Yadkin Financial Corporation Announces Second Quarter 2013 Results; Continued Solid Profitability

July 25, 2013

ELKIN, NC--(Marketwired - Jul 25, 2013) - Yadkin Financial Corporation ( NASDAQ : YDKN )

Second Quarter Highlights:

  • Net income available to common shareholders for the second quarter of 2013 was $4.2 million, or $0.30 per diluted share.
  • The average net interest margin for the quarter was 3.90%, an increase of 33 basis points compared to the prior quarter.
  • Total loan balances increased $10.5 million compared to the prior quarter -- our first quarterly increase in more than 2 years.
  • Net interest income increased $1.1 million compared to the prior quarter due primarily to decreased deposit interest expense.
  • The Company successfully completed its rebranding initiative and the 1-for-3 reverse stock split during the second quarter.

Yadkin Financial Corporation ( NASDAQ : YDKN ), the holding company for Yadkin Bank, announced today financial results for the second quarter ended June 30, 2013. Net income available to common shareholders for the quarter was $4.2 million, or $0.30 per diluted share, compared to net income of $4.2 million, or $0.30 per diluted share, in the first quarter of 2013, and net income of $10.2 million, or $1.57 per diluted share, in the second quarter of 2012.

Joe Towell, President and CEO of Yadkin Financial, commented, "I'm very pleased to report another quarter of solid performance. Our main area of focus in 2013 is solid profitability, and we have delivered on that goal through the first half of the year. We are also maintaining our clean credit profile, which is key to delivering core earnings. Our net interest margin expanded nicely this quarter, as we continue to drive net interest income through loan growth and improving our deposit mix.

"During the second quarter, the Company hit several major milestones: we completed our rebranding initiative, with all divisions of the Company now operating under the Yadkin name; we effected our 1-for-3 reverse stock split; and we were included in the Russell 2000® Small Cap Index. Those items, along with $4.2 million in net income, add up to a very positive quarter and yet another important pillar in the strength of the Yadkin story. Our performance continues to produce strong results, and our Board, management team, and employees are focused on the future. We are looking forward to continued success throughout the second half of 2013."

Second Quarter 2013 Financial Highlights

Asset Quality

The Bank's key asset quality metrics continue to be strong as we maintain a clean credit profile. First, our adversely classified items to Tier 1 capital and loan loss reserve ratio has continued to decrease, down to 22.34% at the end of the second quarter. Our nonperforming loans decreased $4.0 million compared to the prior quarter, to $19.7 million. In addition, nonperforming loans to total loans ratio decreased to 1.47% at June 30, 2013, compared to 1.79% at March 31, 2013. 

                     
    Nonperforming Loan Analysis  
    (Dollars in thousands)  
                     
    June 30, 2013     March 31, 2013  
        % of         % of  
    Outstanding   Total     Outstanding   Total  
Loan Type   Balance   Loans     Balance   Loans  
Construction/land development   $ 3,545   0.27 %   $ 5,290   0.40 %
Residential construction     553   0.04 %     2,284   0.17 %
HELOC     2,003   0.15 %     2,005   0.15 %
1-4 Family residential     2,749   0.21 %     3,027   0.23 %
Commercial real estate     7,739   0.58 %     8,040   0.61 %
Commercial & industrial     2,743   0.21 %     2,756   0.21 %
Consumer & other     366   0.03 %     310   0.02 %
Total   $ 19,698   1.47 %   $ 23,712   1.79 %
                         

Other real estate owned (OREO) totaled $3.8 million at June 30, 2013, a decrease of $1.6 million compared to $5.4 million at March 31, 2013. We sold a large portion of our commercial OREO as part of our accelerated asset disposition plan, and we continue to have success moving our residential properties. Total nonperforming assets at June 30, 2013 were $23.5 million, or 1.30% of total assets, a decrease of $5.7 million from March 31, 2013.

During the second quarter of 2013, the provision for loan losses was $55,000, a decrease of $182,000 from the first quarter of 2013. This decrease is due to the continued clean credit profile of the Company following the completion of the accelerated asset disposition plan. Total net charge-offs for the second quarter of 2013 were $1.6 million, or 0.49% of average loans on an annualized basis.

At June 30, 2013, the allowance for loan losses was $22.9 million, compared to $24.5 million at March 31, 2013. As a percentage of total loans held-for-investment, the allowance for loan losses was 1.74% in the second quarter of 2013, down from 1.88% in the first quarter of 2013. While credit quality has improved, the reserve remains at a conservative level due to continued economic uncertainty and other external factors in our markets. Out of the $22.9 million in total allowance for loan losses at June 30, 2013, the specific allowance for impaired loans accounted for $2.0 million, down from $2.1 million in the first quarter. The remaining general allowance of $20.9 million attributed to unimpaired loans was down from $22.4 million at the end of the first quarter.

Net Interest Income and Net Interest Margin

Net interest income was up $1.1 million quarter over quarter, totaling $16.1 million for the second quarter of 2013. We also experienced a significant increase in our net interest margin. The quarterly average margin increased 33 basis points to 3.90%, up from 3.57% at March 31, 2013. This increase in margin is due primarily to a continued decrease in deposit interest expense.

In the second quarter of 2013, we continued to strategically shift our deposit mix and lower our cost of deposits. Core deposits now represent 61.7% of total deposits, our highest percentage in the last eight quarters, as we focus on core deposit growth. As a result of this strategy, our cost of deposits decreased to 0.55% for the quarter as compared to 0.71% in the first quarter of 2013.

Non-Interest Income

Non-interest income increased $527,000 to $6.2 million compared to $5.7 million in the first quarter of 2013. This increase is due primarily to the increase in service fees this quarter.

Non-Interest Expense

Non-interest expense increased in the second quarter of 2013 to $14.8 million as compared to $13.2 million in the first quarter of 2013. We expect part of this increase to be unique to the second quarter as we recorded many of the budgeted expenses related to our rebranding initiative during the quarter.

Balance Sheet and Capital

Total assets decreased $44.7 million during the second quarter of 2013. However, for the first time in the last two years, we had an increase in total loans, up $10.5 million compared to the prior quarter. The decrease in total deposits of $38.6 million consisted primarily of a reduction in higher cost time deposits. Core deposits increased $25.1 million compared to the prior quarter.

The Company's capital ratios have strengthened and continue to exceed all regulatory requirements. As of June 30, 2013, the Bank's leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 10.3%, 12.5%, and 13.7%, respectively. Leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio were 10.6%, 12.8%, and 14.0% respectively, for the holding company as of June 30, 2013. In addition, the Company's tangible common equity to total tangible assets ratio was 8.0% at the end of the second quarter, compared to 7.8% at March 31, 2013. For capital adequacy purposes, leverage ratio, Tier 1 risk-based capital ratio, and total risk-based capital ratio must be in excess of 5.0%, 6.0%, and 10.0%, respectively, to be considered well-capitalized.

Conference Call

Yadkin Financial Corporation will host a conference call at 10:00 a.m. EDT on Thursday, July 25, 2013 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 audio may be accessed at http://www.media-server.com/m/p/bns4u78z. A replay of the call will be available until July 31, 2013 by dialing 855-859-2056 or 404-537-3406 and entering Conference ID 20307852.

About Yadkin Financial Corporation
Yadkin Financial Corporation is the holding company for Yadkin Bank, a full-service community bank with 33 branches throughout its two regions in North Carolina and South Carolina. The Western Region serves Avery, Watauga, Ashe, Surry, Wilkes, Yadkin, and Iredell Counties. The Southern Region serves Durham, Orange, Mecklenburg, and Union Counties in North Carolina, and Cherokee and York Counties in South Carolina. The Bank provides mortgage-lending services through its mortgage division, Yadkin Mortgage, headquartered in Greensboro, NC. Securities brokerage services are provided by Yadkin Wealth, Inc., a Bank subsidiary with offices located throughout branch network. Yadkin Financial Corporation's website is www.yadkinbank.com. Yadkin shares are traded on NASDAQ under the symbol YDKN.

SAFE HARBOR

This news release contains forward-looking statements, as defined by Federal Securities Laws, including statements about financial outlook and business environment. Forward looking statements generally include words such as "expects," "projects," "anticipates," "believes," "intends," "estimates," "strategy," "plan," "potential," "possible" and other similar expressions. These statements are provided to assist in the understanding of future financial performance and such performance involves risks and uncertainties that may cause actual results to differ materially from those anticipated in such statements. Any such statements are based on current expectations and involve a number of risks and uncertainties. For a discussion of some factors that may cause such forward-looking statements to differ materially from actual results, please refer to the section entitled "Forward-Looking Statements" on pages 44-45 of Yadkin Financial Corporation's quarterly report filed on Form 10-Q with the SEC for the quarter ended June 30, 2013 and in the sections entitled "Risk Factors" in quarterly reports filed on Form 10-Q for the quarters ended March 31, 2013, September 30, 2012, and June 30, 2012, and annual report filed on Form 10-K for the year ended December 31, 2012. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements.

   
   
Yadkin Financial Corporation  
Consolidated Balance Sheets (Unaudited)  
   
  (Amounts in thousands except share and per share data)  
  June 30,   March 31,   December 31,   September 30,   June 30,  
  2013   2013   2012 (a)   2012   2012  
Assets:                              
Cash and due from banks $ 28,104   $ 22,210   $ 36,125   $ 26,048   $ 25,642  
Federal funds sold   50     50     50     50     50  
Interest-earning deposits with banks   4,654     20,447     102,221     97,124     75,895  
                               
U.S. government agencies   16,625     17,232     27,527     32,869     23,058  
Mortgage-backed securities   203,173     248,030     230,894     221,806     248,674  
State and municipal securities   110,410     115,435     84,567     54,769     66,607  
Common and preferred stocks   137     149     132     1,112     1,133  
    Total investment securities   330,345     380,846     343,120     310,556     339,472  
                               
Construction loans   127,564     133,200     131,981     147,408     189,840  
Commercial, financial and other loans   186,965     182,268     193,810     190,294     189,245  
Residential mortgages   167,784     166,565     140,931     174,728     167,774  
Commercial real estate loans   604,667     596,790     617,468     615,733     594,798  
Installment loans   32,133     32,037     33,426     34,216     34,177  
Revolving 1-4 family loans   195,648     193,404     191,888     196,489     196,547  
    Total loans   1,314,761     1,304,264     1,309,504     1,358,868     1,372,381  
Allowance for loan losses   (22,924 )   (24,492 )   (25,149 )   (27,231 )   (28,797 )
    Net loans   1,291,837     1,279,772     1,284,355     1,331,637     1,343,584  
Loans held for sale   22,545     18,461     27,679     24,766     24,867  
Accrued interest receivable   6,546     6,502     6,376     6,229     6,512  
Bank premises and equipment   42,410     42,454     41,849     41,460     41,547  
Foreclosed real estate   3,812     5,449     8,738     22,294     25,573  
Non-marketable equity securities at cost   3,473     3,474     4,154     4,155     4,630  
Investment in bank-owned life insurance   26,736     26,587     26,433     26,274     26,114  
Core deposit intangible   2,301     2,475     2,653     2,914     3,180  
Other assets   39,102     37,865     39,685     26,871     28,273  
                               
    Total assets $ 1,801,915   $ 1,846,592   $ 1,923,438   $ 1,920,378   $ 1,945,339  
                               
Liabilities and shareholders' equity:                              
Deposits:                              
Non-interest bearing $ 252,618   $ 257,388   $ 273,896   $ 256,402   $ 244,191  
NOW, savings and money market accounts   686,438     656,524     624,460     606,220     613,051  
Time certificates:                              
  $100 or more   251,168     281,652     316,146     342,356     348,072  
  Other   332,873     366,095     417,160     446,482     468,049  
    Total deposits   1,523,097     1,561,659     1,631,662     1,651,460     1,673,363  
                               
Borrowings   91,896     99,160     105,136     102,299     99,310  
Accrued expenses and other liabilities   12,306     10,922     15,846     11,383     18,087  
    Total liabilities   1,627,299     1,671,741     1,752,644     1,765,142     1,790,760  
                               
Total shareholders' equity   174,616     174,851     170,794     155,236     154,579  
                               
Total liabilities and shareholders' equity $ 1,801,915   $ 1,846,592   $ 1,923,438   $ 1,920,378   $ 1,945,339  
                               
Period end shares outstanding   14,383,986     14,383,884     14,383,882     6,667,896     6,667,896  
                               
(a) Derived from audited consolidated financial statements.  
   
   
   
Yadkin Financial Corporation  
Consolidated Income Statements (Unaudited)  
   
  Three Months Ended  
  (Amounts in thousands except share and per share data)  
  June 30,   March 31,   December 31,     September 30,     June 30,  
  2013   2013   2012     2012     2012  
                                   
Interest and fees on loans $ 16,950   $ 16,679   $ 17,338     $ 17,735     $ 17,944  
Interest on securities   1,686     1,548     1,381       1,674       1,754  
Interest on federal funds sold   3     6     8       9       8  
Interest-bearing deposits   12     42     66       28       38  
  Total interest income   18,651     18,275     18,793       19,446       19,744  
                                   
Time deposits of $100 or more   1,009     1,352     1,346       1,762       1,913  
Other deposits   1,112     1,432     2,132       2,018       2,193  
Borrowed funds   409     439     570       477       480  
  Total interest expense   2,530     3,223     4,048       4,257       4,586  
                                   
    Net interest income   16,121     15,052     14,745       15,189       15,158  
Provision for loan losses   55     237     31,554       4,251       2,218  
Net interest income after provision for loan losses   16,066     14,815     (16,809 )     10,938       12,940  
                                   
Non-interest income                                  
  Service charges on deposit accounts   1,317     1,269     1,398       1,319       1,325  
  Other service fees   1,401     927     986       857       893  
  Income on investment in bank-owned life insurance   150     153     159       159       157  
  Mortgage banking activities   2,546     3,288     1,448       1,599       1,674  
  Gains on sale of securities   272     4     96       1,348       300  
  Other than temporary impairment of investments   -     (39 )   (50 )     -       -  
  Loss on sale of subsidiary   -     (1 )   (1,019 )     -       -  
  Loss on sale of loans   -     -     (2,132 )     (900 )     -  
  Other   498     56     100       283       57  
    Total non-interest income   6,184     5,657     986       4,665       4,406  
                                   
Non-interest expense                                  
  Salaries and employee benefits   7,953     7,389     6,935       6,914       6,354  
  Occupancy and equipment   1,951     1,815     1,562       1,794       1,790  
  Printing and supplies   150     163     157       168       151  
  Data processing   350     395     447       456       453  
  Communication expense   338     332     354       314       354  
  Advertising and marketing   433     256     77       103       100  
  Amortization of core deposit intangible   175     178     260       266       275  
  FDIC assessment expense   642     592     664       650       659  
  Attorney fees   178     90     263       311       150  
  Other professional fees   497     476     736       491       479  
  Loan collection expense   201     217     569       69       204  
  (Gain) loss on fixed assets   -     -     153       -       (1 )
  Net cost of operation of other real estate owned   (174 )   (822 )   8,136       1,322       2,745  
  Other   2,149     2,134     2,395       1,934       2,019  
    Total non-interest expense   14,843     13,215     22,708       14,792       15,732  
                                   
Income (loss) before income taxes   7,407     7,257     (38,531 )     811       1,614  
Provision for income taxes (benefit)   2,598     2,608     (14,632 )     54       (9,383 )
                                   
Net income (loss)   4,809     4,649     (23,899 )     757       10,997  
    Preferred stock dividend and amortization of preferred stock discount   590     445     1,419       838       833  
Net income (loss) available to common shareholders $ 4,219   $ 4,204   $ (25,318 )   $ (81 )   $ 10,164  
Net income (loss) per common share (a)                                  
    Basic $ 0.30   $ 0.30   $ (3.63 )   $ (0.01 )   $ 1.57  
    Diluted $ 0.30   $ 0.30   $ (3.63 )   $ (0.01 )   $ 1.57  
                                   
Weighted average number of common shares outstanding                                  
    Basic   14,205,223     14,198,382     6,972,526       6,463,084       6,462,173  
    Diluted   14,223,604     14,200,424     6,972,526       6,463,084       6,462,173  
   
   
(a) Net income (loss) per share for prior periods has been adjusted to reflect the 1-for-3 reverse stock split.  
   
   
   
Yadkin Financial Corporation  
(unaudited)  
   
    At or For the Three Months Ended  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2013     2013     2012     2012     2012  
                                         
Per Share Data:                                        
Basic Earnings per Share (8)   $ 0.30     $ 0.30     $ (3.63 )   $ (0.01 )   $ 1.57  
Diluted Earnings per Share (8)     0.30       0.30       (3.63 )     (0.01 )     1.57  
Book Value per Share (8)     10.17       10.21       9.93       16.08       16.02  
                                         
Selected Performance Ratios:                                        
Return on Average Assets (annualized)     0.93 %     0.91 %     -5.15 %     -0.02 %     2.08 %
Return on Average Equity (annualized)     9.63 %     9.94 %     -53.53 %     -0.21 %     26.93 %
Net Interest Margin (annualized)     3.90 %     3.57 %     3.28 %     3.37 %     3.39 %
Net Interest Spread (annualized)     3.76 %     3.40 %     3.08 %     3.19 %     3.21 %
Non-interest Income as a % of Revenue (6)(7)     27.79 %     27.63 %     -6.23 %     29.90 %     25.40 %
Non-interest Income as a % of Average Assets (7)     0.34 %     0.30 %     0.05 %     0.24 %     0.23 %
Non-interest Expense as a % of Average Assets (7)     0.82 %     0.70 %     1.17 %     0.76 %     0.80 %
                                         
Asset Quality:                                        
Loans 30-89 days past due (000's) (4)   $ 6,493     $ 6,060     $ 14,000     $ 13,354     $ 10,321  
Loans over 90 days past due still accruing (000's)     -       -       -       -       -  
Nonperforming Loans (000's)     19,698       23,712       22,817       57,053       63,305  
Other Real Estate Owned (000's)     3,812       5,449       8,738       22,294       25,573  
Nonperforming Assets (000's)(5)     23,510       29,161       31,555       79,347       88,878  
Accruing/Performing troubled debt restructurings (000's)     9,162       8,579       17,667       13,929       12,596  
Nonperforming Loans to Total Loans     1.47 %     1.79 %     1.71 %     4.12 %     4.53 %
Nonperforming Assets to Total Assets     1.30 %     1.58 %     1.64 %     4.13 %     4.57 %
Allowance for Loan Losses to Total Loans     1.71 %     1.85 %     1.88 %     1.97 %     2.06 %
Allowance for Loan Losses to Total Loans Held for Investment     1.74 %     1.88 %     1.92 %     2.00 %     2.10 %
Allowance for Loan Losses to Nonperforming Loans     116.38 %     103.29 %     110.22 %     47.73 %     45.49 %
Net Charge-offs/Recoveries to Average Loans (annualized)     0.49 %     0.27 %     9.74 %     1.66 %     0.99 %
                                         
Capital Ratios:                                        
Equity to Total Assets     9.69 %     9.47 %     8.88 %     8.08 %     7.95 %
Tier 1 leverage ratio(1)     10.30 %     9.72 %     8.92 %     8.73 %     8.55 %
Tier 1 risk-based ratio(1)     12.49 %     12.23 %     11.73 %     11.18 %     10.89 %
Total risk-based capital ratio(1)     13.74 %     13.49 %     12.99 %     12.44 %     12.15 %
                                         
Non-GAAP disclosures(2):                                        
Tangible Book Value per Share   $ 10.01     $ 10.03     $ 9.75     $ 15.64     $ 15.54  
Return on Tangible Equity (annualized) (3)     9.76 %     10.09 %     -54.34 %     -0.21 %     27.54 %
Tangible Common Equity to Tangible Assets (3)     8.00 %     7.83 %     7.30 %     5.44 %     5.33 %
Efficiency Ratio (7)     66.55 %     66.40 %     88.62 %     66.46 %     65.63 %
 
Notes:
(1) Tier 1 leverage, Tier 1 risk-based, and Total risk-based ratios are ratios for the bank, Yadkin Bank 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 they are 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 provide 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 Common Equity is the difference of shareholders' equity less preferred shares and core deposit intangibles. Tangible Assets are the difference of total assets less core deposit intangibles.
(4) Past due numbers exclude loans classified as nonperforming.
(5) Nonperforming assets exclude accruing troubled debt restructured loans.
(6) Ratio is calculated by taking non-interest income as a percentage of net interest income after provision for loan losses plus total non-interest income.
(7) Certain income and expense amounts in the prior periods have been reclassified based on a change in our mortgage reporting segment.
(8) Prior period per share amounts have been adjusted to reflect the 1-for-3 reverse stock split.
   
   
   
Yadkin Financial Corporation    
Average Balance Sheets and Net Interest Income Analysis (Unaudited)    
                                 
    Three Months Ended June 30,    
    2013       2012    
    (Dollars in Thousands)    
                                 
    Average       Yield/       Average       Yield/    
    Balance   Interest   Rate       Balance   Interest   Rate    
INTEREST EARNING ASSETS                                        
Total loans (1,2)   $ 1,325,313   $ 16,978   5.14 %     $ 1,405,230   $ 17,980   5.15 %  
Investment securities     353,837     2,041   2.31 %       352,876     2,000   2.28 %  
Interest-bearing deposits & federal funds sold     17,741     15   0.34 %       74,548     46   0.25 %  
Total average earning assets (1)     1,696,891     19,034   4.50 %   (6)   1,832,654     20,026   4.39 % (6)
Non-interest earning assets     123,142                   124,972              
Total average assets   $ 1,820,033                 $ 1,957,626              
                                         
INTEREST BEARING LIABILITIES                                        
Time deposits   $ 607,172     1,835   1.21 %     $ 835,120     3,665   1.77 %  
Other deposits     674,966     285   0.17 %       616,773     440   0.29 %  
Borrowed funds     99,379     410   1.65 %       103,715     480   1.86 %  
Total interest bearing liabilities     1,381,517     2,530   0.73 %   (7)   1,555,608     4,585   1.19 % (7)
                                         
Non-interest bearing deposits     251,482                   238,370              
Other liabilities     11,260                   12,278              
Total average liabilities     1,644,259                   1,806,256              
                                         
Shareholders' equity     175,774                   151,370              
                                         
                                         
Total average liabilities and shareholders' equity   $ 1,820,033                 $ 1,957,626              
                                         
NET INTEREST INCOME/YIELD (3,4)         $ 16,504   3.90 %           $ 15,441   3.39 %  
                                         
INTEREST SPREAD (5)               3.76 %                 3.21 %  
   
(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 2013 and 2012 includes $68,000 and $62,000, respectively, of accretion for purchase accounting adjustments related to loans acquired in the merger with American Community.
(7) Interest expense for 2013 and 2012 includes $9,000 and $79,000, respectively, of accretion for purchase accounting adjustments related to deposits and borrowings acquired in the merger with American Community.