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Yadkin Financial Corporation Reports Record Earnings  in the Second Quarter of 2016

RALEIGH, N.C., July 21, 2016 (GLOBE NEWSWIRE) -- Yadkin Financial Corporation (NYSE:YDKN) ("Yadkin" or the "Company"), the parent company of Yadkin Bank, today announced financial results for the second quarter ended June 30, 2016.

"We are pleased to report the Company achieved record net income and net operating earnings in the second quarter of 2016," announced Scott Custer, Yadkin's CEO. "The strong performance reflects the impact of the acquisition of NewBridge Bancorp earlier this year and robust growth within the entire branch network."

Second Quarter 2016 Performance Highlights

  • Net income available to common shareholders totaled $17.4 million, or $0.34 per diluted share, in Q2 2016 compared to $0.20 per diluted share in Q1 2016 and $0.33 per diluted share in Q2 2015. Net operating earnings available to common shareholders, which excludes certain non-operating income and expenses, improved to $21.2 million, or $0.41 per diluted share, in Q2 2016 from $0.39 per diluted share in Q1 2016 and $0.38 per diluted share, in Q2 2015.

  • Annualized return on average equity was 7.05 percent in Q2 2016, compared to 4.42 percent in Q1 2016 and 7.71 percent in Q2 2015. Annualized return on average tangible common equity was 11.89 percent in Q2 2016 compared to 7.18 percent in Q1 2016 and 11.90 percent in Q2 2015. Annualized net operating return on average tangible common equity increased to 14.35 percent in Q2 2016 from 13.14 percent in Q1 2016 and 11.94 in Q2 2015.

  • The efficiency ratio, the ratio of expenses to total revenues, improved to 63.5 percent in Q2 2016 from 75.4 percent in Q1 2016 and 64.5 percent in Q2 2015. The operating efficiency ratio improved to 55.5 percent in Q2 2016 from 58.1 percent in Q1 2016 and 60.0 percent in Q2 2015.

  • On an annualized basis, net charge-offs were 0.07 percent of average loans during Q2 2016, compared to 0.15% during Q1 2016.

  • Shareholder's equity totaled $1.00 billion as of June 30, 2016, compared to $984.6 million as of March 31, 2016. Tangible common equity to tangible assets was 8.94 percent as of June 30, 2016, compared to 8.72 percent as of March 31, 2016.

Acquisition of NewBridge Bancorp

On March 1, 2016, the Company completed its acquisition of NewBridge Bancorp (“NewBridge”), pursuant to an Agreement and Plan of Merger, dated October 12, 2015 (the "NewBridge Merger"). Following the NewBridge Merger, the Company is currently the fourth largest bank headquartered in North Carolina and ranks first by North Carolina deposit market share among community banks. The Company now operates 100 full-service banking locations in its North Carolina and South Carolina banking network and has a significant presence in all major North Carolina markets, including Charlotte, the Raleigh-Durham-Chapel Hill Triangle, the Piedmont Triad, and Wilmington. The Company plans to complete the NewBridge systems integration in September 2016. The NewBridge Merger added $2.1 billion in loans, $2.0 billion in deposits, and resulted in significant changes across most balance sheet categories. Additionally, since the merger was effective on March 1, 2016, the Company's results of operations for the first quarter reflect the impact of NewBridge for only one month. As a result, the Company's quarterly and year-to-date 2016 financial results may not be comparable to financial results in prior periods.

Results of Operations and Asset Quality

Net interest income totaled $63.5 million in the second quarter of 2016, which was a significant increase from $48.0 million in the first quarter of 2016. This increase was due to the full quarter impact of NewBridge's interest-earning assets as well as organic loan growth. Net interest margin decreased from 4.05 percent in the first quarter of 2016 to 3.94 percent in the second quarter of 2016, primarily due to lower-yielding acquired NewBridge loans and lower investment securities yields. Core net interest margin, which excludes the impact of accretion income on net interest income, was 3.63 percent in the second quarter of 2016, compared to 3.70 percent in the first quarter of 2016.

Net accretion income on acquired loans totaled $4.8 million in the second quarter of 2016, which consisted of $723 thousand of net accretion on purchased credit-impaired ("PCI") loans and $4.1 million of accretion income on purchased non-impaired loans. Net accretion income on acquired loans in the first quarter of 2016 totaled $3.6 million, which included $1.1 million of net accretion on PCI loans and $2.4 million of net accretion income on purchased non-impaired loans. Net accretion income on purchased non-impaired loans included $1.9 million of accelerated accretion due to principal prepayments in the second quarter of 2016 compared to $767 thousand in the first quarter of 2016. Higher non-PCI accretion income during the second quarter of 2016 reflected the full quarter impact of the NewBridge Merger.

Provision for loan losses was $2.3 million in the second quarter of 2016 compared to $1.9 million in the first quarter of 2016.The following table summarizes changes in the allowance for loan losses ("ALLL") for the quarters presented.

(Dollars in thousands) Non-PCI
Loans
PCI Loans Total
Q2 2016
Balance at April 1, 2016 $9,453 $778 $10,231
Net charge-offs (896) (896)
Provision for loan losses 2,307 (9) 2,298
Balance at June 30, 2016 $10,864 $769 $11,633
Q1 2016
Balance at January 1, 2016 $8,447 $1,322 $9,769
Net charge-offs (1,413) (1,413)
Provision for loan losses 2,419 (544) 1,875
Balance at March 31, 2016 $9,453 $778 $10,231


The ALLL was $11.6 million, or 0.22 percent of total loans as of June 30, 2016, compared to $10.2 million, or 0.20 percent of total loans, as of March 31, 2016. The increase in ALLL to total loans was primarily due to current origination activity. The adjusted ALLL, a non-GAAP metric that includes the ALLL as well as net acquisition accounting fair value adjustments for acquired loans, declined from 1.50 percent of total loans as of March 31, 2016 to 1.41 percent as of June 30, 2016. The decline in the adjusted ALLL ratio was due to improvements in historical loss rates used in the Company's ALLL model.

The provision for loan losses on non-PCI loans decreased by $112 thousand in the second quarter of 2016, primarily due to lower net charge-offs, which totaled $896 thousand in the second quarter of 2016 and $1.4 million in the first quarter of 2016. The annualized net charge-off rate was 0.07 percent of average loans the second quarter of 2016, a decline from 0.15 percent in the first quarter of 2016. The provision credit recorded on PCI loans decreased by $535 thousand on a linked-quarter basis, the result of significantly improved estimated cash flows on certain PCI loan pools during the first quarter of 2016.

Nonperforming loans, which include nonaccrual loans and loans past due 90 days or more and still accruing, as a percentage of total loans increased to 0.94 percent as of June 30, 2016 from 0.83 percent as of March 31, 2016. Total nonperforming assets (which include nonperforming loans and foreclosed assets) as a percentage of total assets similarly increased to 1.08 percent as of June 30, 2016 from 0.83 percent as of March 31, 2016. The Company's nonperforming asset ratio increased from a higher level of nonaccrual loans, a delinquent purchased receivables balance, and higher other real estate balances.

Non-interest income totaled $15.6 million in the second quarter of 2016, an increase from $11.4 million in the first quarter of 2016. Service charges and fees on deposit accounts increased by $1.6 million primarily due to the addition of acquired NewBridge deposit accounts. Mortgage banking income generated $3.9 million during the second quarter of 2016 compared to $1.6 million during the first quarter of 2016 as a result of strong local housing markets within the Company's footprint, a favorable interest rate environment for mortgage activity, and a $1.2 million gain recorded on a forward commitment to sell a portfolio of conforming residential mortgage loans. Government-guaranteed, small business lending income, which includes gains on sales of the guaranteed portion of certain U.S. Small Business Administration ("SBA") loans as well as servicing fees on previously sold SBA loans, contributed $2.7 million to non-interest income in the second quarter of 2016 compared to $3.1 million during the first quarter of 2016.

Non-interest expense totaled $50.2 million in the second quarter of 2016, an increase from $44.8 million in the first quarter of 2016, primarily due to the full-quarter impact of the NewBridge operating costs. Salaries and employee benefits, occupancy and equipment, data processing, and other non-interest expense categories all increased as a result of the NewBridge Merger, which added employees, branch and other facilities, and equipment to the Company's expense base. Personnel-related expenses increased 27.2 percent in the second quarter of 2016, while occupancy expenses increased 32.2 percent over the first quarter of 2016, which had included a single month of post-merger operating expenses. Merger and conversion costs declined $3.8 million in the second quarter of 2016, and include various professional fees, personnel, data processing, technology, and other expenses related to the NewBridge Merger.

The Company's efficiency ratio was 63.5 percent in the second quarter of 2016, compared to 75.4 percent in the first quarter of 2016. Operating efficiency ratio, which excludes gains on sales of available for sale securities, the gain from the sale of an ancillary line of business during second quarter of 2016, merger and conversion costs and restructuring charges, was 55.5 percent in the second quarter of 2016 and 58.1 percent in the first quarter of 2016. Execution of the branch consolidation plan (10 branches were closed in late Q2 2016 and 2 branches are scheduled to close in late Q3 2016), closures of two non-branch locations (scheduled for Q3 2016), and completion of the systems integration (scheduled for September 2016) should enable the Company to fully realize the cost savings and operational leverage that the NewBridge Merger provides. Management believes the majority of projected cost savings will be achieved by the end of Q3 2016 with remaining savings to be realized in Q4 2016 and Q1 2017.

Income tax expense totaled $9.2 million in the second quarter of 2016 compared to $4.9 million in the first quarter of 2016. The Company's effective tax rate declined to 34.6 percent in the second quarter of 2016, from 38.7 percent in the first quarter of 2016, primarily due to the impact of significant non-deductible merger expenses recorded during the first quarter of 2016.

Dividend Information

On July 20, 2016, Yadkin's Board of Directors declared a regular quarterly cash dividend of $0.10 per share on its issued and outstanding shares of unrestricted common stock, payable on August 18, 2016 to shareholders of record on August 11, 2016.

Yadkin Financial Corporation is the bank holding company for Yadkin Bank, a full-service state-chartered community bank providing services in 100 branches across North Carolina and upstate South Carolina. Serving over 130,000 customers, the Company has assets of $7.5 billion. The Bank’s primary business is providing banking, mortgage, investment, and insurance services to consumers and businesses across the Carolinas. The Bank provides SBA lending services through its Government Guaranteed Lending division, headquartered in Charlotte, NC, and mortgage lending services through Yadkin Mortgage, headquartered in Greensboro, NC. Yadkin Financial Corporation’s website is www.yadkinbank.com. Yadkin Financial Corporation's common stock is traded on the NYSE under the symbol YDKN.

Conference Call

The previously scheduled conference call to review Yadkin's second quarter 2016 earnings at 10:00 a.m. Eastern Time has been canceled. Instead, Yadkin Financial Corporation will participate in a joint conference call at 2:00 p.m. Eastern Time regarding the announcement of a proposed plan of merger, as described in a separate joint press release.

Non-GAAP Financial Measures

Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. Yadkin management uses non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) pre-tax, pre-provision operating earnings; (iii) operating non-interest expense, (iv) operating efficiency ratio, (v) adjusted allowance for loan losses to loans; and (vi) tangible common equity, in its analysis of the Company's performance. Net operating earnings available to common shareholders excludes the following from net income available to common shareholders: securities gains and losses, a one-time branch sale gain, merger and conversion costs, restructuring charges, income tax expense from the change in future state tax rates, and the income tax effect of adjustments. Pre-tax, pre-provision operating earnings excludes the following from net income: provision for loan losses, income tax expense, securities gains and losses, a one-time branch sale gain, merger and conversion costs, and restructuring charges. Operating non-interest expense excludes merger and conversion costs and restructuring charges from non-interest expense. The operating efficiency ratio excludes a one-time branch sale gain, securities gains and losses, merger and conversion costs, and restructuring charges from the efficiency ratio. Adjusted allowance for loan losses adds net acquisition accounting fair value discounts to the allowance for loan losses. Tangible common equity excludes preferred stock as well as goodwill and other intangible assets, net, from shareholders' equity.

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company and provide meaningful comparisons to its peers. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Yadkin performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-Looking Statements

Information in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, risks relating to any proposed mergers, reduced earnings due to larger than expected credit losses in the sectors of our loan portfolio secured by real estate due to economic factors, including declining real estate values, increasing interest rates, increasing unemployment, or changes in payment behavior or other factors; reduced earnings due to larger credit losses because our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral; the rate of delinquencies and amount of loans charged-off; the adequacy of the level of our allowance for loan losses and the amount of loan loss provisions required in future periods; costs or difficulties related to the integration of the banks we acquired or may acquire may be greater than expected; our ability to achieve the estimated synergies from the NewBridge Acquisition and once integrated, the effects of such business combination on our future financial condition, operating results, strategy and plans; our ability to integrate NewBridge on our schedule and budget; results of examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for loan losses or write down assets; the amount of our loan portfolio collateralized by real estate; our ability to maintain appropriate levels of capital; adverse changes in asset quality and resulting credit risk-related losses and expenses; increased funding costs due to market illiquidity, competition for funding, and increased regulatory requirements with regard to funding; significant increases in competitive pressure in the banking and financial services industries; changes in political conditions or the legislative or regulatory environment, including the effect of future financial reform legislation on the banking industry; general economic conditions, either nationally or regionally and especially in our primary service area, becoming less favorable than expected resulting in, among other things, a deterioration in credit quality; our ability to retain our existing customers, including our deposit relationships; changes occurring in business conditions and inflation; changes in monetary and tax policies; ability of borrowers to repay loans; risks associated with a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers or other third parties, including cyber attacks, which could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses; changes in accounting principles, policies or guidelines; changes in the assessment of whether a deferred tax valuation allowance is necessary; our reliance on secondary liquidity sources such as Federal Home Loan Bank advances, sales of securities and loans, federal funds lines of credit from correspondent banks and out-of-market time deposits; loss of consumer confidence and economic disruptions resulting from terrorist activities or military actions; and changes in the securities markets. Additional factors that could cause actual results to differ materially are discussed in the Company’s filings with the Securities and Exchange Commission, including without limitation its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K. The forward-looking statements in this press release speak only as of the date of the press release, and the Company does not assume any obligation to update such forward-looking statements.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Three months ended
(Dollars in thousands, except per share data)June 30, 2016 March 31,
2016
December 31,
2015
September 30,
2015
June 30, 2015
Interest income
Loans$64,345 $47,971 $41,025 $40,300 $40,404
Investment securities7,231 6,113 5,243 3,957 3,786
Federal funds sold and interest-earning deposits81 103 54 47 45
Total interest income71,657 54,187 46,322 44,304 44,235
Interest expense
Deposits4,433 3,467 2,950 3,097 3,073
Short-term borrowings1,360 808 489 437 331
Long-term debt2,375 1,867 1,541 1,465 1,504
Total interest expense8,168 6,142 4,980 4,999 4,908
Net interest income63,489 48,045 41,342 39,305 39,327
Provision for loan losses2,298 1,875 2,714 1,576 994
Net interest income after provision for loan losses61,191 46,170 38,628 37,729 38,333
Non-interest income
Service charges and fees5,795 4,212 3,436 3,566 3,495
Government-guaranteed lending2,680 3,072 3,170 3,009 3,677
Mortgage banking3,850 1,623 1,571 1,731 1,633
Bank-owned life insurance733 552 466 470 465
Gain (loss) on sales of available for sale securities64 130 (85) 84
Gain on sale of trust business417
Gain on sale of branches 88
Other2,098 1,765 1,320 2,022 1,446
Total non-interest income15,637 11,354 9,966 10,798 10,800
Non-interest expense
Salaries and employee benefits22,939 18,040 15,777 14,528 15,391
Occupancy and equipment7,315 5,535 4,722 4,641 4,637
Data processing2,783 2,140 1,931 1,851 1,929
Professional services1,547 1,108 861 1,196 1,407
FDIC insurance premiums770 821 674 732 772
Foreclosed asset expenses137 311 366 277 445
Loan, collection, and repossession expense1,004 1,133 926 931 850
Merger and conversion costs6,531 10,335 803 104 (25)
Restructuring charges25 21 282 50 2,294
Amortization of other intangible assets1,671 1,053 745 761 777
Other5,483 4,307 3,477 3,777 3,839
Total non-interest expense50,205 44,804 30,564 28,848 32,316
Income before income taxes26,623 12,720 18,030 19,679 16,817
Income tax expense9,219 4,920 6,182 7,891 6,076
Net income17,404 7,800 11,848 11,788 10,741
Dividends on preferred stock 183
Net income available to common shareholders$17,404 $7,800 $11,848 $11,788 $10,558
NET INCOME PER COMMON SHARE
Basic$0.34 $0.20 $0.37 $0.37 $0.33
Diluted0.34 0.20 0.37 0.37 0.33
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic51,311,504 38,102,926 31,617,993 31,608,909 31,609,021
Diluted51,490,182 38,194,964 31,815,333 31,686,150 31,610,620


SELECTED PERFORMANCE RATIOS AND FINANCIAL DATA - QUARTERLY

As of and for the three months ended
(Dollars in thousands, except per share data)June 30, 2016 March 31,
2016
December 31,
2015
September 30,
2015
June 30, 2015
Selected Performance Ratios (Annualized)
Return on average assets0.94% 0.57% 1.07% 1.08% 1.01%
Net operating return on average assets (Non-GAAP)1.15 1.09 1.14 1.15 1.14
Return on average shareholders' equity7.05 4.42 8.38 8.45 7.71
Net operating return on average shareholders' equity (Non-GAAP)8.59 8.39 8.92 8.98 8.68
Return on average tangible equity (Non-GAAP)11.89 7.18 12.36 12.57 11.90
Net operating return on average tangible equity (Non-GAAP)14.35 13.14 13.34 13.13 11.94
Yield on earning assets, tax equivalent4.45 4.57 4.72 4.83 4.84
Cost of interest-bearing liabilities0.63 0.64 0.66 0.65 0.63
Net interest margin, tax equivalent3.94 4.05 4.29 4.19 4.29
Efficiency ratio63.45 75.43 59.57 57.58 64.47
Operating efficiency ratio (Non-GAAP)55.50 58.12 57.46 57.27 60.04
Per Common Share
Net income, basic$0.34 $0.20 $0.37 $0.37 $0.33
Net income, diluted0.34 0.20 0.37 0.37 0.33
Net operating earnings, basic (Non-GAAP)0.41 0.39 0.40 0.40 0.38
Net operating earnings, diluted (Non-GAAP)0.41 0.39 0.40 0.40 0.38
Book value19.44 19.13 17.73 17.56 17.28
Tangible book value (Non-GAAP)12.28 11.94 12.51 12.31 12.01
Common shares outstanding51,577,575 51,480,284 31,726,767 31,711,901 31,712,021
Asset Quality Data and Ratios
Nonperforming loans:
Nonaccrual loans$39,039 $27,981 $21,194 $27,830 $25,692
Accruing loans past due 90 days or more10,264 14,992 11,337 9,303 6,800
Nonperforming purchased accounts receivable7,907
Other real estate23,091 18,435 15,346 11,793 13,547
Total nonperforming assets$80,301 $61,408 $47,877 $48,926 $46,039
Restructured loans not included in nonperforming assets$5,663 $5,147 $5,609 $2,564 $2,333
Net charge-offs to average loans (annualized)0.07% 0.15% 0.25% 0.12% 0.12%
Allowance for loan losses to loans0.22 0.20 0.32 0.30 0.28
Adjusted allowance for loan losses to loans (Non-GAAP)1.41 1.50 1.62 1.75 1.88
Nonperforming loans to loans0.94 0.83 1.06 1.25 1.10
Nonperforming assets to total assets1.08 0.83 1.07 1.12 1.06
Capital Ratios
Tangible equity to tangible assets (Non-GAAP)8.94% 8.72% 9.21% 9.30% 9.16%
Yadkin Financial Corporation1:
Tier 1 leverage9.10 12.32 9.42 9.40 9.22
Common equity Tier 110.06 9.87 10.55 10.5 10.43
Tier 1 risk-based capital10.43 10.24 10.59 10.55 10.43
Total risk-based capital11.57 11.36 11.96 11.98 11.88
Yadkin Bank1:
Tier 1 leverage9.77 13.25 10.34 10.35 10.17
Common equity Tier 111.20 10.96 11.64 11.64 11.53
Tier 1 risk-based capital11.20 10.96 11.64 11.64 11.53
Total risk-based capital11.45 11.19 11.99 12.04 11.93
1 Regulatory capital ratios for Q2 2016 are estimates.


YEAR TO DATE RESULTS OF OPERATIONS (UNAUDITED)

Six months ended June 30,
(Dollars in thousands, except per share data)2016 2015
Interest income
Loans$112,316 $80,200
Investment securities13,344 7,782
Federal funds sold and interest-earning deposits184 95
Total interest income125,844 88,077
Interest expense
Deposits7,980 5,962
Short-term borrowings2,166 620
Long-term debt4,244 2,992
Total interest expense14,390 9,574
Net interest income111,454 78,503
Provision for loan losses4,173 1,955
Net interest income after provision for loan losses107,281 76,548
Non-interest income
Service charges and fees on deposit accounts10,007 6,748
Government-guaranteed lending5,752 6,550
Mortgage banking5,473 2,955
Bank-owned life insurance1,285 937
Gain on sales of available for sale securities194 85
Gain on sale of trust business417
Other3,863 2,364
Total non-interest income26,991 19,639
Non-interest expense
Salaries and employee benefits40,979 30,593
Occupancy and equipment12,850 9,436
Data processing4,923 3,817
Professional services2,655 2,499
FDIC insurance premiums1,591 1,486
Foreclosed asset expenses448 633
Loan, collection, and repossession expense2,144 1,786
Merger and conversion costs16,866 195
Restructuring charges46 3,201
Amortization of other intangible assets2,723 1,592
Other9,704 8,036
Total non-interest expense94,929 63,274
Income before income taxes39,343 32,913
Income tax expense14,140 11,922
Net income25,203 20,991
Dividends on preferred stock 821
Net income available to common shareholders$25,203 $20,170
NET INCOME PER COMMON SHARE
Basic$0.56 $0.64
Diluted0.56 0.64
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic44,707,215 31,607,971
Diluted44,836,812 31,609,785


QUARTERLY BALANCE SHEETS (UNAUDITED)

Ending balances
(Dollars in thousands, except per share data) June 30, 2016 March 31,
2016
December 31,
2015 (1)
September 30,
2015
June 30, 2015
Assets
Cash and due from banks $70,637 $67,923 $60,783 $54,667 $65,620
Interest-earning deposits with banks 49,744 42,892 50,885 23,088 57,141
Federal funds sold 155 250 200
Investment securities available for sale 1,038,307 1,103,444 689,132 713,492 649,015
Investment securities held to maturity 38,959 39,071 39,182 39,292 39,402
Loans held for sale 139,513 53,820 47,287 37,962 38,622
Loans 5,268,768 5,208,752 3,076,544 2,979,779 2,955,771
Allowance for loan losses (11,633) (10,231) (9,769) (9,000) (8,358)
Net loans 5,257,135 5,198,521 3,066,775 2,970,779 2,947,413
Purchased accounts receivable 9,657 57,175 52,688 69,383 69,933
Federal Home Loan Bank stock 45,284 41,851 24,844 22,932 21,976
Premises and equipment, net 111,245 119,244 73,739 75,530 77,513
Bank-owned life insurance 141,930 141,170 78,863 78,397 77,927
Other real estate 23,091 18,435 15,346 11,793 13,547
Deferred tax asset, net 67,829 79,342 55,607 54,402 62,179
Goodwill 338,180 337,711 152,152 152,152 152,152
Other intangible assets, net 30,745 32,416 13,579 14,324 15,085
Accrued interest receivable and other assets 92,814 87,995 53,032 44,033 39,327
Total assets $7,455,225 $7,421,010 $4,474,144 $4,362,226 $4,327,052
Liabilities
Deposits:
Non-interest demand $1,156,507 $1,151,128 $744,053 $730,928 $697,653
Interest-bearing demand 1,119,970 1,158,417 523,719 484,187 475,597
Money market and savings 1,620,217 1,576,974 1,024,617 1,001,739 991,982
Time 1,441,892 1,463,193 1,017,908 1,030,915 1,077,862
Total deposits 5,338,586 5,349,712 3,310,297 3,247,769 3,243,094
Short-term borrowings 811,383 761,243 375,500 395,500 355,500
Long-term debt 229,012 198,320 194,967 129,859 147,265
Accrued interest payable and other liabilities 73,706 127,093 30,831 32,301 33,077
Total liabilities 6,452,687 6,436,368 3,911,595 3,805,429 3,778,936
Shareholders' equity
Common stock 51,578 51,480 31,727 31,712 31,712
Common stock warrant 717 717 717 717 717
Additional paid-in capital 905,727 904,711 492,828 492,387 492,151
Retained earnings 45,895 33,621 44,794 36,109 27,481
Accumulated other comprehensive loss (1,379) (5,887) (7,517) (4,128) (3,945)
Total shareholders' equity 1,002,538 984,642 562,549 556,797 548,116
Total liabilities and shareholders' equity $7,455,225 $7,421,010 $4,474,144 $4,362,226 $4,327,052
(1) Derived from audited financial statements as of December 31, 2015.


QUARTERLY NET INTEREST MARGIN ANALYSIS

Three months ended
June 30, 2016
Three months ended
March 31, 2016
Three months ended
June 30, 2015
(Dollars in thousands)Average
Balance
Interest(1) Yield/Cost(1) Average
Balance
Interest(1) Yield/Cost(1) Average
Balance
Interest(1) Yield/Cost(1)
Assets
Loans(2)$5,322,521 $64,478 4.87% $3,843,108 $48,065 5.03% $2,966,953 $40,468 5.47%
Investment securities(3)1,150,664 7,684 2.69 905,582 6,460 2.87 685,796 4,024 2.35
Federal funds and other59,357 81 0.55 63,660 103 0.65 49,407 45 0.37
Total interest-earning assets6,532,542 72,243 4.45% 4,812,350 54,628 4.57% 3,702,156 44,537 4.83%
Goodwill337,485 216,758 152,152
Other intangibles, net31,797 20,032 15,570
Other non-interest-earning assets514,206 437,297 401,690
Total assets$7,416,030 $5,486,437 $4,271,568
Liabilities and Equity
Interest-bearing demand$1,141,173 $536 0.19% $741,589 $303 0.16% $475,546 $158 0.13%
Money market and savings1,582,191 1,115 0.28 1,202,797 776 0.26 997,732 718 0.29
Time1,448,912 2,782 0.77 1,196,072 2,387 0.80 1,078,460 2,197 0.82
Total interest-bearing deposits4,172,276 4,433 0.43 3,140,458 3,466 0.44 2,551,738 3,073 0.48
Short-term borrowings758,180 1,360 0.72 475,267 808 0.68 320,694 331 0.41
Long-term debt280,520 2,375 3.41 252,442 1,867 2.97 136,377 1,504 4.42
Total interest-bearing liabilities5,210,976 8,168 0.63% 3,868,167 6,141 0.64% 3,008,809 4,908 0.65%
Non-interest-bearing deposits1,147,659 864,192 676,858
Other liabilities64,282 43,786 27,090
Total liabilities6,422,917 4,776,145 3,712,757
Shareholders’ equity993,113 710,292 558,811
Total liabilities and shareholders’ equity$7,416,030 $5,486,437 $4,271,568
Net interest income, taxable equivalent $64,075 $48,487 $39,629
Interest rate spread 3.82% 3.93% 4.18%
Tax equivalent net interest margin 3.94% 4.05% 4.29%
Percentage of average interest-earning assets to average interest-bearing liabilities 125.36% 124.41% 123.04%
(1) Interest amounts and yields are stated on a taxable-equivalent basis assuming a federal income tax rate of 35 percent.
(2) Loans include loans held for sale and non-accrual loans.
(3) Investment securities include investments in FHLB stock.


APPENDIX - RECONCILIATION OF NON-GAAP MEASURES - QUARTERLY

As of and for the three months ended
(Dollars in thousands, except per share data)June 30, 2016 March 31,
2016
December 31,
2015
September 30,
2015
June 30, 2015
Operating Earnings
Net income$17,404 $7,800 $11,848 $11,788 $10,741
Securities (gains) losses(64) (130) 85 (84)
Gain on sale of trust business(417)
Gain on sale of branches (88)
Merger and conversion costs6,531 10,335 803 104 (25)
Restructuring charges25 21 282 50 2,294
Income tax effect of adjustments(2,269) (3,217) (311) (59) (836)
DTA revaluation from reduction in state income tax rates, net of federal benefit 651
Net operating earnings (Non-GAAP)21,210 14,809 12,619 12,534 12,090
Dividends on preferred stock 183
Net operating earnings available to common shareholders (Non-GAAP)$21,210 $14,809 $12,619 $12,534 $11,907
Net operating earnings per common share:
Basic (Non-GAAP)$0.41 $0.39 $0.40 $0.40 $0.38
Diluted (Non-GAAP)0.41 0.39 0.40 0.40 0.38
Pre-Tax, Pre-Provision Operating Earnings
Net income$17,404 $7,800 $11,848 $11,788 $10,741
Provision for loan losses2,298 1,875 2,714 1,576 994
Income tax expense9,219 4,920 6,182 7,891 6,076
Pre-tax, pre-provision income28,921 14,595 20,744 21,255 17,811
Securities (gains) losses(64) (130) 85 (84)
Gain on sale of trust business(417)
Gain on sale of branches (88)
Merger and conversion costs6,531 10,335 803 104 (25)
Restructuring charges25 21 282 50 2,294
Pre-tax, pre-provision operating earnings (Non-GAAP)$34,996 $24,821 $21,826 $21,409 $19,996
Operating Non-Interest Income
Non-interest income$15,637 $11,354 $9,966 $10,798 $10,800
Securities (gains) losses(64) (130) 85 (84)
Gain on sale of trust business(417)
Gain on sale of branches (88)
Operating non-interest income (Non-GAAP)$15,156 $11,224 $9,963 $10,798 $10,716
Operating Non-Interest Expense
Non-interest expense$50,205 $44,804 $30,564 $28,848 $32,316
Merger and conversion costs(6,531) (10,335) (803) (104) 25
Restructuring charges(25) (21) (282) (50) (2,294)
Operating non-interest expense (Non-GAAP)$43,649 $34,448 $29,479 $28,694 $30,047
Operating Efficiency Ratio
Efficiency ratio63.45% 75.43% 59.57% 57.58% 64.47%
Adjustment for securities gains (losses)0.05 0.16 (0.10) 0.11
Adjustment for gain on sale of trust business0.34
Adjustment for gain on sale of branches 0.10
Adjustment for merger and conversion costs(8.31) (17.43) (1.56) (0.21) 0.04
Adjustment for restructuring costs(0.03) (0.04) (0.55) (0.10) (4.58)
Operating efficiency ratio (Non-GAAP)55.50% 58.12% 57.46% 57.27% 60.04%
Taxable-Equivalent Net Interest Income
Net interest income$63,489 $48,045 $41,342 $39,305 $39,327
Taxable-equivalent adjustment586 442 325 314 302
Taxable-equivalent net interest income (Non-GAAP)$64,075 $48,487 $41,667 $39,619 $39,629
Core Net Interest Income and Net Interest Margin (Annualized)
Taxable-equivalent net interest income (Non-GAAP)$64,075 $48,487 $41,667 $39,619 $39,629
Acquisition accounting amortization / accretion adjustments related to:
Loans(4,781) (3,565) (2,970) (3,404) (4,035)
Deposits(471) (553) (522) (713) (863)
Borrowings and debt60 119 170 155 132
Income from issuer call of debt security (165) (742)
Core net interest income (Non-GAAP)$58,883 $44,323 $37,603 $35,657 $34,863
Divided by: average interest-earning assets$6,532,542 $4,812,350 $3,851,009 $3,750,223 $3,702,156
Taxable-equivalent net interest margin (Non-GAAP)3.94% 4.05% 4.29% 4.19% 4.29%
Core taxable-equivalent net interest margin (Non-GAAP)3.63% 3.70% 3.87% 3.77% 3.78%
Adjusted Allowance for Loan Losses
Allowance for loan losses$11,633 $10,231 $9,769 $9,000 $8,358
Net acquisition accounting fair value discounts to loans62,745 68,063 40,188 43,095 47,160
Adjusted allowance for loan losses (Non-GAAP)$74,378 $78,294 $49,957 $52,095 $55,518
Divided by: total loans$5,268,768 $5,208,752 $3,076,544 $2,979,779 $2,955,771
Adjusted allowance for loan losses to loans (Non-GAAP)1.41% 1.50% 1.62% 1.75% 1.88%
Tangible Equity to Tangible Assets
Shareholders' equity$1,002,538 $984,642 $562,549 $556,797 $548,116
Less goodwill and other intangible assets368,925 370,127 165,731 166,476 167,237
Tangible equity (Non-GAAP)$633,613 $614,515 $396,818 $390,321 $380,879
Total assets$7,455,225 $7,421,010 $4,474,144 $4,362,226 $4,327,052
Less goodwill and other intangible assets368,925 370,127 165,731 166,476 167,237
Tangible assets$7,086,300 $7,050,883 $4,308,413 $4,195,750 $4,159,815
Tangible equity to tangible assets (Non-GAAP)8.94% 8.72% 9.21% 9.30% 9.16%
Tangible Book Value per Share
Tangible equity (Non-GAAP)$633,613 $614,515 $396,818 $390,321 $380,879
Divided by: common shares outstanding51,577,575 51,480,284 31,726,767 31,711,901 31,712,021
Tangible book value per common share (Non-GAAP)$12.28 $11.94 $12.51 $12.31 $12.01


APPENDIX - RECONCILIATION OF NON-GAAP MEASURES-YEAR TO DATE

Six months ended June 30,
(Dollars in thousands, except per share data)2016 2015
Operating Earnings
Net income$25,203 $20,991
Securities gains(194) (85)
Gain on sale of trust business(417)
Merger and conversion costs16,866 195
Restructuring charges46 3,201
Income tax effect of adjustments(5,486) (1,267)
Net operating earnings (Non-GAAP)36,018 23,035
Dividends on preferred stock 821
Net operating earnings available to common shareholders (Non-GAAP)$36,018 $22,214
Net operating earnings per common share:
Basic (Non-GAAP)$0.81 $0.70
Diluted (Non-GAAP)0.80 0.70
Pre-Tax, Pre-Provision Operating Earnings
Net income$25,203 $20,991
Provision for loan losses4,173 1,955
Income tax expense14,140 11,922
Pre-tax, pre-provision income43,516 34,868
Securities gains(194) (85)
Gain on sale of trust business(417)
Merger and conversion costs16,866 195
Restructuring charges46 3,201
Pre-tax, pre-provision operating earnings (Non-GAAP)$59,817 $38,179
Operating Non-Interest Income
Non-interest income$26,991 $19,639
Securities gains(194) (85)
Gain on sale of trust business(417)
Operating non-interest income (Non-GAAP)$26,380 $19,554
Operating Non-Interest Expense
Non-interest expense$94,929 $63,274
Merger and conversion costs(16,866) (195)
Restructuring charges(46) (3,201)
Operating non-interest expense (Non-GAAP)$78,017 $59,878
Operating Efficiency Ratio
Efficiency ratio68.57% 64.47%
Adjustment for securities gains0.09 0.06
Adjustment for gain on sale of trust business0.21
Adjustment for merger and conversion costs(12.23) (0.21)
Adjustment for restructuring costs(0.04) (3.26)
Operating efficiency ratio (Non-GAAP)56.60% 61.06%


CONTACT: Terry Earley, CFO Yadkin Financial Corporation Phone: (919) 659-9015 Email: Terry.Earley@yadkinbank.com

Source:Yadkin Financial Corporation