SOURCE: Yadkin Valley Financial Corporation

July 27, 2006 14:20 ET

Yadkin Valley Financial Corporation Announces an Increase in Net Income of 21.8% for the Second Quarter

ELKIN, NC -- (MARKET WIRE) -- July 27, 2006 -- Yadkin Valley Financial Corporation (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, reports earnings of $3,419,825 for the quarter ended June 30, 2006, an increase of 21.8% as compared with earnings of $2,807,320 for the same quarter last year. Basic and diluted earnings per share were $0.32 and $0.26, for the quarters ended June 30, 2006 and 2005, respectively. Return on equity increased to 11.49% for the quarter ended June 30, 2006 from 9.87% for the quarter ended June 30, 2005, and return on tangible equity increased to 16.79% from 14.82% for the same periods.

Earnings for the six months ended June 30, 2006 were $6,348,037, a 20.5% increase over the prior year. Year to date diluted earnings per share were $0.59 and $0.49, respectively, for June 30, 2006 and 2005. Year to date basic earnings per share were $0.60 and $0.49, for the same periods. Return on equity increased to 10.78% for the six-month period ended June 30, 2006 from 9.41% for the six-month period ended June 30, 2005, and return on tangible equity increased to 15.82% from 14.16% for the same periods.

Total assets grew by $56.0 million (5.5%) for the six month period ended June 30, 2006 and by $89.5 million (9.0%) since June 30, 2005. Deposit growth of $52.7 million (6.5%) for the first six months of 2006 was used to fund $37.4 million growth in net loans held for investment with the remainder being invested in securities and overnight funds. The net interest margin expanded to 4.51% in the first six months of 2006 from 4.02% in the first six months of 2005.

Commenting on the results, Bill Long, President and CEO, stated, "We are pleased to report growth in earnings per share of $0.06 or 23% over the second quarter of 2005 and $0.10 or 20% over the first six months of 2005. Consistent growth in deposits, loans, net interest margin and noninterest income have combined to provide the earnings growth that our shareholders expect and deserve. I appreciate the work of our employees and leadership of our board to produce these results. Asset growth continues to be driven by our ability to attract core deposits, primarily noninterest-bearing and time certificates at competitive market rates. Noninterest-bearing deposits have grown by $24.1 million or 17.7% since year end. We added $30.1 million in jumbo CDs and $20.0 million in other CDs since year end from a combination of new deposits and transfers from money market accounts. Our strong loan growth has enabled us to make this additional funding from deposits profitable. Total loans and deposits from the four new branches opened over the last nineteen months were $39.3 million and $56.1 million, respectively, at June 30, 2006. Sidus Financial, LLC, our mortgage lending subsidiary, closed $414.4 million of mortgage loans over the first six months of 2006 compared with $396.3 million for the first six months of 2005, despite a decline in the industry volume. We expect to continue this progress during the remainder of 2006."

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 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
                                          June 30,          June 30,
                                           2006              2005

Net interest income                     $   10,313        $    8,471
Provision for loan losses                      550               382
Other income                                 3,489             3,231
Other expenses                               7,905             7,101
Income taxes                                 1,927             1,412
Net income                                   3,420             2,807
Income per share:
   Basic                                $     0.32        $     0.26
   Diluted                              $     0.32        $     0.26


                                          For the Six Months Ended
                                          June 30,          June 30,
                                           2006              2005

Net interest income                     $   20,108        $   16,537
Provision for loan losses                    1,115               764
Other income                                 6,632             6,160
Other expenses                              15,828            14,117
Income taxes                                 3,449             2,546
Net income                                   6,348             5,270

Income per share:
   Basic                                $     0.60        $     0.49
   Diluted                              $     0.59        $     0.49


                                      As of June 30,  As of December 31,
                                           2006              2005 *

Assets                                  $1,080,264        $1,024,295
Securities available for sale              122,300           113,716
Gross loans held for investment            775,703           737,530
Allowance for loan losses                  (10,277)           (9,474)
Loans held for sale                         44,900            31,427
Goodwill                                    32,136            32,136
Core deposit intangible                      5,436             5,851
Non-interest bearing deposits              160,018           135,912
NOW, savings, and money market             229,862           251,423
Time deposits over $100,000                200,720           170,574
Other time deposits                        276,488           256,444
Stockholders' equity                       119,142           116,323
Shares outstanding                          10,648            10,680

* Note: Derived from audited financial statements


Yadkin Valley Financial Corporation
(unaudited)


                                       For the Three Months Ended
                                Jun 30,  Mar 31,  Dec 31,  Sep 30,  Jun 30,
                                 2006     2006     2005     2005     2005
Per Share Data:
Basic Earnings per Share       $  0.32  $  0.27  $  0.28  $  0.27  $  0.26
Diluted Earnings per Share     $  0.32  $  0.27  $  0.27  $  0.27  $  0.26
Book Value per Share           $ 11.19  $ 11.04  $ 10.89  $ 10.80  $ 10.65
Tangible Book Value per Share  $  7.66  $  7.49  $  7.33  $  7.27  $  7.10
Cash Dividends per Share       $  0.12  $  0.11  $  0.11  $  0.11  $  0.11

Selected Performance Ratios:
Return on Average Assets
 (annualized)                     1.30%    1.18%    1.17%    1.17%    1.16%
Return on Average Equity
 (annualized)                    11.49%   10.06%   10.03%   10.07%    9.87%
Return on Tangible Equity
 (annualized)                    16.79%   14.82%   14.82%   14.98%   14.82%
Net Interest Margin               4.47%    4.55%    4.26%    4.04%    4.03%
Net Interest Spread               3.91%    4.09%    3.81%    3.64%    3.68%
Noninterest Income as a % of
 Revenue                         26.33%   26.61%   27.69%   30.76%   28.54%
Noninterest Income as a % of
 Average Assets                   0.33%    0.33%    0.34%    0.37%    0.33%
Noninterest Expense as a % of
  Average Assets                  0.75%    0.81%    0.78%    0.77%    0.73%
Efficiency Ratio                 55.14%   59.37%   59.49%   58.94%   58.26%

Asset Quality:
Nonperforming Loans (000’s)      3,113    3,478    3,199    3,059    4,076
Nonperforming Assets(000’s)      3,482    3,765    3,962    4,085    4,972
Nonperforming Loans to Total
 Loans                            0.38%    0.44%    0.42%    0.40%    0.54%
Nonperforming Assets to Total
 Assets                           0.32%    0.36%    0.39%    0.41%    0.50%
Allowance for Loan Losses to
 Total Loans                      1.25%    1.27%    1.23%    1.23%    1.19%
Allowance for Loan Losses to
 Nonperforming Loans              3.30     2.87     2.96     3.04     2.21
Net Charge-offs to Average
 Loans (annualized)               0.12%    0.03%    0.15%    0.11%    0.03%

Capital Ratios:
Equity to Total Assets           11.03%   11.33%   11.36%   11.58%   11.49%
Tangible Equity to Total
 Tangible Assets                  7.82%    7.98%    7.94%    8.10%    7.97%
Tier 1 leverage ratio             8.17%    8.31%    8.19%    8.14%    8.10%
Tier 1 risk-based ratio           9.36%    9.49%    9.38%    9.45%    9.35%
Total risk-based capital ratio   10.52%   10.66%   10.51%   10.59%   10.46%



                                                For the Six Months Ended
                                             June 30,   June 30,   June 30,
                                                2006       2005       2004
Selected Performance Ratios:
Return on Average Assets (annualized)           1.24%      1.11%      1.03%
Return on Average Equity (annualized)          10.78%      9.41%      8.40%
Return on Tangible Equity (annualized)         15.82%     14.16%     12.13%
Net Interest Margin                             4.51%      4.02%      3.87%
Net Interest Spread                             3.99%      3.67%      3.60%
Noninterest Income as a % of Revenue           25.88%     28.09%     24.41%
Noninterest Income as a % of Average
 Assets                                         0.64%      0.64%      0.51%
Noninterest Expense as a % of  Average
 Assets                                         1.54%      1.47%      1.31%
Efficiency Ratio                               56.97%     59.68%     56.95%

Asset Quality:
Net Charge-offs to Average Loans
 (annualized)                                   0.08%      0.11%      0.24%


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

(Unaudited)
Six Months Ended:                                 June 30, 2006
                                        -----------------------------------
                                          Average                 Yield/
                                          Balance    Interest      Rate
                                        ----------- ----------- ----------
INTEREST EARNING ASSETS
Federal funds sold                      $     2,874 $        65       4.56%
Interest bearing deposits                     2,399          51       4.29%
Investment securities (1)                   120,129       2,680       4.50%
Total loans (1,2)                           787,340      29,312       7.51%
                                        ----------- -----------
Total average earning assets (1)            912,742      32,108       7.09%
                                                    -----------
Noninterest earning assets                  117,344
                                        -----------
Total average assets                    $ 1,030,086
                                        ===========

INTEREST BEARING LIABILITIES
NOW and money market                    $   197,869 $     1,815       1.85%
Savings                                      40,294         200       1.00%
Time certificates                           441,535       8,492       3.88%
                                        ----------- -----------
Total interest bearing deposits             679,698      10,507       3.12%
Repurchase agreements sold                   30,091         421       2.82%
Borrowed funds                               51,778         762       2.97%
                                        ----------- -----------
Total interest bearing liabilities          761,567      11,690       3.10%
                                        ----------- -----------

Noninterest bearing deposits                143,731
Stockholders' equity                        118,748
Other liabilities                             6,040
                                        -----------
Total average liabilities and
   stockholders' equity                 $ 1,030,086
                                        ===========

NET INTEREST INCOME/
    YIELD (3,4)                                     $    20,418       4.51%
                                                    ===========

INTEREST SPREAD (5)                                                   3.99%




(Unaudited)
Six Months Ended:                                 June 30, 2005
                                        -----------------------------------
                                          Average                 Yield/
                                          Balance    Interest      Rate
                                        ----------- ----------- ----------
INTEREST EARNING ASSETS
Federal funds sold                      $     3,589 $        47       2.64%
Interest bearing deposits                     3,239          40       2.49%
Investment securities (1)                   110,734       2,290       4.17%
Total loans (1,2)                           724,363      22,572       6.23%
                                        ----------- -----------
Total average earning assets (1)            841,925      24,949       5.98%
                                                    -----------
Noninterest earning assets                  118,030
                                        -----------
Total average assets                    $   959,955
                                        ===========

INTEREST BEARING LIABILITIES
NOW and money market                    $   214,006 $     1,503       1.42%
Savings                                      44,254         241       1.10%
Time certificates                           351,982       5,072       2.91%
                                        ----------- -----------
Total interest bearing deposits             610,242       6,816       2.25%
Repurchase agreements sold                   32,105         231       1.45%
Borrowed funds                               72,561       1,138       3.16%
                                        ----------- -----------
Total interest bearing liabilities          714,908       8,185       2.31%
                                        ----------- -----------

Noninterest bearing deposits                121,303
Stockholders' equity                        112,956
Other liabilities                            10,788
                                        -----------
Total average liabilities and
   stockholders' equity                 $   959,955
                                        ===========

NET INTEREST INCOME/
    YIELD (3,4)                                     $    16,764       4.02%
                                                    ===========

INTEREST SPREAD (5)                                                   3.67%


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