Financial Corporation (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, announced financial results for the fourth quarter and full year ending December 31, 2008. Net income for the fourth quarter of 2008 totaled $217,000 or $0.02 per diluted share, compared to net income of $3.1 million or $0.29 per share in the fourth quarter of 2007. The decrease in quarterly net income was primarily due to a $2.7 million increase in the provision for loan losses as compared to the same period as last year. Also impacting net income was a 6% decrease in net interest income, which was primarily driven by a decrease in the prime rate of 400 basis points during 2008.

Net income for the year ended December 31, 2008 was $6.7 million or $0.59 per diluted share, compared to $14.7 million or $1.37 per diluted share for the year ended December 31, 2007. The decrease in net income for the full year ended December 31, 2008 was primarily due to a $5.4 million increase in the provision for loan losses as well as a 4% decrease in net interest income.

Bill Long, President and CEO commented, "As the economic environment becomes even more difficult, Yadkin Valley remains well-positioned to manage the challenges ahead of us. During the fourth quarter, nonperforming assets increased slightly to 1.09% of total assets from 0.86% in the third quarter. While this is above our historic average, our asset quality remains attractive relative to our peers and the industry as a whole, which revealed nonperforming assets as a percentage of total assets above 2.00% on average as of the fourth quarter of 2008. While our asset quality continues to outperform our peers, our reserves as a percentage of total loans are in line with our peers, which on average were above 1.75%. During 2008, we significantly improved our credit administration and review processes, and these improvements will allow us to effectively manage problem assets as we move forward in 2009.

"We remain well-capitalized from a regulatory standpoint, and are pleased to be adding $36 million in new capital during the first quarter of 2009 under the Treasury's Capital Purchase Program. This additional capital will allow us to selectively take advantage of the unique opportunities that have arisen as a result of the market disruption within the banking industry that began last September, particularly as we begin to complete the American Community merger. We believe that we have sufficient capital to grow our franchise, as well as absorb any potential loan losses.

"During the fourth quarter, we made substantial progress on planning the American Community merger and integrating their employees and processes. The planned extensive training is ongoing for American Community employees in areas including risk grading and underwriting loans, real estate value assessment, and problem loan reporting and tracking. We have reviewed American Community's loan portfolio extensively for potential losses, and believe that the risk inherent in its loan portfolio is manageable. The merger remains on track, and is expected to close soon after the special shareholders' meetings scheduled for February 26, 2009. Since the end of 2002, we have successfully integrated three financial institutions with total assets of $587 million, and we believe this speaks to our ability to successfully acquire and integrate quality financial institutions.

"While credit quality remains our top priority, we are still focused on profitable growth. Sidus Financial, our mortgage subsidiary, completed a record year in 2008 in terms of originations, closing just over $1.0 billion in new mortgage loans, and begins 2009 with a loan pipeline at record levels. We believe this volume is significant in light of the current weak housing environment, and expect it to improve our noninterest income.

"Lastly, while we are cautiously optimistic about growth prospects for the markets in which we operate, we believe that we will successfully weather a difficult 2009. We expect modest loan growth compared to prior years, excluding the American Community merger. We believe that our net interest margin will remain relatively stable during the first quarter of 2009 as deposit pricing has become more rational across our markets. We anticipate that we will continue to add to our loan loss reserves as we expect economic conditions to weaken over the next six months. While we anticipate that our asset quality metrics will deteriorate slightly during the first half of 2009, we believe that they will continue to outperform our peer and industry averages, and remain at manageable levels."

FOURTH QUARTER 2008 FINANCIAL HIGHLIGHTS

Net Interest Income and Net Interest Margin

Net interest income totaled $9.9 million, a decrease of 6% compared to $10.5 million in the fourth quarter of 2007. The decrease in net interest income on a year-over-year basis was primarily due to the 400 basis points decrease in the prime rate during 2008, which had a more immediate effect upon variable rate loans than deposit costs. The net interest margin decreased by 101 basis points to 3.02% in the fourth quarter of 2008 from 4.03% in the fourth quarter of 2007.

Compared to the third quarter of 2008, net interest income decreased 7%. The decrease in net interest income was primarily due to a 31 basis point decrease in the net interest margin, to 3.02% from 3.33%, primarily resulting from the 175 basis points decrease in the prime rate that occurred during the fourth quarter of 2008.

Non-Interest Income

Non-interest income increased 22% to $4.5 million, compared to $3.7 million in the fourth quarter of 2007. The increase in year-over-year non-interest income was primarily related to a 14% increase in service charges, and a 51% increase in mortgage sale gains. Also contributing to the increase in non-interest income was a $215,000 write-down to market value of other real-estate owned during the fourth quarter of 2007. This real estate, most of which was rental property, was acquired in a foreclosure which occurred during the third quarter of 2007.

Compared to the third quarter of 2008, non-interest income increased $1.5 million (48%). This increase was primarily due a third quarter pretax charge of $972,800 for other than temporary impairment on Freddie Mac preferred stock. Excluding this charge, non-interest income would have increased 12% compared to the third quarter. Service charges increased 2% sequentially, while gains on mortgage sales rose 20%.

Non-Interest Expense

Non-interest expense increased 26% to $10.1 million compared to $8.0 million in the fourth quarter of 2007. The year-over-year increase was largely due to additional salary and benefits expense, occupancy expense, and other expense associated with the Cardinal State Bank acquisition.

Compared to the third quarter of 2008, non-interest expenses increased 4%, primarily due to a 24% increase in other expense. The increase in other expense was primarily related to an increase in year end payables over the prior year. These payables consisted of normal operating expenses accrued at each year end that increased due to additional bank branches and timing of vendor billing. Offsetting the increase in other expense was a 4% decrease in salaries and employee benefits, due to the reversal of incentive plan accruals, and a 14% decrease in occupancy expense due to the reversal of prior quarters' over accrual for property taxes.

Balance Sheet Growth

Total assets increased $315.6 million, or 26% compared to the fourth quarter of 2007. Total loans increased $286.0 million, or 30% compared to the fourth quarter of 2007, and total deposits increased $191.6 million, or 20%. The increase in assets, loans, and deposits on a year-over-year basis was primarily due to the acquisition of Cardinal State Bank. Excluding the Cardinal acquisition, assets increased 8%, loans increased 15%, and deposits increased 2% year-over-year.

Compared to the September 30, 2008, total assets, loans, and deposits increased 16%, 25%, and 17% on an annualized basis. The increase in loans was largely driven by an increase in already established equity credit lines, particularly within the Cardinal State and Piedmont markets. Deposit growth was primarily driven by an increase in CDs as well as money market accounts as customers moved their balances to Yadkin Valley as a result of the disruption in the banking environment. Deposit growth was strong, particularly in the Yadkin Valley and High Country regions.

Asset Quality

Nonperforming loans increased by $2.9 million to $12.6 million or 1.01% of total loans compared to $9.7 million or 0.83% of total loans as of the third quarter of 2008. The majority of the increase was due to the addition of one $1.8 million residential builder relationship which was added to nonaccrual loans during the fourth quarter of 2008. The remainder of the additions to nonperforming loans was related to several smaller credits comprised of various loan types. Approximately 25% to 30% of the Company's nonaccrual loans continue to pay as agreed. The following chart highlights nonperforming loans by loan category, and as a percentage of total loans:

                                        Nonperforming Loan Analysis
                                          (Dollars in thousands)
                                -------------------------------------------
                                 Fourth Quarter 2008   Third Quarter 2008
                                --------------------- ---------------------
                                               % of                  % of
                                Outstanding   Total   Outstanding   Total
Loan Type                         Balance     Loans     Balance     Loans
                                ------------ -------  ------------ -------
Construction/land development   $      1,777    0.14% $      1,881    0.16%
Residential construction               1,807    0.15%          855    0.07%
HELOC                                    219    0.02%          708    0.06%
1-4 Family residential                 2,187    0.18%          722    0.06%
Multifamily residential                  539    0.04%          103    0.01%
Commercial real estate                 1,585    0.13%          542    0.05%
Commercial & industrial                4,288    0.35%        4,603    0.40%
Consumer & other                         148    0.01%          253    0.02%
                                ------------ -------  ------------ -------
Total                           $     12,550    1.01% $      9,667    0.83%
                                ------------ -------  ------------ -------

Other real estate owned (OREO) totaled $4.0 million at the end of the fourth quarter compared to $3.0 million in the third quarter. The increase in OREO was primarily attributable to tracts of land that were acquired in foreclosure. Total nonperforming assets were $16.6 million or 1.09% of total assets as of December 31, 2008, up from $12.7 million or 0.86% of total assets as of September 30, 2008.

During the fourth quarter of 2008, net charge-offs totaled 0.60% of average loans on an annualized basis, compared to 0.24% during the third quarter of 2008. Loan loss reserves as a percentage of total loans increased to 1.54% in the fourth quarter of 2008, up from 1.42% in the third quarter of 2008.

Capital

Yadkin Valley remains well-capitalized for regulatory purposes. As of December 31, 2008, the total capital ratio was 10.34%, Tier 1 ratio was 9.15%, and leverage ratio was 8.25% for the bank holding company. The bank's total capital ratio was 10.26%, Tier 1 ratio was 9.01%, and leverage ratio was 8.12%. Tangible equity as a percentage of tangible assets was 6.38%.

Conference Call

Yadkin Valley Financial will host a conference call today at 11:00 a.m. EST to discuss fourth quarter and full year 2008 financial results. The call may be accessed by dialing 877-545-1490 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=35521&c=YAVY&mediakey=AEF65777FEB6DAF4428EFC8BD7771FE4&e=0 (Due to its length, this URL may need to be copied and pasted into your Internet browser's address field. Remove the extra space if one exists.)

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 29 branches throughout its four regions in North Carolina. The Yadkin Valley Bank region serves Ashe, Forsyth, Surry, Wilkes, and Yadkin Counties. The Piedmont Bank region serves Iredell and Mecklenburg Counties. The High Country Bank region serves Avery and Watauga Counties. The Cardinal State Bank region serves Durham, Orange, and Granville Counties. The 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 website is www.yadkinvalleybank.com. Yadkin Valley shares are traded on NASDAQ under the symbol YAVY.

Certain statements in this press release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements concerning our future growth, plans, objectives, expectations, performance, events and the like, as well as any other statements, including those regarding the proposed merger, that are not historical facts and are thus prospective. Such forward-looking statements are subject to risks, uncertainties, and other factors, including, but not limited to: the businesses of Yadkin Valley and American Community may not be integrated successfully or such integration may take longer to accomplish than expected; disruption from the merger may make it more difficult to maintain relationships with clients, associates, or suppliers; the required governmental approvals of the merger may not be obtained on the proposed terms and schedule; shareholders may not approve the merger; continued disruption in worldwide and U.S. economic conditions; changes in the interest rate environment which may reduce the net interest margin; a continued downturn in the economy or real estate market; greater than expected noninterest expenses or excessive loan losses as a result of changes in market conditions and the adverse impact on the value of the underlying collateral and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. For a more detailed description of factors that could cause or contribute to such differences, please see Yadkin Valley's and American Community's filings with the Securities and Exchange Commission.

Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. These projections and statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable though they are inherently uncertain and difficult to predict. 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 either company or any person that the future events, plans, or expectations contemplated by either company will be achieved. Yadkin Valley and American Community do not intend to and assume no responsibility for updating or revising any forward-looking statement contained in this press release, whether as a result of new information, future events or otherwise

Yadkin Valley Financial Corporation
(Amounts in thousands except per share data)
(unaudited)
                                      For the Three Months Ended
                             December 31,    September 30,   December 31,
                                 2008            2008            2007

Interest Income:
Interest and fees on loans   $      16,586   $      17,552   $      17,532
Interest on federal funds
 sold                                   11               8              31
Interest on taxable
 securities                          1,272           1,335           1,390
Interest on tax-exempt
 securities                            393             382             348
Interest-bearing deposits               76             161              38
                             -------------   -------------   -------------
  Interest income                   18,338          19,438          19,339
Interest expense                     8,449           8,813           8,800
                             -------------   -------------   -------------
  Net interest income                9,889          10,625          10,539
Provision for loan losses            4,360           1,334           1,689
                             -------------   -------------   -------------
  Net interest income after
   provision for loan loss           5,529           9,291           8,850
                             -------------   -------------   -------------
Noninterest Income:
Service charges on deposit
 accounts                            1,148           1,172           1,008
Other service fees                     779             858             841
Net gain on sales of
 mortgage loans                      2,250           1,872           1,488
Net (loss) on sales of
 investment securities                 (43)           (966)              1
Income on investment in bank
 owned life Insurance                  221             238             260
Mortgage banking income                123             (11)            175
Other income (loss)                     35            (105)            (77)
                             -------------   -------------   -------------
  Total noninterest income           4,513           3,058           3,696
                             -------------   -------------   -------------
Noninterest Expense:
Salaries and employee
 benefits                            4,956           5,136           4,708
Occupancy and equipment
 expense                             1,123           1,307             930
Printing and supplies                  333             176             141
Data processing                        186             217              83
Communications expense                 277             272             193
Amortization of core deposit
 intangible                            225             229             187
Other expense                        3,003           2,424           1,753
                             -------------   -------------   -------------
  Total noninterest expense         10,103           9,761           7,995
                             -------------   -------------   -------------
Income before income taxes             (61)          2,588           4,551
Income taxes                          (278)            795           1,484
                             -------------   -------------   -------------
Net income                   $         217   $       1,793   $       3,067
                             =============   =============   =============
Income per share:
    Basic                    $        0.02   $        0.16   $        0.29
    Diluted                  $        0.02   $        0.15   $        0.29

Average shares outstanding -
 basic                              11,533          11,525          10,570
Average shares outstanding -
 diluted                            11,585          11,583          10,650







Yadkin Valley Financial Corporation
(Amounts in thousands except per share data)
(unaudited)
                                      For the Twelve Months Ended
                                             December 31,
                                 2008            2007            2006

Interest income              $      74,781   $      75,193   $      67,306
Interest expense                    34,536          33,301          26,429
                             -------------   -------------   -------------
  Net interest income               40,245          41,892          40,877
Provision for loan losses            7,852           2,489           2,165
                             -------------   -------------   -------------
  Net interest income after
   provision for loan loss          32,393          39,403          38,712
                             -------------   -------------   -------------
Noninterest Income:
Service charges on deposit
 accounts                            4,394           3,946           3,758
Other service fees                   3,378           3,561           3,400
Net gain on sales of
 mortgage loans                      7,679           5,882           6,026
Net gain (loss) on sales of
 investment securities              (1,016)             45             (86)
Income on investment in bank
 owned life Insurance                  928           1,046             699
Mortgage banking income                190             451             257
Bank owned life insurance
 death benefit                                         564
Other income (loss)                     (6)            (50)            291
                             -------------   -------------   -------------
  Total noninterest income          15,547          15,445          14,345
                             -------------   -------------   -------------
Noninterest Expense:
Salaries and employee
 benefits                           20,007          19,161          18,693
Occupancy and equipment
 expense                             4,701           3,917           3,901
Printing and supplies                  890             550             591
Data processing                        786             399             418
Communications expense               1,035           1,127           1,031
Amortization of core deposit
 intangible                            877             777             813
Other expense                       10,363           7,028           6,646
                             -------------   -------------   -------------
  Total noninterest expense         38,659          32,959          32,093
                             -------------   -------------   -------------
Income before income taxes           9,281          21,889          20,964
Income taxes                         2,630           7,201           7,172
                             -------------   -------------   -------------
Net income                   $       6,651   $      14,688   $      13,792
                             =============   =============   =============
Income per share:
    Basic                    $        0.59   $        1.39   $        1.30
    Diluted                  $        0.59   $        1.37   $        1.28

Average shares outstanding -
 basic                              11,236          10,595          10,641
Average shares outstanding -
 diluted                            11,307          10,713          10,789








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

                                             As of Dec 31,
                                 2008            2007*           2006*
Assets
  Cash and due from banks    $      22,553   $      24,268   $      42,387
  Federal funds sold and
   interest-bearing deposits         3,469           2,058           1,669
  Securities available for
   sale                            137,771         142,484         127,521
  Gross loans held for
   investment                    1,187,569         898,753         814,910
  Allowance for loan losses        (19,098)        (12,446)        (10,829)
                             -------------   -------------   -------------
    Net loans held for
     investment                  1,168,471         886,307         804,081
  Loans held for sale               49,929          52,754          42,351
  Accrued interest
   receivable                        5,594           6,055           5,796
  Premises and equipment,
   net                              33,900          26,780          27,098
  Federal Home Loan Bank
   stock                             7,877           2,557           3,633
  Investment in bank-owned
   life insurance                   23,607          22,683          22,797
  Goodwill                          54,149          32,697          32,697
  Core deposit intangible            4,660           4,261           5,038
  Other assets                      14,651           8,173           5,797
                             -------------   -------------   -------------
      Total Assets           $   1,526,631   $   1,211,077   $   1,120,865
                             =============   =============   =============

Liabilities and Stockholders'
 Equity
  Non-interest bearing
   deposits                  $     153,573   $     154,979   $     151,812
  NOW, savings, and money
   market                          283,891         232,888         233,032
  Time deposits over
   $100,000                        333,375         267,530         228,553
  Other time deposits              384,203         308,045         294,450
                             -------------   -------------   -------------
    Total deposits               1,155,042         963,442         907,847
  Borrowed funds                   207,962         104,199          79,063
  Accrued interest payable           3,554           3,435           2,975
  Other liabilities                  7,670           6,732           6,581
                             -------------   -------------   -------------
      Total Liabilities          1,374,228       1,077,808         996,466
  Stockholders' equity             152,403         133,269         124,399
                             -------------   -------------   -------------
  Total Liabilities and
   Stockholders' Equity      $   1,526,631   $   1,211,077   $   1,120,865
                             =============   =============   =============

  Shares outstanding at
   end of period                    11,536          10,563          10,611
  * 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,
                                2008     2008     2008     2008     2007
                                               (restated)
              Per Share Data:
     Basic Earnings per Share $  0.02  $  0.16  $  0.15  $  0.28   $  0.29
   Diluted Earnings per Share $  0.02  $  0.15  $  0.15  $  0.27   $  0.29
         Book Value per Share $ 13.21  $ 13.24  $ 13.00  $ 13.16   $ 12.62
Tangible Book Value per Share $  8.11  $  8.12  $  7.87  $  8.12   $  9.12
     Cash Dividends per Share $  0.13  $  0.13  $  0.13  $  0.13   $  0.13

  Selected Performance Ratios:
     Return on Average Assets
                 (annualized)    0.06%    0.49%    0.49%    0.98%     1.04%
     Return on Average Equity
                 (annualized)    0.56%    4.66%    4.57%    8.55%     9.14%
    Return on Tangible Equity
                 (annualized)    0.91%    7.61%    7.45%   11.75%    12.66%
          Net Interest Margin
                 (annualized)    3.02%    3.33%    3.34%    3.56%     4.03%
          Net Interest Spread
                 (annualized)    2.65%    2.90%    2.87%    2.94%     3.30%
 Noninterest Income as a % of
                     Revenue    44.94%   24.76%   31.84%   30.61%    26.45%
 Noninterest Income as a % of
              Average Assets     0.31%    0.21%    0.29%    0.33%     0.32%
Noninterest Expense as a % of
              Average Assets     0.68%    0.68%    0.72%    0.73%     0.69%
Net Noninterest income as a %
           of Average Assets    -0.38%   -0.47%   -0.43%   -0.40%    -0.37%
             Efficiency Ratio   67.61%   68.64%   67.82%   62.68%    54.12%

                Asset Quality:
  Nonperforming Loans (000's)  12,551    9,667    4,830    4,992     1,962
  Nonperforming Assets(000's)  16,569   12,668    6,945    7,289     2,564
 Nonperforming Loans to Total
                       Loans     1.01%    0.83%    0.43%    0.48%     0.21%
Nonperforming Assets to Total
                      Assets     1.09%    0.86%    0.49%    0.51%     0.21%
 Allowance for Loan Losses to
        Total Loans Held For
                  Investment     1.61%    1.48%    1.48%    1.40%     1.38%
 Allowance for Loan Losses to
         Nonperforming Loans      152%     171%     329%     292%      634%
Net Charge-offs/Recoveries to
   Average Loans (annualized)    0.60%    0.24%    0.14%   (0.01)%    0.21%

               Capital Ratios:
       Equity to Total Assets    9.98%   10.39%   10.46%   10.58%    11.01%
  Tangible Equity to Tangible
                      Assets     6.38%    6.64%    6.60%    6.80%     8.21%
     Tier 1 leverage ratio(1)    8.12%    8.36%    8.40%   10.07%     8.41%
   Tier 1 risk-based ratio(1)    9.01%    9.40%    9.34%    9.50%     9.16%
     Total risk-based capital
                     ratio(1)   10.26%   10.65%   10.59%    10.74%   10.36%

Note:  (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



Yadkin Valley Financial Corporation
(unaudited)


                                            For the Twelve Months Ended
                                        Dec 31,  Dec 31,  Dec 31,  Dec 31,
                                          2008     2007    2006     2005

           Selected Performance Ratios:
              Return on Average Assets     0.48%    1.31%    1.31%    1.14%
              Return on Average Equity     4.58%   11.32%   11.52%    9.79%
             Return on Tangible Equity     6.99%   15.90%   16.80%   14.65%
                   Net Interest Margin     3.31%    4.20%    4.45%    4.10%
                   Net Interest Spread     2.86%    3.49%    3.88%    3.71%
  Noninterest Income as a % of Revenue    32.43%   28.15%   27.04%   28.68%
  Noninterest Income as a % of Average
                               Assets      1.13%    1.37%    1.36%    1.35%
Noninterest Expense as a % of  Average
                               Assets      2.81%    2.93%    3.05%    3.02%
      Net Noninterest Income as a % of
                       Average Assets     -1.68%   -1.56%   -1.69%   -1.67%
                      Efficiency Ratio    66.74%   55.45%   56.16%   59.32%

                        Asset Quality:
     Net Charge-offs to Average Loans      0.26%    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, 2008          December 31, 2007
                      -------------------------- --------------------------
                         Average         Yield/    Average          Yield/
                         Balance Interest Rate     Balance  Interest Rate
                      ---------- ------- ------  ---------- ------- ------
INTEREST EARNING
 ASSETS
Federal funds sold    $    4,609 $    11   0.95% $    3,493 $    31   3.52%
Interest bearing
 deposits                  6,220      76   4.85%      3,387      38   4.45%
Investment securities
 (1)                     137,010   1,838   5.32%    144,191   1,892   5.21%
Total loans (1,2)      1,179,459  16,621   5.59%    905,455  17,570   7.70%
                      ---------- -------         ---------- -------
Total average earning
 assets (1)            1,327,298  18,546   5.54%  1,056,526  19,531   7.33%
                                 -------                    -------
Noninterest earning
 assets                  149,763                    108,609
                      ----------                 ----------
Total average assets  $1,477,061                 $1,165,135
                      ==========                 ==========

INTEREST BEARING
 LIABILITIES
NOW and money market  $  244,607 $   856   1.39% $  193,008 $ 1,078   2.22%
Savings                   36,964      30   0.32%     35,281      70   0.79%
Time certificates        701,426   6,638   3.75%    565,841   6,863   4.81%
                      ---------- -------         ---------- -------
Total interest
 bearing deposits        982,997   7,524   3.04%    794,130   8,011   4.00%
Repurchase agreements
 sold                     45,920     210   1.81%     40,490     357   3.50%
Borrowed funds           129,672     715   2.19%     31,072     432   5.52%
                      ---------- -------         ---------- -------
Total interest
 bearing liabilities   1,158,589   8,449   2.89%    865,692   8,800   4.03%
                      ---------- -------         ---------- -------

Noninterest bearing
 deposits                153,322                    159,218
Stockholders' equity     153,344                    133,166
Other liabilities         11,806                      7,059
                      ----------                 ----------
Total average
 liabilities and
stockholders' equity  $1,477,061                 $1,165,135
                      ==========                 ==========

NET INTEREST INCOME/
YIELD (3,4)                      $10,097   3.02%            $10,731   4.03%
                                 =======                    =======

INTEREST SPREAD (5)                        2.65%                      3.30%

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, 2008          December 31, 2007
                      -------------------------- --------------------------
                        Average          Yield/   Average           Yield/
                        Balance  Interest Rate    Balance  Interest  Rate
                      ---------- ------- ------  ---------- ------- ------
INTEREST EARNING
 ASSETS
Federal funds sold    $    2,451 $    56   2.28% $    5,825 $   298   5.12%
Interest bearing
 deposits                  9,885     376   3.80%      3,213     148   4.61%
Investment securities
 (1)                     138,674   7,442   5.37%    137,839   7,067   5.13%
Total loans (1,2)      1,088,626  67,725   6.22%    867,725  68,377   7.88%
                      ---------- -------         ---------- -------
Total average earning
 assets (1)            1,239,636  75,599   6.10%  1,014,602  75,890   7.48%
                                 -------                    -------
Noninterest earning
 assets                  136,221                    110,230
                      ----------                 ----------
Total average assets  $1,375,857                 $1,124,832
                      ==========                 ==========

INTEREST BEARING
 LIABILITIES
NOW and money market  $  235,836 $ 3,866   1.64% $  188,909 $ 4,196   2.22%
Savings                   36,949     185   0.50%     36,152     343   0.95%
Time certificates        640,282  26,210   4.09%    550,448  26,453   4.81%
                      ---------- -------         ---------- -------
Total interest
 bearing deposits        913,067  30,261   3.31%    775,509  30,992   4.00%
Repurchase agreements
 sold                     48,981   1,132   2.31%     36,171   1,223   3.38%
Borrowed funds           103,086   3,143   3.05%     21,980   1,086   4.94%
                      ---------- -------         ---------- -------
Total interest
 bearing liabilities   1,065,134  34,536   3.24%    833,660  33,301   3.99%
                      ---------- -------         ---------- -------

Noninterest bearing
 deposits                154,074                    154,838
Stockholders' equity     145,184                    129,722
Other liabilities         11,465                      6,612
                      ----------                 ----------
Total average
 liabilities and
stockholders' equity  $1,375,857                 $1,124,832
                      ==========                 ==========

NET INTEREST INCOME/
YIELD (3,4)                      $41,063   3.31%            $42,589   4.20%
                                 =======                    =======

INTEREST SPREAD (5)                        2.86%                      3.49%

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

    Megan R. Malanga
    Nvestcom Investor Relations
    (954) 781-4393
    Email Contact