YADKIN FINANCIAL Corp - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - YADKIN FINANCIAL Corp	Financial_Report.xls
EX-31.1 - EXHIBIT 31.1 - YADKIN FINANCIAL Corp	ex31-1q12015.htm
EX-31.2 - EXHIBIT 31.2 - YADKIN FINANCIAL Corp	ex31-2q12015.htm
EX-32.2 - EXHIBIT 32.2 - YADKIN FINANCIAL Corp	ex32-2q12015.htm
EX-32.1 - EXHIBIT 32.1 - YADKIN FINANCIAL Corp	ex32-1q12015.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO ___________

Commission File Number 000-52099

YADKIN FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)



North Carolina	20-4495993
(State or other jurisdiction of Incorporation	(IRS Employer Identification Number)
or organization)

3600 Glenwood Avenue, Suite 300

Raleigh, North Carolina 27612

(Address of principal executive offices)

(Zip Code)

(919) 659-9000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



	Large accelerated filer ¨	Accelerated filer x
	Non-accelerated filer ¨	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

Indicate the number of shares outstanding of each of the registrant’s classes of Common Stock, as of the latest practicable date: 30,954,024 shares of Voting Common Stock and 654,997 shares of Non-Voting Common Stock outstanding as of May 8, 2015.

YADKIN FINANCIAL CORPORATION

TABLE OF CONTENTS



		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	3

	Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014	5

	Consolidated Statement of Changes in Shareholders' Equity for the Three Months Ended March 31, 2015 and 2014	6

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	7

	Condensed Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	51

Item 4.	Controls and Procedures	52

Part II.	OTHER INFORMATION	53

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3.	Defaults Upon Senior Securities	53

Item 4.	Mine Safety Disclosures	53

Item 5.	Other Information	53

Item 6.	Exhibits	54

Part I. Financial Information

Item 1. Financial Statements



YADKIN FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
As of March 31, 2015 and December 31, 2014



(Dollars in thousands, except share data)	March 31, 2015			December 31, 2014*
Assets
Cash and due from banks	$	55,426		$	65,312
Interest-earning deposits with banks	52,826			66,548
Federal funds sold	250			505
Investment securities available for sale, at fair value	658,323			672,421
Investment securities held to maturity	39,511			39,620
Loans held for sale	32,322			20,205
Loans	2,913,859			2,898,266
Allowance for loan losses	(8,284		)	(7,817		)
Net loans	2,905,575			2,890,449
Purchased accounts receivable	62,129			44,821
Federal Home Loan Bank stock, at cost	20,277			19,499
Premises and equipment, net	78,683			80,379
Bank-owned life insurance	77,462			76,990
Foreclosed assets	12,427			12,891
Deferred tax asset, net	66,415			72,403
Goodwill	151,083			151,083
Other intangible assets, net	15,862			16,677
Accrued interest receivable and other assets	38,782			36,506
Total assets	$	4,267,353		$	4,266,309

Liabilities
Deposits:
Non-interest demand	$	655,333		$	680,387
Interest-bearing demand	472,524			469,898
Money market and savings	1,010,348			1,004,796
Time	1,070,970			1,092,283
Total deposits	3,209,175			3,247,364
Short-term borrowings	325,500			250,500
Long-term debt	137,199			180,164
Accrued interest payable and other liabilities	27,660			30,479
Total liabilities	3,699,534			3,708,507

Shareholders’ Equity
Preferred stock, no par value, 1,000,000 shares authorized, 28,405 shares issued and outstanding at March 31, 2015 and December 31, 2014	28,405			28,405
Common stock, $1.00 par value, 75,000,000 shares authorized; 31,609,021 and 31,599,150 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively	31,609			31,599
Common stock warrants	717			717
Additional paid-in capital	492,194			492,014
Retained earnings	16,922			7,311
Accumulated other comprehensive loss	(2,028		)	(2,244		)
Total shareholders' equity	567,819			557,802
Total liabilities and shareholders' equity	$	4,267,353		$	4,266,309

See accompanying Notes to Consolidated Financial Statements.


*	Derived from the audited consolidated financial statements included in the Company's 2014 Annual Report on Form 10-K.

- 3 -



YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended March 31, 2015 and 2014



	Three months ended March 31,
(Dollars in thousands, except per share data)	2015		2014
Interest income
Loans	$	39,796	$	19,969
Investment securities	3,996		1,985
Federal funds sold and interest-earning deposits	50		26
Total interest income	43,842		21,980
Interest expense
Deposits	2,889		1,659
Short-term borrowings	289		78
Long-term debt	1,488		1,031
Total interest expense	4,666		2,768
Net interest income	39,176		19,212
Provision for loan losses	961		1,290
Net interest income after provision for loan losses	38,215		17,922
Non-interest income
Service charges and fees on deposit accounts	3,253		1,315
Government-guaranteed lending	2,873		2,341
Mortgage banking	1,322		318
Bank-owned life insurance	472		306
Gain on sales of available for sale securities	1		—
Other	918		750
Total non-interest income	8,839		5,030
Non-interest expense
Salaries and employee benefits	15,202		9,098
Occupancy and equipment	4,799		2,663
Data processing	1,888		1,030
FDIC deposit insurance premiums	714		390
Professional services	1,092		685
Foreclosed asset expenses, net	188		263
Loan, collection, and repossession expense	936		681
Merger and conversion costs	220		1,209
Restructuring charges	907		836
Amortization of other intangible assets	815		227
Other	4,197		1,954
Total non-interest expense	30,958		19,036
Income before income taxes	16,096		3,916
Income tax expense	5,846		1,681
Net income	10,250		2,235
Dividends on preferred stock	639		—
Net income attributable to non-controlling interests	—		990
Net income available to common shareholders	$	9,611	$	1,245

Net income per common share
Basic	$	0.30	$	0.14
Diluted	0.30		0.14

Weighted average common shares outstanding
Basic	31,606,909		9,219,406
Diluted	31,608,928		9,219,406

See accompanying Notes to Consolidated Financial Statements.

- 4 -



YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
For the Three Months Ended March 31, 2015 and 2014



	Three months ended March 31,
(Dollars in thousands)	2015			2014

Net income	$	10,250		$	2,235
Other comprehensive income:
Securities available for sale:
Unrealized holding gains on available for sale securities	4,322			3,311
Tax effect	(1,547		)	(1,276		)
Reclassification of gains on sales of securities recognized in earnings	(1		)	—
Tax effect	—			—
Net of tax amount	2,774			2,035
Cash flow hedges:
Unrealized losses on cash flow hedges	(4,163		)	(951		)
Tax effect	1,605			367
Net of tax amount	(2,558		)	(584		)
Total other comprehensive income	216			1,451
Comprehensive income	$	10,466		$	3,686

See accompanying Notes to Consolidated Financial Statements.

- 5 -



YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
For the Three Months Ended March 31, 2015 and 2014



	Preferred Stock			Common Stock			Common Stock Warrants		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Shareholders' Equity Before Non-Controlling Interests			Non-Controlling Interests			Total Shareholders' Equity
(Dollars in thousands)	Shares	Amount		Shares	Amount		Common Stock Warrants		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Shareholders' Equity Before Non-Controlling Interests			Non-Controlling Interests			Total Shareholders' Equity

Balance at December 31, 2013	—	$	—	9,219,406	$	9,219	$	—	$	144,964	$	(10,658	)	$	(2,725	)	$	140,800		$	97,259		$	238,059
Net income	—	—		—	—		—		—		1,245			—			1,245			990			2,235
Other comprehensive income	—	—		—	—		—		—		—			1,041			1,041			410			1,451
Stock-based compensation	—	—		—	—		—		109		—			—			109			54			163
Subsidiary stock options exercised	—	—		—	—		—		—		—			—			—			100			100
Issuance of VSB common stock	—	—		—	—		—		1,301		—			97			1,398			43,068			44,466
Dividends paid on VSB preferred stock	—	—		—	—		—		—		—			—			—			(314		)	(314		)
Repurchase of VSB preferred stock	—	—		—	—		—		—		—			—			—			(42,849		)	(42,849		)
Balance as of March 31, 2014	—	$	—	9,219,406	$	9,219	$	—	$	146,374	$	(9,413	)	$	(1,587	)	$	144,593		$	98,718		$	243,311

Balance as of December 31, 2014	28,405	$	28,405	31,599,150	$	31,599	$	717	$	492,014	$	7,311		$	(2,244	)	$	557,802		$	—		$	557,802
Net income	—	—		—	—		—		—		10,250			—			10,250			—			10,250
Other comprehensive income	—	—		—	—		—		—		—			216			216			—			216
Stock-based compensation	—	—		—	—		—		70		—			—			70			—			70
Stock options exercised	—	—		9,871	10		—		110		—			—			120			—			120
Dividends paid on preferred stock	—	—		—	—		—		—		(639		)	—			(639		)	—			(639		)
Balance as of March 31, 2015	28,405	$	28,405	31,609,021	$	31,609	$	717	$	492,194	$	16,922		$	(2,028	)	$	567,819		$	—		$	567,819

See accompanying Notes to Consolidated Financial Statements.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31, 2015 and 2014



	Three months ended March 31,
(Dollars in thousands)	2015			2014
Cash flows from operating activities
Net income	$	10,250		$	2,235
Adjustments to reconcile net income to net cash used in operating activities:
Stock-based compensation	70			163
Provision for loan losses	961			1,290
Accretion of acquisition discount on purchased loans	(6,552		)	(5,084		)
Depreciation	1,564			756
Amortization of core deposit intangible	815			227
Amortization of acquisition premium on time deposits	(1,033		)	(614		)
Net accretion of acquisition discount on long-term debt	211			(9		)
Gain on mortgage loan commitments	(294		)	24
Gain on sales of loans held for sale	(3,594		)	(2,519		)
Originations of loans held for sale	(82,441		)	(42,264		)
Proceeds from sales of loans held for sale	73,918			42,288
Increase in cash surrender value of bank-owned life insurance	(472		)	(238		)
Deferred income taxes	5,846			1,681
Gain on sales of available for sale securities	(1		)	—
Net amortization of premiums on available for sale securities	1,345			624
Net loss on disposal of foreclosed assets	(58		)	20
Valuation adjustments on foreclosed assets	166			62
Gain on sales of loans held for investment	—			(362		)
Change in assets and liabilities:
Decrease in accrued interest receivable	121			725
(Increase) decrease in other assets	(6,260		)	839
Decrease in accrued interest payable	(692		)	(445		)
Decrease in other liabilities	(2,127		)	(901		)
Net cash used in operating activities	(8,257		)	(1,502		)
Cash flows from investing activities
Purchases of investment securities available for sale	—			(9,542		)
Purchases of investment securities held to maturity	—			(3,119		)
Proceeds from maturities and repayments of investment securities available for sale	17,181			9,388
Proceeds from call of investment securities held to maturity	—			500
Proceeds from sales of investment securities available for sale	197			—
Loan originations and principal collections, net	(9,897		)	11,301
Proceeds from sales of loans	—			817
Purchases of trade accounts receivable, net	(17,308		)	(21,037		)
Purchases of premises and equipment	(484		)	(231		)
Disposals of premises and equipment	616			1,240
Proceeds from disposal of foreclosed assets	718			—
Purchases and redemptions of Federal Home Loan Bank stock, net	(778		)	474
Net cash used in investing activities	(9,755		)	(10,209		)
Cash flows from financing activities
Net decrease in deposits	(37,156		)	(16,813		)
Proceeds from issuance of short-term borrowings, net	57,500			—
Proceeds from issuance (repayment) of long-term debt, net	(25,676		)	50
Proceeds from exercise of stock options	120			99
Proceeds from issuance of subsidiary common stock, net of issuance costs	—			44,466
Repurchase of subsidiary preferred stock	—			(42,849		)
Dividends paid on subsidiary preferred stock	—			(578		)
Dividends paid on preferred stock	(639		)	—
Net cash provided by financing activities	(5,851		)	(15,625		)
Net change in cash and cash equivalents	(23,863		)	(27,336		)
Cash and cash equivalents, beginning of period	132,365			100,779
Cash and cash equivalents, end of period	$	108,502		$	73,443

- 7 -



	Three months ended March 31,
(Dollars in thousands)	2015			2014
SUPPLEMENTAL DISCLOSURES:
Cash payments for:
Interest	$	6,180		$	3,836
Income taxes	—			—
Noncash investing activities:
Transfers of loans to foreclosed assets	$	362		$	309
Change in fair value of securities available for sale, net of tax	2,774			2,035
Change in fair value of cash flow hedge, net of tax	(2,558		)	(584		)

See accompanying Notes to Consolidated Financial Statements.

- 8 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE A – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements include the accounts of Yadkin Financial Corporation (the "Company" or "Yadkin") and its wholly-owned subsidiary, Yadkin Bank. Yadkin is a bank holding company incorporated under the laws of North Carolina and headquartered in Raleigh, North Carolina. Yadkin, which was formed in 2006, conducts its business operations primarily through Yadkin Bank. Yadkin Bank is a North Carolina chartered community bank providing banking and financial services in 73 branches across North Carolina and upstate South Carolina. The interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). They do not include all of the information and footnotes required by such accounting principles for complete financial statements. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and accompanying footnotes of the Company's 2014 Form 10-K.

In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included, and all intercompany transactions have been eliminated in consolidation. Results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2015. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

On July 4, 2014, the Company completed its mergers (the “Mergers”) with VantageSouth Bancshares, Inc. ("VantageSouth") and Piedmont Community Bank Holdings, Inc. ("Piedmont"), pursuant to an Agreement and Plan of Merger dated January 27, 2014, as amended (the “Merger Agreement”). At closing, VantageSouth and Piedmont merged with and into Yadkin, with Yadkin continuing as the surviving corporation. Pursuant to the Merger Agreement, holders of VantageSouth common stock received 0.3125 shares of voting common stock of Yadkin for each share of VantageSouth common stock. Holders of Piedmont common stock received (i) 6.28597 shares of voting common stock of Yadkin; (ii) $6.6878 in cash; and (iii) a right to receive a pro rata portion of certain shares of voting common stock of Yadkin at a later date if such shares do not become payable under the Piedmont Phantom Equity Plan. Immediately following the Mergers, VantageSouth Bank, the wholly owned banking subsidiary of VantageSouth, merged with and into Yadkin Bank.

The Mergers were accounted for as a reverse merger using the acquisition method of accounting primarily due to the relative voting interests in the Company upon completion of the Mergers. As a result, Piedmont and its consolidated subsidiaries represent the accounting acquirer, and Yadkin represents the accounting acquiree. Therefore, historical financial results of the Company prior to the Mergers reflect the historical balances of Piedmont. Financial results of the Company following the Mergers reflect balances of the combined organization. As required under the acquisition method of accounting, the assets and liabilities of Yadkin as of the date of the Mergers were recorded at estimated fair value and added to those of Piedmont. The Mergers had a significant impact on all aspects of the Company's financial statements, and as a result, financial results after the Mergers may not be comparable to financial results prior to the Mergers.

Recently Adopted and Issued Accounting Standards

In April 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-03: Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 require a reporting entity to present debt issuance costs related to a recognized debt liability in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments. The amendments in ASU 2015-03 are effective for interim and annual periods beginning after December 15, 2015, for public companies, and is to be applied retrospectively. Early adoption is permitted. Adoption of ASU 2015-03 is not expected to have a material impact on the Company’s financial position or results of operations.

In August 2014, the FASB issued ASU No. 2014-14, Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure. The amendments in ASU 2014-14 require a reporting entity to derecognize a mortgage loan and recognize a separate other receivable upon foreclosure if certain conditions are met. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance expected to be recovered from the guarantor. The amendments in ASU No. 2014-14 were effective for interim and annual periods beginning after December 15, 2014. Adoption of ASU 2014-14 did not have a material impact on the Company’s financial position or results of operations.

- 9 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860). The amendments in ASU 2014-11 change the accounting for repurchase-to-maturity transactions to secured borrowing accounting. The guidance also requires separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement. ASU 2014-11 was effective for interim and annual reporting periods beginning after December 15, 2014. Adoption of ASU 2014-11 did not have a material impact on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in ASU No. 2014-09 provide a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The amendments in ASU No. 2014-09 are effective for periods beginning after December 15, 2017. Early adoption is not permitted. Adoption of ASU No. 2014-09 is not expected to have a material impact on the Company’s financial position or results of operations.

In January 2014, the FASB issued ASU 2014-04, Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in ASU 2014-04 clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amendments in ASU 2014-04 were effective for periods beginning after December 15, 2014. Adoption of ASU 2014-04 did not have a material impact on the Company’s financial position or results of operations.

In January 2014, the FASB issued ASU 2014-01, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects. The amendments in ASU 2014-01 permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). The amendments in ASU 2014-01 were effective for periods beginning after December 15, 2014. Adoption of this Update did not have a material impact on the Company’s financial position or results of operations.

NOTE B – PER SHARE RESULTS

Basic and diluted net income per share are computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each period. Diluted net income per share reflects the potential dilution that could occur if common stock options and warrants were exercised, resulting in the issuance of common stock that then shared in the net income of the Company.

Basic and diluted net income per share have been computed based upon net income available to common shareholders as presented in the accompanying consolidated statements of operations divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below.



	Three months ended March 31,
	2015	2014

Weighted average number of common shares	31,606,909	9,219,406
Effect of dilutive stock options and warrants	2,019	—
Weighted average number of common shares and dilutive potential common shares	31,608,928	9,219,406

Anti-dilutive stock options	45,538	—
Anti-dilutive stock warrants	91,178	—

- 10 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE C – MERGERS AND ACQUISITIONS

Mergers with VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc.

On July 4, 2014, the Company completed its mergers with VantageSouth and Piedmont pursuant to the Merger Agreement. At closing, VantageSouth and Piedmont merged with and into Yadkin, with Yadkin continuing as the surviving corporation. Piedmont owned a controlling interest in VantageSouth at the time of the Mergers. Pursuant to the Merger Agreement, holders of VantageSouth common stock received 0.3125 shares of voting common stock of Yadkin for each share of VantageSouth common stock. Holders of Piedmont common stock received (i) 6.28597 shares of voting common stock of Yadkin; (ii) $6.6878 in cash; and (iii) a right to receive a pro rata portion of certain shares of voting common stock of the Company at a later date if such shares do not become payable under the Piedmont Phantom Equity Plan. Immediately following the Mergers, VantageSouth Bank, the wholly owned banking subsidiary of VantageSouth, merged with and into Yadkin Bank.

The Mergers were accounted for as a reverse merger using the acquisition method of accounting primarily due to the relative voting interests in the Company upon completion of the Mergers. As a result, Piedmont and its consolidated subsidiaries represent the accounting acquirer, and Yadkin represents the accounting acquiree. Therefore, the historical financial results of the Company prior to the Mergers reflect the historical balances of Piedmont, and the financial results of the Company after the Mergers reflect the combined organization. The assets and liabilities of Yadkin as of the date of the Mergers were recorded at estimated fair value and added to those of Piedmont. The Company completed its valuations of Yadkin's assets and liabilities but may refine those valuations for up to a year from the date of the Mergers. The Mergers had a significant impact on all aspects of the Company's financial statements, and as a result, financial results after the Mergers may not be comparable to financial results prior to the Mergers.

The Piedmont Phantom Equity Plan, which is a type of deferred compensation plan, was assumed by the Company in the Mergers. A total of 856,447 shares of Yadkin’s voting common stock that otherwise would have been issued to Piedmont shareholders as merger consideration if the Piedmont Phantom Equity Plan did not exist was issued to a rabbi trust established by Yadkin to serve as a source of payment for both (i) payments due under the Piedmont Phantom Equity Plan and (ii) contingent merger consideration payable to former holders of Piedmont common stock.

From an accounting perspective, 28,405 shares of Yadkin's Series T and T-ACB Preferred Stock were assumed by the Company in the Mergers. The Series T and T-ACB Preferred Stock rank equally and have identical terms. They have no maturity date and pay cumulative dividends of 9.0 percent annually. The Company has received approval from appropriate regulatory authorities to redeem the Series T and T-ACB Preferred Stock and anticipates completing that redemption during the second quarter of 2015.

Yadkin issued 17.3 million shares of voting common stock in connection with the Mergers, which represented approximately 55 percent of the voting interests in the Company at the time of the Mergers. Guidance in FASB ASC 805-40-30-2 explains that the purchase price in a reverse merger is determined "based on the number of equity interests the legal [acquiree] would have had to issue to give the owners of the legal [acquirer] the same equity interest in the combined entity that results from the reverse acquisition." The first step in estimating the purchase price in the Mergers is to determine the ownership of the combined institution following the Mergers. The table below summarizes, for each shareholder group immediately prior to the Mergers, the ownership of Yadkin common stock immediately following the Mergers as well as the market capitalization of the combined institution using Yadkin’s stock price at the time of the Mergers.



	Yadkin Financial Corporation Ownership and Market Value Table
Shareholder Groups Immediately Prior to Mergers	Number of Outstanding YDKN Shares	Percentage Ownership		Market Value at $19.41 YDKN Share Price

Piedmont shareholders	9,219,406	29.1	%	$	178,949
VantageSouth shareholders (excluding Piedmont)	7,195,127	22.7	%	139,657
Shares issued and held in Rabbi Trust	856,447	2.7	%	16,624
Total Piedmont and VantageSouth shareholders	17,270,980	54.6	%	335,230
Yadkin shareholders	14,380,127	45.4	%	279,118
Total	31,651,107	100.0	%	$	614,348

- 11 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Next, the number of shares Piedmont would have had to issue to give Yadkin and other owners the same percentage ownership in the combined institution is calculated in the table below.



	Hypothetical Piedmont Ownership
Shareholder Groups Immediately Prior to Mergers	Number of Outstanding Piedmont Shares	Percentage Ownership

Piedmont shareholders	1,466,664	29.1	%
VantageSouth shareholders (excluding Piedmont)	1,144,633	22.7	%
Shares issued and held in Rabbi Trust	136,247	2.7	%
Total Piedmont and VantageSouth shareholders	2,747,544	54.6	%
Yadkin shareholders	2,287,654	45.4	%
Total	5,035,198	100.0	%

Finally, the purchase price is calculated based on the number of hypothetical Piedmont shares issued to Yadkin shareholders multiplied by the share price as demonstrated in the table below. Because Piedmont was the accounting acquirer in the Mergers and was a private company, the market price per share was derived from Yadkin’s closing stock price at the time of the Mergers. The equivalent Piedmont market price per share was calculated based on the 6.28597 exchange ratio in the Mergers.



	Calculation of Purchase Price

Equivalent Piedmont market price per share	$	122.01
Number of Piedmont shares issued to Yadkin shareholders	2,287,654
Purchase price (in thousands)	$	279,115

The following table presents the Yadkin assets acquired, liabilities assumed and other equity interests as of July 4, 2014, as well as the related purchase price allocation and calculation of the residual goodwill.



	As Reported by Yadkin at July 4, 2014		Initial Fair Value Adjustments				Measurement Period Adjustments			As Reported by the Company at July 4, 2014
Assets:
Cash and cash equivalents	$	36,116	$	—			$	—		$	36,116
Investment securities available for sale	259,143		(1,488		)	(a)	—			257,655
Loans held for sale	15,696		—			(b)	—			15,696
Loans, net	1,403,419		(30,740		)		—			1,372,679
Federal Home Loan Bank stock, at cost	3,778		—				—			3,778
Premises and equipment	40,204		(2,344		)	(c)	—			37,860
Bank-owned life insurance	27,306		—				—			27,306
Foreclosed assets	2,271		(601		)	(d)	—			1,670
Deferred tax asset, net	16,955		5,939			(e)	—			22,894
Goodwill	—		124,172			(f)	657		(n)	124,829
Other intangible assets	1,665		10,965			(g)	321		(o)	12,951
Accrued interest receivable and other assets	16,330		(2,229		)	(h)	542		(p)	14,643
Total assets	1,822,883		103,674				1,520			1,928,077
Liabilities:
Deposits	1,509,581		5,019			(i)	—			1,514,600
Short-term borrowings	72,879		—				—			72,879
Long-term debt	38,217		(15,486		)	(j)	—			22,731
Accrued interest payable and other liabilities	8,448		(338		)	(k)	1,520		(q)	9,630
Total liabilities	1,629,125		(10,805		)		1,520			1,619,840
Net assets acquired	193,758		114,479				—			308,237
Other equity interests:
Preferred stock	28,405		—			(l)	—			28,405
Common stock warrants	1,850		(1,133		)	(m)	—			717
Total other equity interests	30,255		(1,133		)		—			29,122
Purchase price										$	279,115

- 12 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Explanation of fair value adjustments

(a) Adjustment reflects opening fair value of securities portfolio, which was established as the new book basis of the portfolio.

(b) Adjustment reflects the elimination of Yadkin's historical allowance for loan losses of $16.4 million and the recording of a fair value discount of $47.2 million on the loan portfolio. The fair value discount was calculated by forecasting cash flows over the expected remaining life of each loan and discounting those cash flows to present value using current market rates for similar loans. Forecasted cash flows include an estimate of lifetime credit losses on the loan portfolio.

(c) Adjustment reflects fair value adjustments on certain acquired branch offices as well as certain software and computer equipment.

(d) Adjustment reflects the write down of certain foreclosed assets based on current estimates of property values given current market conditions and additional discounts based on the Company's planned disposition strategy.

(e) Adjustment reflects the tax impact of acquisition accounting fair value adjustments.

(f) Goodwill represents the excess of the purchase price over the fair value of acquired net assets.

(g) Adjustment reflects the fair value of the acquired core deposit intangible.

(h) Adjustment reflects the impact of fair value adjustments on other assets, which include mortgage servicing assets, certain unusable prepaid expenses, and the elimination of accrued interest on purchased credit-impaired loans.

(i) Adjustment reflects the fair value premium on time deposits, which was calculated by discounting future contractual interest payments at a current market interest rate.

(j) Adjustments reflect the fair value adjustments for subordinated debt issued to fund trust preferred securities and long-term Federal Home Loan Bank ("FHLB") advances, which were calculated by discounting future contractual interest payments at a current market interest rate for similar instruments. For FHLB advances, the fair value adjustment is consistent with the prepayment penalty the FHLB would charge to terminate the advance.

(k) Adjustments reflect accruals and fair value adjustments for other liabilities, which include the write-off of unearned income, deferred gains, and accrued liabilities that will not be paid.

(l) No fair value adjustments were made to Yadkin's outstanding preferred stock. The acquisition date preferred dividend rate of 9.0 percent approximated the then-current market yield for issuances of similar perpetual preferred stock. The preferred stock was redeemable at the liquidation value on the acquisition date, and the Company expected the remaining life of the preferred stock would be relatively short.

(m) The fair value of the common stock warrants was estimated using a Black-Scholes option pricing model assuming all 91,178 warrants will remain outstanding through expiration on July 24, 2019. Assumptions and inputs used in the option pricing model included stock price volatility of 48.6 percent, no dividends, a risk free interest rate of 1.74 percent, and an exercise price of $21.90 per common warrant.

(n) Amount reflects adjustments to goodwill resulting from adjustments (o), (p) and (q).

(o) Amount reflects an adjustment to estimated fair value of the acquired core deposit intangible.

(p) Amount reflects adjustments to acquired deferred tax assets and the tax impact of adjustments (o) and (p).

(q) Amount reflects the adjustment of change in control obligations existing under various employment agreements that were triggered by the Mergers.

Supplemental Pro Forma Information

The table below presents supplemental pro forma information as if the Mergers with VantageSouth and Piedmont had occurred at the beginning of the earliest period presented, which was January 1, 2014. Pro forma results include adjustments for amortization and accretion of fair value adjustments and do not include any projected cost savings or other anticipated benefits of the Mergers. Therefore, the pro forma financial information is not indicative of the results of operations that would have occurred had the transactions been effected on the assumed date.



	Three months ended March 31,
	2015		2014

Net interest income	$	39,176	$	39,085

Net income	10,250		8,952

Net income available to common shareholders	9,611		8,393

Basic income per common share	0.30		0.28

Diluted income per common share	0.30		0.27

Weighted average basic common shares outstanding	31,606,909		30,484,994

Weighted average diluted common shares outstanding	31,608,928		30,632,168

- 13 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE D – INVESTMENT SECURITIES

The following tables summarize the amortized cost, gross unrealized gains and losses, and fair value of investment securities available for sale and held to maturity by major classification.



	March 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
GSE obligations	$	14,922	$	113	$	—	$	15,035
SBA-guaranteed securities	58,566		101		322		58,345
Mortgage-backed securities issued by GSE	413,433		2,638		1,635		414,436
Corporate bonds	118,983		1,317		45		120,255
Non-agency RMBS	4,535		1		19		4,517
Non-agency CMBS	3,552		—		4		3,548
Municipal bonds	38,682		450		1		39,131
Other debt securities	245		—		—		245
Equity securities	2,819		11		19		2,811
Total securities available for sale	$	655,737	$	4,631	$	2,045	$	658,323

Securities held to maturity:
Municipal bonds	$	39,511	$	1,096	$	—	$	40,607



	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
GSE obligations	$	14,914	$	30	$	—	$	14,944
SBA-guaranteed securities	60,408		84		372		60,120
Mortgage-backed securities issued by GSE	428,076		1,086		3,879		425,283
Corporate bonds	118,799		1,261		148		119,912
Non-agency RMBS	4,961		3		1		4,963
Non-agency CMBS	3,576		2		—		3,578
Municipal bonds	39,907		355		4		40,258
Other debt securities	498		—		—		498
Equity securities	3,017		1		153		2,865
Total securities available for sale	$	674,156	$	2,822	$	4,557	$	672,421

Securities held to maturity:
Corporate bonds	$	39,620	$	966	$	—	$	40,586

- 14 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following tables summarize gross unrealized losses and fair values, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.



	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2015
Securities available for sale:
SBA-guaranteed securities	$	93	$	1	$	35,738	$	321	$	35,831	$	322
Mortgage-backed securities issued by GSE	20,082		86		126,247		1,549		146,329		1,635
Corporate bonds	12,836		25		3,821		20		16,657		45
Non-agency RMBS	4,421		19		—		—		4,421		19
Non-agency CMBS	3,548		4		—		—		3,548		4
Municipal bonds	2,026		1		—		—		2,026		1
Equity securities	2,603		19		—		—		2,603		19
Total temporarily impaired AFS securities	$	45,609	$	155	$	165,806	$	1,890	$	211,415	$	2,045

December 31, 2014
Securities available for sale:
SBA-guaranteed securities	$	94	$	1	$	41,950	$	371	$	42,044	$	372
Mortgage-backed securities issued by GSE	152,186		1,117		149,746		2,762		301,932		3,879
Corporate bonds	18,123		64		3,767		84		21,890		148
Non-agency RMBS	1,318		1		—		—		1,318		1
Municipals bonds	1,953		4		—		—		1,953		4
Equity securities	2,711		153		—		—		2,711		153
Total temporarily impaired AFS securities	$	176,385	$	1,340	$	195,463	$	3,217	$	371,848	$	4,557

Unrealized losses on investment securities as of March 31, 2015 related to 47 mortgage-backed securities issued by U.S. government-sponsored enterprises ("GSEs"), 15 securities guaranteed by the U.S. Small Business Administration ("SBA"), 6 municipal bonds, 5 corporate bonds, 3 non-agency residential mortgage-backed securities, 1 non-agency commercial mortgage-backed securities and 2 marketable equity securities. Unrealized losses on investment securities as of December 31, 2014 related to 76 mortgage-backed securities issued by GSEs, 19 SBA-guaranteed securities, 6 municipal bonds, 5 corporate bonds, 4 marketable equity securities, 1 GSE obligation, and 1 non-agency residential mortgage-backed security.

As of March 31, 2015, 54 securities had been in an unrealized loss position for more than a twelve month period. The Company had $20 in gross unrealized losses on corporate bonds as of March 31, 2015 that had been in an unrealized loss position for more than twelve months, which were the only securities in this position that were not issued or guaranteed by a U.S. government agency or GSE. Based on a review of financial statements and other financial data for these corporate issuers, the Company does not believe the unrealized losses on these bonds were due to credit events.

The securities in an unrealized loss position as of March 31, 2015 continue to perform and are expected to perform through maturity, and the issuers have not experienced significant adverse events that would call into question their ability to repay these debt obligations according to contractual terms. Further, because the Company does not intend to sell these investments and does not believe that it will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, unrealized losses on such securities were not considered to represent other-than-temporary impairment as of March 31, 2015.

As of March 31, 2015 and December 31, 2014, the Company held no individual investment securities with an aggregate book value greater than 10 percent of total shareholders’ equity. As of March 31, 2015 and December 31, 2014, investment securities with carrying values of $307,553 and $314,184, respectively, were pledged to secure public deposits, borrowings and for other purposes required or permitted by law.

- 15 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The amortized cost and fair values of securities available for sale, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	March 31, 2015				December 31, 2014
	Amortized cost		Fair value		Amortized cost		Fair value
Securities available for sale:
Due within one year	$	39,735	$	39,993	$	30,365	$	30,536
Due after one year through five years	304,549		307,311		294,557		295,252
Due after five years through ten years	275,617		275,031		313,733		311,313
Due after ten years	33,017		33,177		32,484		32,455
Equity securities	2,819		2,811		3,017		2,865
	$	655,737	$	658,323	$	674,156	$	672,421
Securities held to maturity:
Due after one year through five years	$	25,981	$	26,662	$	20,177	$	20,747
Due after five years through ten years	9,903		10,120		15,836		16,092
Due after ten years	3,627		3,825		3,607		3,747
	$	39,511	$	40,607	$	39,620	$	40,586

The following table summarizes securities gains for the periods presented.



	Three months ended March 31,
	2015		2014

Gross gains on sales of securities available for sale	$	1	$	—
Gross losses on sales of securities available for sale	—		—
Total securities gains	$	1	$	—

NOTE E – LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table summarizes the Company's loans by type.



	March 31, 2015			December 31, 2014
Commercial:
Commercial real estate	$	1,375,771		$	1,355,536
Commercial and industrial	459,121			468,848
Construction and development	384,210			370,807
Consumer:
Residential real estate	354,362			360,249
Construction and development	30,177			30,061
Home equity	275,090			276,662
Other consumer	35,771			36,874
Gross loans	2,914,502			2,899,037
Less:
Deferred loan fees	(643		)	(771		)
Allowance for loan losses	(8,284		)	(7,817		)
Net loans	$	2,905,575		$	2,890,449

As of March 31, 2015 and December 31, 2014, loans with a recorded investment of $920,398 and $828,365, respectively, were pledged to secure borrowings or available lines of credit with correspondent banks.

- 16 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Purchased Credit-Impaired Loans

Loans for which it is probable at acquisition that all contractually required payments will not be collected are considered purchased credit-impaired ("PCI") loans. The following table relates to acquired Yadkin PCI loans and summarizes the contractually required payments, which includes principal and interest, expected cash flows to be collected, and the fair value of acquired PCI loans at the merger date.



	Yadkin Merger July 4, 2014

Contractually required payments	$	110,365
Nonaccretable difference	(21,102		)
Cash flows expected to be collected at acquisition	89,263
Accretable yield	(8,604		)
Fair value of PCI loans at acquisition	$	80,659

The following table summarizes changes in accretable yield, or income expected to be collected, related to all of the Company's PCI loans for the periods presented.



	Three months ended March 31,
	2015			2014

Balance, beginning of period	$	25,181		$	25,349
Accretion of income	(3,628		)	(3,077		)
Reclassifications from nonaccretable difference	1,554			2,150
Other, net	3,257			(1,007		)
Balance, end of period	$	26,364		$	23,415

The outstanding balance of PCI loans consists of the undiscounted sum of all amounts, including amounts deemed principal, interest, fees, penalties, and other under the loan, owed by the borrower at the reporting date, whether or not currently due and whether or not any such amounts have been written or charged off. The unpaid principal balance of PCI loans was $211,382 and $228,956 as of March 31, 2015 and December 31, 2014, respectively.

Purchased Non-impaired Loans

Purchased non-impaired loans are also recorded at fair value at acquisition, and the related fair value discount or premium is recognized as an adjustment to yield over the remaining life of each loan. The following table relates to acquired Yadkin purchased non-impaired loans and provides the contractually required payments, fair value, and estimate of contractual cash flows not expected to be collected at the merger date.



	Yadkin Merger July 4, 2014

Contractually required payments	$	1,502,793
Fair value of acquired loans at acquisition	1,292,020
Contractual cash flows not expected to be collected	36,219

- 17 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Allowance for Loan Losses

The following tables summarize the activity in the allowance for loan losses for the periods presented.



	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Residential Real Estate			Consumer Construction			Home Equity			Other Consumer			Total
Three months ended March 31, 2015
Beginning balance	$	2,796		$	1,274		$	1,691		$	1,237		$	194		$	546		$	79		$	7,817
Charge-offs	(99		)	(369		)	(16		)	(10		)	—			(135		)	(136		)	(765		)
Recoveries	5			136			5			24			27			41			33			271
Provision for loan losses	252			295			52			—			(8		)	254			116			961
Ending balance	$	2,954		$	1,336		$	1,732		$	1,251		$	213		$	706		$	92		$	8,284

Three months ended March 31, 2014
Beginning balance	$	2,419		$	805		$	1,400		$	1,673		$	187		$	476		$	83		$	7,043
Charge-offs	(242		)	(241		)	(196		)	(196		)	—			(188		)	(96		)	(1,159		)
Recoveries	4			5			—			11			—			12			7			39
Provision for loan losses	99			213			406			238			27			203			104			1,290
Ending balance	$	2,280		$	782		$	1,610		$	1,726		$	214		$	503		$	98		$	7,213

The following tables summarize the ending allowance for loans losses and the recorded investment in loans by portfolio segment and impairment method.



	March 31, 2015
	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Residential Real Estate		Consumer Construction		Home Equity		Other Consumer		Total
Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	52	$	60	$	—	$	—	$	—	$	62	$	—	$	174
Collectively evaluated for impairment	2,369		1,232		1,687		698		213		448		86		6,733
Purchased credit-impaired	533		44		45		553		—		196		6		1,377
Total	$	2,954	$	1,336	$	1,732	$	1,251	$	213	$	706	$	92	$	8,284

Loans:
Ending balance:
Individually evaluated for impairment	$	10,745	$	2,884	$	867	$	1,336	$	—	$	373	$	—	$	16,205
Collectively evaluated for impairment	1,253,631		445,372		350,939		324,258		28,706		270,560		35,214		2,708,680
Purchased credit-impaired	111,395		10,865		32,404		28,768		1,471		4,157		557		189,617
Total	$	1,375,771	$	459,121	$	384,210	$	354,362	$	30,177	$	275,090	$	35,771	$	2,914,502

- 18 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	December 31, 2014
	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Residential Real Estate		Consumer Construction		Home Equity		Other Consumer		Total
Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	158	$	229	$	—	$	—	$	—	$	3	$	—	$	390
Collectively evaluated for impairment	2,177		952		1,590		681		194		456		79		6,129
Purchased credit-impaired	461		93		101		556		—		87		—		1,298
Total	$	2,796	$	1,274	$	1,691	$	1,237	$	194	$	546	$	79	$	7,817

Loans:
Ending balance:
Individually evaluated for impairment	$	5,398	$	2,343	$	910	$	928	$	—	$	406	$	—	$	9,985
Collectively evaluated for impairment	1,227,597		452,487		337,540		328,693		28,436		271,928		36,244		2,682,925
Purchased credit-impaired	122,541		14,018		32,357		30,628		1,625		4,328		630		206,127
Total	$	1,355,536	$	468,848	$	370,807	$	360,249	$	30,061	$	276,662	$	36,874	$	2,899,037

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans according to credit risk. The Company uses the following general definitions for risk ratings:


•	Pass. These loans range from superior quality with minimal credit risk to loans requiring heightened management attention but that are still an acceptable risk and continue to perform as contracted.

•

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date. Loans where adverse economic conditions have developed that do not jeopardize liquidation of the debt, but substantially increase the level of risk may also warrant this rating.

•

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.


•	Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

- 19 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following tables summarize the risk category of loans by class of loans.



	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2015
Non-PCI Loans
Commercial:
Real estate	$	1,215,732	$	31,010	$	17,634	$	—	$	1,264,376
Commercial and industrial	429,272		12,636		6,280		68		448,256
Construction and development	346,346		3,482		1,978		—		351,806
Consumer:
Residential real estate	311,855		5,425		8,314		—		325,594
Construction and development	27,430		750		526		—		28,706
Home equity	262,952		4,714		3,267		—		270,933
Other consumer	34,666		215		278		55		35,214
Total	$	2,628,253	$	58,232	$	38,277	$	123	$	2,724,885

PCI Loans
Commercial:
Real estate	$	56,538	$	37,397	$	17,460	$	—	$	111,395
Commercial and industrial	7,379		1,703		1,783		—		10,865
Construction and development	11,916		11,241		9,247		—		32,404
Consumer:
Residential real estate	13,149		8,161		7,458		—		28,768
Construction and development	260		539		672		—		1,471
Home equity	172		2,694		1,289		2		4,157
Other consumer	7		457		93		—		557
Total	$	89,421	$	62,192	$	38,002	$	2	$	189,617



	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2014
Non-PCI Loans
Commercial:
Real estate	$	1,187,938	$	32,142	$	12,915	$	—	$	1,232,995
Commercial and industrial	433,093		15,148		6,510		79		454,830
Construction and development	334,213		2,128		2,109		—		338,450
Consumer:
Residential real estate	316,743		4,527		8,351		—		329,621
Construction and development	27,447		735		254		—		28,436
Home equity	264,953		4,238		3,143		—		272,334
Other consumer	35,736		237		269		2		36,244
Total	$	2,600,123	$	59,155	$	33,551	$	81	$	2,692,910

PCI Loans
Commercial:
Real estate	$	57,095	$	45,711	$	19,735	$	—	$	122,541
Commercial and industrial	7,408		2,936		3,674		—		14,018
Construction and development	6,857		16,374		9,126		—		32,357
Consumer:
Residential real estate	12,703		8,206		9,719		—		30,628
Construction and development	189		723		713		—		1,625
Home equity	143		2,827		1,358		—		4,328
Other consumer	2		488		140		—		630
Total	$	84,397	$	77,265	$	44,465	$	—	$	206,127

- 20 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following tables summarize the past due status of non-PCI loans based on contractual terms.



	30-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total
March 31, 2015
Non-PCI Loans
Commercial:
Real estate	$	8,684	$	6,290	$	14,974	$	1,249,402	$	1,264,376
Commercial and industrial	5,884		1,832		7,716		440,540		448,256
Construction and development	2,618		453		3,071		348,735		351,806
Consumer:
Residential real estate	7,870		2,696		10,566		315,028		325,594
Construction and development	308		250		558		28,148		28,706
Home equity	2,874		544		3,418		267,515		270,933
Other consumer	442		85		527		34,687		35,214
Total	$	28,680	$	12,150	$	40,830	$	2,684,055	$	2,724,885



	30-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total
December 31, 2014
Non-PCI Loans
Commercial:
Real estate	$	7,971	$	2,383	$	10,354	$	1,222,641	$	1,232,995
Commercial and industrial	5,612		1,707		7,319		447,511		454,830
Construction and development	1,162		369		1,531		336,919		338,450
Consumer:
Residential real estate	4,872		2,210		7,082		322,539		329,621
Construction and development	569		12		581		27,855		28,436
Home equity	3,985		395		4,380		267,954		272,334
Other Consumer	797		70		867		35,377		36,244
Total	$	24,968	$	7,146	$	32,114	$	2,660,796	$	2,692,910

The following table summarizes the recorded investment of non-PCI loans on nonaccrual status and loans greater than 90 days past due and accruing by class.



	March 31, 2015				December 31, 2014
	Nonaccrual		Loans greater than 90 days past due and accruing		Nonaccrual		Loans greater than 90 days past due and accruing
Non-PCI Loans
Commercial:
Commercial real estate	$	12,549	$	—	$	5,685	$	—
Commercial and industrial	4,933		—		4,594		2
Construction and development	1,657		—		1,692		—
Consumer:
Residential real estate	4,742		—		3,755		—
Construction and development	482		—		254		—
Home equity	2,177		—		1,721		—
Other consumer	301		—		248		—
Total	$	26,841	$	—	$	17,949	$	2

- 21 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following table provides information on impaired loans. This table excludes PCI loans and loans evaluated collectively as a homogeneous group.



	Recorded Investment With a Recorded Allowance		Recorded Investment With no Recorded Allowance		Total		Related Allowance		Unpaid Principal Balance
March 31, 2015
Non-PCI Loans
Commercial:
Commercial real estate	$	549	$	10,196	$	10,745	$	52	$	10,786
Commercial and industrial	393		2,491		2,884		60		2,884
Construction and development	—		867		867		—		875
Consumer:
Residential real estate	—		1,336		1,336		—		1,347
Home equity	62		311		373		62		401
Total	$	1,004	$	15,201	$	16,205	$	174	$	16,293

December 31, 2014
Non-PCI Loans
Commercial:
Commercial real estate	$	885	$	4,513	$	5,398	$	158	$	5,330
Commercial and industrial	525		1,818		2,343		229		2,718
Construction and development	—		910		910		—		1,971
Consumer:
Residential real estate	—		928		928		—		3,863
Construction and development	—		—		—		—		—
Home equity	62		344		406		3		1,920
Other consumer	—		—		—		—		—
Total	$	1,472	$	8,513	$	9,985	$	390	$	15,802



	Three Months Ended March 31,
	2015				2014
	Average Balance		Interest Income		Average Balance		Interest Income
Non-PCI Loans
Commercial:
Commercial real estate	$	8,072	$	16	$	4,341	$	6
Commercial and industrial	2,613		1		352		—
Construction and development	889		—		2,445		—
Consumer:
Residential real estate	1,132		22		923		—
Construction and development	—		—		121		—
Home equity	390		—		422		—
Other consumer	—		—		7		—
Total	$	13,096	$	39	$	8,611	$	6

The Company may modify certain loans under terms that are below market in order to maximize the amount collected from a borrower that is experiencing financial difficulties. These modifications are considered to be troubled debt restructurings ("TDRs"). TDRs are evaluated individually for impairment based on the collateral value, if the loan is determined to be collateral dependent, or discounted expected cash flows, if the loan is not determined to be collateral dependent. The Company has no commitments to lend additional funds to any borrowers that have had a loan modified in a TDR. The following table provides the number and recorded investment of TDRs outstanding.

- 22 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	March 31, 2015			December 31, 2014
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Commercial real estate	$	4,372	8	$	4,215	7
Commercial and industrial	166		4	172		4
Commercial construction	131		2	131		2
Residential real estate	1,761		6	1,770		6
Home equity	83		2	83		2
Total	$	6,513	22	$	6,371	21

The following table provides the number and recorded investment of TDRs modified during the three months ended March 31, 2015 and 2014.



	TDRs Modified
	Three months ended March 31, 2015			Three months ended March 31, 2014
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	—	—	$	877	3
Commercial and industrial	—		—	75		2
Residential real estate	398		1	442		3
Home equity	—		—	39		1
Total	$	398	1	$	1,433	$	9

No TDRs that were modified in the twelve months ended March 31, 2015 subsequently defaulted during the three months ended March 31, 2015. No TDRs that were modified in the twelve months ended March 31, 2014 subsequently defaulted during the three months ended March 31, 2014. The Company does not generally forgive principal or unpaid interest as part of when restructuring loans. Therefore, the recorded investment in TDRs during 2015 and 2014 did not change following the modifications.

NOTE F – LOAN SERVICING

Mortgage Loan Servicing

The Company retains the servicing rights on mortgage loans sold to its investors. The unpaid principal balance of loans serviced for investors was $473,575 and $455,033 as of March 31, 2015 and December 31, 2014, respectively. Mortgage servicing rights ("MSRs") are initially recognized at fair value in other assets on the consolidated balance sheets and are subsequently accounted for at the lower of cost or market. MSRs are amortized in proportion to, and over the estimated period, that net servicing income is expected to be received based on estimates of net cash flows on the loans serviced. The amount and timing of estimated future net cash flows are updated based on actual results and updated projections. Mortgage servicing fees, which are recorded in mortgage banking income in the consolidated statements of operations, totaled $293 in the three months ended March 31, 2015.

The following table summarizes MSR activity for the three months ended March 31, 2015. The Company did not retain mortgage servicing on loans sold during the comparable period of 2014.



	Three months ended March 31, 2015

Balance at beginning of period before valuation allowance	$	4,284
Additions	395
Repayments	(129		)
Amortization	(182		)
Balance at end of period before valuation allowance	4,368
Valuation allowance at end of period	(255		)
Balance at end of period after valuation allowance	$	4,113

- 23 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

MSRs are separated into pools based on common risk characteristics of the underlying loans, and impairment is evaluated at least quarterly at the pool level. If impairment exists at the pool level, the MSR is written down through a valuation allowance and is charged against mortgage income. Valuation allowances at period end are summarized in the preceding table.

The fair value of MSRs is highly sensitive to changes in assumptions and is determined by estimating the present value of the asset's future cash flows utilizing market-based prepayment rates, discount rates and other assumptions validated through comparison to trade information, industry surveys and with the use of independent third party appraisals. Changes in prepayment speed assumptions have the most significant impact on the fair value of MSRs. Generally, as interest rates decline, mortgage loan prepayments accelerate due to increased refinance activity, which results in a decrease in the fair value of the MSR. Measurement of fair value is limited to the conditions existing and the assumptions utilized as of a particular point in time, and those assumptions may not be appropriate if they are applied at a different time.

The characteristics and sensitivity of the fair value of MSRs to changes in key assumptions is included in the accompanying table.



	March 31, 2015			December 31, 2014

Composition of mortgage loans serviced for others:
Fixed rate loans	99.88		%	99.86		%
Adjustable rate loans	0.12		%	0.14		%
Total	100.00		%	100.00		%

Weighted average life (years)	5.54			5.77
Prepayment speed	13.37		%	12.62		%
Discount rate	9.50		%	9.60		%
Effect on fair value due to change in interest rates:
+ 0.25%	$	633		$	566
+ 0.50%	944			801
- 0.25%	(651		)	(668		)
- 0.50%	(822		)	(844		)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the changes in assumptions to fair value may not be linear. Also, in the preceding table, the effects of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumptions. Frequently, changes in one factor would result in another factor changing, which would magnify or contract the effect of the change.

SBA-Guaranteed Loan Servicing

The Company retains the servicing rights on SBA-guaranteed loans sold to investors. The standard sale structure under the SBA Secondary Participation Guaranty Agreement provides for the Company to retain a portion of the cash flow from the interest payment received on the loan, which is commonly known as a servicing spread. The unpaid principal balance of SBA-guaranteed loans serviced for investors was $156,277 and $136,093 as of March 31, 2015 and December 31, 2014, respectively. SBA-guaranteed loan servicing assets are initially recognized at fair value in other assets on the consolidated balance sheets and are subsequently accounted for at the lower of cost or market. SBA servicing assets are amortized over the expected life of the related loans serviced as a reduction to the servicing income recognized from the servicing spread. SBA servicing fees, which are recorded in government-guaranteed lending income in the consolidated statements of operations, totaled $371 and $192 for the three months ended March 31, 2015 and 2014, respectively.

The table below summarizes the activity in the SBA-guaranteed loan servicing asset for the periods presented.



	Three months ended March 31,
	2015			2014

Balance at beginning of period	$	3,081		1,759
Additions	535			419
Amortization	(96		)	(51	)
Balance at end of period	$	3,520		2,127

- 24 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The fair value of the servicing asset is compared to the amortized basis when certain triggering events occur. If the amortized basis exceeds the fair value, the asset is considered impaired and is written down to fair value through a valuation allowance on the asset and a charge against SBA income. There was no valuation allowance recorded on the SBA-guaranteed loan servicing asset as of March 31, 2015 or December 31, 2014.

NOTE G – COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the maximum exposure the Company has in particular classes of financial instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit is based on a credit evaluation of the borrower. Collateral obtained varies but may include real estate, equipment, stocks, bonds, and certificates of deposit.

The following table is a summary of the contractual amount of the Company’s exposure to off-balance sheet commitments.



	March 31, 2015		December 31, 2014

Lending commitments:
Commitments to extend credit	$	693,552	$	658,925
Financial standby letters of credit	14,965		12,421
Other commitments:
Standby letters of credit issued by the FHLB on the Bank's behalf	10,000		10,000
Capital commitment to private investment funds	2,764		2,280

The reserve for unfunded commitments was $484 and $522 as of March 31, 2015 and December 31, 2014, respectively, which was recorded in other liabilities on the consolidated balance sheets.

NOTE H – DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments to manage its interest rate risk. These instruments carry varying degrees of credit, interest rate, and market or liquidity risks. Derivative instruments are recognized as either assets or liabilities on the balance sheet and are measured at fair value. Subsequent changes in the fair value of derivatives are recognized in other comprehensive income ("OCI") for effective hedges, and changes in fair value are recognized in earnings for all other derivatives.

Interest Rate Swaps

In 2013 and 2014, the Company entered into six different forward starting interest rate swaps on a total of $175,000 of forecasted three-month FHLB advances to reduce its exposure to variability in interest payments attributable to changes in three-month LIBOR. Beginning on the respective effective dates, these interest rate swaps will exchange the three-month LIBOR component of interest on the FHLB advances with fixed interest rates. Each three-month FHLB advance will be executed to correspond to the effective dates of the respective interest rate swaps and will continue to be rolled for the full term of each swap.

In August 2014, the Company entered into two additional forward starting interest rate swaps on a total of $50,000 of forecasted brokered money market deposits to reduce its exposure to variability in interest payments attributable to changes in one-month LIBOR, which is the underlying index of the brokered money market deposits. Beginning on the respective effective dates, these interest rate swaps began to exchange one-month LIBOR, plus the applicable spread, with fixed interest rates. Each brokered money market account is expected to maintain at least $25,000 on deposit with the Company through the maturity of the interest rate swaps.

- 25 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

In March 2015, the Company restructured certain of its derivative positions by terminating four interest rate swaps prior to their effective start dates and entering into two new forward starting interest rate swaps on a total of $50,000 of forecasted three-month FHLB advances to reduce its exposure to variability in interest payments attributable to changes in three-month LIBOR. Beginning on the respective effective dates, these interest rate swaps will exchange the three-month LIBOR component of interest on the FHLB advances with fixed interest rates of 2.540 and 2.576 percent. Each three-month FHLB advance will be executed to correspond to the effective dates of the respective interest rate swaps and will continue to be rolled for the full term of each swap.

The interest rate swaps outstanding as of March 31, 2015 are expected to be highly effective and are accounted for as cash flow hedges with the change in fair value recognized in OCI. The purpose of these cash flow hedges is to reduce the Company's earnings and economic value at risk in a rising interest rate environment. The following table summarizes key terms of each active interest rate swap.

Interest Rate Swap

Notional Amount

Effective Start Date

Maturity Date

Pay Fixed Rate

Receive Floating Rate

Swap 1

25,000

October 1, 2014

August 31, 2017

1.197

1-Month LIBOR + 0.10%

Swap 2

25,000

October 16, 2014

August 16, 2018

1.596

1-Month LIBOR + 0.13%

Swap 3

25,000

February 5, 2016

February 5, 2021

2.703

3-Month LIBOR

Swap 4

50,000

August 5, 2016

August 5, 2021

2.882

3-Month LIBOR

Swap 5

25,000

October 5, 2017

October 5, 2027

2.540

3-Month LIBOR

Swap 6

25,000

March 5, 2018

March 5, 2028

2.576

3-Month LIBOR

175,000

For the terminated interest rate swaps, the changes in value that were recorded in accumulated other comprehensive income ("AOCI") before termination will be amortized to yield over the period the forecasted hedged transactions impact earnings. The forecasted hedged transactions remain probable of occurring. The following table summarizes information regarding the four terminated interest rate swaps.

Terminated Interest Rate Swap

Notional Amount

Original Effective Start Date

Original Maturity Date

Date Terminated

Termination Fee Paid

Terminated Swap 1

25,000

April 6, 2015

April 5, 2020

March 27, 2015

123

Terminated Swap 2

25,000

May 5, 2015

May 5, 2020

March 27, 2015

122

Terminated Swap 3

25,000

June 5, 2015

June 5, 2020

March 27, 2015

121

Terminated Swap 4

25,000

August 5, 2015

August 5, 2020

March 27, 2015

921

100,000

1,288

Interest Rate Caps

In May 2012, the Company purchased separate interest rate cap contracts on a $7,500 subordinated term loan and on $8,000 in junior subordinated debt previously issued to Crescent Financial Capital Trust I, an unconsolidated trust formed to issue trust preferred securities ("TRUPs"). In August 2014, the Company also purchased separate interest rate cap contracts on $25,000 in junior subordinated debt previously issued to Yadkin Valley Statutory Trust I and on $10,000 in junior subordinated debt previously issued to American Community Capital Trust. The underlying index for each debt instrument is three-month LIBOR. In the event that the underlying index rate exceeds the strike rate on the respective cap, the counterparty would pay the Company the difference between the underlying index and the strike rate.

These interest rate cap contracts are classified as effective cash flow hedges. Therefore, the changes in fair value of the caps are recognized in OCI. The purpose of these cash flow hedges is to reduce the Company's earnings and economic value at risk in a rising interest rate environment. The following table summarizes key terms of each interest rate cap.

Interest Rate Cap

Notional Amount

Effective Start Date

Maturity Date

Strike Rate

Underlying Index of Cap

Variable Rate on Underlying Debt

Cap 1

7,500

July 1, 2012

July 1, 2017

0.47

3-Month LIBOR

3-Month LIBOR + 4.00%

Cap 2

8,000

July 7, 2012

July 7, 2017

0.47

3-Month LIBOR

3-Month LIBOR + 3.10%

Cap 3

25,000

September 15, 2014

September 15, 2019

1.82

3-Month LIBOR

3-Month LIBOR + 1.32%

Cap 4

10,000

September 30, 2014

September 30, 2019

1.85

3-Month LIBOR

3-Month LIBOR + 2.80%

50,500

- 26 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Mortgage Loan Commitments

The Company enters into interest rate lock commitments with customers and commitments to sell mortgages to investors. The forward sale commitments are entered into with investors to manage the interest rate risk associated with the customer interest rate lock commitments, and both are considered derivative financial instruments. These derivative instruments are carried at fair value and do not qualify for hedge accounting. The fair value of the interest rate lock commitments is based on the value that can be generated when the underlying loan is sold on the secondary market and is included on the consolidated balance sheets in other assets and on the consolidated statements of operations in mortgage banking income. The fair value of the forward sale commitments is based on changes in the value of the commitment, principally because of changes in interest rates, and is included on the consolidated balance sheets in other assets or other liabilities and on the consolidated statements of operations in mortgage banking income.

The following table summarizes the balance sheet location and fair value amounts of derivative instruments grouped by the underlying hedged instrument.



		March 31, 2015				December 31, 2014
	Balance Sheet Location	Notional Amount		Fair Value		Notional Amount		Fair Value

FHLB advances:
Interest rate swaps	Other assets	$	—	$	—	$	75,000	$	795
Interest rate swaps	Other liabilities	125,000		3,590		100,000		2,249

Brokered money market deposits:
Interest rate swaps	Other liabilities	50,000		522		50,000		200

Subordinated term loan:
Interest rate cap	Other assets	7,500		83		7,500		128

TRUPs:
Interest rate caps	Other assets	43,000		751		43,000		1,104

Mortgage loan commitments:
Interest rate lock commitments	Other assets	36,968		636		23,274		342
Forward sale commitments	Other liabilities	61,810		138		34,727		49

The Company only transacts with derivative counterparties with strong credit standings and requires liquid collateral to secure credit exposure.

NOTE I – FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received on the measurement date to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants, with a three level valuation input hierarchy. The following is a description of valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities. Securities available for sale ("AFS") are recorded at fair value on a recurring basis. Fair value measurements are based upon quoted market exchange prices, if available. If quoted prices are not available, third-party pricing sources are generally utilized to determine fair value. These fair values are derived from market-based pricing matrices that were developed using observable inputs that include benchmark yields, benchmark securities, reported trades, offers, bids, issuer spreads, and broker quotes. Level 1 securities include securities traded on an active exchange, such as the New York Stock Exchange, or SBA-guaranteed securities where active market pricing is readily available. Level 2 securities include GSE securities and mortgage-backed securities issued by GSEs, private label mortgage-backed securities, municipal bonds and corporate debt securities. Level 3 securities include certain corporate debt securities with limited trading activity. The following table provides the components of the change in fair value of Level 3 available for sale securities for the periods presented.

- 27 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	Three months ended March 31,
	2015		2014

Level 3 AFS securities at beginning of period	$	11,290	$	7,583
Sales, calls or maturities	—		(1,000		)
Changes in unrealized gains and losses	90		171
Level 3 AFS securities at end of period	$	11,380	$	6,754

SBA-Guaranteed Loans. The Company has elected to account for certain SBA-guaranteed loans at fair value on a recurring basis. Generally, the Company has reached an agreement with an investor to sell the guaranteed portion of these loans, and these amounts are classified in loans held for sale on the consolidated balance sheets until the sale is complete. The unguaranteed retained portion of the loans remains in loans held for investment and continues to be adjusted to fair value over the remaining life of the respective loans. Fair value estimates for these loans are based on observable market data and pricing and are therefore classified as recurring Level 2.

Derivatives. Derivative instruments include interest rate swaps and caps and are valued on a recurring basis using quoted market prices, dealer quotes, or third party pricing models that are primarily sensitive to market observable data. Currently outstanding derivatives, except for mortgage interest rate lock commitments described below, are classified as Level 2 within the fair value hierarchy.

Mortgage Loan Commitments. The fair value of interest rate lock commitments, which are included in derivatives assets and liabilities in the fair value measurement tables below, is based on servicing rate premium, origination income net of origination costs, fall out rates and changes in loan pricing between the commitment date and period end. Interest rate lock commitments are measured at fair value on a recurring basis and are classified as Level 3. The following table provides the components of the change in fair value of interest rate lock commitments for the periods presented.



	Three months ended March 31,
	2015			2014

Interest rate lock commitments at beginning of period	$	342		$	354
Issuances	1,465			328
Settlements	(1,171		)	(351		)
Interest rate lock commitments at end of period	$	636		$	331

The fair value of forward sale commitments, also included in derivative assets and liabilities in the fair value measurement tables below, is based on changes in loan pricing between the commitment date and period end. Forward sale commitments are measured at fair value on a recurring basis and are classified as Level 2. The difference between the interest rate lock commitment issuances and settlements in the preceding table and the change in fair value of forward sale commitments in the period represents the gain on mortgage loan commitments and is included in mortgage banking income on the consolidated statements of operations.

Loans. Loans are not generally recorded at fair value on a recurring basis. However, certain loans are determined to be impaired, and those loans are charged down to estimated fair value. The fair value of impaired loans that are collateral dependent is based on collateral value. For impaired loans that are not collateral dependent, estimated value is based on either an observable market price, if available, or the present value of expected future cash flows. Those impaired loans not requiring a charge-off represent loans for which the estimated fair value exceeds the recorded investments in such loans. When the fair value of an impaired loan is based on an observable market price or a current appraised value with no adjustments, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available, or the Company determines the fair value of the collateral is further impaired below the appraised value, and there is no observable market price, the impaired loan is classified as nonrecurring Level 3.

Foreclosed Assets. Foreclosed assets are adjusted to fair value upon transfer of loans to foreclosed assets. Subsequently, foreclosed assets are carried at lower of cost or net realizable value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Given the lack of observable market prices for identical properties and market discounts applied to appraised values, the Company classifies foreclosed assets as nonrecurring Level 3.

- 28 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following tables summarize fair value information for assets and liabilities measured on a recurring and nonrecurring basis.



	Total		Level 1		Level 2		Level 3
March 31, 2015
Measured at fair value on a recurring basis:
Securities available for sale:
GSE obligations	$	15,035	$	—	$	15,035	$	—
SBA-guaranteed securities	58,345		58,345		—		—
Mortgage-backed securities issued by GSE	414,436		—		414,436		—
Corporate bonds	120,255		2,524		106,351		11,380
Non-agency RMBS	4,517		—		4,517		—
Non-agency CMBS	3,548		—		3,548		—
Municipal bonds	39,131		—		39,131		—
Other debt securities	245		245		—		—
Equity securities	2,811		2,811		—		—
SBA-guaranteed loans held for sale	7,735		—		7,735		—
SBA loans held for investment	6,472		—		6,472		—
Derivative assets	1,470		—		834		636
Derivative liabilities	4,251		—		4,251		—

Measured at fair value on a non-recurring basis:
Impaired loans	$	16,031	$	—	$	—	$	16,031
Foreclosed assets	12,427		—		—		12,427



	Total		Level 1		Level 2		Level 3
December 31, 2014
Measured at fair value on a recurring basis:
Securities available for sale:
GSE obligations	$	14,944	$	—	$	14,944	$	—
SBA-guaranteed securities	60,120		60,120		—		—
Mortgage-backed securities issued by GSE	425,283		—		425,283		—
Corporate bonds	119,912		2,545		106,077		11,290
Non-agency RMBS	4,963		—		4,963		—
Non-agency CMBS	3,578		—		3,578		—
Municipal bonds	40,258		—		40,258		—
Other debt securities	498		498		—		—
Equity securities	2,865		2,865		—		—
SBA-guaranteed loans held for sale	8,365		—		8,365		—
SBA loans held for investment	8,906		—		8,906		—
Derivative assets	2,368		—		2,026		342
Derivative liabilities	2,497		—		2,497		—

Measured at fair value on a non-recurring basis:
Impaired loans	$	9,595	$	—	$	—	$	9,595
Foreclosed assets	12,891		—		—		12,891

- 29 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Quantitative Information About Level 3 Fair Value Measurements

The table below outlines the valuation techniques, unobservable inputs, and the range of quantitative inputs used in the valuations.



				Fair Value
	Valuation Technique	Unobservable Input	Range	March 31, 2015		December 31, 2014
Recurring measurements:
Investment securities	Pricing model	Illiquidity or credit factor in discount rates	1-2%	$	11,380	$	11,290

Interest rate lock commitments	Pricing model	Pull through rates	80-95%	636		342

Nonrecurring measurements:
Impaired loans	Discounted appraisals	Collateral discounts	15-50%	16,031		9,595
	Discounted expected cash flows	Expected loss rates	0-75%
	Discounted expected cash flows	Discount rates	2-8%
Foreclosed assets	Discounted appraisals	Collateral discounts	15-50%	12,427		12,891

The significant unobservable input used in the fair value measurement of the Company’s interest rate lock commitments is the closing ratio (or pull through rate), which represents the percentage of loans currently in a lock position which management estimates will ultimately close. Generally, the fair value of an interest rate lock commitment is positive (negative) if the prevailing interest rate is lower (higher) than the interest rate lock commitment rate. Therefore, an increase in the pull through rates (i.e., higher percentage of loans estimated to close) will result in the fair value of the interest rate lock commitments increasing in a gain position, or decreasing in a loss position. The pull through ratio is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock. The pull through rate is computed based on historical internal data and the ratio is periodically reviewed by the Company’s mortgage banking department.

Due to the nature of the Company’s business, a significant portion of its assets and liabilities consist of financial instruments. Accordingly, the estimated fair values of these financial instruments are disclosed. Quoted market prices, if available, are utilized as an estimate of the fair value of financial instruments. The fair value of such instruments has been derived based on assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimates. Accordingly, the net amounts ultimately collected could be materially different from the estimates presented below. In addition, these estimates are only indicative of the values of individual financial instruments and should not be considered an indication of the fair value of the Company taken as a whole.

Cash and Cash Equivalents. The carrying amounts for cash and cash equivalents are a reasonable estimate of fair value.

Investment Securities Available for Sale. A description of fair value estimates for securities available for sale is included in the recurring fair value measurements section above.

Investment Securities Held to Maturity. The fair value of the municipal bonds classified as held to maturity are derived from market-based pricing matrices that were developed using observable inputs that include benchmark yields, benchmark securities, reported trades, offers, bids, issuer spreads, and broker quotes. These securities are classified as Level 2 in the fair value hierarchy since the inputs used in the valuation are readily available market inputs.

Loans Held For Sale. The fair value of mortgage loans held for sale is based on commitments on hand from investors within the secondary market. A description of fair value estimates for SBA-guaranteed loans held for sale is included in the recurring fair value measurements section above.

Loans. Expected cash flows are forecasted over the remaining life of each loan and are discounted to present value at current market interest rates for similar loans considering loan collateral type and credit quality.

Federal Home Loan Bank Stock. Given the option to redeem this stock at par through the FHLB, the carrying value of FHLB stock approximates fair value.

- 30 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Purchased Accounts Receivable. Purchased accounts receivable, which are classified in other assets on the consolidated balance sheet, are initially recorded at fair value, which is the same as the discounted purchase price, and generally have maturities between 30 and 60 days. Due to the short duration of these assets, the carrying amounts are a reasonable estimate of fair value.

Deposits. The fair value of demand deposits, savings, money market and NOW accounts represents the amount payable on demand. The fair value of time deposits is estimated by calculating the present value of cash flows on the time deposit portfolio discounted using interest rates currently offered for instruments of similar remaining maturities.

Short-term Borrowings and Long-term Debt. The fair value of short-term borrowings and long-term debt are based upon the discounted value when using current rates at which borrowings of similar maturity could be obtained.

Accrued Interest Receivable and Accrued Interest Payable. The carrying amounts of accrued interest receivable and payable approximate fair value due to the short maturities of these instruments.

Derivative Instruments. A description of fair value estimates for derivative instruments is included in the recurring fair value measurements section above.

The following tables summarize the carrying amounts and estimated fair values of the Company's financial instruments.



	March 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	108,502	$	108,502	$	108,502	$	—	$	—
Investment securities available for sale	658,323		658,323		63,967		582,976		11,380
Investment securities held to maturity	39,511		40,607		—		40,607		—
Loans held for sale	32,322		32,322		—		32,322		—
Loans, net	2,905,575		2,937,060		—		6,472		2,930,588
Purchased accounts receivable	62,129		62,129		—		62,129		—
Federal Home Loan Bank stock	20,277		20,277		—		20,277		—
Derivative assets	1,470		1,470		—		834		636
Accrued interest receivable	11,950		11,950		—		11,950		—

Financial liabilities:
Deposits	3,209,175		3,210,666		—		3,210,666		—
Short-term borrowings	325,500		325,500		—		—		325,500
Long-term debt	137,199		142,499		—		—		142,499
Derivative liabilities	4,251		4,251		—		4,251		—
Accrued interest payable	1,996		1,996		—		1,996		—



	December 31, 2014
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	132,365	$	132,365	$	132,365	$	—	$	—
Investment securities available for sale	672,421		672,421		66,028		595,103		11,290
Investment securities held to maturity	39,620		40,404		—		40,404		—
Loans held for sale	20,205		20,205		—		20,205		—
Loans, net	2,890,449		2,919,573		—		1,241		2,918,332
Purchased accounts receivable	44,821		44,821		—		44,821		—
Federal Home Loan Bank stock	19,499		19,499		—		19,499		—
Derivative assets	2,368		2,368		—		2,027		341
Accrued interest receivable	12,071		12,071		—		12,071		—

Financial liabilities:
Deposits	3,247,364		3,245,431		—		3,245,431		—
Short-term borrowings	250,500		250,500		—		—		250,500
Long-term debt	180,164		183,326		—		—		183,326
Derivative liabilities	2,497		2,497		—		2,497		—
Accrued interest payable	2,688		2,688		—		2,688		—

- 31 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE J - CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the activity in accumulated other comprehensive income for the periods presented. All amounts are net of tax.



	Unrealized Net Gains (Losses) on AFS Securities			Unrealized Net Gains (Losses) on Cash Flow Hedges			Total

Balance at January 1, 2015	$	(1,185	)	$	(1,059	)	$	(2,244	)
Other comprehensive income (loss) before reclassifications	2,775			(2,558		)	217
Amounts reclassified for securities gains	(1		)	—			(1		)
Net other comprehensive income (loss) during period	2,774			(2,558		)	216
Balance at March 31, 2015	$	1,589		$	(3,617	)	$	(2,028	)

Balance at January 1, 2014	$	(6,554	)	$	2,381		$	(4,173	)
Other comprehensive income (loss) before reclassifications	2,035			(584		)	1,451
Amounts reclassified for securities gains	—			—			—
Net other comprehensive income (loss) during period	2,035			(584		)	1,451
Balance before non-controlling interests at March 31, 2014	(4,519		)	1,797			(2,722		)
Non-controlling interests	(1,883		)	748			(1,135		)
Balance at March 31, 2014	$	(2,636	)	$	1,049		$	(1,587	)

- 32 -

Management's Discussion and Analysis of Financial Condition and Results of Operations

Yadkin Financial Corporation (the “Company” or “Yadkin”) is a bank holding company incorporated under the laws of North Carolina and headquartered in Raleigh, North Carolina. The Company conducts its business operations primarily through its wholly-owned subsidiary, Yadkin Bank, a full-service state-chartered community bank with 73 branches across North Carolina and upstate South Carolina. Yadkin Bank provides banking, mortgage, investment and insurance services to businesses and consumers across the Carolinas.

Management’s discussion and analysis is intended to assist readers in understanding and evaluating the financial condition and consolidated results of operations of the Company. This discussion and analysis includes descriptions of significant transactions, trends and other factors affecting the Company’s operating results for the three months ended March 31, 2015, and 2014, as well as the financial condition of the Company as of March 31, 2015, and December 31, 2014. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in this report.

Mergers with VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc.

On July 4, 2014, the Company completed its mergers (the “Mergers”) with VantageSouth Bancshares, Inc. (“VantageSouth”) and Piedmont Community Bank Holdings, Inc. (“Piedmont”), pursuant to an Agreement and Plan of Merger dated January 27, 2014, as amended (the “Merger Agreement”). At closing, VantageSouth and Piedmont merged with and into Yadkin, with Yadkin continuing as the surviving corporation. Piedmont owned a controlling interest in VantageSouth at the time of the Mergers. Pursuant to the Merger Agreement, holders of VantageSouth common stock received 0.3125 shares of voting common stock of Yadkin for each share of VantageSouth common stock. Holders of Piedmont common stock received (i) 6.28597 shares of voting common stock of Yadkin; (ii) $6.6878 in cash; and (iii) a right to receive a pro rata portion of certain shares of voting common stock of the Company at a later date if such shares do not become payable under the Piedmont Phantom Equity Plan. Immediately following the Mergers, VantageSouth Bank, the wholly owned banking subsidiary of VantageSouth, merged with and into Yadkin Bank.

The Mergers were accounted for as a reverse merger using the acquisition method of accounting primarily due to the relative voting interests in the Company upon completion of the Mergers. As a result, Piedmont and its consolidated subsidiaries represent the accounting acquirer, and Yadkin represents the accounting acquiree. Therefore, the historical financial results of the Company prior to the Mergers reflect the historical balances of Piedmont, and the financial results of the Company after the Mergers reflect the combined organization. In addition, the assets and liabilities of Yadkin as of the date of the Mergers have been recorded at estimated fair value and added to those of Piedmont. The Company has substantially completed its valuations of Yadkin's assets and liabilities but may refine those valuations for up to a year from the date of the Mergers. The Mergers had a significant impact on all aspects of the Company's financial statements, and as a result, financial results after the Mergers may not be comparable to financial results prior to the Mergers.

Executive Summary

The following is a summary of the Company’s financial highlights and significant events in the first quarter of 2015:


•	Net income available to common shareholders totaled $9.6 million, or $0.30 per diluted share, in Q1 2015 compared to $1.2 million, or $0.14 per diluted share, in Q1 2014.


•	Net operating earnings available to common shareholders, which excludes certain non-operating items, totaled $10.3 million, or $0.33 per diluted share, in Q1 2015 compared to $2.2 million, or $0.24 per diluted share in Q1 2014.


•	Operating return on average assets equaled 1.04 percent in Q1 2015 while operating return on average tangible common equity equaled 11.35 percent.


•	Operating efficiency, which represents operating expenses to total operating revenues, improved to 62.1 percent in Q1 2015 from 70.1 percent in Q1 2014.


•	Net charge-offs declined to $494 thousand, or 0.07 percent of average loans, in Q1 2015 from $1.1 million, or 0.32 percent of average loans, in Q1 2014.


•	Annualized net loan growth was 2.2 percent in Q1 2015, which was a product of total loan originations and commitments in the quarter of $304.8 million.

- 33 -


•	The Company announced an expense reduction and branch optimization plan includes the elimination of certain back office positions as well as the planned closure of six branches in Q3 2015.


•	The Company received regulatory approval to redeem $28.4 million of preferred stock originally issued to the U.S. Treasury in connection with its TARP Capital Purchase Program. The redemption is expected to occur on or around May 13, 2015. Redemption of the preferred stock will improve pre-tax earnings by $2.6 million annually and will increase fully-diluted earnings per share by $0.08 annually.


•	The Company announced that Joe Towell will transition from his position as Executive Chairman to Chairman of the Board effective June 30, 2015.

Non-GAAP Financial Measures

Statements included in this management's discussion and analysis 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. The Company's management uses these non-GAAP financial measures, including: (i) net operating earnings available to common shareholders; (ii) pre-tax, pre-provision operating earnings, (iii) operating non-interest income, (iv) operating non-interest expense, (v) operating efficiency ratio, (vi) adjusted allowance for loan losses to loans; and (vii) tangible common equity, in its analysis of the Company's performance. The adjusted allowance for loan losses non-GAAP reconciliation is presented within the allowance for loan losses section below. The tangible common equity non-GAAP reconciliations, which include tangible book value per share and the tangible common equity to tangible assets ratio, are presented within the capital section below.

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company without regard to transactional activities. 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 the Company's 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 Company's results or financial condition as reported under GAAP.

- 34 -



	Three months ended March 31,
(Dollars in thousands, except per share data)	2015			2014

Operating Earnings
Net income (GAAP)	$	10,250		$	2,235
Securities gains	(1		)	—
Merger and conversion costs	220			1,209
Restructuring charges	907			836
Income tax effect of adjustments	(431		)	(452		)
Net operating earnings (non-GAAP)	10,945			3,828
Dividends on preferred stock	639			—
Net income attributable to non-controlling interests	—			990
Allocation of adjustments to non-controlling interests	—			599
Net operating earnings available to common shareholders (Non-GAAP)	$	10,306		$	2,239

Net operating earnings per common share:
Basic (Non-GAAP)	$	0.33		$	0.24
Diluted (Non-GAAP)	0.33			0.24

Pre-Tax, Pre-Provision Operating Earnings
Net income (GAAP)	$	10,250		$	2,235
Provision for loan losses	961			1,290
Income tax expense	5,846			1,681
Pre-tax, pre-provision income	17,057			5,206
Securities losses gains	(1		)	—
Merger and conversion costs	220			1,209
Restructuring charges	907			836
Pre-tax, pre-provision operating earnings (Non-GAAP)	$	18,183		$	7,251

Operating Non-Interest Income
Non-interest income (GAAP)	$	8,839		$	5,030
Securities gains	(1		)	—
Operating non-interest income (Non-GAAP)	$	8,838		$	5,030

Operating Non-Interest Expense
Non-interest expense (GAAP)	$	30,958		$	19,036
Merger and conversion costs	(220		)	(1,209		)
Restructuring charges	(907		)	(836		)
Operating non-interest expense (Non-GAAP)	$	29,831		$	16,991

Operating Efficiency Ratio
Efficiency ratio (GAAP)	64.48		%	78.52		%
Effect to adjust for securities gains	—		%	—		%
Effect to adjust for restructuring charges	(1.89		)%	(3.45		)%
Effect to adjust for merger and conversion costs	(0.46		)%	(4.98		)%
Operating efficiency ratio (Non-GAAP)	62.13		%	70.09		%

- 35 -

Analysis of Results of Operations

Net income available to common shareholders was $9.6 million, or $0.30 per diluted common share, in the first quarter of 2015, which was an increase from $1.2 million, or $0.14 per diluted common share, in the first quarter of 2014. Net operating earnings available to common shareholders, which excludes certain nonrecurring income and expenses, improved to $10.3 million in the first quarter of 2015 from $2.2 million in the first quarter of 2014. Similarly, pre-tax, pre-provision operating earnings increased to $18.2 million in the first quarter of 2015 from $7.3 million in the first quarter of 2014.

As discussed below, the improvements in the results of operations in the first quarter of 2015 compared to the first quarter of 2014 reflect the benefit of significant operating leverage provided by the Mergers. The balance sheet growth and customer base expansion have resulted in improved net interest income and non-interest income, while the Company continues efforts to achieve the efficiencies resulting from elimination of duplicative functions. In the aggregate, the revenue growth in the first quarter of 2015 represents twice the growth in non-interest expense when compared to the pre-merger results for the first quarter of 2014.

Net Interest Income

Net interest income improved to $39.2 million in the first quarter of 2015 from $19.2 million in the first quarter of 2014. The increase in net interest income was the result of a significant increase in earning assets from the Mergers, organic business activity, and an improved net interest margin. Average earning assets increased from $1.86 billion in the first quarter of 2014 to $3.69 billion in the first quarter of 2015. Over this period, average loan balances increased by $1.52 billion, of which $1.39 billion was from acquired Yadkin loans, and average investment securities increased by $291.0 million, of which $257.7 million was from acquired Yadkin investments. In addition, average deposits increased by $1.53 billion, of which $1.51 billion was from acquired Yadkin deposits.

The Company's net interest margin expanded from 4.19 percent in the first quarter of 2014 to 4.33 percent in the first quarter of 2015. The improved net interest margin was due to an improved mix of interest-earning assets, a higher taxable-equivalent yield on investment securities, and higher non-interest bearing deposit balances. Net interest income improvement was partially offset by lower loan yields. Loan yields were negatively impacted by proportionally lower accretion income and pricing pressure on loan originations from a combination of lower prevailing market interest rates and stiff competition for loans from other financial institutions. The aggregate yield on earning assets, which benefited from an improved earning asset mix and higher investment yields, increased from 4.79 percent in the first quarter of 2014 to 4.84 percent in the first quarter of 2015. The cost of interest-bearing liabilities declined from 0.68 percent in the first quarter of 2014 to 0.63 percent in the first quarter of 2015, which primarily reflected lower deposit costs from the addition of the Yadkin deposit base.

Net accretion income on acquired loans totaled $4.5 million in the first quarter of 2015, which consisted of $1.5 million of net accretion on purchased credit-impaired (“PCI”) loans and $2.9 million of accretion income on purchased non-impaired loans. Net accretion income on acquired loans in the first quarter of 2014 totaled $3.1 million, which included $1.1 million of net accretion on PCI loans and $2.0 million of accretion income on purchased non-impaired loans. Accretion income on purchased non-impaired loans included $906 thousand of accelerated accretion due to principal prepayments in the first quarter of 2015 compared to $631 thousand in the first quarter of 2014.

- 36 -

The following table summarizes the major components of net interest income and the related yields and costs for the quarterly periods presented.



	Three months ended March 31, 2015						Three months ended March 31, 2014
(Dollars in thousands)	Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*

Assets
Loans (1)	$	2,924,287	$	39,796	5.52	%	$	1,400,086	$	19,969	5.78	%
Investment securities (2)	706,888		4,229		2.43		415,870		1,991		1.94
Federal funds and other	59,572		50		0.34		46,384		26		0.23
Total interest-earning assets	3,690,747		44,075		4.84	%	1,862,340		21,986		4.79	%
Goodwill	151,083						26,254
Other intangibles, net	16,359						5,769
Other non-interest-earning assets	391,489						207,252
Total assets	$	4,249,678					$	2,101,615

Liabilities and Equity
Interest-bearing demand	$	470,919	160		0.14	%	$	348,050	180		0.21	%
Money market and savings	1,003,156		716		0.29		475,698		349		0.30
Time	1,089,950		2,013		0.75		630,727		1,130		0.73
Total interest-bearing deposits	2,564,025		2,889		0.46		1,454,475		1,659		0.46
Short-term borrowings	288,000		289		0.41		128,000		78		0.25
Long-term debt	150,450		1,488		4.01		60,587		1,031		6.90
Total interest-bearing liabilities	3,002,475		4,666		0.63	%	1,643,062		2,768		0.68	%
Noninterest-bearing deposits	657,702						232,807
Other liabilities	25,356						9,079
Total liabilities	3,685,533						1,884,948
Shareholders’ equity	564,145						216,667
Total liabilities and shareholders' equity	$	4,249,678					$	2,101,615

Net interest income, taxable equivalent			$	39,409					$	19,218
Interest rate spread (3)					4.21	%					4.11	%
Tax equivalent net interest margin (4)					4.33	%					4.19	%

Percentage of average interest-earning assets to average interest-bearing liabilities					122.92	%					113.35	%
* Taxable equivalent basis


(1)	Loans include loans held for sale and nonaccrual loans.


(2)	Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 34.0 percent. The taxable-equivalent adjustment was $233 thousand and $6 thousand for the 2015 and 2014 periods, respectively.


(3)	Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.


(4)	Net interest margin represents annualized net interest income divided by average interest-earning assets.

- 37 -

Changes in interest income and interest expense can result from variances in both volume and rates. The following table presents the relative impact on tax-equivalent net interest income to changes in the average outstanding balances of interest-earning assets and interest-bearing liabilities and the rates earned and paid on such assets and liabilities.



	Change from Q1 2014 to Q1 2015 due to:
(Dollars in thousands)	Volume		Yield/Cost			Total Change
Interest earning assets:
Loans	$	20,779	$	(952	)	$	19,827
Investment securities	1,646		592			2,238
Federal funds and other interest-earning assets	8		16			24
Total interest-earning assets	22,433		(344		)	22,089

Interest-bearing liabilities:
Interest-bearing demand	52		(72		)	(20		)
Money market and savings	376		(9		)	367
Time deposits	846		37			883
Total interest-bearing deposits	1,274		(44		)	1,230
Short-term borrowings	139		72			211
Long-term debt	1,030		(573		)	457
Total interest-bearing liabilities	2,443		(545		)	1,898
Change in net interest income	$	19,990	$	201		$	20,191

Provision for Loan Losses

The following table summarizes the changes in the Company's allowance for loan losses ("ALLL") for the quarters presented.



(Dollars in thousands)	Non-PCI Loans			PCI Loans			Total

1Q 2015:
Balance at January 1, 2015	$	6,519		$	1,298		$	7,817
Net charge-offs	(494		)	—			(494		)
Provision for loan losses	882			79			961
Balance at March 31, 2015	$	6,907		$	1,377		$	8,284

1Q 2014:
Balance at January 1, 2014	$	4,682		$	2,361		$	7,043
Net charge-offs	(1,120		)	—			(1,120		)
Provision for loan losses	1,602			(312		)	1,290
Balance at March 31, 2014	$	5,164		$	2,049		$	7,213

Provision for loan losses was $961 thousand in the first quarter of 2015 compared to $1.3 million in the first quarter of 2014. The decrease in provision for loan losses reflected lower provision expense for non-PCI loans, net of higher provision expense for PCI loans. Provision expense on non-PCI loans decreased primarily due to lower net charge-offs, which decreased to 0.07 percent of average loans in the first quarter of 2015 from 0.32 percent of average loans in the first quarter of 2014. The $312 thousand PCI provision credit in the prior year was due to the reversal of previously established reserves on certain commercial and residential real estate loan pools as cash flows improved in those pools.

Loans acquired with evidence of credit deterioration since origination are accounted for as PCI loans. Subsequent to acquisition of these loans, estimates of cash flows expected to be collected are updated each reporting period based on assumptions regarding default rates, loss severities, and other factors that reflect current market conditions. If the Company has probable decreases in cash flows expected to be collected at the pool level due to credit, the provision for loan losses is charged, resulting in an increase to the allowance for loan losses. Events that would result in probable decreases in expected cash flows include (i) reductions in estimated collateral values for collateral dependent loans, (ii) loans becoming collateral dependent during the period for which there is an estimated collateral shortfall, (iii) non-payment of cash flows expected to be collected in prior re-estimations, and (iv) deterioration in the weighted average credit grade or past due status for loans with cash flows estimated based on these factors.

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If there are probable and significant increases in cash flows expected to be collected, the Company will first reverse any previously established ALLL and then increase interest income as a prospective yield adjustment over the remaining life of the loans. Events that would result in probable increases in expected cash flows include (i) increases in estimated collateral values for collateral dependent loans, (ii) loans becoming non-collateral dependent during the period for which there was an estimated collateral shortfall in prior estimations, (iii) actual cash flow collections in excess of prior estimates, and (iv) improvement in the weighted average credit grade or past due status for loans with cash flows estimated based on these factors.

Results of the Company’s cash flow re-estimation for PCI loans in the first quarter of 2015 are summarized as follows.



(Dollars in thousands)	Provision			Yield Adjustment			Previous Yield		New Yield

Loan pools with cash flow improvement	$	(278	)	$	1,085		7.50	%	9.48	%
Loan pools with cash flow decrease	357			(1,746		)	9.42	%	6.42	%
Total	$	79		$	(661	)	8.98	%	7.12	%

Non-Interest Income

The following table provides a summary of non-interest income for the periods presented.



	Three months ended March 31,				Variance
(Dollars in thousands)	2015		2014		$		%

Service charges and fees on deposit accounts	$	3,253	$	1,315	$	1,938	147.4	%
Government-guaranteed lending	2,873		2,341		532		22.7
Mortgage banking	1,322		318		1,004		315.7
Bank-owned life insurance	472		306		166		54.2
Gain on sales of available for sale securities	1		—		1		—
Other	918		750		168		22.4
Total non-interest income	$	8,839	$	5,030	$	3,809	75.7	%

Non-interest income totaled $8.8 million in the first quarter of 2015, which was an increase from $5.0 million in the first quarter of 2014. Service charges and fees on deposit accounts increased by $1.9 million primarily due to the addition of acquired Yadkin deposit accounts. Government-guaranteed, small business lending income, which includes gains on sales of the guaranteed portion of certain SBA loans originated by the Company as well as servicing fees on previously sold SBA loans, increased by $532 thousand due to a higher volume of loan originations and sales as the Company has expanded its government lending presence into new markets. Mortgage banking income increased by $1.0 million due to higher production volumes with the addition of Yadkin's mortgage bankers as well as servicing income generated by Yadkin's mortgage servicing portfolio. Additionally, bank-owned life insurance income increased from acquired Yadkin life insurance policies.

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Non-Interest Expense

The following table provides a summary of non-interest expense for the periods presented.



	Three months ended March 31,				Variance
(Dollars in thousands)	2015		2014		$			%

Salaries and employee benefits	$	15,202	$	9,098	$	6,104		67.1	%
Occupancy and equipment	4,799		2,663		2,136			80.2
Data processing	1,888		1,030		858			83.3
FDIC deposit insurance premiums	714		390		324			83.1
Professional services	1,092		685		407			59.4
Foreclosed asset expense, net	188		263		(75		)	(28.5	)
Loan, collection, and repossession expense	936		681		255			37.4
Merger and conversion costs	220		1,209		(989		)	(81.8	)
Restructuring charges	907		836		71			8.5
Amortization of other intangible assets	815		227		588			259.0
Other	4,197		1,954		2,243			114.8
Total non-interest expense	$	30,958	$	19,036	$	11,922		62.6	%

Non-interest expense totaled $31.0 million in the first quarter of 2015 compared to $19.0 million in the first quarter of 2014. Salaries and employee benefits, occupancy and equipment, data processing, and other non-interest expense categories were all significantly impacted by the Mergers which added employees, branch and other facilities, and equipment to the Company's expense base. Further, FDIC deposit insurance premiums and intangible asset amortization were impacted by the acquired Yadkin deposit base. Operating non-interest expense, which excludes merger and conversion costs and restructuring charges, increased from $17.0 million in the first quarter of 2014 to $29.8 million in the first quarter of 2015. Additionally, the Company's operating efficiency ratio improved from 70.1 percent in the first quarter of 2014 to 62.1 percent in the first quarter of 2015 primarily due to the significant scale and operating leverage provided by the Mergers.

Lower merger and conversion costs partially offset higher non-interest expenses in the quarter. These costs included professional fees, severance, technology, rebranding, and branch network expenses necessary to complete the Mergers and related system conversions. Restructuring charges of $907 thousand in the first quarter of 2015 related to severance costs associated with the Company's expense reduction and branch optimization plan which includes the elimination of twenty-five back office positions as well as the planned closing of six branches scheduled to occur in the third quarter of 2015. Restructuring charges of $836 thousand in the first quarter of 2014 related to an earlier branch optimization plan and efforts to streamline the Company's organizational structure in certain back office functions following VantageSouth's acquisition of ECB Bancorp, Inc.

Income Taxes

Income tax expense was $5.8 million in the first quarter of 2015 and $1.7 million in the first quarter of 2014. The Company's effective tax rate improved to 36.3 percent in the first quarter of 2015 from 42.9 percent in the first quarter of 2014. This tax rate improvement was due to higher non-deductible merger expenses in the prior year quarter.

Analysis of Financial Condition

Investment Activities

The Company's investment portfolio plays a major role in the management of liquidity and interest rate sensitivity and, therefore, is managed in the context of the overall balance sheet. In general, the primary goals of the investment portfolio are: (i) to provide a sufficient margin of liquid assets to meet unanticipated deposit and loan fluctuations and overall funds management objectives; (ii) to provide eligible securities to secure public funds as prescribed by law and other borrowings; (iii) to provide structures and terms to enable management to properly management interest rate risk on the balance sheet; and (iv) to earn the maximum return on funds invested that is commensurate with meeting the requirements of (i), (ii) and (iii). The Company invests in securities as allowable under bank regulations and its investment policy. These securities include obligations of the U.S. Treasury, U.S. government agencies, U.S. government-sponsored entities, including mortgage-backed securities, bank eligible obligations of any state or political subdivision, privately-issued residential and commercial mortgage-backed securities, bank eligible corporate bonds, limited types of mutual funds and equity securities.

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The amortized cost and fair value of the available-for-sale securities portfolio was $655.7 million and $658.3 million, respectively, as of March 31, 2015 compared to $674.2 million and $672.4 million, respectively, as of December 31, 2014. The amortized cost and fair value of the held-to-maturity securities portfolio was $39.5 million and $40.6 million, respectively, as of March 31, 2015 compared to $39.6 million and $40.6 million, respectively, as of December 31, 2014. The portfolio declined in the quarter as the Company has used principal cash flows from the securities portfolio to partially fund loan growth. The Company intends to continue reinvesting cash flows from the portfolio into loans throughout 2015.

Marketable investment securities accounted for as available for sale are recorded at fair value with unrealized gains and losses charged to accumulated other comprehensive income. The investment securities portfolio as of March 31, 2015 consisted of U.S. government-sponsored enterprise ("GSE") obligations, securities guaranteed by the U.S. Small Business Administration ("SBA"), mortgage-backed securities issued by GSEs, investment grade corporate bonds, investment grade non-agency residential mortgage-backed securities, investment grade non-agency commercial mortgage-backed securities, investment grade non-taxable municipal bonds, and equity securities of certain financial institutions. As of March 31, 2015 and December 31, 2014, the available-for-sale securities portfolio had $4.6 million and $2.8 million, respectively, of unrealized gains and $2.0 million and $4.6 million, respectively, of unrealized losses.

The following table summarizes the amortized cost and fair value of the securities portfolio.



	March 31, 2015				December 31, 2014
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Securities available for sale:
GSE obligations	$	14,922	$	15,035	$	14,914	$	14,944
SBA-guaranteed securities	58,566		58,345		60,408		60,120
Mortgage-backed securities issued by GSE	413,433		414,436		428,076		425,283
Corporate bonds	118,983		120,255		118,799		119,912
Non-agency RMBS	4,535		4,517		4,961		4,963
Non-agency CMBS	3,552		3,548		3,576		3,578
Municipal bonds	38,682		39,131		39,907		40,258
Other debt securities	245		245		498		498
Equity securities	2,819		2,811		3,017		2,865
Total securities available for sale	$	655,737	$	658,323	$	674,156	$	672,421

Securities held to maturity:
Municipal bonds	$	39,511	$	40,607	$	39,620	$	40,586

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The following table summarizes the amortized cost of debt securities in the investment portfolio as of March 31, 2015, segregated by major category with ranges of maturities⁽¹⁾and average yields⁽²⁾.



	1 Year or Less				Over 1 to 5 Years				Over 5 to 10 Years				More than 10 Years				Total
(Dollars in thousands)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield

Securities available for sale:
GSE obligations	$	—	—	%	$	15,035	1.09	%	$	—	—	%	$	—	—	%	$	15,035	1.09	%
SBA-guaranteed securities	—		—	%	7,485		1.39	%	50,860		1.41	%	—		—	%	58,345		1.41	%
Mortgage-backed securities issued by GSE	3,664		3.30	%	181,068		2.12	%	206,315		2.44	%	23,389		3.23	%	414,436		2.35	%
Corporate bonds	25,466		2.71	%	76,570		1.92	%	13,630		3.20	%	4,589		3.06	%	120,255		2.28	%
Non-agency RMBS	—		—	%	—		—	%	96		5.49	%	4,421		4.76	%	4,517		4.78	%
Non-agency CMBS	3,548		1.87	%	—		—	%	—		—	%	—		—	%	3,548		1.87	%
Municipal bonds	7,070		2.15	%	27,153		3.10	%	4,130		2.92	%	778		5.97	%	39,131		2.97	%
Other debt securities	245		0.50	%	—		—	%	—		—	%	—		—	%	245		0.50	%
Total debt securities available for sale	$	39,993	2.57	%	$	307,311	2.09	%	$	275,031	2.29	%	$	33,177	3.48	%	$	655,512	2.27	%

Securities held to maturity:
Municipal bonds	$	—	—	%	$	25,981	3.86	%	$	9,903	3.89	%	$	3,627	5.77	%	$	39,511	4.04	%


(1)	Mortgage-backed securities, which are not due at a single maturity date, have been included in maturity groupings based on weighted average maturities anticipating future prepayments.


(2)	Yields are calculated on a taxable equivalent basis using the statutory federal income tax rate of 34 percent. Yields are calculated based on the amortized cost of the securities.

As of March 31, 2015, the weighted average life of the Company's debt securities was 5.1 years, and the weighted average effective duration was 3.1 years.

The Company also owned $20.3 million and $19.5 million of FHLB stock as of March 31, 2015 and December 31, 2014, respectively. This stock is recorded at cost and is classified separately from investment securities on the consolidated balance sheets.

Lending Activities

The primary goal of the Company's lending function is to help clients achieve their financial goals by providing quality loan products that are fair to the client and profitable to the Company. In addition to the importance placed on client knowledge and continuous involvement with clients, the Company's lending process incorporates the standards of a consistent company-wide credit culture and an in-depth knowledge of our local markets. Furthermore, the Company employs strict underwriting criteria governing the degree of assumed risk and the diversity of the loan portfolio. In this context, the Company strives to meet the credit needs of businesses and consumers in its markets while pursuing a balanced strategy of loan profitability, loan growth, and loan quality.

The Company provides a wide range of business and consumer loans in the markets it serves. Its objective is to have a well-diversified and balanced portfolio of business and consumer loans. In order to manage loan portfolio risk, the Company has established concentration limits by borrower, product type, loan structure, and industry. The majority of business loans are secured by business assets and real estate supported in most cases by personal guarantees. Consumer loans are primarily secured with personal assets and real estate. Underwriting is primarily focused on the underlying cash flow of the business or consumer and secondarily on assets securing the loans.

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Loans, net of deferred loan fees, totaled $2.91 billion as of March 31, 2015, which was an increase of $15.6 million since December 31, 2014, a 2.2 percent annual growth rate. The composition of the Company’s loan portfolio as of March 31, 2015 was as follows: 47.2 percent in commercial real estate loans, 15.8 percent in commercial and industrial loans, 13.2 percent in commercial construction and land development loans, 12.2 percent in residential real estate loans, 1.0 percent in consumer construction and land development loans, 9.4 percent in home equity loans and lines of credit, and 1.2 percent in consumer loans. The composition of the loan portfolio as of December 31, 2014 was as follows: 46.8 percent in commercial real estate loans, 16.2 percent in commercial and industrial loans, 12.8 percent in commercial construction and land development loans, 12.4 percent in residential real estate loans, 1.0 percent in consumer construction and land development loans, 9.5 percent in home equity loans and lines of credit, and 1.3 percent in consumer loans.

For each acquired loan portfolio, the Company made fair value adjustments by projecting expected future principal and interest cash flows over the remaining life of each loan and then discounting those cash flows based on market rates for similar loans at the time of initial recognition. Because acquired loans are marked to fair value and the legacy allowance for loan losses is eliminated at acquisition, the Company believes an analysis of the loan portfolio carrying value and unpaid borrower principal balances ("UPB") is useful in evaluating the portfolio.

The following table summarizes the UPB and carrying amounts of the loan portfolio by type.



	March 31, 2015						December 31, 2014
(Dollars in thousands)	UPB		Carrying Amount		% of UPB		UPB		Carrying Amount		% of UPB

Commercial:
Commercial real estate	$	1,394,082	$	1,375,771	98.7	%	$	1,374,729	$	1,355,536	98.6	%
Commercial and industrial	464,432		459,121		98.9	%	474,950		468,848		98.7	%
Construction and development	390,935		384,210		98.3	%	378,477		370,807		98.0	%
Consumer:
Residential real estate	360,022		354,362		98.4	%	366,264		360,249		98.4	%
Construction and development	30,740		30,177		98.2	%	30,661		30,061		98.0	%
Home equity	288,320		275,090		95.4	%	290,630		276,662		95.2	%
Consumer	37,085		35,771		96.5	%	38,545		36,874		95.7	%
Total	$	2,965,616	$	2,914,502	98.3	%	$	2,954,256	$	2,899,037	98.1	%

Acquired loan balances decreased from $2.21 billion as of December 31, 2014 to $2.17 billion as of March 31, 2015, while non-acquired loans increased from $685.3 million as of December 31, 2014 to $748.2 million as of March 31, 2015.

The following table summarizes the scheduled maturities of loans separated by fixed and variable rate loans.



	March 31, 2015
(Dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction and Development		Residential Real Estate		Consumer Construction		Home Equity		Consumer		Total

Fixed Rate: (1)
1 year or less	$	76,972	$	24,305	$	24,484	$	26,274	$	4,995	$	93	$	7,476	$	164,599
1-5 years	734,433		131,870		73,450		142,894		20,489		2,564		21,948		1,127,648
After 5 years	193,693		17,726		24,297		48,891		3,602		2,477		1,682		292,368
Total	1,005,098		173,901		122,231		218,059		29,086		5,134		31,106		1,584,615
Variable Rate: (1)
1 year or less	98,997		155,660		162,601		11,411		831		9,328		3,938		442,766
1-5 years	207,480		62,538		80,235		17,477		260		48,999		540		417,529
After 5 years	64,196		67,022		19,143		107,415		—		211,629		187		469,592
Total	370,673		285,220		261,979		136,303		1,091		269,956		4,665		1,329,887
Total loans	$	1,375,771	$	459,121	$	384,210	$	354,362	$	30,177	$	275,090	$	35,771	$	2,914,502


(1)	Loan maturities are presented based on the final contractual maturity of each loan and do not reflect contractual principal payments prior to maturity on amortizing loans.

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Loans acquired with evidence of credit deterioration since origination are accounted for as PCI loans. Where possible, PCI loans with common risk characteristics are grouped into pools at acquisition. For PCI loan pools, the excess of the cash flows initially expected to be collected over the fair value of the loans at the acquisition date (i.e., the accretable yield) is accreted into interest income over the estimated remaining life of the PCI loans using the effective yield method, provided that the timing and the amount of future cash flows is reasonably estimable. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. The recorded investment in PCI loans as of March 31, 2015 totaled $189.6 million, of which $188.9 million were grouped into pools and $710 thousand were accounted for on an individual loan basis. The recorded investment in PCI loans as of December 31, 2014 totaled $206.1 million, of which $205.4 million were grouped into pools and $712 thousand were accounted for on an individual loan basis.

Due to the significance of the Company's acquired loan portfolio and related acquisition accounting adjustments, traditional credit ratios should not be used when comparing prior periods to the current period or when comparing the Company to other financial institutions. Specifically, the current period (i) ALLL to total loans, (ii) ALLL to nonperforming loans, (iii) nonperforming loans to total loans, (iv) nonperforming assets to total assets, and (v) net charge-offs to average loans may not be comparable to prior periods or other financial institutions.

Nonperforming Assets

Loans are considered past due when the contractual amounts due with respect to principal and interest are not received within 30 days of the contractual due date. Loans are generally classified as nonaccrual if they are past due for a period of 90 days or more, unless such loans are well secured and in the process of collection. If a loan or a portion of a loan is classified as doubtful or as partially charged off, the loan is generally classified as nonaccrual. Loans that are on a current payment status or past due less than 90 days may also be classified as nonaccrual if repayment in full of principal and/or interest is in doubt. Loans may be returned to accrual status when all principal and interest amounts contractually due are reasonably assured of repayment within an acceptable period of time, and there is a sustained period of repayment performance of interest and principal by the borrower in accordance with the contractual terms.

PCI loans with common risk characteristics are grouped in pools at acquisition. These loans are evaluated for accrual status at the pool level rather than the individual loan level and performance is based on management's ability to reasonably estimate the amount and timing of future cash flows rather than a borrower's ability to repay contractual loan amounts. Since management is able to reasonably estimate the amount and timing of future cash flows on the Company's PCI loan pools, none of these loans have been identified as nonaccrual. However, PCI loans included in pools are identified as nonperforming if they are past due 90 days or more at acquisition or become 90 days or more past due after acquisition. The past due status is determined based on the contractual terms of the individual loans.

While a loan is classified as nonaccrual and the future collectability of the recorded loan balance is doubtful, collections of interest and principal are generally applied as a reduction to the principal outstanding, except in the case of loans with scheduled amortizations where the payment is generally applied to the oldest payment due. When the future collectability of the recorded loan balance is expected, interest income may be recognized on a cash basis. In the case where a nonaccrual loan had been partially charged off, recognition of interest on a cash basis is limited to that which would have been recognized on the recorded loan balance at the contractual interest rate. Receipts in excess of that amount are recorded as recoveries to the allowance for loan losses until prior charge-offs have been fully recovered.

Assets acquired as a result of foreclosure are recorded at estimated fair value in other real estate (or foreclosed assets). Any excess of cost over estimated fair value at the time of foreclosure is charged to the allowance for loan losses. Valuations are periodically performed on these properties, and any subsequent write-downs are charged to earnings. Routine maintenance and other holding costs are included in non-interest expense.

Loans, excluding pooled PCI loans, are classified as troubled debt restructurings (“TDR”) by the Company when certain modifications are made to the loan terms and concessions are granted to the borrowers due to financial difficulty experienced by those borrowers. The Company grants concessions by (1) reduction of the stated interest rate for the remaining original life of the debt or (2) extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk. The Company does not generally grant concessions through forgiveness of principal or accrued interest. The Company’s policy with respect to accrual of interest on loans restructured in a TDR follows relevant supervisory guidance. That is, if a borrower has

- 44 -

demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is likely. If a borrower was materially delinquent on payments prior to the restructuring but shows the capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual until there is demonstrated performance under new terms. Lastly, if the borrower does not perform under the restructured terms, the loan is placed on non-accrual status. The Company closely monitors these loans and ceases accruing interest on them if management believes that the borrowers may not continue performing based on the restructured note terms.

PCI loans that were classified as TDRs prior to acquisition are not classified as TDRs by the Company after the acquisition date. Subsequent modification of a PCI loan accounted for in a pool that would otherwise meet the definition of a TDR is not reported, or accounted for, as a TDR since pooled PCI loans are excluded from the scope of TDR accounting. A PCI loan not accounted for in a pool would be reported, and accounted for, as a TDR if modified in a manner that meets the definition of a TDR after the acquisition date.

Nonperforming loans as a percentage of total loans was 1.29 percent as of March 31, 2015 compared to 0.92 percent as of December 31, 2014 and 1.51 percent as of March 31, 2014. Total nonperforming assets as a percentage of total assets was 1.17 percent as of March 31, 2015 compared to 0.93 percent as of December 31, 2014 and 1.44 percent as of March 31, 2014. Acquired PCI loans that are included in loan pools, including acquired Yadkin PCI loans, are reclassified at acquisition to accrual status and thus are not included as nonperforming assets unless they are 90 days or greater past due.

The following table summarizes the Company's nonperforming assets.



(Dollars in thousands)	March 31, 2015		December 31, 2014

Nonaccrual loans	$	26,841	$	17,949
Accruing loans past due 90 days or more (1)	10,789		8,810
Foreclosed assets	12,427		12,891
Total nonperforming assets	$	50,057	$	39,650

Restructured loans not included above	$	2,043	$	3,948

(1) Balances include PCI loans past due 90 days or more that are grouped in pools which accrue interest based on pool yields.

The following table summarizes the Company’s nonperforming loans by type.



	March 31, 2015				December 31, 2014
(Dollars in thousands)	Carrying Value		% of Loans in Category		Carrying Value		% of Loans in Category

Commercial:
Commercial real estate	$	18,183	1.32	%	$	9,268	0.68	%
Commercial and industrial	5,463		1.19		6,224		1.33
Construction and development	4,790		1.25		3,843		1.04
Consumer:
Residential real estate	6,001		1.69		4,891		1.36
Construction and development	597		1.98		372		1.24
Home equity	2,295		0.83		1,909		0.69
Consumer	301		0.84		252		0.68
Total nonperforming loans	$	37,630	1.29	%	$	26,759	0.92	%

Allowance for Loan Losses

The ALLL and related provision are calculated separately for PCI loans and non-PCI loans. The following description of the Company's ALLL methodology primarily relates to non-PCI loans. The evaluation of PCI loans for impairment follows a different methodology which is described above. The ALLL is a reserve established through a provision for probable loan losses charged to expense. Balances are charged against the ALLL when the collectability of principal is unlikely. Subsequent recoveries, if any, are credited to the ALLL. The ALLL is maintained at a level based on management's best estimate of probable credit losses that are inherent in the loan portfolio. Management evaluates the adequacy of the ALLL on at least a quarterly basis.

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For non-PCI loans, the evaluation of the adequacy of the ALLL includes both loans evaluated collectively for impairment and loans evaluated individually for impairment. The determination of loss rates on loans collectively evaluated for impairment involves considerations of historic loan loss experience as well as certain qualitative factors such as current delinquency levels and trends, loan growth, loan portfolio composition, prevailing economic conditions, the loan review function, and other relevant factors. As of March 31, 2015, the Company used a trailing 3.75-year historical net charge-off rates in combination with the qualitative factors to determine appropriate loss rates for each identified risk category. The Company had previously been utilizing a 3-year historical loan loss period to calculate its historical charge-off rates but modified its approach in the third quarter of 2014 to freeze the earliest quarter in the look-back period (Q3 2011). The purpose of this change was to reflect the appropriate historical charge-off rate for the current credit cycle in the ALLL model. Therefore, one quarter will be added to the historical look-back period until the model reaches 4 full years of historical losses.

The Company utilizes an internal grading system to assign the degree of inherent risk on each loan in the portfolio. The risk grade is initially assigned by the lending officer and reviewed by the credit administration function. The internal risk grading system is reviewed and tested periodically by the loan review function. The Company's ALLL model uses the internal loan grading system to segment each category of loans by risk grade. Calculated loss rates are weighted more heavily for higher risk loans.

A loan, excluding PCI loans, is considered individually impaired, based on current information and events, if it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Reserves, or charge-offs, on individually impaired loans that are collateral dependent are based on the fair value of the underlying collateral, less an estimate of selling costs, while reserves, or charge-offs, on loans that are not collateral dependent are based on either an observable market price, if available, or the present value of expected future cash flows discounted at the historical effective interest rate. PCI loans within pools are not evaluated individually for impairment.

The following table presents the allocation of the ALLL for the periods presented.



	March 31, 2015				December 31, 2014
(Dollars in thousands)	Amount		% of Total Allowance		Amount		% of Total Allowance

Commercial:
Commercial real estate	$	2,954	35.66	%	$	2,796	35.77	%
Commercial and industrial	1,336		16.13		1,274		16.30
Construction and development	1,732		20.91		1,885		24.11
Consumer:
Residential real estate	1,251		15.10		1,783		22.81
Construction and development	213		2.57		—		—
Home equity	706		8.52		—		—
Consumer	92		1.11		79		1.01
Total allowance for loan losses	$	8,284	100.00	%	$	7,817	100.00	%

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The following table summarizes changes in the ALLL for the periods presented.



	Three months ended March 31,
(Dollars in thousands)	2015			2014

ALLL, beginning of period	$	7,817		$	7,043
Charge-offs:
Commercial:
Commercial real estate	99			242
Commercial and industrial	369			241
Construction and development	16			196
Consumer:
Residential real estate	10			196
Home equity	135			188
Consumer	136			96
Total charge-offs	765			1,159
Recoveries:
Commercial:
Commercial real estate	5			4
Commercial and industrial	136			5
Construction and development	5			—
Consumer:
Residential real estate	24			11
Home equity	41			12
Consumer	33			7
Total recoveries	271			39
Net charge-offs	494			1,120
Provision for loan losses	961			1,290
ALLL, end of period	$	8,284		$	7,213

Net charge-offs to average loans (annualized)	0.07		%	0.32		%

The ALLL to total loans ratio was 0.28 percent as of March 31, 2015 compared to 0.27 percent as of December 31, 2014. The adjusted ALLL, which includes the ALLL as well as net acquisition fair value adjustments for acquired loans, declined from 2.17 percent of total loans as of December 31, 2014 to 2.04 percent of total loans as of March 31, 2015. The reduction in adjusted ALLL resulted primarily from lower loss rates used in the ALLL model due to improvement in charge-off levels and continued accretion of fair value adjustments. The following non-GAAP reconciliation provides a calculation of the adjusted ALLL and the related adjusted ALLL as a percentage of total loans for the periods presented.



(Dollars in thousands)	March 31, 2015			December 31, 2014

Allowance for loan losses (GAAP)	$	8,284		$	7,817
Net acquisition accounting fair value discounts to loans	51,125			55,166
Adjusted allowance for loan losses	$	59,409		$	62,983
Loans	$	2,913,859		$	2,898,266
Adjusted allowance for loan losses to loans (Non-GAAP)	2.04		%	2.17		%

Deposit Activities

Deposits are the primary source of funds for the Company's lending and investing activities. The Company provides a range of deposit services to businesses and individuals, including non-interest bearing checking accounts, interest bearing checking accounts, savings accounts, money market accounts, IRAs and CDs. These accounts generally earn interest at rates the Company establishes based on market factors and the anticipated amount and timing of funding needs. The establishment or continuity of a core deposit relationship can be a factor in loan pricing decisions. While the Company's primary focus is on establishing customer relationships to attract core deposits, at times, the Company uses brokered deposits and other wholesale deposits to supplement its funding sources. As of March 31, 2015, brokered deposits represented approximately 8.6 percent of total deposits.

Total deposits as of March 31, 2015 were $3.21 billion, which was a decrease of $38.2 million from December 31, 2014. As of March 31, 2015 and December 31, 2014, the Company had outstanding time deposits under $100 thousand of $535.3 million and $415.0 million, respectively, and time deposits over $100 thousand of $535.7 million and $677.8 million, respectively.

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The composition of the deposit portfolio, by category, as of March 31, 2015 was as follows: 33.4 percent in time deposits, 31.5 percent in money market and savings, 20.4 percent in non-interest bearing demand deposits, and 14.7 percent in interest-bearing demand deposits. The composition of the deposit portfolio, by category, as of December 31, 2014 was as follows: 33.6 percent in time deposits, 30.9 percent in money market and savings, 21.0 percent in non-interest bearing demand deposits, and 14.5 percent in interest-bearing demand deposits.

The following table summarizes the average balances outstanding and average interest rates for each major category of deposits for the periods presented.



	Three months ended March 31,
	2015						2014
(Dollars in thousands)	Average Balance		% of Total		Average Rate		Average Balance		% of Total		Average Rate

Non-interest demand	$	657,702	20.41	%	—	%	$	232,807	13.81	%	—	%
Interest-bearing demand	470,919		14.62		0.14		348,050		20.63		0.21
Money market and savings	1,003,156		31.14		0.29		475,698		28.19		0.30
Time deposits	1,089,950		33.83		0.75		630,727		37.37		0.73
Total average deposits	$	3,221,727	100.00		0.36		$	1,687,282	100.00		0.40

The overall mix of deposits has shifted to a higher percentage of non-interest demand deposits with reductions in the percentage of deposits held in interest-bearing demand and time deposit accounts. The Company believes its deposit product offerings are properly structured to attract and retain core low-cost deposit relationships. The average cost of deposits was 0.36 percent in the first quarter of 2015 compared to 0.40 percent in the first quarter of 2014 due to changes in deposit mix and lower deposit interest rates.

Borrowings and Long-Term Debt

The Company uses short-term borrowings and long-term debt to provide both funding and, to a lesser extent, regulatory capital. Short-term borrowings totaled $325.5 million and $250.5 million as of March 31, 2015 and December 31, 2014, respectively, and consisted of FHLB advances maturing within twelve months. The balance of short-term FHLB advances increased during the quarter to partially fund loan growth and to compensate for the decline in deposit balances. The Company also shifted some its maturities from long-term to short-term as the duration on the investment portfolio continues to decrease and as the mix of loans in the pipeline continue to be weighted towards variable rate lending.

Long-term debt totaled $137.2 million as of March 31, 2015, which was a decrease from $180.2 million as of December 31, 2014. The Company had outstanding long-term FHLB advances of $61.6 million and $104.7 million as of March 31, 2015 and December 31, 2014, respectively. As of March 31, 2015 and December 31, 2014, long-term debt included $7.1 million in a subordinated term loan due in 2018 as well as $38.1 million in fixed rate subordinated notes due in 2023. As of March 31, 2015, long-term debt also included a total of $24.6 million in junior subordinated debentures issued to various unconsolidated trusts which were formed to issue trust preferred securities. This amount grew from a balance of $24.4 million as of December 31, 2014 due to accretion of fair value discounts related to the trust preferred securities. Capital lease obligations, which are included in long-term debt, totaled $5.9 million and $6.0 million as of March 31, 2015 and December 31, 2014, respectively.

Shareholders’ Equity

Total shareholders’ equity was $567.8 million as of March 31, 2015, which was an increase of $10.0 million from December 31, 2014. This increase was primarily due to net income of $10.3 million and other comprehensive income of $216 thousand. Dividends on preferred stock of $639 thousand reduced shareholders' equity.

Liquidity

Liquidity management involves the ability to fund the needs and requirements of depositors and borrowers, fund loan commitments, pay operating expenses, and ensure compliance with regulatory liquidity requirements. To ensure the Company is positioned to meet immediate and future cash demands, management regularly evaluates the Company's deposit mix and trends and relies on various internal analyses of its liquidity, which includes liquidity stress testing as well as short-term and long-term liquidity planning. The Company's liquidity management is governed by its liquidity policy and contingent funding plan which are both approved annually by the Board of Directors.

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Investment portfolio principal payments and maturities, loan principal payments, deposit growth, brokered deposit sources, and available borrowings from the FHLB, and various federal funds lines from correspondent banks are the primary sources of liquidity for the Bank. The primary uses of liquidity are repayments of borrowings, deposit maturities and withdrawals, disbursements of loan proceeds, and investment purchases. The primary uses of liquidity at the holding company are preferred stock dividends, debt payments on its subordinated debt and TRUPs, and operating expenses. The primary sources of liquidity at the holding company are dividend distributions from the Bank. In addition, on July 2, 2014, the holding company entered into a loan agreement with a correspondent bank providing for a revolving loan of up to an aggregate principal amount of $10.0 million. Borrowings under the loan agreement accrue interest at LIBOR plus 4.0 percent. The loan agreement will expire on July 1, 2015. However, the Company may extend the maturity date by twelve months so long as it is not in default under the loan agreement. The obligations of the loan agreement are secured by, among other things, a pledge of all of the capital stock of the Bank.

As of March 31, 2015, the Company's liquid assets (which include cash and due from banks, interest-earning deposits with banks, federal funds sold, and investment securities available for sale) totaled $766.8 million, which represented 18 percent of total assets and 24 percent of total deposits. Supplementing this on-balance sheet liquidity, the Company has available off-balance sheet liquidity in the form of lines of credit from various correspondent banks which totaled $391.7 million as of March 31, 2015. As of March 31, 2015, outstanding commitments for undisbursed lines of credit and letters of credit totaled $708.5 million, standby letters of credit issued by the FHLB on the Bank's behalf totaled $10.0 million, and outstanding capital commitments to a private investment fund were $2.8 million. Management believes that the aggregate liquidity position of the Company is sufficient to meet deposit maturities and withdrawals, borrowing commitments, loan funding requirements, and operating expenses. Core deposits (total deposits less brokered deposits), one of the Company's most stable sources of liquidity, together with common equity capital funded $3.47 billion, or 81 percent, of total assets as of March 31, 2015 compared to $3.50 billion, or 82 percent, of total assets as of December 31, 2014.

Contractual Obligations

The following table presents the Company's significant fixed and determinable contractual obligations by payment date. The payment amounts represent those amounts contractually due to the recipient. The table excludes liabilities recorded where management cannot reasonably estimate the timing of any payments that may be required in connection with these liabilities.



	March 31, 2015
(Dollars in thousands)	1 Year or Less		Over 1 to 3 Years		Over 3 to 5 Years		More Than 5 Years		Total

Time deposits	$	583,907	$	261,979	$	225,080	$	4	$	1,070,970
Short-term borrowings	325,500		—		—		—		325,500
Long-term debt	—		61,362		13,002		62,835		137,199
Operating leases	4,077		6,471		4,525		5,117		20,190
Capital leases	565		1,155		1,195		6,468		9,383
Total contractual obligations	$	914,049	$	330,967	$	243,802	$	74,424	$	1,563,242

Capital

The maintenance of appropriate levels of capital is a management priority and is monitored on a regular basis. The Company's principal goals related to the maintenance of capital are to provide adequate capital to support the Company's risk profile, provide financial flexibility to support future growth and client needs, comply with relevant laws, regulations, and supervisory guidance, and provide a competitive return to shareholders.

On July 2, 2013, the Federal Reserve Board, and on July 9, 2013, the FDIC, adopted a final rule that implements the Basel III changes to the international regulatory capital framework, referred to as the “Basel III Rules.” The Basel III Rules apply to both depository institutions and their holding companies. The Basel III Rules, which became effective for both the Company and the Bank on January 1, 2015, include new risk-based and leverage capital ratio requirements which refine the definition of what constitutes “capital” for purposes of calculating those ratios. The minimum capital level requirements applicable to the Company and the Bank under the Basel III Rules are: (i) a new common equity Tier 1 risk-based capital ratio of 4.5 percent; (ii) a Tier 1 risk-based capital ratio of 6 percent (increased from 4 percent); (iii) a total risk-based capital ratio of 8 percent (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4 percent for all institutions. Common equity Tier 1 capital will consist of retained earnings and common stock instruments, subject to certain adjustments.

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The Basel III Rules also establish a “capital conservation buffer” of 2.5 percent above the new regulatory minimum risk-based capital requirements. The conservation buffer, when added to the capital requirements, result in the following minimum ratios: (i) a common equity Tier 1 risk-based capital ratio of 7.0 percent, (ii) a Tier 1 risk-based capital ratio of 8.5 percent, and (iii) a total risk-based capital ratio of 10.5 percent. The new capital conservation buffer requirement is to be phased in beginning in January 2016 at 0.625 percent of risk-weighted assets and will increase by that amount each year until fully implemented in January 2019. An institution would be subject to limitations on certain activities including payment of dividends, share repurchases and discretionary bonuses to executive officers if its capital level is below the buffer amount.

The Basel III Rules also revise the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels do not meet certain thresholds. The prompt corrective action rules were modified to include a common equity Tier 1 capital component and to increase certain other capital requirements for the various thresholds. For example, under the proposed prompt corrective action rules, insured depository institutions will be required to meet the following capital levels in order to qualify as “well capitalized:” (i) a new common equity Tier 1 risk-based capital ratio of 6.5 percent; (ii) a Tier 1 risk-based capital ratio of 8 percent (increased from 6 percent); (iii) a total risk-based capital ratio of 10 percent (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5 percent (unchanged from current rules). The Basel III Rules also set forth certain changes in the methods of calculating certain risk-weighted assets, which in turn will affect the calculation of risk based ratios.

The Company's and the Bank’s capital amounts and ratios as of March 31, 2015 are presented in the table below.



(Dollars in thousands)	Actual				Minimum for Capital Adequacy Purposes				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
Yadkin Financial Corporation
Total risk-based capital	$	439,164	12.25	%	$	286,759	8.00	%	N/A		N/A
Tier 1 risk-based capital	388,095		10.83	%	215,070		6.00	%	N/A		N/A
Common equity Tier 1	363,600		10.14	%	161,302		4.50	%	N/A		N/A
Tier 1 leverage capital	388,095		9.60	%	161,734		4.00	%	N/A		N/A

Yadkin Bank
Total risk-based capital	$	441,550	12.34	%	$	286,357	8.00	%	$	357,947	10.00	%
Tier 1 risk-based capital	428,531		11.97	%	214,768		6.00	%	286,357		8.00	%
Common equity Tier 1	428,531		11.97	%	161,076		4.50	%	232,665		6.50	%
Tier 1 leverage capital	428,531		10.59	%	161,822		4.00	%	202,277		5.00	%

The Company has received approval from the Federal Reserve Bank of Richmond to redeem the $28.4 million of outstanding preferred stock that had originally been issued to the U.S. Treasury in connection with its TARP Capital Purchase Program. The redemption is expected to occur on or around May 13, 2015.

The Company's tangible book value per common share was $11.78 as of March 31, 2015, which was an increase from $11.44 as of December 31, 2014. Tangible common equity to tangible assets increased to 9.08 percent as of March 31, 2015 from 8.82 percent as of December 31, 2014. The following table presents the calculation of tangible book value per common share and tangible common equity to tangible assets, which are both non-GAAP financial metrics.



(Dollars in thousands)	March 31, 2015			December 31, 2014

Total shareholders' equity	$	567,819		$	557,802
Less: Preferred stock	28,405			28,405
Less: Goodwill and other intangible assets, net	166,945			167,760
Tangible common equity	$	372,469		$	361,637
Common shares outstanding	31,609,021			31,599,150
Tangible book value per share	$	11.78		$	11.44

Total assets	$	4,267,353		$	4,266,309
Less: Goodwill and other intangible assets, net	166,945			167,760
Tangible assets	$	4,100,408		$	4,098,549
Tangible common equity to tangible assets	9.08		%	8.82		%

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Forward-Looking Information

This periodic report on Form 10-Q contains certain “forward-looking statements” that represent management’s judgments concerning the future and are subject to risks and uncertainties that could cause the Company’s actual operating results and financial position to differ materially from those projected in the forward-looking statements. Such forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “anticipate,” “should,” “would,” “project,” “future,” “strategy,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “intend,” “seeks,” or other similar words and expressions of the future. Risks and other factors that could influence the estimates include risks associated with any change in management, strategic direction, business plan, or operations, our management’s ability to successfully integrate the Company’s business and execute its business plan across new and diverse markets in North Carolina, South Carolina and elsewhere, greater than expected costs or difficulties related to the integration of acquired companies, local economic conditions affecting retail and commercial real estate, disruptions in the credit markets, particularly in light of continued economic uncertainty in the European Union, continued political unrest and instability in the Middle East; changes in interest rates, adverse developments in the real estate market affecting the value and marketability of collateral securing loans made by the Bank, the failure of assumptions underlying loan loss and other reserves, competition and the risk of new and changing regulation, including, but not limited to recent proposals that would change capital standards and asset risk-weighting for financial institutions. 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 previous Annual Reports on Form 10-K of the Company and of predecessor companies. The forward-looking statements in this document speak only as of the date hereof, and the Company does not assume any obligation to update such forward-looking statements, except as may otherwise be required by law.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company intends to reach its strategic financial objectives through the effective management of market risk. Like many financial institutions, the Company’s most significant market risk exposure is interest rate risk. The Company's primary goal in managing interest rate risk is to minimize the effect that changes in market interest rates have on earnings and capital. This goal is accomplished through the active management of the balance sheet. The goal of these activities is to structure the maturity and repricing of assets and liabilities to produce stable net interest income despite changing interest rates. The Company's overall interest rate risk position is maintained within a series of policies approved by the Board of Directors and guidelines established and monitored by the Bank’s Asset/Liability Committee (“ALCO”).

To measure, monitor, and report on interest rate risk, the Company begins with two models: (1) net interest income ("NII") at risk, which measures the impact on NII over the next twelve and twenty-four months to immediate changes in interest rates and (2) net economic value of equity ("EVE"), which measures the impact on the present value of net assets to immediate changes in interest rates. NII at risk is designed to measure the potential short-term impact of changes in interest rates on NII. EVE is a long-term measure of interest rate risk to the Company's balance sheet, or equity. Finally, gap analysis, which is the difference between the amount of balance sheet assets and liabilities repricing within a specified time period, is used as a secondary measurement of the Company's interest rate risk position. All of these models are subject to ALCO guidelines and are monitored regularly.

In calculating NII at risk, the Company begins with a base amount of NII that is projected over the next twelve and twenty-four months, assuming that the balance sheet is static and the yield curve remains unchanged over the period. The current yield curve is then “shocked,” or moved immediately, ±1.0 percent, ±2.0 percent, ±3.0 percent and ±4.0 percent in a parallel fashion, or at all points along the yield curve. New twelve-month NII projections are then developed using the same balance sheet but with the new yield curves, and these results are compared to the base scenario. The Company also performs yield curve twist scenarios to evaluate potential NII at risk under different scenarios such as a flattening yield curve, a steepening curve, and others that management deems appropriate.

EVE at risk is based on the change in the present value of all assets and liabilities under different interest rate scenarios. The present value of existing cash flows with the current yield curve serves as the base case. The Company then applies an immediate parallel shock to that yield curve of ±1.0 percent, ±2.0 percent, ±3.0 percent and ±4.0 percent and recalculates the cash flows and related present values.

Key assumptions used in the models described above include the timing of cash flows, the maturity and repricing of assets and liabilities, changes in market conditions, and interest-rate sensitivities of the Company's non-maturity deposits with respect to interest rates paid and the level of balances. These assumptions are inherently uncertain and, as a result, the models cannot precisely calculate future NII or predict the impact of changes in interest rates on NII and EVE. Actual results could differ from simulated results due to the timing, magnitude and frequency of changes in interest rates and market conditions, changes in spreads and management strategies, among other factors. Projections of NII are assessed as part of the Company's forecasting process.

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NII and EVE Analysis. The following table presents the estimated exposure to NII for the next twelve months due to immediate changes in interest rates and the estimated exposure to EVE due to immediate changes in interest rates. All information is presented as of March 31, 2015.



	March 31, 2015
(Dollars in thousands)	Estimated Exposure to NII		Estimated Exposure to EVE

Immediate change in interest rates:
+ 4.0%	11.10	%	5.76	%
+ 3.0%	7.84		4.57
+ 2.0%	4.08		3.42
+ 1.0%	0.97		1.91
No change	—		—
- 1.0%	(1.99	)	(3.98	)

While the measures presented in the table above are not a prediction of future NII or EVE valuations, they do suggest that if all other variables remained constant, immediate increases in interest rates at all points on the yield curve may produce higher NII in the short term. Other important factors that impact the levels of NII are balance sheet size and mix, interest rate spreads, the slope of the yield curve, the speed of interest rates changes, and management actions taken in response to the preceding conditions.

Item 4. Controls and Procedures

The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(b) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of March 31, 2015. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in the Company’s internal controls over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, these internal controls.

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Part II. Other Information

Item 1. Legal Proceedings

The Company and Yadkin Bank have been named defendants in legal actions arising from normal business activities in which damages in various amounts are claimed. Although the amount of any liability with respect to such matters cannot be determined, in the opinion of management, any liability arising from these matters will not have a material effect on Yadkin's consolidated financial statements.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

- 53 -

Item 6. Exhibits



2.1	Agreement and Plan of Merger By and Among Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. dated as of January 27, 2014. The Merger Agreement contains a listing and references identifying the contents of all omitted disclosure schedules and the Company hereby agrees to furnish supplementally a copy of any omitted disclosure schedule to the Securities and Exchange Commission upon request. (1)

2.2	First Amendment to the Agreement and Plan of Merger By and Among Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. dated as of April 22, 2014. (2)

3.1	Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company, effective as of July 4, 2014 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed July 7, 2014)

3.2	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed July 7, 2014)

10.1	Loan Agreement dated as of July 2, 2014 by and between VantageSouth Bancshares, Inc. and NexBank SSB (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed July 7, 2014)

10.2	Promissory Note dated as of July 2, 2014 issued by VantageSouth Bancshares, Inc. to NexBank SSB (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed July 7, 2014)

10.3	Pledge and Security Agreement dated as of July 2, 2014 by and between VantageSouth Bancshares, Inc. and NexBank SSB (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed July 7, 2014)

31.1	Certification of Principal Executive Officer pursuant to Rule 13a – 14(a).

31.2	Certification of Principal Financial Officer pursuant to Rule 13a – 14(a).

32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document.

101.SCH	XBRL Taxonomy Extension Schema Document.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	XBRL Taxonomy Extension Label Linkbase Document.

_____________________________________________________________

(1) Incorporated by reference to corresponding exhibit to the Current Report on Form 8-K filed with the SEC on January 30, 2014.

(2) Incorporated by reference to corresponding exhibit to the Current Report on Form 8-K filed with the SEC on April 25, 2014.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		YADKIN FINANCIAL CORPORATION

Date:	May 8, 2015	By:	/s/ Scott M. Custer
			Scott M. Custer
			President and Chief Executive Officer

Date:	May 8, 2015	By:	/s/ Terry S. Earley
			Terry S. Earley
			Executive Vice President and Chief Financial Officer

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