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Yadkin Financial Corporation Reports Earnings for the Third Quarter of 2016

RALEIGH, N.C., Oct. 19, 2016 (GLOBE NEWSWIRE) -- Yadkin Financial Corporation (NYSE:YDKN) ("Yadkin" or the "Company"), the parent company of Yadkin Bank, today announced financial results for the third quarter ended September 30, 2016.

"The third quarter has been a very active one at Yadkin beginning with the exciting announcement that we plan to merge with F.N.B. Corporation," stated Scott Custer, Yadkin's CEO. "With this proposed merger, we believe that we have found a partner that shares our core values and will enable us to expand banking and financial services in a unique way to our customers across the Carolinas. Merger integration activities are well underway and are proceeding according to schedule. In addition to the hard work invested into merger integration activities, the Company maintained a sharp focus on continuing to provide excellent customer service and executing our business plan. We are very pleased to announce record operating earnings per share, improved operating efficiency, and book value growth in the third quarter of 2016."

Third Quarter 2016 Performance Highlights (GAAP)

  • Net income available to common shareholders totaled $16.3 million, or $0.32 per diluted share, in Q3 2016 compared to $0.34 per diluted share in Q2 2016 and $0.37 per diluted share in Q3 2015.

  • Annualized return on assets was 0.88 percent in Q3 2016 compared to 0.94 percent in Q2 2016 and 1.08 percent in Q3 2015.

  • Annualized return on average equity was 6.41 percent in Q3 2016 compared to 7.05 percent in Q2 2016 and 8.45 percent in Q3 2015.

  • The expense efficiency ratio was 63.2 percent in Q3 2016 compared to 63.5 percent in Q2 2016 and 57.6 percent in Q3 2015.

  • The Company grew book value per share to $19.60 as of September 30, 2016 from $19.44 per share as of June 30, 2016.

Third Quarter 2016 Operating Highlights (Non-GAAP)

  • Net operating earnings available to common shareholders, which excludes certain non-operating income and expenses, improved to a record of $22.3 million, or $0.43 per diluted share, in Q3 2016 from $0.41 per diluted share in Q2 2016 and $0.40 per diluted share in Q3 2015.

  • Annualized net operating return on assets improved to a record 1.20 percent in Q3 2016 from 1.15 percent in both Q2 2016 and Q3 2015.

  • Annualized net operating return on average tangible common equity also improved to a record 14.44 percent in Q3 2016 from 14.35 percent in Q2 2016 and 13.34 in Q3 2015.

  • Operating expense efficiency ratio improved to 54.3 percent in Q3 2016 from 55.5 percent in Q2 2016 and 57.3 percent in Q3 2015.

  • The Company grew tangible book value per share to $12.47 as of September 30, 2016 from $12.28 per share as of June 30, 2016.

Results of Operations and Asset Quality - Linked Quarter Comparison

Net interest income totaled $64.0 million in the third quarter of 2016, which was an increase from $63.5 million in the second quarter of 2016. The Company improved its net interest income with higher average loan balances and slightly higher loan yields, partially offset by lower investment balances and yields, and higher costs of deposits and interest-bearing liabilities. Net interest margin decreased from 3.94 percent in the second quarter of 2016 to 3.92 percent in the third quarter of 2016 primarily due to lower investment securities yields and higher funding costs. Core net interest margin, which excludes the impact of accretion income on net interest income, was 3.62 percent in the third quarter of 2016, which was down slightly from 3.63 percent in the second quarter of 2016.

Net accretion income on acquired loans totaled $4.7 million in the third quarter of 2016, which consisted of $1.0 million of net accretion on purchased credit-impaired ("PCI") loans and $3.7 million of accretion income on purchased non-impaired loans. Net accretion income on acquired loans in the second quarter of 2016 totaled $5.1 million, which included $1.1 million of net accretion on PCI loans and $4.1 million of net accretion income on purchased non-impaired loans. Net accretion income on purchased non-impaired loans included $1.8 million of accelerated accretion due to principal prepayments in the third quarter of 2016 compared to $1.9 million in the second quarter of 2016.

Provision for loan losses was $3.0 million in the third quarter of 2016 compared to $2.3 million in the second 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
Q3 2016
Balance at July 1, 2016 $10,864 $769 $11,633
Net charge-offs (2,483) (5) (2,488)
Provision for loan losses 3,129 (132) 2,997
Balance at September 30, 2016 $11,510 $632 $12,142
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

The ALLL was $12.1 million, or 0.23 percent of total loans as of September 30, 2016, compared to $11.6 million, or 0.22 percent of total loans, as of June 30, 2016. The increase in ALLL to total loans was primarily due to reserve building on originated loans. 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 1.41 percent of total loans as of June 30, 2016 to 1.29 percent as of September 30, 2016. The decline in the adjusted ALLL ratio was due to accretion runoff on the acquired portfolio as well as improvements in historical loss rates used in the Company's ALLL model.

Provision for loan losses on non-PCI loans increased $822 thousand in the third quarter of 2016, primarily due to higher net charge-offs, which totaled $2.5 million in the third quarter of 2016, compared to $896 thousand in the second quarter of 2016. The annualized net charge-off rate was 0.18 percent of average loans the third quarter of 2016 compared to 0.07 percent in the second quarter of 2016. The provision credit recorded on PCI loans increased by $123 thousand on a linked-quarter basis, the result of improved cash flows on certain PCI loan pools.

Nonaccrual loans declined by $7.8 million in the third quarter of 2016 due to the foreclosure of a single, large multi-family project in the Raleigh, NC area. Partly as a result of this foreclosure, the ratio of nonperforming loans (nonaccrual loans and loans past due 90 days or more and still accruing) to total loans declined from 0.94 percent as of June 30, 2016 to 0.77 percent as of September 30, 2016. Total nonperforming assets (nonperforming loans, delinquent purchased accounts receivables and foreclosed assets) as a percentage of total assets increased slightly to 1.09 percent as of September 30, 2016, from 1.08 percent as of June 30, 2016.

Non-interest income totaled $16.8 million in the third quarter of 2016, an increase from $15.6 million in the second quarter of 2016. Mortgage banking income generated $4.2 million in the third quarter of 2016 compared to $3.9 million in the second quarter of 2016 as a result of strong residential sales activity within the Company's footprint and a favorable interest rate environment for mortgage activity. Mortgage banking income was also benefited in both quarters by sales of certain conforming 15-year mortgage loans that were acquired in the NewBridge Merger. Government-guaranteed, small business lending income improved to $3.6 million in the third quarter of 2016 from $2.7 million during the second quarter of 2016 primarily due to a change in production mix to more fully funded guaranteed loans that can be sold more quickly.

Non-interest expense totaled $51.1 million in the third quarter of 2016 compared to $50.2 million in the second quarter of 2016, primarily due to higher merger and conversion costs. Personnel-related expenses increased by 0.7 percent in the third quarter of 2016, while occupancy expenses decreased by 3.7 percent from the second quarter of 2016. Merger and conversion costs, which include various professional fees, personnel, data processing, technology, and other expenses related to the NewBridge and FNB mergers, increased by $646 thousand in the third quarter of 2016.

The Company's efficiency ratio was 63.2 percent in the third quarter of 2016 compared to 63.5 percent in the second quarter of 2016. Operating efficiency ratio, which excludes certain non-operating income and expenses, improved to 54.3 percent in the third quarter of 2016 from 55.5 percent in the second quarter of 2016. In a strategic effort to improve operating efficiency following the NewBridge Merger, the Company closed ten branches late in the second quarter of 2016, which reduced personnel and occupancy expenses. The Company has announced that the NewBridge systems integration (originally scheduled for September 2016) will now be completed following the FNB Merger. Postponement of the NewBridge systems integration means that some of the cost savings originally anticipated following the NewBridge Merger will not be realized in 2016. However, the Company believes that this decision will minimize customer impact and will better position the upcoming FNB integration.

Income tax expense totaled $10.4 million in the third quarter of 2016 compared to $9.2 million in the second quarter of 2016. The Company's effective tax rate increased from 34.6 percent in the second quarter of 2016 to 39.1 percent in the third quarter of 2016, partially due to the impact of significant non-deductible merger expenses recorded during the third quarter of 2016. The higher effective tax rate also reflected a $552 thousand one-time charge to income tax expense to account for the revaluation of the Company's state deferred tax assets as the North Carolina state corporate income tax rate will be reduced from 4 percent to 3 percent effective January 1, 2017.

Merger with 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 now the fourth largest bank headquartered in North Carolina and ranks first by North Carolina deposit market share among community banks. The Company 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. As a result of the NewBridge Merger, the Company's 2016 financial results may not be comparable to financial results in prior periods.

Dividend Information

On October 19, 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 November 17, 2016 to shareholders of record on November 10, 2016.

Yadkin Financial Corporation is the bank holding company for Yadkin Bank, a full-service state-chartered community bank providing services in 98 branches across North Carolina and upstate South Carolina. Serving over 130,000 customers, the Company has assets of $7.4 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.

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 Merger 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; failure to obtain all regulatory approvals and meet other closing conditions pursuant to the Agreement and Plan of Merger, dated July 20, 2016, by and between First National Bank of Pennsylvania ("F.N.B.") and the Company (the "FNB Merger"), including approval by the shareholders of F.N.B. and the Company, respectively, on the expected terms and time schedule; delay in closing the FNB Merger; difficulties and delays in integrating the F.N.B. and the Company businesses or fully realizing cost savings and other benefits; business disruption following the FNB Merger; customer acceptance of F.N.B. products and services; potential difficulties encountered in expanding into a new market following the FNB Merger; customer disintermediation; 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)September 30,
2016
June 30, 2016 March 31,
2016
December 31,
2015
September 30,
2015
Interest income
Loans$65,980 $64,345 $47,971 $41,025 $40,300
Investment securities6,618 7,231 6,113 5,243 3,957
Federal funds sold and interest-earning deposits101 81 103 54 47
Total interest income72,699 71,657 54,187 46,322 44,304
Interest expense
Deposits4,803 4,433 3,467 2,950 3,097
Short-term borrowings1,690 1,360 808 489 437
Long-term debt2,215 2,375 1,867 1,541 1,465
Total interest expense8,708 8,168 6,142 4,980 4,999
Net interest income63,991 63,489 48,045 41,342 39,305
Provision for loan losses2,997 2,298 1,875 2,714 1,576
Net interest income after provision for loan losses60,994 61,191 46,170 38,628 37,729
Non-interest income
Service charges and fees5,757 5,795 4,212 3,436 3,566
Government-guaranteed lending3,600 2,680 3,072 3,170 3,009
Mortgage banking4,223 3,850 1,623 1,571 1,731
Bank-owned life insurance1,427 733 552 466 470
Gain (loss) on sales of available for sale securities 64 130 (85)
Gain on sale of trust business 417
Gain on sale of branches 88
Other1,782 2,098 1,765 1,320 2,022
Total non-interest income16,789 15,637 11,354 9,966 10,798
Non-interest expense
Salaries and employee benefits23,102 22,939 18,040 15,777 14,528
Occupancy and equipment7,041 7,315 5,535 4,722 4,641
Data processing2,779 2,783 2,140 1,931 1,851
Professional services1,426 1,547 1,108 861 1,196
FDIC insurance premiums1,473 770 821 674 732
Foreclosed asset expenses342 137 311 366 277
Loan, collection, and repossession expense1,133 1,004 1,133 926 931
Merger and conversion costs7,177 6,531 10,335 803 104
Restructuring charges 25 21 282 50
Amortization of other intangible assets1,628 1,671 1,053 745 761
Other4,957 5,483 4,307 3,477 3,777
Total non-interest expense51,058 50,205 44,804 30,564 28,848
Income before income taxes26,725 26,623 12,720 18,030 19,679
Income tax expense10,439 9,219 4,920 6,182 7,891
Net income$16,286 $17,404 $7,800 $11,848 $11,788
NET INCOME PER COMMON SHARE
Basic$0.32 $0.34 $0.20 $0.37 $0.37
Diluted0.32 0.34 0.20 0.37 0.37
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic51,507,217 51,311,504 38,102,926 31,617,993 31,608,909
Diluted51,605,620 51,490,182 38,194,964 31,815,333 31,686,150

SELECTED PERFORMANCE RATIOS AND FINANCIAL DATA - QUARTERLY

As of and for the three months ended
(Dollars in thousands, except per share data)September 30,
2016
June 30, 2016 March 31,
2016
December 31,
2015
September 30,
2015
Selected Performance Ratios (Annualized)
Return on average assets0.88% 0.94% 0.57% 1.07% 1.08%
Net operating return on average assets (Non-GAAP)1.20 1.15 1.09 1.14 1.15
Return on average shareholders' equity6.41 7.05 4.42 8.38 8.45
Net operating return on average shareholders' equity (Non-GAAP)8.78 8.59 8.39 8.92 8.98
Return on average tangible equity (Non-GAAP)10.72 11.89 7.18 12.36 12.57
Net operating return on average tangible equity (Non-GAAP)14.44 14.35 13.14 13.14 13.34
Yield on earning assets, tax equivalent4.45 4.45 4.57 4.81 4.72
Cost of interest-bearing liabilities0.68 0.63 0.64 0.65 0.66
Net interest margin, tax equivalent3.92 3.94 4.05 4.29 4.19
Efficiency ratio63.21 63.45 75.43 59.57 57.58
Operating efficiency ratio (Non-GAAP)54.32 55.50 58.12 57.46 57.27
Per Common Share
Net income, basic$0.32 $0.34 $0.20 $0.37 $0.37
Net income, diluted0.32 0.34 0.20 0.37 0.37
Net operating earnings, basic (Non-GAAP)0.43 0.41 0.39 0.40 0.40
Net operating earnings, diluted (Non-GAAP)0.43 0.41 0.39 0.40 0.40
Book value19.60 19.44 19.13 17.73 17.56
Tangible book value (Non-GAAP)12.47 12.28 11.94 12.51 12.31
Common shares outstanding51,750,138 51,577,575 51,480,284 31,726,767 31,711,901
Asset Quality Data and Ratios
Nonperforming loans:
Nonaccrual loans$31,199 $39,039 $27,981 $21,194 $27,830
Accruing loans past due 90 days or more9,162 10,264 14,992 11,337 9,303
Nonperforming purchased accounts receivable7,907 7,907
Other real estate31,726 23,091 18,435 15,346 11,793
Total nonperforming assets$79,994 $80,301 $61,408 $47,877 $48,926
Restructured loans not included in nonperforming assets$5,585 $5,663 $5,147 $5,609 $2,564
Net charge-offs to average loans (annualized)0.18% 0.07% 0.15% 0.25% 0.12%
Allowance for loan losses to loans0.23 0.22 0.20 0.32 0.30
Adjusted allowance for loan losses to loans (Non-GAAP)1.29 1.41 1.50 1.62 1.75
Nonperforming loans to loans0.77 0.94 0.83 1.06 1.25
Nonperforming assets to total assets1.09 1.08 0.83 1.07 1.12
Capital Ratios
Tangible equity to tangible assets (Non-GAAP)9.24% 8.94% 8.72% 9.21% 9.30%
Yadkin Financial Corporation1:
Tier 1 leverage9.40 9.17 12.32 9.42 9.40
Common equity Tier 110.32 10.06 9.87 10.55 10.50
Tier 1 risk-based capital10.71 10.45 10.24 10.59 10.55
Total risk-based capital11.86 11.58 11.36 11.96 11.98
Yadkin Bank1:
Tier 1 leverage10.06 9.84 13.25 10.34 10.35
Common equity Tier 111.45 11.21 10.96 11.64 11.64
Tier 1 risk-based capital11.45 11.21 10.96 11.64 11.64
Total risk-based capital11.72 11.46 11.19 11.99 12.04
1 Regulatory capital ratios for Q3 2016 are estimates.

YEAR TO DATE RESULTS OF OPERATIONS (UNAUDITED)

Nine months ended
September 30,
(Dollars in thousands, except per share data)2016 2015
Interest income
Loans$178,296 $120,500
Investment securities19,962 11,739
Federal funds sold and interest-earning deposits285 142
Total interest income198,543 132,381
Interest expense
Deposits12,703 9,059
Short-term borrowings3,858 1,057
Long-term debt6,457 4,457
Total interest expense23,018 14,573
Net interest income175,525 117,808
Provision for loan losses7,170 3,531
Net interest income after provision for loan losses168,355 114,277
Non-interest income
Service charges and fees15,764 10,314
Government-guaranteed lending9,352 9,559
Mortgage banking9,696 4,686
Bank-owned life insurance2,712 1,407
Gain on sales of available for sale securities194 85
Gain on sale of trust business417
Other5,645 4,386
Total non-interest income43,780 30,437
Non-interest expense
Salaries and employee benefits64,081 45,121
Occupancy and equipment19,891 14,077
Data processing7,702 5,668
Professional services4,081 3,695
FDIC insurance premiums3,064 2,218
Foreclosed asset expenses790 910
Loan, collection, and repossession expense3,270 2,717
Merger and conversion costs24,043 299
Restructuring charges46 3,251
Amortization of other intangible assets4,352 2,353
Other14,747 11,813
Total non-interest expense146,067 92,122
Income before income taxes66,068 52,592
Income tax expense24,578 19,813
Net income41,490 32,779
Dividends on preferred stock 822
Net income available to common shareholders$41,490 $31,957
NET INCOME PER COMMON SHARE
Basic$0.88 $1.01
Diluted0.88 1.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic46,990,428 31,608,287
Diluted47,080,186 31,647,866

QUARTERLY BALANCE SHEETS (UNAUDITED)

Ending balances
(Dollars in thousands, except per share data) September 30,
2016
June 30, 2016 March 31,
2016
December 31,
2015 (1)
September 30,
2015
Assets
Cash and due from banks$96,090 $70,637 $67,923 $60,783 $54,667
Interest-earning deposits with banks66,188 49,744 42,892 50,885 23,088
Federal funds sold 155 250
Investment securities available for sale965,960 1,038,307 1,103,444 689,132 713,492
Investment securities held to maturity38,847 38,959 39,071 39,182 39,292
Loans held for sale85,964 139,513 53,820 47,287 37,962
Loans5,253,309 5,268,768 5,208,752 3,076,544 2,979,779
Allowance for loan losses(12,142) (11,633) (10,231) (9,769) (9,000)
Net loans5,241,167 5,257,135 5,198,521 3,066,775 2,970,779
Purchased accounts receivable7,907 9,657 57,175 52,688 69,383
Federal Home Loan Bank stock41,693 45,284 41,851 24,844 22,932
Premises and equipment, net108,557 111,245 119,244 73,739 75,530
Bank-owned life insurance140,125 141,930 141,170 78,863 78,397
Other real estate31,726 23,091 18,435 15,346 11,793
Deferred tax asset, net62,303 67,829 79,342 55,607 54,402
Goodwill339,549 338,180 337,711 152,152 152,152
Other intangible assets, net29,117 30,745 32,416 13,579 14,324
Accrued interest receivable and other assets95,887 92,814 87,995 53,032 44,033
Total assets$7,351,080 $7,455,225 $7,421,010 $4,474,144 $4,362,226
Liabilities
Deposits:
Non-interest demand$1,161,790 $1,156,507 $1,151,128 $744,053 $730,928
Interest-bearing demand1,142,060 1,119,970 1,158,417 523,719 484,187
Money market and savings1,609,104 1,620,217 1,576,974 1,024,617 1,001,739
Time1,397,074 1,441,892 1,463,193 1,017,908 1,030,915
Total deposits5,310,028 5,338,586 5,349,712 3,310,297 3,247,769
Short-term borrowings791,721 811,383 761,243 375,500 395,500
Long-term debt164,215 229,012 198,320 194,967 129,859
Accrued interest payable and other liabilities71,009 73,706 127,093 30,831 32,301
Total liabilities6,336,973 6,452,687 6,436,368 3,911,595 3,805,429
Shareholders' equity
Common stock51,750 51,578 51,480 31,727 31,712
Common stock warrant717 717 717 717 717
Additional paid-in capital907,626 905,727 904,711 492,828 492,387
Retained earnings57,026 45,895 33,621 44,794 36,109
Accumulated other comprehensive loss(3,012) (1,379) (5,887) (7,517) (4,128)
Total shareholders' equity1,014,107 1,002,538 984,642 562,549 556,797
Total liabilities and shareholders' equity$7,351,080 $7,455,225 $7,421,010 $4,474,144 $4,362,226
(1) Derived from audited financial statements as of December 31, 2015.

QUARTERLY NET INTEREST MARGIN ANALYSIS

Three months ended
September 30, 2016
Three months ended
June 30, 2016
Three months ended
September 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)$5,382,434 $66,122 4.89% $5,322,521 $64,478 4.87% $2,985,063 $40,362 5.36%
Investment securities(3)1,127,580 7,110 2.51 1,150,664 7,684 2.69 709,914 4,209 2.35
Federal funds and other51,241 101 0.78 59,357 81 0.55 55,246 47 0.34
Total interest-earning assets6,561,255 73,333 4.45% 6,532,542 72,243 4.45% 3,750,223 44,618 4.72%
Goodwill338,108 337,485 152,152
Other intangibles, net30,188 31,797 14,763
Other non-interest-earning assets458,290 514,206 400,811
Total assets$7,387,841 $7,416,030 $4,317,949
Liabilities and Equity
Interest-bearing demand$1,088,490 $510 0.19% $1,141,173 $536 0.19% $487,173 $130 0.11%
Money market and savings1,639,707 1,336 0.32 1,582,191 1,115 0.28 996,357 713 0.28
Time1,387,752 2,957 0.85 1,448,912 2,782 0.77 1,056,806 2,254 0.85
Total interest-bearing deposits4,115,949 4,803 0.46 4,172,276 4,433 0.43 2,540,336 3,097 0.48
Short-term borrowings781,861 1,690 0.86 758,180 1,360 0.72 349,900 437 0.50
Long-term debt229,772 2,215 3.84 280,520 2,375 3.41 125,846 1,465 4.62
Total interest-bearing liabilities5,127,582 8,708 0.68% 5,210,976 8,168 0.63% 3,016,082 4,999 0.66%
Non-interest-bearing deposits1,180,832 1,147,659 718,989
Other liabilities68,855 64,282 29,196
Total liabilities6,377,269 6,422,917 3,764,267
Shareholders’ equity1,010,572 993,113 553,682
Total liabilities and shareholders’ equity$7,387,841 $7,416,030 $4,317,949
Net interest income, taxable equivalent $64,625 $64,075 $39,619
Interest rate spread 3.77% 3.82% 4.06%
Tax equivalent net interest margin 3.92% 3.94% 4.19%
Percentage of average interest-earning assets to average interest-bearing liabilities 127.96% 125.36% 124.34%
(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)September 30,
2016
June 30,
2016
March 31,
2016
December 31,
2015
September 30,
2015
Operating Earnings
Net income$16,286 $17,404 $7,800 $11,848 $11,788
Securities (gains) losses (64) (130) 85
Gain on sale of trust business (417)
Gain on sale of branches (88)
Merger and conversion costs7,177 6,531 10,335 803 104
Restructuring charges 25 21 282 50
Income tax effect of adjustments(1,719) (2,269) (3,217) (311) (59)
DTA revaluation from reduction in state income tax rates, net of federal benefit552 651
Net operating earnings (Non-GAAP)$22,296 $21,210 $14,809 $12,619 $12,534
Net operating earnings per common share:
Basic (Non-GAAP)$0.43 $0.41 $0.39 $0.40 $0.40
Diluted (Non-GAAP)0.43 0.41 0.39 0.40 0.40
Pre-Tax, Pre-Provision Operating Earnings
Net income$16,286 $17,404 $7,800 $11,848 $11,788
Provision for loan losses2,997 2,298 1,875 2,714 1,576
Income tax expense10,439 9,219 4,920 6,182 7,891
Pre-tax, pre-provision income29,722 28,921 14,595 20,744 21,255
Securities (gains) losses (64) (130) 85
Gain on sale of trust business (417)
Gain on sale of branches (88)
Merger and conversion costs7,177 6,531 10,335 803 104
Restructuring charges 25 21 282 50
Pre-tax, pre-provision operating earnings (Non-GAAP)$36,899 $34,996 $24,821 $21,826 $21,409
Operating Non-Interest Income
Non-interest income$16,789 $15,637 $11,354 $9,966 $10,798
Securities (gains) losses (64) (130) 85
Gain on sale of trust business (417)
Gain on sale of branches (88)
Operating non-interest income (Non-GAAP)$16,789 $15,156 $11,224 $9,963 $10,798
Operating Non-Interest Expense
Non-interest expense$51,058 $50,205 $44,804 $30,564 $28,848
Merger and conversion costs(7,177) (6,531) (10,335) (803) (104)
Restructuring charges (25) (21) (282) (50)
Operating non-interest expense (Non-GAAP)$43,881 $43,649 $34,448 $29,479 $28,694
Operating Efficiency Ratio
Efficiency ratio63.21% 63.45% 75.43% 59.57% 57.58%
Adjustment for securities gains (losses) 0.05 0.16 (0.10)
Adjustment for gain on sale of trust business 0.33
Adjustment for gain on sale of branches 0.10
Adjustment for merger and conversion costs(8.89) (7.97) (17.43) (1.56) (0.21)
Adjustment for restructuring costs (0.03) (0.04) (0.55) (0.10)
Operating efficiency ratio (Non-GAAP)54.32% 55.50% 58.12% 57.46% 57.27%
Taxable-Equivalent Net Interest Income
Net interest income$63,991 $63,489 $48,045 $41,342 $39,305
Taxable-equivalent adjustment634 586 442 325 314
Taxable-equivalent net interest income (Non-GAAP)$64,625 $64,075 $48,487 $41,667 $39,619
Core Net Interest Income and Net Interest Margin (Annualized)
Taxable-equivalent net interest income (Non-GAAP)$64,625 $64,075 $48,487 $41,667 $39,619
Acquisition accounting amortization / accretion adjustments related to:
Loans(4,744) (4,781) (3,565) (2,970) (3,404)
Deposits(329) (471) (553) (522) (713)
Borrowings and debt85 60 119 170 155
Income from issuer call of debt security (165) (742)
Core net interest income (Non-GAAP)$59,637 $58,883 $44,323 $37,603 $35,657
Divided by: average interest-earning assets$6,561,255 $6,532,542 $4,812,350 $3,851,009 $3,750,223
Taxable-equivalent net interest margin (Non-GAAP)3.92% 3.94% 4.05% 4.29% 4.19%
Core taxable-equivalent net interest margin (Non-GAAP)3.62% 3.63% 3.70% 3.87% 3.77%
Adjusted Allowance for Loan Losses
Allowance for loan losses$12,142 $11,633 $10,231 $9,769 $9,000
Net acquisition accounting fair value discounts to loans55,787 62,745 68,063 40,188 43,095
Adjusted allowance for loan losses (Non-GAAP)$67,929 $74,378 $78,294 $49,957 $52,095
Divided by: total loans$5,253,309 $5,268,768 $5,208,752 $3,076,544 $2,979,779
Adjusted allowance for loan losses to loans (Non-GAAP)1.29% 1.41% 1.50% 1.62% 1.75%
Tangible Equity to Tangible Assets
Shareholders' equity$1,014,107 $1,002,538 $984,642 $562,549 $556,797
Less goodwill and other intangible assets368,666 368,925 370,127 165,731 166,476
Tangible equity (Non-GAAP)$645,441 $633,613 $614,515 $396,818 $390,321
Total assets$7,351,080 $7,455,225 $7,421,010 $4,474,144 $4,362,226
Less goodwill and other intangible assets368,666 368,925 370,127 165,731 166,476
Tangible assets$6,982,414 $7,086,300 $7,050,883 $4,308,413 $4,195,750
Tangible equity to tangible assets (Non-GAAP)9.24% 8.94% 8.72% 9.21% 9.30%
Tangible Book Value per Share
Tangible equity (Non-GAAP)$645,441 $633,613 $614,515 $396,818 $390,321
Divided by: common shares outstanding51,750,138 51,577,575 51,480,284 31,726,767 31,711,901
Tangible book value per common share (Non-GAAP)$12.47 $12.28 $11.94 $12.51 $12.31

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

Source:Yadkin Financial Corporation