Yadkin Valley Financial Corporation Announces an Increase in Net Income of 23.9% for the Third Quarter

Yadkin Valley Financial Corporation, (NASDAQ: YAVY), the holding company for Yadkin Valley Bank and Trust Company, reports earnings of $3,637,101 for the quarter ended September 30, 2006, an increase of 23.9% as compared with earnings of $2,935,176 for the same quarter last year. Basic and diluted earnings per share were $0.34 and $0.27 for the quarters ended September 30, 2006 and 2005, respectively, an increase of 25.9%. Return on equity increased to 12.10% for the quarter ended September 30, 2006 from 10.07% for the quarter ended September 30, 2005, and return on tangible equity increased to 17.66% from 14.98% for the same periods.

Earnings for the nine months ended September 30, 2006 were $9,985,127, a 21.7% increase over the prior year. Year to date diluted earnings per share were $0.93 and $0.76, respectively, for September 30, 2006 and 2005, a 22.4% increase. Year to date basic earnings per share were $0.94 and $0.77 for the same periods. Return on equity increased to 11.25% for the nine-month period ended September 30, 2006 from 9.63% for the nine-month period ended September 30, 2005, and return on tangible equity increased to 16.50% from 14.44% for the same periods.

Total assets grew by $69.8 million (9.1% annualized) for the nine-month period ended September 30, 2006 and by $96.8 million (9.7%) since September 30, 2005. Deposit growth of $51.8 million (8.5% annualized) for the first nine months of 2006 was used to fund $40.4 million growth in net loans held for investment with the remainder being invested in securities and overnight funds. The net interest margin expanded to 4.48% in the first nine months of 2006 from 4.02% in the first nine months of 2005.

Commenting on the results, Bill Long, President and CEO, stated, "Our third quarter earnings of 34 cents per share reflected a strong increase of 7 cents over the third quarter 2005 and an increase of 2 cents over the second quarter 2006. Return on equity at 12.10% for the quarter continued to improve toward our goal of 15%. The earnings increase over the prior year was driven by margin expansion and noninterest income which together exceeded the additional costs of operating three branches that have opened during the last fourteen months. In our Piedmont region, the newest Mooresville branch that opened on Medical Park Drive in September 2005, has already grown to $15 million in deposits and $10 million in loans. In Watauga and Avery Counties, our High Country region has increased deposits by 17.9% since September 30, 2005. We're also excited about our continued growth in existing markets as well as entering new markets in our Yadkin Valley region. During October 2006 in Yadkinville, we have begun construction on a permanent building. In early 2007, we plan to open a branch in Pfafftown, located west of Winston-Salem in Forsyth County."

"Each of our three banking regions, our mortgage and securities brokerage subsidiaries, our operations group, and our administrative staff contributed to the growth in assets and profitablility while improving the efficiency ratio. To recognize the leadership of our board and hard work of our employees that allowed us to reach $1 billion in assets last year, we held a celebration on September 23rd in North Wilkesboro with a cookout, bluegrass music, and recreation for the children and a few adventurous adults."

"Our stock price improved following our second quarter report supported by meetings with analysts and investors since last year. The price reached a new twelve-month high at $16.15 during the quarter, and the average daily closing price was $15.31, up 8.4% over the average price in the third quarter of 2005. We reached another significant milestone with our first independent research as Ryan Beck & Company initiated coverage in their report released October 3, 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
                                                Sept 30,     Sept 30,
                                                  2006         2005

        Net interest income                    $ 10,389     $  8,799
        Provision for loan losses                   525          498
        Other income                              3,926        3,688
        Other expenses                            8,212        7,642
        Income taxes                              1,941        1,412
        Net income                                3,637        2,935
        Income per share:
             Basic                             $   0.34     $   0.27
             Diluted                           $   0.34     $   0.27

                                             For the Nine Months Ended
                                                Sept 30,     Sept 30,
                                                  2006         2005

        Net interest income                    $ 30,497     $ 25,336
        Provision for loan losses                 1,640        1,262
        Other income                             10,558        9,848
        Other expenses                           24,040       21,759
        Income taxes                              5,390        3,957
        Net income                                9,985        8,205
        Income per share:
             Basic                              $  0.94     $   0.77
             Diluted                            $  0.93     $   0.76

                                            As of Sept. 30  As of Dec. 31,
                                                  2006          2005 *
Assets
        Securities available for sale          $128,485     $113,716
        Gross loans held for investment         779,075      737,530
        Allowance for loan losses               (10,615)      (9,474)
Loans held for sale                              41,161       31,427
        Goodwill                                 32,136       32,136
        Core deposit intangible                   5,235        5,851
        Other Assets                            118,642      113,108
                Total Assets                  1,094,119    1,024,294
Liabilities and Stockholders' Equity
Non-interest bearing deposits                   148,246      135,912
        NOW, savings, and money market          223,205      251,423
        Time deposits over $100,000             207,643      170,574
        Other time deposits                     287,087      256,444
        Other liabilities                       106,349       93,618
                Total Liabilities               972,530      907,971
        Stockholders' equity                    121,589      116,323
                Total Liabilities and
                 Stockholders' Equity         1,094,119    1,024,294

Shares outstanding                               10,610       10,680
*Note: Derived from audited financial statements


Yadkin Valley Financial Corporation
(unaudited)

                                       For the Three Months Ended

                                 Sept 30 Jun 30,  Mar 30   Dec 31, Sept 30
                                 2006     2006     2005     2005    2005
Per Share Data:
Basic Earnings per Share       $  0.34  $  0.32  $  0.27  $  0.28  $  0.27
Diluted Earnings per Share     $  0.34  $  0.32  $  0.27  $  0.27  $  0.27
Book Value per Share           $ 11.46  $ 11.19  $ 11.04  $ 10.89  $ 10.80
Tangible Book Value per Share  $  7.94  $  7.66  $  7.49  $  7.33  $  7.27
Cash Dividends per Share       $  0.12  $  0.12  $  0.11  $  0.11  $  0.11

Selected Performance Ratios:
Return on Average Assets
 (annualized)                     1.36%    1.30%    1.18%    1.17%    1.17%
Return on Average Equity
 (annualized)                    12.10%   11.49%   10.06%   10.03%   10.07%
Return on Tangible Equity
 (annualized)                    17.66%   16.79%   14.82%   14.82%   14.98%
Net Interest Margin               4.43%    4.47%    4.55%    4.26%    4.04%
Net Interest Spread               3.79%    3.91%    4.09%    3.81%    3.64%
Noninterest Income as a % of
 Revenue                         28.47%   26.33%   26.61%   27.69%   30.76%
Noninterest Income as a % of
 Average Assets                   0.37%    0.33%    0.33%    0.34%    0.37%
Noninterest Expense as a % of
  Average Assets                  0.77%    0.75%    0.81%    0.78%    0.77%
Efficiency Ratio                 55.35%   55.14%   59.37%   59.49%   58.94%

Asset Quality:
Nonperforming Loans (000’s)      5,184    3,113    3,478    3,199    3,059
Nonperforming Assets(000’s)      5,311    3,482    3,765    3,962    4,085
Nonperforming Loans to Total
 Loans                            0.63%    0.38%    0.44%    0.42%    0.40%
Nonperforming Assets to Total
 Assets                           0.49%    0.32%    0.36%    0.39%    0.41%
Allowance for Loan Losses to
 Total Loans                      1.29%    1.25%    1.27%    1.23%    1.23%
Allowance for Loan Losses to
 Nonperforming Loans              2.05     3.30     2.87     2.96     3.04
Net Charge-offs to Average
 Loans (annualized)               0.09%    0.12%    0.03%    0.15%    0.11%

Capital Ratios:
Equity to Total Assets           11.11%   11.03%   11.33%   11.36%   11.58%
Tangible Equity to Total
 Tangible Assets                  7.97%    7.82%    7.98%    7.94%    8.10%
Tier 1 leverage ratio             8.18%    8.17%    8.31%    8.19%    8.14%
Tier 1 risk-based ratio           9.38%    9.36%    9.49%    9.38%    9.45%
Total risk-based capital ratio   10.57%   10.52%   10.66%   10.51%   10.59%



                                 For the Nine Months Ended

                                                Sept     Sept     Sept
                                                30,      30,      30,
                                                2006     2005     2004
Selected Performance Ratios:
Return on Average Assets (annualized)            1.28%    1.13%    1.06%
Return on Average Equity (annualized)           11.25%    9.63%    8.77%
Return on Tangible Equity (annualized)          16.50%   14.44%   12.65%
Net Interest Margin                              4.48%    4.02%    3.92%
Net Interest Spread                              3.91%    3.66%    3.65%
Noninterest Income as a % of Revenue            26.79%   29.03%   23.86%
Noninterest Income as a % of Average Assets      1.01%    1.01%    0.75%
Noninterest Expense as a % of  Average Assets    2.31%    2.24%    1.98%
Efficiency Ratio                                56.41%   59.42%   56.74%

Asset Quality:
Net Charge-offs to Average Loans (annualized)    0.08%    0.11%    0.19%



                   Average Balance Sheets and Net Interest Income Analysis
                              (Dollars in Thousands)
(Unaudited)
Nine Months Ended:
                                      September  30, 2006
                               ----------------------------------
                                 Average                 Yield/
                                 Balance    Interest      Rate
                               ----------- ----------- ----------
INTEREST EARNING ASSETS
Federal funds sold             $     3,674 $       136       4.95%
Interest bearing deposits            2,270          71       4.18%
Investment securities (1)          122,725       4,173       4.55%
Total loans (1,2)                  794,979      45,342       7.63%
                               ----------- -----------
Total average earning assets
 (1)                               923,648      49,722       7.20%
                                           -----------
Noninterest earning assets         118,669
                               -----------
Total average assets           $ 1,042,317
                               ===========

INTEREST BEARING LIABILITIES
NOW and money market           $   187,234 $     2,792       1.99%
Savings                             39,872         298       1.00%
Time certificates                  456,409      13,842       4.05%
                               ----------- -----------
Total interest bearing
 deposits                          683,515      16,932       3.31%
Repurchase agreements sold          30,573         650       2.84%
Borrowed funds                      47,673       1,172       3.29%
                               ----------- -----------
Total interest bearing
 liabilities                       761,761      18,754       3.29%
                               ----------- -----------

Noninterest bearing deposits       146,012
Stockholders' equity               118,637
Other liabilities                   15,907
                               -----------
Total average liabilities and
   stockholders' equity        $ 1,042,317
                               ===========

NET INTEREST INCOME/
    YIELD (3,4)                            $    30,968       4.48%
                                           ===========

INTEREST SPREAD (5)                                          3.91%



(Unaudited)
Nine Months Ended:                     September 30, 2005
                               ----------------------------------
                                 Average                 Yield/
                                 Balance    Interest      Rate
                               ----------- ----------- ----------
INTEREST EARNING ASSETS
Federal funds sold             $     3,504 $        80       3.05%
Interest bearing deposits            3,341          72       2.88%
Investment securities (1)          111,069       3,434       4.13%
Total loans (1,2)                  735,195      35,284       6.42%
                               ----------- -----------
Total average earning assets
 (1)                               853,109      38,870       6.09%
                                           -----------
Noninterest earning assets         117,998
                               -----------
Total average assets           $   971,107
                               ===========

INTEREST BEARING LIABILITIES
NOW and money market           $   210,503 $     2,322       1.47%
Savings                             43,811         353       1.08%
Time certificates                  364,300       8,301       3.05%
                               ----------- -----------
Total interest bearing
 deposits                          618,614      10,976       2.37%
Repurchase agreements sold          33,895         511       2.02%
Borrowed funds                      72,222       1,699       3.15%
                               ----------- -----------
Total interest bearing
 liabilities                       724,731      13,186       2.43%
                               ----------- -----------

Noninterest bearing deposits       121,657
Stockholders' equity               113,885
Other liabilities                   10,834
                               -----------
Total average liabilities and
   stockholders' equity        $   971,107
                               ===========

NET INTEREST INCOME/
    YIELD (3,4)                            $    25,684       4.02%
                                           ===========

INTEREST SPREAD (5)                                          3.66%

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.


For additional information contact:
William A. Long, President and CEO
Edwin E. Laws, CFO
(336) 526-6312

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