SOURCE: Yadkin Valley Financial Corporation

Yadkin Valley Financial Corporation

January 27, 2011 07:00 ET

Yadkin Valley Financial Corporation Announces Fourth Quarter and Full Year 2010 Results

ELKIN, NC--(Marketwire - January 27, 2011) - Yadkin Valley Financial Corporation (NASDAQ: YAVY)

Fourth Quarter Highlights:

--  Provision for loan losses was $6.3 million, a decrease of $1.6 million
    compared to the third quarter of 2010
--  Total deposits increased 2% compared to the third quarter of 2010,
    driven by a 26% increase in NOW, savings, and money market deposits in
    the fourth quarter of 2010
--  Net interest margin was 2.97%, a decrease of 15 basis points compared
    to the third quarter of 2010
--  Nonperforming assets increased to 3.95% of total assets from 3.77% in
    the third quarter of 2010
--  Net charge-offs increased to $13.3 million, or 3.08% of average loans
    on an annualized basis, compared to $7.4 million, or 1.75% of average
    loans on an annualized basis, in the third quarter of 2010
--  Loan loss reserves as a percentage of total loans held for investment
    decreased to 2.36%, compared to 2.73% in the third quarter of 2010 due
    to a decrease in allowance for impaired loans
--  Allowance for impaired loans decreased to $6.3 million from $13.6
    million in the third quarter of 2010 due to charge-offs of the impaired
    portion of collateral dependent loans previously reserved
--  Leverage ratio, Tier 1 risk-based capital ratio and total risk-based
    capital ratio were 7.04%, 9.26% and 10.52%, respectively, for the Bank
--  Net loss available to common shareholders was $9,000, or $0.00 per
    diluted share

Full Year Highlights:

--  Sidus Financial closed in excess of $937.0 million in new mortgage
    loans during 2010 and successfully expanded into three new states in
    the Mid-Atlantic region
--  Initiated strategic succession plan and implemented significant expense
    reduction initiative
--  Total deposits increased 11%, driven by 32% growth in NOW, savings,
    and money market accounts
--  Cumulative net charge-offs of $35.2 million in 2010, and $60.2 million
    since the beginning of the credit cycle at January 1, 2008
--  Net loss available to common shareholders of $3.2 million, or $0.20 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 ended December 31, 2010. Net loss available to common shareholders for the fourth quarter of 2010 totaled $9,000, or $0.00 per diluted share. This compares to a net loss of $2.8 million, or $0.18 per diluted share, in the third quarter of 2010, and net income of $3.2 million, or $0.20 per diluted share, in the fourth quarter of 2009.

The net loss available to common shareholders for the year ended December 31, 2010 improved to $3.2 million, or $0.20 per diluted share, compared to a net loss of $77.5 million, or $5.23 per diluted share, for the year ended December 31, 2009. Full year 2009 results were significantly impacted by the $61.6 million goodwill impairment charge recorded during the third quarter of 2009. Excluding this charge, the net loss available to common shareholders was $16.0 million, or $1.08 per diluted share, for the full year ended December 31, 2009.

Joe Towell, President and COO of Yadkin Valley Bank and Trust Company, commented, "In the fourth quarter of 2010, we took a conservative stance with our impaired loans by charging down $10.0 million to fair market value. These charge-downs, which were predominantly related to construction/land development loans, had reserves allocated in prior quarters. At the same time, we recognized a reduction in our classified loans, which accounts for the decrease in the overall allowance for loan losses. We are continuing to make progress in quickly and effectively risk grading the portfolio, reserving for impaired loans, and recognizing charge-offs.

"Also during the fourth quarter, we significantly reduced our deposit rates; however, we retained a greater amount of CD balances than we had anticipated resulting in excess liquidity. This excess liquidity was invested in cash and equivalents. During the first quarter of 2011, we will be examining the profitability of our CD relationships to further reduce deposit costs, which should alleviate this excess liquidity.

"Sidus continues to expand its retail and wholesale operations nationally, and began the first quarter of 2011 with a healthy loan pipeline. We expect Sidus' fee income contribution to remain consistent with levels in the first quarter of 2010 as long as the interest rate environment remains favorable. In addition to demand for mortgage loans at Sidus, we are also beginning to see demand for owner-occupied commercial real estate loans and commercial and industrial loans at the Bank.

"Lastly, we remain well-capitalized from a regulatory perspective. We are continuing to closely monitor our capital levels and are actively evaluating a number of options to improve our capital position. We are carefully considering the best interests of our shareholders in evaluating our capital options."

Fourth Quarter 2010 Financial Highlights

Asset Quality

Nonperforming loans increased by $2.3 million, to $65.4 million, or 3.96% of total gross loans at December 31, 2010, compared to $63.1 million, or 3.67% of total gross loans at September 30, 2010. The majority of the increase was related to the addition of 130 loans totaling $20.7 million, offset by charge-offs of $9.0 million, principal reductions and upgrades of $3.9 million, and transfers to Other Real Estate Owned (OREO) of $5.6 million. The increase in nonperforming loans was predominantly related to construction/land development, residential construction, and commercial real estate loans. Net charge-offs totaled $13.3 million, or 3.08% of average loans on an annualized basis, up from $7.4 million, or 1.75% of average loans (on an annualized basis) during the third quarter of 2010.

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

                              December 31, 2010       September 30, 2010
                            ----------------------- -----------------------
                                           % of                    % of
                            Outstanding   Total     Outstanding   Total
Loan Type                     Balance     Loans       Balance     Loans
                             ----------- ----------  ----------- ----------
Construction/land
 development                $    13,919       0.84% $    13,346       0.78%
Residential construction         11,915       0.72%      11,674       0.68%
HELOC                             3,068       0.19%       2,294       0.13%
1-4 Family residential            7,889       0.48%       7,916       0.46%
Commercial real estate           24,562       1.49%      23,034       1.34%
Commercial & industrial           3,420       0.21%       4,226       0.25%
Consumer & other                    627       0.04%         604       0.04%
                            ----------- ----------  ----------- ----------
Total                       $    65,400       3.96% $    63,094       3.67%
                            ----------- ----------  ----------- ----------

OREO totaled $25.6 million at December 31, 2010, an increase of $3.1 million compared to $22.5 million at the end of the third quarter. The increase in OREO was primarily due to the addition of 20 properties totaling $5.8 million. Total nonperforming assets were $91.0 million, or 3.95% of total assets, an increase from $85.6 million, or 3.77% of total assets as of September 30, 2010.

During the fourth quarter of 2010, the provision for loan losses decreased $1.6 million to $6.3 million compared to the third quarter. The allowance for loan losses was $37.8 million, a decrease of $6.9 million compared to $44.7 million at September 30, 2010. As a percentage of total loans held for investment, the allowance for loan losses was 2.36% in the fourth quarter of 2010, down from 2.73% in the third quarter. Loan loss reserves totaled 58% of nonperforming loans, down from 71% at the end of the third quarter. Out of the $37.8 million in total allowance for loan losses at December 31, 2010, the specific allowance for impaired loans accounted for $6.3 million, down from $13.6 million at the end of the third quarter. The decrease in the specific allowance for impaired loans resulted from charge-downs on collateral dependent loans of $10.0 million to fair market value which were reserved for in prior quarters. The remaining general allowance, $31.5 million, attributed to unimpaired loans, was up from $31.1 million at the end of the third quarter due primarily to higher historic loss ratios which resulted from increased charge-offs during the fourth quarter. This increase was partially offset by an overall decrease in classified, non-impaired loans of $26.8 million.

Net Interest Income and Net Interest Margin

Net interest income totaled $16.0 million, a decrease of $300,000, or 2%, compared to the third quarter of 2010. Deposit costs decreased significantly in the fourth quarter of 2010 compared to the third quarter, however, a high level of certificates of deposit was retained resulting in excess liquidity. Loan growth continues to be slow, and as a result, cash and equivalents increased $86.6 million. This resulted in a decrease of 15 basis points in the net interest margin to 2.97%, compared to 3.12% in the third quarter of 2010. 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 2.91%, a decrease of 12 basis points compared to 3.03% in the third quarter of 2010.

Non-Interest Income

Non-interest income increased $1.7 million, or 30%, to $7.3 million from $5.6 million in the third quarter of 2010. The increase in net interest income was primarily related to securities gains of $1.3 million, as well as a $268,000 increase in other service fees and a $445,000 increase in net mortgage sale gains, both of which were due to an increased level of mortgage production at Sidus. Excluding the securities gains, non-interest income increased $470,000, or 8%. Partially offsetting these items was an other than temporary impairment of investment securities of $102,000, which was related to an investment in one financial services company.

Non-Interest Expense

Non-interest expense decreased $397,000, or 2%, to $17.0 million, compared to $17.4 million in the third quarter of 2010. The decrease in non-interest expense was primarily related to a $562,000 decrease in salaries and employee benefits and a $138,000 decrease in occupancy and equipment expense. These decreases were primarily related to the expense reduction plan which was initiated in the third quarter of 2010. Somewhat offsetting these items was a $373,000 increase in other expense, which was related to franchise tax expense as well as a higher level of expenses associated with maintaining foreclosed property.

Balance Sheet and Capital

Compared to the third quarter of 2010, total assets increased $29.8 million, or 1%. The increase in total assets was primarily related to an $86.6 million increase in cash and equivalents. Total gross loans decreased $66.6 million, or 4%. The decrease in total gross loans was primarily due to a $40.8 million decrease in loans held for investment, which was predominantly related to a $21.0 million decrease in construction/land development and residential construction loan balances and a $24.1 million decrease in commercial real estate loans. The decrease in these loans more than offset growth of $3.0 million and $2.3 million, in commercial and industrial loans and residential mortgages, respectively. Total deposits increased $38.9 million, or 2%, compared to the third quarter of 2010, and total core deposits increased 8%. Deposit growth primarily resulted from a $122.1 million increase in NOW, savings and money market deposits, as well as $10.3 million increase in non-interest bearing demand deposits. Brokered CDs and CDARs remain a relatively small portion of the Company's funding sources, as these deposits represented 5% of total deposits at December 31, 2010, a slight decrease from the level at September 30, 2010.

The Bank remains well-capitalized for regulatory purposes. As of December 31, 2010, the Bank's leverage ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio were 7.04%, 9.26%, and 10.52%, 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. EST on Thursday, January 27, 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?eventid=91811&CompanyID=YAVY&e=1&mediaKey=C0BD0B7D7BA30A3E46A5C745FA0F7F34. A replay of the call will be available until February 3, 2011 by dialing 800-642-1687 or 706-645-9291 and entering access code 39847894.

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)
                 December   September                            December
                    31,         30,      June 30,   March 31,       31,
                   2010        2010        2010        2010      2009 (a)
                ----------  ----------  ----------  ----------  ----------
Assets:
Cash and due
 from banks     $   31,967  $   32,112  $   30,178  $   27,002  $   31,939
Federal funds
 sold                   31       2,427       6,123           8          93
Interest-earning
 deposits
 with banks        197,782     108,665     184,592     208,727      60,305
U.S.
 government
 agencies           14,551      21,966      25,274      39,756      42,894
Mortgage-backed
 securities        209,706     193,358     126,004      72,810      78,389
State and
 municipal
 securities         72,621      73,235      55,868      59,574      61,378
Common and
 preferred
 stocks              1,124       1,159       1,134       1,056       1,180
                ----------  ----------  ----------  ----------  ----------
    Total
     investment
     securities    298,002     289,718     208,280     173,196     183,841
Construction
 loans             300,877     321,905     333,015     344,138     364,853
Commercial,
 financial and
 other loans       222,667     219,660     231,105     265,286     271,433
Residential
 mortgages         174,536     172,286     177,887     169,267     169,790
Commercial
 real estate
 loans             650,696     674,806     648,423     625,394     619,151
Installment
 loans              42,443      44,070      49,544      47,112      48,545
Revolving 1-4
 family loans      209,319     208,660     207,801     204,834     202,676
                ----------  ----------  ----------  ----------  ----------
    Total
     Loans       1,600,538   1,641,387   1,647,775   1,656,031   1,676,448
Allowance for
 loan losses       (37,752)    (44,735)    (44,306)    (45,399)    (48,625)
                ----------  ----------  ----------  ----------  ----------
    Net loans    1,562,786   1,596,652   1,603,469   1,610,632   1,627,823
Loans held for
 sale               50,419      76,199      49,542      24,308      49,715
Accrued
 interest
 receivable          7,947       8,176       7,520       7,866       7,783
Bank premises
 and equipment      45,970      45,368      44,434      44,075      43,642
Foreclosed
 real estate        25,582      22,480      18,195      16,656      14,345
Non-marketable
 equity
 securities at
 cost                9,416       9,784      10,539      10,539      10,539
Investment in
 bank-owned
 life
 insurance          25,278      25,103      24,852      24,660      24,454
Goodwill             4,944       4,944       4,944       4,944       4,944
Core deposit
 intangible          4,907       5,212       5,527       5,852       6,186
Other assets        35,563      43,949      41,986      44,647      48,003
                ----------  ----------  ----------  ----------  ----------

    Total
     assets     $2,300,594  $2,270,789  $2,240,181  $2,203,112  $2,113,612
                ==========  ==========  ==========  ==========  ==========

 Liabilities
  and
  shareholders'
  equity:
 Deposits:
 Non-interest
  bearing       $  216,161  $  205,856  $  210,940  $  211,272  $  207,850
 NOW, savings
  and money
  market
  accounts         589,790     467,731     468,773     455,189     445,508
Time
 certificates:
  $100,000 or
   more            476,826     531,892     516,146     529,253     560,825
  Other            737,629     776,012     757,579     713,351     607,569
                ----------  ----------  ----------  ----------  ----------
    Total
     deposits    2,020,406   1,981,491   1,953,438   1,909,065   1,821,752

 Borrowings        116,768     119,274     118,621     126,600     123,467
 Accrued
  expenses and
  other
  liabilities       15,963      19,364      15,409      14,511      16,127
                ----------  ----------  ----------  ----------  ----------
     Total
      liabilit-
      ies        2,153,137   2,120,128   2,087,468   2,050,176   1,961,346

 Total
  shareholders'
  equity           147,457     150,660     152,713     152,936     152,266
                ----------  ----------  ----------  ----------  ----------

 Total
  liabilities
  and
  shareholders'
  equity        $2,300,594  $2,270,789  $2,240,181  $2,203,112  $2,113,612
                ==========  ==========  ==========  ==========  ==========

 Period End
  Shares
  Outstanding   16,147,640  16,144,640  16,144,640  16,134,640  16,129,640


 (a) Derived from audited consolidated financial statements




Yadkin Valley Financial Corporation
Consolidated Income Statements (Unaudited)

                  (Amounts in thousands except share and per share data)
                 December   September      June       March      December
Three months        31,         30,         30,         31,         31,
 ended             2010        2010        2010        2010        2009
                ----------  ----------  ----------  ----------  ----------

Interest and
 fees on loans  $   22,500  $   22,921  $   22,458  $   22,958  $   23,627
Interest on
 securities          2,241       2,096       1,661       1,771       1,839
Interest on
 federal funds
 sold                    7           1           2           -           4
Interest-bearing
 deposits               88         110         126          61          13
                ----------  ----------  ----------  ----------  ----------
  Total
   interest
   income           24,836      25,128      24,247      24,790      25,483
                ----------  ----------  ----------  ----------  ----------

Time deposits
 of $100,000
 or more            3,136       3,503       3,274       3,361       3,273
Other deposits      5,084       4,699       4,781       4,055       3,642
Borrowed funds        660         618         595         567         706
                ----------  ----------  ----------  ----------  ----------
  Total
   interest
   expense           8,880       8,820       8,650       7,983       7,621
                ----------  ----------  ----------  ----------  ----------

    Net
     interest
     income         15,956      16,309      15,597      16,807      17,862
Provision for
 loan losses        6,277       7,879       5,809       4,384       3,146
                ----------  ----------  ----------  ----------  ----------
Net interest
 income after
 provision
 for loan losses     9,679       8,429       9,788      12,423      14,716
                ----------  ----------  ----------  ----------  ----------

Non-interest
 income
  Service
   charges on
   deposit
   accounts          1,498       1,539       1,486       1,437       1,572
  Other service
   fees              1,253         985         917         841       1,250
  Net gain on
   sales of
   mortgage
   loans             3,128       2,683       1,876       1,334       2,812
  Income on
   investment
   in bank
   owned life
   insurance           175         251         192         207         145
  Mortgage
   banking
   operations          (66)         53          60          56         486
  Gains on sale
   of
   securities        1,291           1         844          44           -
  Other than
   temporary
   impairment of
   investments        (101)       (115)        (61)       (205)        (17)
  Other                154         175         140          66          64
                ----------  ----------  ----------  ----------  ----------
    Total
     non-interest
     income          7,332       5,572       5,454       3,780       6,312
                ----------  ----------  ----------  ----------  ----------

Non-interest
 expense
  Salaries and
   employee
   benefits          7,686       8,248       6,941       6,663       6,938
  Occupancy and
   equipment         2,160       2,298       1,957       1,966       1,865
  Printing and
   supplies            175         169         259         274         273
  Data
   processing          376         380         384         313         489
  Communication
   expense             453         445         436         459         448
  Advertising
   and
   marketing           252         362         204         178         414
  Amortization
   of core
   deposit
   intangible          305         315         325         334         338
  FDIC
   assessment
   expense           1,126       1,122       1,288         830         619
  Attorney fees        170         222         148          75         112
  Loan
   collection
   expense             342         307         289         272         637
  Net loss on
   other real
   estate owned        639         586         402         796         189
  Other              3,291       2,918       2,347       2,372       2,161
                ----------  ----------  ----------  ----------  ----------
    Total
     non-interest
     expense        16,975      17,372      14,980      14,532      14,483
                ----------  ----------  ----------  ----------  ----------

Income (loss)
 before income
 taxes                  36      (3,370)        262       1,671       6,545
Provision for
 income taxes
 (benefit)            (823)     (1,299)        (23)        757       2,630
                ----------  ----------  ----------  ----------  ----------

Net income
 (loss)                859      (2,071)        285         914       3,915
                ----------  ----------  ----------  ----------  ----------
    Preferred
     stock
     dividend and
     amortization of
     preferred
     stock
     discount          868         771         771         771         754
                ----------  ----------  ----------  ----------  ----------
Net income
 (loss)
 available to
 common
 shareholders   $       (9) $   (2,842) $     (486) $      143  $    3,161
                ==========  ==========  ==========  ==========  ==========

    Basic       $    (0.00) $    (0.18) $    (0.03) $     0.01  $     0.20
    Diluted     $    (0.00) $    (0.18) $    (0.03) $     0.01  $     0.20

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




Yadkin Valley Financial Corporation
(unaudited)
                                  At or For the Three Months Ended
                          ------------------------------------------------
                          December  September   June      March   December
                            31,        30,       30,       31,       31,
                            2010      2010      2010      2010    2009 (a)
                          --------  --------  --------  --------  --------

Per Share Data:
Basic Earnings (Loss) per
 Share                    $  (0.00) $  (0.18) $  (0.03) $   0.01  $   0.20
Diluted Earnings (Loss)
 per Share                   (0.00)    (0.18)    (0.03)     0.01      0.20
Book Value per Share          6.24      6.44      6.58      6.61      6.58

Selected Performance
 Ratios:
Return on Average Assets
 (annualized)                 0.00%    -0.51%    -0.09%     0.03%     0.62%
Return on Average Equity
 (annualized)                -0.02%    -7.37%    -1.26%     0.38%     8.26%
Net Interest Margin
 (annualized)                 2.97%     3.12%     3.12%     3.47%     3.83%
Net Interest Spread
 (annualized)                 2.77%     2.91%     2.84%     3.25%     3.59%
Non-interest Income as a
 % of Revenue                43.10%    39.80%    34.76%    23.33%    30.02%
Non-interest Income as a
 % of Average Assets          0.32%     0.25%     0.25%     0.18%     0.31%
Non-interest Expense as a
 % of Average Assets          0.73%     0.77%     0.67%     0.68%     0.71%

Asset Quality:
Loans 30-89 days past due
 (000's)                  $ 25,353  $ 37,682  $ 16,163  $ 14,297  $ 23,190
Loans over 90 days past
 due still accruing
 (000's)                         -         -         -         -         6
Nonperforming Loans
 (000's)                    65,400    63,094    50,853    52,870    36,255
Other Real Estate Owned
 (000's)                    25,582    22,480    18,195    16,656    14,345
Nonperforming Assets
 (000's)                    90,983    85,574    69,048    69,526    50,600
Troubled debt
 restructurings (000's)     14,733    14,733     8,184     5,267     5,544
Nonperforming Loans to
 Total Loans                  3.96%     3.67%     3.00%     3.15%     2.10%
Nonperforming Assets to
 Total Assets                 3.95%     3.77%     3.08%     3.16%     2.39%
Allowance for Loan Losses
 to Total Loans               2.29%     2.60%     2.61%     2.70%     2.82%
Allowance for Loan Losses
 to Total Loans Held for
 Investment                   2.36%     2.73%     2.69%     2.74%     2.90%
Allowance for Loan Losses
 to Nonperforming Loans      57.72%    70.90%    87.12%    86.00%   134.00%
Net Charge-offs/Recoveries
 to Average Loans
 (annualized)                 3.08%     1.75%     1.64%     1.83%     2.05%

Capital Ratios:
Equity to Total Assets        6.41%     6.63%     6.82%     6.94%     7.20%
Tier 1 leverage ratio(1)      7.04%     7.40%     7.53%     7.76%     8.16%
Tier 1 risk-based
 ratio(1)                     9.26%     9.10%     9.39%     9.26%     9.16%
Total risk-based capital
 ratio(1)                    10.52%    10.36%    10.65%    10.52%    10.43%

Non-GAAP disclosures(2):
Tangible Book Value per
 Share                        5.63      5.82      5.93      5.94      5.89
Return on Tangible Equity
 (annualized) (3)            -0.02%    -7.89%    -1.36%     0.41%     8.93%
Tangible Equity to
 Tangible Assets (3)          6.01%     6.22%     6.38%     6.48%     6.71%
Efficiency Ratio             70.63%    76.96%    68.75%    68.00%    57.08%

(a) Derived from audited consolidated financial statements

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




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

                              Three Months Ended December 31,
                 ----------------------------------------------------------
                           2010                            2009
                 --------------------------     ---------------------------
                                   (Dollars in Thousands)

                   Average            Yield/      Average            Yield/
                   Balance   Interest Rate        Balance   Interest Rate
                 ----------- -------- ----      ----------- -------- -----
INTEREST EARNING
 ASSETS
Total loans
 (1,2)           $ 1,708,178 $ 22,545 5.24%     $ 1,703,155 $ 23,711 24.20%
Federal funds
 sold                 11,530        7 0.24%           5,531        3  0.22%
Investment
 securities          308,649    2,511 3.23%         200,603    2,362  4.67%
Interest-bearing
 deposits            142,161       88 0.24%           2,920       14  1.90%
                 ----------- --------           ----------- --------
Total average
 earning assets
 (1)               2,170,519   25,150 4.60% (6)   1,912,209   26,090  5.41%
                             --------                       --------
Noninterest
 earning assets      145,760                        124,707
                 -----------                    -----------
Total average
 assets          $ 2,316,279                    $ 2,036,916
                 ===========                    ===========

INTEREST BEARING
 LIABILITIES
Time deposits    $ 1,280,449 $  7,200 2.23%     $ 1,100,181 $  6,144  2.22%
Other deposits       527,697    1,020 0.77%         428,007      771  0.71%
Borrowed funds       120,413      660 2.17%         134,483      706  2.08%
                 ----------- --------           ----------- --------
Total interest
 bearing
 liabilities       1,928,559    8,880 1.83% (7)   1,662,671    7,621  1.82%

Noninterest
 bearing
 deposits            219,818                        219,690
Other
 liabilities          16,136                          2,772
                 -----------                    -----------
Total average
 liabilities       2,164,513                      1,885,133
                 -----------                    -----------

Shareholders'
 equity              151,766                        151,783

Total average
 liabilities and
   shareholders' -----------                    -----------
    equity       $ 2,316,279                    $ 2,036,916
                 ===========                    ===========

NET INTEREST                 --------                       --------
 INCOME/YIELD (3,4)          $ 16,270 2.97%                 $ 18,469  3.83%
                             ========                       ========

INTEREST SPREAD (5)                   2.77%                           3.59%

(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 2010 and 2009 includes $251 and $1,042,
    respectively, of accretion for purchase accounting adjustments related
    to loans acquired in the merger with American Community.
(7) Interest expense for 2010 and 2009 includes $119 and $839,
    respectively, of accretion for purchase accounting adjustments related
    to deposits and borrowings acquired in the merger with American
    Community.



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

                              Twelve Months Ended December 31,
                  ---------------------------------------------------------
                            2010                           2009
                  --------------------------     --------------------------
                                   (Dollars in thousands)

                    Average            Yield/      Average           Yield/
                    Balance   Interest Rate        Balance   Interest Rate
                  ----------- -------- ----      ----------- -------- ----
INTEREST EARNING
 ASSETS
Total loans (1,2) $ 1,696,469 $ 91,012 5.36%     $ 1,596,094 $ 88,486 5.54%
Federal funds
 sold                   4,424       10 0.23%          13,090       25 0.19%
Investment
 securities           232,577    8,742 3.76%         189,333    8,051 4.25%
Interest-bearing
 deposits             156,583      385 0.25%           8,344       45 0.54%
                  ----------- --------           ----------- --------
Total average
 earning assets
 (1)                2,090,053  100,149 4.79% (6)   1,806,861   96,607 5.35%
                              --------                       --------
Noninterest
 earning assets       142,102                        150,434
                  -----------                    -----------
Total average
 assets           $ 2,232,156                    $ 1,957,295
                  ===========                    ===========

INTEREST BEARING
 LIABILITIES
Time deposits     $ 1,258,639 $ 28,396 2.26%     $ 1,024,653 $ 25,855 2.52%
Other deposits        472,358    3,497 0.74%         377,951    3,129 0.83%
Borrowed funds        120,717    2,440 2.02%         161,099    2,847 1.77%
                  ----------- --------           ----------- --------
Total interest
 bearing
 liabilities        1,851,714   34,333 1.85% (7)   1,563,703   31,831 2.04%

Noninterest
 bearing deposits     211,027                        190,363
Other liabilities      15,013                         11,866
                  -----------                    -----------
Total average
 liabilities        2,077,754                      1,765,932
                  -----------                    -----------

Shareholders'
 equity               154,401                        191,363

Total average
 liabilities and
 shareholders'    -----------                    -----------
 equity           $ 2,232,155                    $ 1,957,295
                  ===========                    ===========

NET INTEREST                  --------                       --------
INCOME/YIELD (3,4)            $ 65,816 3.15%                 $ 64,776 3.59%
                              ========                       ========

INTEREST SPREAD (5)                    2.94%                          3.31%

(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 2010 and 2009 includes $1,610 and $6,036,
    respectively, of accretion for purchase accounting adjustments related
    to loans acquired in the merger with American Community.
(7) Interest expense for 2010 and 2009 includes $896 and $4,232,
    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:

    William A. Long
    President and Chief Executive Officer
    (336) 526-6312

    Joseph H. Towell
    President and Chief Operating Officer
    Yadkin Valley Bank and Trust Company
    (704) 768-1133
    Email Contact

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

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