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 securities 6,618     7,231     6,113     5,243     3,957  
Federal funds sold and interest-earning deposits 101     81     103     54     47  
Total interest income 72,699     71,657     54,187     46,322     44,304  
Interest expense                  
Deposits 4,803     4,433     3,467     2,950     3,097  
Short-term borrowings 1,690     1,360     808     489     437  
Long-term debt 2,215     2,375     1,867     1,541     1,465  
Total interest expense 8,708     8,168     6,142     4,980     4,999  
Net interest income 63,991     63,489     48,045     41,342     39,305  
Provision for loan losses 2,997     2,298     1,875     2,714     1,576  
Net interest income after provision for loan losses 60,994     61,191     46,170     38,628     37,729  
Non-interest income                  
Service charges and fees 5,757     5,795     4,212     3,436     3,566  
Government-guaranteed lending 3,600     2,680     3,072     3,170     3,009  
Mortgage banking 4,223     3,850     1,623     1,571     1,731  
Bank-owned life insurance 1,427     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      
Other 1,782     2,098     1,765     1,320     2,022  
Total non-interest income 16,789     15,637     11,354     9,966     10,798  
Non-interest expense                  
Salaries and employee benefits 23,102     22,939     18,040     15,777     14,528  
Occupancy and equipment 7,041     7,315     5,535     4,722     4,641  
Data processing 2,779     2,783     2,140     1,931     1,851  
Professional services 1,426     1,547     1,108     861     1,196  
FDIC insurance premiums 1,473     770     821     674     732  
Foreclosed asset expenses 342     137     311     366     277  
Loan, collection, and repossession expense 1,133     1,004     1,133     926     931  
Merger and conversion costs 7,177     6,531     10,335     803     104  
Restructuring charges     25     21     282     50  
Amortization of other intangible assets 1,628     1,671     1,053     745     761  
Other 4,957     5,483     4,307     3,477     3,777  
Total non-interest expense 51,058     50,205     44,804     30,564     28,848  
Income before income taxes 26,725     26,623     12,720     18,030     19,679  
Income tax expense 10,439     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  
Diluted 0.32     0.34     0.20     0.37     0.37  
                   
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                  
Basic 51,507,217     51,311,504     38,102,926     31,617,993     31,608,909  
Diluted 51,605,620     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 assets 0.88 %   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’ equity 6.41     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 equivalent 4.45     4.45     4.57     4.81     4.72  
Cost of interest-bearing liabilities 0.68     0.63     0.64     0.65     0.66  
Net interest margin, tax equivalent 3.92     3.94     4.05     4.29     4.19  
                   
Efficiency ratio 63.21     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, diluted 0.32     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 value 19.60     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 outstanding 51,750,138     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 more 9,162     10,264     14,992     11,337     9,303  
Nonperforming purchased accounts receivable 7,907     7,907              
Other real estate 31,726     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 loans 0.23     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 loans 0.77     0.94     0.83     1.06     1.25  
Nonperforming assets to total assets 1.09     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 leverage 9.40     9.17     12.32     9.42     9.40  
Common equity Tier 1 10.32     10.06     9.87     10.55     10.50  
Tier 1 risk-based capital 10.71     10.45     10.24     10.59     10.55  
Total risk-based capital 11.86     11.58     11.36     11.96     11.98  
Yadkin Bank1:                  
Tier 1 leverage 10.06     9.84     13.25     10.34     10.35  
Common equity Tier 1 11.45     11.21     10.96     11.64     11.64  
Tier 1 risk-based capital 11.45     11.21     10.96     11.64     11.64  
Total risk-based capital 11.72     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 securities 19,962     11,739  
Federal funds sold and interest-earning deposits 285     142  
Total interest income 198,543     132,381  
Interest expense      
Deposits 12,703     9,059  
Short-term borrowings 3,858     1,057  
Long-term debt 6,457     4,457  
Total interest expense 23,018     14,573  
Net interest income 175,525     117,808  
Provision for loan losses 7,170     3,531  
Net interest income after provision for loan losses 168,355     114,277  
Non-interest income      
Service charges and fees 15,764     10,314  
Government-guaranteed lending 9,352     9,559  
Mortgage banking 9,696     4,686  
Bank-owned life insurance 2,712     1,407  
Gain on sales of available for sale securities 194     85  
Gain on sale of trust business 417      
Other 5,645     4,386  
Total non-interest income 43,780     30,437  
Non-interest expense      
Salaries and employee benefits 64,081     45,121  
Occupancy and equipment 19,891     14,077  
Data processing 7,702     5,668  
Professional services 4,081     3,695  
FDIC insurance premiums 3,064     2,218  
Foreclosed asset expenses 790     910  
Loan, collection, and repossession expense 3,270     2,717  
Merger and conversion costs 24,043     299  
Restructuring charges 46     3,251  
Amortization of other intangible assets 4,352     2,353  
Other 14,747     11,813  
Total non-interest expense 146,067     92,122  
Income before income taxes 66,068     52,592  
Income tax expense 24,578     19,813  
Net income 41,490     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  
Diluted 0.88     1.01  
       
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING      
Basic 46,990,428     31,608,287  
Diluted 47,080,186     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 banks 66,188     49,744     42,892     50,885     23,088  
Federal funds sold     155         250      
Investment securities available for sale 965,960     1,038,307     1,103,444     689,132     713,492  
Investment securities held to maturity 38,847     38,959     39,071     39,182     39,292  
Loans held for sale 85,964     139,513     53,820     47,287     37,962  
Loans 5,253,309     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 loans 5,241,167     5,257,135     5,198,521     3,066,775     2,970,779  
Purchased accounts receivable 7,907     9,657     57,175     52,688     69,383  
Federal Home Loan Bank stock 41,693     45,284     41,851     24,844     22,932  
Premises and equipment, net 108,557     111,245     119,244     73,739     75,530  
Bank-owned life insurance 140,125     141,930     141,170     78,863     78,397  
Other real estate 31,726     23,091     18,435     15,346     11,793  
Deferred tax asset, net 62,303     67,829     79,342     55,607     54,402  
Goodwill 339,549     338,180     337,711     152,152     152,152  
Other intangible assets, net 29,117     30,745     32,416     13,579     14,324  
Accrued interest receivable and other assets 95,887     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 demand 1,142,060     1,119,970     1,158,417     523,719     484,187  
Money market and savings 1,609,104     1,620,217     1,576,974     1,024,617     1,001,739  
Time 1,397,074     1,441,892     1,463,193     1,017,908     1,030,915  
Total deposits 5,310,028     5,338,586     5,349,712     3,310,297     3,247,769  
Short-term borrowings 791,721     811,383     761,243     375,500     395,500  
Long-term debt 164,215     229,012     198,320     194,967     129,859  
Accrued interest payable and other liabilities 71,009     73,706     127,093     30,831     32,301  
Total liabilities 6,336,973     6,452,687     6,436,368     3,911,595     3,805,429  
                   
Shareholders’ equity                  
Common stock 51,750     51,578     51,480     31,727     31,712  
Common stock warrant 717     717     717     717     717  
Additional paid-in capital 907,626     905,727     904,711     492,828     492,387  
Retained earnings 57,026     45,895     33,621     44,794     36,109  
Accumulated other comprehensive loss (3,012 )   (1,379 )   (5,887 )   (7,517 )   (4,128 )
Total shareholders’ equity 1,014,107     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 other 51,241     101     0.78     59,357     81     0.55     55,246     47     0.34  
Total interest-earning assets 6,561,255     73,333     4.45 %   6,532,542     72,243     4.45 %   3,750,223     44,618     4.72 %
Goodwill 338,108             337,485             152,152          
Other intangibles, net 30,188             31,797             14,763          
Other non-interest-earning assets 458,290             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 savings 1,639,707     1,336     0.32     1,582,191     1,115     0.28     996,357     713     0.28  
Time 1,387,752     2,957     0.85     1,448,912     2,782     0.77     1,056,806     2,254     0.85  
Total interest-bearing deposits 4,115,949     4,803     0.46     4,172,276     4,433     0.43     2,540,336     3,097     0.48  
Short-term borrowings 781,861     1,690     0.86     758,180     1,360     0.72     349,900     437     0.50  
Long-term debt 229,772     2,215     3.84     280,520     2,375     3.41     125,846     1,465     4.62  
Total interest-bearing liabilities 5,127,582     8,708     0.68 %   5,210,976     8,168     0.63 %   3,016,082     4,999     0.66 %
Non-interest-bearing deposits 1,180,832             1,147,659             718,989          
Other liabilities 68,855             64,282             29,196          
Total liabilities 6,377,269             6,422,917             3,764,267          
Shareholders’ equity 1,010,572             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 costs 7,177     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 benefit 552                 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 losses 2,997     2,298     1,875     2,714     1,576  
Income tax expense 10,439     9,219     4,920     6,182     7,891  
Pre-tax, pre-provision income 29,722     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 costs 7,177     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 ratio 63.21 %   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 adjustment 634     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 debt 85     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 loans 55,787     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 assets 368,666     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 assets 368,666     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 outstanding 51,750,138     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  
CONTACT: Terry Earley, CFO
Yadkin Financial Corporation
Phone: (919) 659-9015
Email: Terry.Earley@yadkinbank.com
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