SOURCE: Yadkin Valley Financial Corporation

Yadkin Valley Financial Corporation

August 17, 2009 13:36 ET

Yadkin Valley Financial Corporation Announces Second Quarter 2009 Results

ELKIN, NC--(Marketwire - August 17, 2009) - Yadkin Valley Financial Corporation (NASDAQ: YAVY)

Financial Highlights:

--  Non-interest income increased $2.3 million or 44% compared to the
    first quarter of 2009
--  Tier 1, total capital, and leverage ratios of 9.04%, 10.25%, and
    8.21%, respectively for the bank holding company as reported to the Federal
    Reserve; tangible equity ratio of 6.27%
--  Provision for loan losses of $16.5 million, an increase of $5.9
    million compared to the first quarter 2009
--  Loan loss reserves increased to 2.62% of total gross loans or 2.82% of
    total loans held for investment, compared to 2.27% of total gross loans or
    2.61% of total loans held for investment in the first quarter 2009
--  Nonperforming loans increased to 1.82% of total gross loans from 1.28%
    in the first quarter 2009
--  Nonperforming assets increased to 1.84% of total assets from 1.33% in
    the first quarter 2009
--  Net charge-offs decreased to $1.1 million or 0.27% of average loans on
    an annualized basis, compared to $2.0 million or 0.63% on an annualized
    basis in the first quarter 2009
--  Net interest margin was 3.76%, an increase of 89 basis points compared
    to 2.87% in the first quarter
--  Net loss of $6.6 million; and after the preferred dividend, a net loss
    for common shareholders of $7.1 million, or $0.46 per diluted share
    

Yadkin Valley Financial Corporation (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, announced financial results for the second quarter ending June 30, 2009. The Company reported a net loss of $6.6 million, compared to a net loss of $4.2 million in the first quarter of 2009. After the preferred dividend, the net loss for common shareholders was $7.1 million or $0.46 per diluted share, compared to a net loss for common shareholders of $4.6 million or $0.40 per diluted share in the first quarter of 2009. The decrease in quarterly net income was primarily due to a $5.9 million increase in the provision for loan losses as well as one-time merger-related expenses of $2.2 million, and a one-time FDIC assessment of $1.0 million. Partially offsetting these items was the accretion of $4.1 million to net interest income due to adjustments to financial assets and liabilities to their fair market values as part of purchase accounting treatment relating to the merger with American Community Bancshares, and a $2.3 million increase in non-interest income. The Company completed the American Community merger on April 17, 2009, which resulted in an increase of $529.3 million in tangible assets, including $416.3 million in loans, $439.9 million in deposits and $15.3 million in tangible equity as of the closing date.

Bill Long, President and CEO, commented, "We are excited to begin a new chapter of Yadkin Valley Financial following the historic merger with American Community. We believe that our entrance into the high growth markets in Union and Mecklenburg Counties through the addition of American Community is a significant step toward long term asset growth.

"Even during this extremely challenging credit cycle, we have continued to manage our problem assets well. Due to our conservative approach to identifying and working through nonperforming loans, we believe that our asset quality has continued to outperform our peers. Nonperforming assets increased to 1.84% of total assets compared to our peer average of over 2.80%. We continued to make significant additions to the allowance for loan losses in the second quarter following our regular conservative analysis of the loan portfolio. Accordingly, our loan loss reserves as a percentage of total gross loans of 2.62%, or 2.82% of loans held for investment, remained stronger than our peer average which was just over 1.75%. While our nonperforming assets are expected to be higher than historic amounts for the remainder of 2009, we believe they will remain at manageable levels.

"Looking ahead to the second half of 2009, we anticipate that our core net interest margin will remain relatively stable assuming no changes to interest rates, and depending upon our level of nonperforming loans. Over the second half of 2009, we anticipate further reductions in our cost of funds as we continue to focus on low cost deposit gathering. While fee income due to mortgage refinance activity remained robust during the first half of 2009, we anticipate that it will slow during the second half of this year as mortgage rates have risen slightly which has cooled refinancings. We also anticipate a more muted level of loan growth in 2009 compared to recent years due to the slow economy. In addition, we anticipate a higher yet manageable level of net charge-offs as we continue to aggressively work through our problem assets so that we can return to our focus on growth by early 2010. Lastly, we are currently evaluating a number of different capital raising options over the second half of 2009, which if completed would increase our regulatory capital levels, support our growth initiatives, and absorb loan losses. Armed with additional capital, and with the steps that we are taking to manage our nonperforming assets, we believe that we will emerge from the current economic cycle as a stronger financial institution."

Second Quarter 2009 Financial Highlights

Asset Quality

Nonperforming loans increased by $14.6 million to $32.0 million, or 1.82% of total gross loans, compared to $17.4 million, or 1.28% of total gross loans, as of the first quarter of 2009. The majority of the increase was due to the addition of 17 commercial real estate loans totaling $6.5 million, 12 residential construction loans totaling $4.6 million, 16 commercial and industrial loans totaling $2.5 million, and 12 construction/land development loans totaling $2.1 million. These increases were partially offset by $2.5 million in loans that were moved out of nonaccrual status at the end of the second quarter.

                                        Nonperforming Loan Analysis
                                           (Dollars in thousands)
                                  -----------------------------------------
                                  Second Quarter 2009  First Quarter 2009
                                  -------------------- --------------------
                                                % of                 % of
                                  Outstanding  Total   Outstanding  Total
Loan Type                           Balance    Loans     Balance    Loans
                                  ----------- -------  ----------- -------
Construction/land development           7,567    0.43%       2,911    0.21%
Residential construction                8,415    0.48%       2,924    0.21%
HELOC                                   1,229    0.07%         942    0.07%
1-4 Family residential                  2,754    0.16%       2,635    0.19%
Multifamily residential                     0    0.00%         539    0.04%
Commercial real estate                  8,177    0.46%       4,363    0.32%
Commercial & industrial                 3,583    0.20%       2,920    0.21%
Consumer & other                          282    0.02%         185    0.01%
                                  ----------- -------  ----------- -------
Total                             $    32,008    1.82% $    17,420    1.28%
                                  ----------- -------  ----------- -------

Other real estate owned (OREO) totaled $7.8 million at the end of the second quarter, up from $4.3 million in the first quarter. The increase in OREO was primarily due to the addition of residential construction properties totaling $2.3 million and land development properties totaling $805,000. Total nonperforming assets were $39.8 million, or 1.84% of total assets, up from $21.7 million, or 1.33% of total assets, as of March 31, 2009.

During the second quarter of 2009, the provision for loan losses increased $5.9 million to $16.5 million compared to the first quarter. The allowance for loan losses increased to $46.2 million, an increase of $15.3 million compared to $30.9 million in the first quarter. Net charge-offs totaled 0.27% of average loans on an annualized basis compared to 0.63% on an annualized basis during the first quarter. Loan loss reserves as a percentage of total gross loans increased to 2.62%, up from 2.27% in the first quarter, and 2.82% of total loans held for investment, up from 2.61% in the first quarter. Loan loss reserves were 1.44 times nonperforming loans, a decrease from 1.77 times in the first quarter.

Out of the $46.2 million in total allowance for loans losses at June 30, 2009, the specific allowance for impaired loans accounted for $12.0 million, up from $6.6 million at the end of the first quarter. The remaining general allowance, $34.2 million, was attributed to unimpaired loans and was up from $24.3 million at the end of the first quarter. This increase in the general allowance was driven primarily by increased charge-offs for the rolling eight quarters ended June 30, 2009 as compared to the eight quarter period ending March 31, 2009, and by downgrades to loans.

Net Interest Income and Net Interest Margin

Net interest income totaled $17.6 million, an increase of $7.6 million compared to the first quarter of 2009. The increase in net interest income is due to a $483 million or 34% increase in average earning assets resulting from the American Community merger which closed on April 17, 2009. On a linked quarter basis, the net interest margin increased 89 basis points to 3.76% from 2.87%. The net interest margin was positively impacted by adjustments to assets and liabilities to their fair market values as part of purchase accounting treatment relating to the merger. Excluding these fair market value adjustments, the core net interest margin was 2.90%, an increase of three basis points compared to the first quarter. The increase in the core net interest margin was largely due to a reduction in deposit costs as market rates continued to ease during the second quarter.

Non-Interest Income

Non-interest income increased 44% to $7.6 million, compared to $5.3 million in the first quarter of 2009. The sequential growth in non-interest income was primarily due to a 47% increase in deposit service charges, a 28% increase in other service fees, and a 50% increase in gains on mortgage loan sales. The increase in deposit service charges was primarily related to an increased number of accounts following the American Community merger. The increase in other service fees and gains on mortgage loan sales were attributed to an increased level of mortgage loan refinance activity due to the low interest rate environment. Partially offsetting these items was a $207,000 loss on mortgage banking income related to a decrease in the value of mortgage servicing rights, and a $114,000 other loss related to the sale of foreclosed real estate.

Non-Interest Expense

Non-interest expense increased 59% to $18.7 million, compared to $11.8 million in the first quarter of 2009. The increase was primarily due to a higher expense base following the American Community merger. Also impacting non-interest expense in the second quarter of 2009 was a one-time $1.0 million FDIC special assessment, as well as $2.2 million in merger-related expenses.

Balance Sheet and Capital

Compared to the first quarter of 2009, total assets, loans, and deposits increased 32%, 39%, and 42%, respectively. Excluding the impact of the American Community merger, loans held for investment and total deposits increased approximately 4% and 7%, respectively. Loan growth was primarily attributable to strong loan demand in the Company's Piedmont and Yadkin regions. Organic deposit growth was primarily related to an increase in CD and reciprocal CDAR balances, particularly within the Piedmont, American Community, and High Country regions.

The Company remains well-capitalized for regulatory purposes. As of June 30, 2009, the Company's Tier 1, total capital, and leverage ratios were 9.04%, 10.25%, and 8.21%, respectively. Tangible equity as a percentage of tangible assets was 6.27%.

Conference Call

Yadkin Valley Financial will host a conference call today at 2:00 p.m. EDT to discuss second quarter 2009 financial results. The call may be accessed by dialing 877-723-9518 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=38409&c=YAVY&mediakey=8E6871487CB61D679BE097C14C767A4E&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.) A replay of the conference call will be available until August 31 by dialing 888-203-1112 and entering access code 9004623.

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 43 branches throughout its four regions in North Carolina, and one region that operates in both North and South 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 American Community Bank region 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 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 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; 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 does not intend to and assumes 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
Condensed Consolidated Statements of Income
(unaudited)

                                              For the Three Months Ended
                                             ----------------------------
                                             June 30,  March 31, June 30,
                                               2009      2009      2008
                                             --------  --------  --------
                                             ($ in thousands except share
                                                 and per share data)
INTEREST INCOME:
Interest and fees on loans                   $ 23,936  $ 16,028  $ 17,224
Interest on federal funds sold                      1         1        26
Interest and dividends on securities:
Taxable                                         1,363     1,175     1,344
Non-taxable                                       513       385       373
Interest-bearing deposits                          10        11       134
                                             --------  --------  --------
TOTAL INTEREST INCOME                          25,823    17,600    19,101
                                             --------  --------  --------
INTEREST EXPENSE:
Time deposits of $100,000 or more               3,734     3,101     2,726
Other interest bearing deposits                 3,753     3,960     4,985
Borrowed funds                                    782       625     1,017
                                             --------  --------  --------
TOTAL INTEREST EXPENSE                          8,269     7,686     8,728
                                             --------  --------  --------
NET INTEREST INCOME                            17,554     9,914    10,373
PROVISON FOR LOAN LOSSES                       16,457    10,550     1,708
                                             --------  --------  --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
 LOSSES                                         1,097      (636)    8,665
                                             --------  --------  --------

NONINTEREST INCOME:
Service charges on deposit accounts             1,535     1,047     1,066
Other service fees                              1,365     1,065       877
Net gain on sales of mortgage loans             4,802     3,199     1,785
Net loss on sales of investment securities          -         -        (7)
Income on investment in bank owned life
 insurance                                        234       231       235
Mortgage banking income (loss)                   (207)     (307)       68
Other income (loss)                              (122)       36        23
                                             --------  --------  --------
TOTAL NONINTEREST INCOME                        7,607     5,271     4,047
                                             --------  --------  --------

NONINTEREST EXPENSES:
Salaries and employee benefits                  8,299     5,627     5,048
Occupancy and equipment expense                 1,842     1,327     1,294
Printing and supplies                             272       232       196
Data processing                                   427       133       271
Communications expense                            330       323       278
Advertising and marketing expense                 213       376       152
Amortization of core deposit intangible           350       225       235
FDIC assessment expense                         1,797       662       191
Loss on other than temporary impairment of
 securities                                         -       179         -
Other expense                                   5,524     2,709     2,488
                                             --------  --------  --------
TOTAL NONINTEREST EXPENSE                      19,054    11,793    10,153
                                             --------  --------  --------

INCOME (LOSS) BEFORE INCOME TAXES             (10,350)   (7,158)    2,559
INCOME TAX (BENEFIT)                           (3,795)   (2,995)      832
                                             --------  --------  --------
NET INCOME (LOSS)                              (6,555)   (4,163)    1,727
Preferred stock dividend                          528       445         -
                                             --------  --------  --------
NET INCOME (LOSS) AVAILABLE TO COMMON
 SHAREHOLDERS                                $ (7,083) $ (4,608) $  1,727
                                             ========  ========  ========
INCOME PER COMMON SHARE:
Basic                                        $  (0.46) $   0.40  $   0.15
Diluted                                         (0.46)     0.40      0.15
CASH DIVIDENDS PER COMMON SHARE

AVERAGE SHARES OUTSTANDING:
Basic                                          15,322    11,537    11,493
Diluted                                        15,322    11,537    11,526




Yadkin Valley Financial Corporation
Consolidated Statements of Income
(unaudited)

                                              For the Six Months Ended
                                          --------------------------------
                                          June 30,   June 30,   June 30,
                                            2009       2008       2007
                                          ---------  ---------  ----------
                                            ($ in thousands except share
                                                and per share data)
INTEREST INCOME:
Interest and fees on loans                $  39,964  $  33,437  $   33,325
Interest on federal funds sold                    2         37         168
Interest and dividends on securities:
Taxable                                       2,538      2,649       2,488
Non-taxable                                     898        742         579
Interest-bearing deposits                        21        139          63
                                          ---------  ---------  ----------
TOTAL INTEREST INCOME                        43,423     37,004      36,623
                                          ---------  ---------  ----------
INTEREST EXPENSE:
Time deposits of $100,000 or more             6,835      5,683       5,727
Other time and savings deposits               7,713      9,510       9,250
Borrowed funds                                1,407      2,081       1,020
                                          ---------  ---------  ----------
TOTAL INTEREST EXPENSE                       15,955     17,274      15,997
                                          ---------  ---------  ----------
NET INTEREST INCOME                          27,468     19,730      20,626
PROVISON FOR LOAN LOSSES                     27,007      2,158         500
                                          ---------  ---------  ----------
NET INTEREST INCOME AFTER PROVISION FOR
 LOAN LOSSES                                    461     17,572      20,126
                                          ---------  ---------  ----------

NON-INTEREST INCOME:
Service charges on deposit accounts           2,582      2,075       1,935
Other service fees                            2,430      1,741       1,856
Net gain on sales of mortgage loans           8,001      3,557       3,056
Net loss on sales of investment
 securities                                      (4)        (7)        530
Income on investment in bank owned life
 insurance                                      465        468         212
Mortgage banking income (loss)                 (514)        78         482
Other income (loss)                             (78)        64         120
                                          ---------  ---------  ----------
TOTAL NON-INTEREST INCOME                    12,882      7,976       8,191
                                          ---------  ---------  ----------

NON-INTEREST EXPENSES:
Salaries and employee benefits               13,926      9,915       9,828
Occupancy and equipment expense               3,170      2,271       2,002
Printing and supplies                           504        381         283
Data processing                                 560        383         211
Communications expense                          652        486         597
Advertising and marketing expense               589        336         236
Amortization of core deposit intangible         575        423         395
FDIC assessment expense                       2,459        243          89
Loss on other than temporary impairment
 of securities                                    -        179
Other expense                                 8,412      4,178       3,306
                                          ---------  ---------  ----------
TOTAL NON-INTEREST EXPENSE                   30,847     18,795      16,947
                                          ---------  ---------  ----------

INCOME (LOSS) BEFORE INCOME TAXES           (17,504)     6,753      11,370
INCOME TAX (BENEFIT)                         (6,790)     2,112       3,671
                                          ---------  ---------  ----------
NET INCOME (LOSS)                           (10,714)     4,641       7,699
Preferred stock dividend                        973          -           -
                                          ---------  ---------  ----------
NET INCOME (LOSS) AVAILABLE TO COMMON
 SHAREHOLDERS                             $ (11,687) $   4,641  $    7,699
                                          =========  =========  ==========

INCOME PER COMMON SHARE:
Basic                                     $   (0.87) $    0.42  $     0.73
Diluted                                       (0.87)      0.42        0.71
CASH DIVIDENDS PER COMMON SHARE

AVERAGE SHARES OUTSTANDING:
Basic                                        13,440     11,033      10,614
Diluted                                      13,440     11,093      10,798




Yadkin Valley Financial Corporation
Consolidated Balance Sheets
Unaudited

                                                     As of
                                     -------------------------------------
                                       June 30,   December 31,   June 30,
                                         2009        2008*         2008
                                     -----------  -----------  -----------
ASSETS
CASH AND CASH EQUIVALENTS
  Cash and due from banks            $    39,586  $    22,554  $    28,403
  Federal funds sold                         362           58            -
  Interest-bearing deposits                5,150        3,411       14,245
                                     -----------  -----------  -----------
    TOTAL CASH AND CASH EQUIVALENTS       45,098       26,023       42,648
                                     -----------  -----------  -----------

SECURITIES AVAILABLE FOR SALE            196,229      137,813      141,198

GROSS LOANS                            1,641,097    1,187,569    1,076,513
  Less: Allowance for loan losses        (46,243)     (22,355)     (15,879)
                                     -----------  -----------  -----------
    NET LOANS                          1,594,854    1,165,214    1,060,634
                                     -----------  -----------  -----------

LOANS HELD FOR RESALE                    121,142       49,929       47,143
ACCRUED INTEREST RECEIVABLE                7,380        5,442        5,891
PREMISES AND EQUIPMENT, NET               44,531       33,900       33,029
FORECLOSED REAL ESTATE                     7,769        4,018        2,115
FEDERAL HOME LOAN BANK STOCK, AT COST     10,539        7,877        6,767
INVESTMENT IN BANK-OWNED LIFE
 INSURANCE                                24,073       23,607       23,149
GOODWILL                                  66,510       53,503       54,033
CORE DEPOSIT INTANGIBLE                    6,852        4,660        5,114
OTHER ASSETS                              33,383       12,302        9,380

                                     -----------  -----------  -----------
  TOTAL ASSETS                       $ 2,158,360  $ 1,524,288  $ 1,431,101
                                     ===========  ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS
  Non-interest bearing demand
   deposits                              201,846      153,573      165,056
  NOW, savings and money market
   accounts                              396,239      283,891      283,404
  Time certificates:
    Over $100,000                        554,704      333,375      276,957
    Other                                625,371      384,203      371,303
                                     -----------  -----------  -----------
    TOTAL DEPOSITS                     1,778,160    1,155,042    1,096,720
                                     -----------  -----------  -----------

SHORT-TERM BORROWINGS                    105,870      169,112      153,650
LONG-TERM BORROWINGS                      46,886       38,850       19,316
ACCRUED INTEREST PAYABLE                   3,534        3,555        3,381
OTHER LIABILITIES                         20,441        8,085        8,305

                                     -----------  -----------  -----------
  TOTAL LIABILITIES                    1,954,891    1,374,644    1,281,372
                                     -----------  -----------  -----------

STOCKHOLDERS' EQUITY
  COMMON STOCK                            16,130       11,537       11,516
  PREFERRED STOCK                         34,422            -            -
  SURPLUS                                116,268       88,030       87,846
  RETAINED EARNINGS                       34,725       48,070       50,775
  ACCUMULATED OTHER COMPREHENSIVE
   INCOME                                  1,924        2,007         (408)
                                     -----------  -----------  -----------
  TOTAL STOCKHOLDERS' EQUITY             203,469      149,644      149,729
                                     -----------  -----------  -----------

  TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY              $ 2,158,360  $ 1,524,288  $ 1,431,101
                                     ===========  ===========  ===========
  * Note: Derived from audited financial statements




Yadkin Valley Financial Corporation
(unaudited)

                                  At or For the Three Months Ended
                          ------------------------------------------------
                          June 30,  Mar 31,   Dec 31,   Sept 30,  June 30,
                            2009      2009      2008      2008      2008
                          --------  --------  --------  --------  --------

Per Share Data:
Basic Earnings per Share  $  (0.46) $  (0.40) $  (0.22) $   0.16  $   0.15
Diluted Earnings per Share   (0.46)    (0.40)    (0.22)     0.15      0.15
Book Value per Share         10.48     12.63     12.97     13.24     13.00
Tangible Book Value per
 Share                        5.93      7.61      7.93      8.12      7.87
Cash Dividends per Share      0.06      0.06      0.13      0.13      0.13

Selected Performance
 Ratios:
Return on Average Assets
 (annualized)                -1.27%    -1.07%    -0.69%     0.49%     0.49%
Return on Average Equity
 (annualized)               -12.81%    -9.25%    -6.64%     4.66%     4.57%
Return on Tangible Equity
 (annualized)               -18.93%   -13.62%   -10.79%     7.61%     7.58%
Net Interest Margin
 (annualized)                 3.76%     2.87%     2.94%     3.33%     3.34%
Net Interest Spread
 (annualized)                 3.45%     2.53%     2.57%     2.90%     2.87%
Noninterest Income as a %
 of Revenue                  87.40%   113.72%    68.88%    24.76%    31.84%
Noninterest Income as a %
 of Average Assets            0.37%     0.34%     0.30%     0.21%     0.29%
Noninterest Expense as a
 % of Average Assets          0.92%     0.75%     0.73%     0.68%     0.72%
Net Noninterest income as
 a % of Average Assets       -0.55%    -0.42%    -0.42%    -0.47%    -0.43%
Efficiency Ratio             73.44%    75.38%    73.32%    68.64%    67.82%

Asset Quality:
Nonperforming Loans
 (000's)                  $ 32,008  $ 17,420  $ 13,647  $  8,169  $  4,830
Nonperforming
 Assets(000's)              39,777    21,738    17,665    11,169     6,945
Nonperforming Loans to
 Total Loans                  1.82%     1.28%     1.10%     0.70%     0.43%
Nonperforming Assets to
 Total Assets                 1.84%     1.33%     1.16%     0.76%     0.49%
Allowance for Loan Losses
 to Total Loans Held For
 Investment                   2.82%     2.61%     1.88%     1.48%     1.47%
Allowance for Loan Losses
 to Nonperforming Loans     144.00%   177.00%   164.00%   202.00%   329.00%
Net Charge-offs/Recoveries
 to Average Loans
 (annualized)                 0.27%     0.63%     0.60%     0.24%     0.14%

Capital Ratios:
Equity to Total Assets        7.83%    11.00%     9.82%    10.39%    10.46%
Tangible Equity to
 Tangible Assets (2)          4.59%     7.73%     6.24%     6.64%     6.60%
Tier 1 leverage ratio(1)      7.87%     8.65%     8.12%     8.36%     8.40%
Tier 1 risk-based
 ratio(1)                     8.67%     9.71%     9.01%     9.40%     9.34%
Total risk-based capital
 ratio(1)                     9.92%    10.97%    10.26%    10.65%    10.59%

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) Tangible Equity is the difference of stockholders' 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
(unaudited)

                                                      For the Six Months
                                                        Ended June 30,
                                                    ----------------------
                                                     2009    2008    2007
                                                    ------  ------  ------

Selected Performance Ratios:
Return on Average Assets (annualized)                -1.19%   0.72%   1.41%
Return on Average Equity (annualized)               -10.66%   6.45%  12.16%
Return on Tangible Equity (annualized)              -15.40%   9.72%  17.22%
Net Interest Margin                                   3.37%   3.44%   4.27%
Net Interest Spread                                   3.06%   2.89%   3.57%
Noninterest Income as a % of Revenue                 96.55%  30.47%  28.93%
Noninterest Income as a % of Average Assets           0.71%   0.61%   0.74%
Noninterest Expense as a % of  Average Assets         1.69%   1.44%   1.54%
Net Noninterest income as a % of Average Assets      -0.99%  -0.83%  -0.80%
Efficiency Ratio                                     74.16%  65.30%  57.78%

Asset Quality:
Net Charge-offs to Average Loans (annualized)         0.42%   0.07%   0.01%




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

                                  Three Months Ended June 30,
                      ----------------------------------------------------
                                2009                       2008
                      -------------------------  -------------------------
                       Average            Yield/  Average            Yield/
                       Balance   Interest Rate    Balance   Interest Rate
                      ---------- -------- -----  ---------- -------- -----
INTEREST EARNING
 ASSETS
Total loans (1,2)     $1,691,622 $ 23,974  5.68% $1,103,901 $ 17,261  6.27%
Federal funds sold         3,946        1  0.10%      5,423       26  1.92%
Investment securities    200,218    2,146  4.30%    143,659    1,881  5.25%
Interest-bearing
 deposits                 10,287       10  0.39%     15,341      134  3.50%
                      ---------- --------        ---------- --------
Total average earning
 assets (1)            1,906,073   26,131  5.50%  1,268,324   19,302  6.10%
                                 --------                   --------
Noninterest earning
 assets                  156,713                    143,654
                      ----------                 ----------
Total average assets  $2,062,786                 $1,411,978
                      ==========                 ==========

INTEREST BEARING
 LIABILITIES
Time deposits         $1,076,689 $  6,642  2.47% $  648,981 $  6,646  4.11%
Other deposits           390,228      845  0.87%    286,827    1,066  1.49%
Borrowed funds           152,875      782  2.05%    145,132    1,016  2.81%
                      ---------- --------        ---------- --------
Total interest
 bearing liabilities   1,619,792    8,269  2.05%  1,080,940    8,728  3.24%

Noninterest bearing
 deposits                190,726                    161,137
Other liabilities         16,677                     18,394
                      ----------                 ----------
Total average
 liabilities           1,827,195                  1,260,471
                      ----------                 ----------

Stockholders' equity     235,591                    151,507

Total average
 liabilities and      ----------                 ----------
 stockholders' equity $2,062,786                 $1,411,978
                      ==========                 ==========

NET INTEREST INCOME/             --------                   --------
 YIELD (3,4)                     $ 17,862  3.76%            $ 10,574  3.34%
                                 ========                   ========

INTEREST SPREAD (5)                        3.45%                      2.87%

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)

                                    Six Months Ended June 30,
                      ----------------------------------------------------
                                2009                       2008
                      -------------------------  -------------------------
                       Average            Yield/  Average            Yield/
                       Balance   Interest Rate    Balance   Interest Rate
                      ---------- -------- -----  ---------- -------- -----
INTEREST EARNING
 ASSETS
Total loans (1,2)     $1,488,518 $ 40,037  5.42% $1,017,687 $ 33,515  6.60%
Federal funds sold         4,309        2  0.09%      3,394       37  2.19%
Investment securities    172,262    3,832  4.49%    144,036    3,719  5.18%
Interest-bearing
 deposits                  6,199       21  0.68%      9,800      139  2.84%
                      ---------- --------        ---------- --------
Total average earning
 assets (1)            1,671,288   43,892  5.30%  1,174,917   37,410  6.39%
                                 --------                   --------
Noninterest earning
 assets                  149,294                    126,125
                      ----------                 ----------
Total average assets  $1,820,582                 $1,301,042
                      ==========                 ==========

INTEREST BEARING
 LIABILITIES
Time deposits         $  912,012 $ 12,976  2.87% $  603,561 $ 13,071  4.34%
Other deposits           338,990    1,572  0.94%    260,230    2,122  1.64%
Borrowed funds           185,754    1,407  1.53%    126,237    2,081  3.31%
                      ---------- --------        ---------- --------
Total interest
 bearing liabilities   1,436,756   15,955  2.24%    990,028   17,274  3.50%

Noninterest bearing
 deposits                168,093                    152,462
Other liabilities         12,967                     14,318
                      ----------                 ----------
Total average
 liabilities           1,617,816                  1,156,808
                      ----------                 ----------

Stockholders' equity     202,766                    144,234

Total average
 liabilities and      ----------                 ----------
 stockholders' equity $1,820,582                 $1,301,042
                      ==========                 ==========

NET INTEREST INCOME/             --------                   --------
 YIELD (3,4)                     $ 27,937  3.37%            $ 20,136  3.44%
                                 ========                   ========

INTEREST SPREAD (5)                        3.06%                      2.89%

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