YADKIN FINANCIAL Corp - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - YADKIN FINANCIAL Corp	ex32-2q32015.htm
EX-31.1 - EXHIBIT 31.1 - YADKIN FINANCIAL Corp	ex31-1q32015.htm
EX-32.1 - EXHIBIT 32.1 - YADKIN FINANCIAL Corp	ex32-1q32015.htm
EX-31.2 - EXHIBIT 31.2 - YADKIN FINANCIAL Corp	ex31-2q32015.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 September 30, 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: 31,064,442 shares of Voting Common Stock and 654,997 shares of Non-Voting Common Stock outstanding as of November 5, 2015.

YADKIN FINANCIAL CORPORATION

TABLE OF CONTENTS



		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014	3

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014	4

	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014	5

	Consolidated Statement of Changes in Shareholders' Equity for the Nine Months Ended September 30, 2015 and 2014	6

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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	37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	61

Item 4.	Controls and Procedures	62

Part II.	OTHER INFORMATION	63

Item 1.	Legal Proceedings	63

Item 1A.	Risk Factors	63

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64

Item 3.	Defaults Upon Senior Securities	64

Item 4.	Mine Safety Disclosures	64

Item 5.	Other Information	64

Item 6.	Exhibits	65

Part I. Financial Information

Item 1. Financial Statements



YADKIN FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
As of September 30, 2015 and December 31, 2014



(Dollars in thousands, except share data)	September 30, 2015			December 31, 2014*
Assets
Cash and due from banks	$	54,667		$	65,312
Interest-earning deposits with banks	23,088			66,548
Federal funds sold	—			505
Investment securities available for sale, at fair value	713,492			672,421
Investment securities held to maturity	39,292			39,620
Loans held for sale	37,962			20,205
Loans	2,979,779			2,898,266
Allowance for loan losses	(9,000		)	(7,817		)
Net loans	2,970,779			2,890,449
Purchased accounts receivable	69,383			44,821
Federal Home Loan Bank stock, at cost	22,932			19,499
Premises and equipment, net	75,530			80,379
Bank-owned life insurance	78,397			76,990
Foreclosed assets	11,793			12,891
Deferred tax asset, net	54,402			73,059
Goodwill	152,152			152,152
Other intangible assets, net	14,324			16,677
Accrued interest receivable and other assets	44,033			36,506
Total assets	$	4,362,226		$	4,268,034

Liabilities
Deposits:
Non-interest demand	$	730,928		$	680,387
Interest-bearing demand	484,187			469,898
Money market and savings	1,001,739			1,004,796
Time	1,030,915			1,092,283
Total deposits	3,247,769			3,247,364
Short-term borrowings	395,500			250,500
Long-term debt	129,859			180,164
Accrued interest payable and other liabilities	32,301			32,204
Total liabilities	3,805,429			3,710,232

Shareholders’ Equity
Preferred stock, no par value, 1,000,000 shares authorized; 28,405 shares issued and outstanding at December 31, 2014	—			28,405
Common stock, $1.00 par value, 75,000,000 shares authorized; 31,711,901 and 31,599,150 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	31,712			31,599
Common stock warrants	717			717
Additional paid-in capital	492,387			492,014
Retained earnings	36,109			7,311
Accumulated other comprehensive loss	(4,128		)	(2,244		)
Total shareholders' equity	556,797			557,802
Total liabilities and shareholders' equity	$	4,362,226		$	4,268,034

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.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three and Nine Months Ended September 30, 2015 and 2014



	Three months ended September 30,					Nine months ended September 30,
(Dollars in thousands, except per share data)	2015		2014			2015		2014
Interest income
Loans	$	40,300	$	41,667		$	120,500	$	81,453
Investment securities	3,957		3,756			11,739		7,733
Federal funds sold and interest-earning deposits	47		38			142		90
Total interest income	44,304		45,461			132,381		89,276
Interest expense
Deposits	3,097		2,374			9,059		5,690
Short-term borrowings	437		65			1,057		238
Long-term debt	1,465		1,510			4,457		3,571
Total interest expense	4,999		3,949			14,573		9,499
Net interest income	39,305		41,512			117,808		79,777
Provision for loan losses	1,576		816			3,531		2,570
Net interest income after provision for loan losses	37,729		40,696			114,277		77,207
Non-interest income
Service charges and fees on deposit accounts	3,566		3,265			10,314		6,068
Government-guaranteed lending	3,009		2,072			9,559		6,533
Mortgage banking	1,731		1,520			4,686		2,368
Bank-owned life insurance	470		572			1,407		1,267
Gain (loss) on sales of available for sale securities	—		(96		)	85		122
Gain on sale of branch	—		415			—		415
Other	2,022		1,313			4,386		2,582
Total non-interest income	10,798		9,061			30,437		19,355
Non-interest expense
Salaries and employee benefits	14,528		16,800			45,121		34,555
Occupancy and equipment	4,641		4,856			14,077		10,066
Data processing	1,851		1,255			5,668		3,276
FDIC deposit insurance premiums	732		700			2,218		1,455
Professional services	1,196		1,153			3,695		2,512
Foreclosed asset expenses, net	277		129			910		542
Loan, collection, and repossession expense	931		1,192			2,717		2,226
Merger and conversion costs	104		17,270			299		20,547
Restructuring charges	50		180			3,251		1,109
Amortization of other intangible assets	761		845			2,353		1,296
Other	3,777		3,807			11,813		7,778
Total non-interest expense	28,848		48,187			92,122		85,362
Income before income taxes	19,679		1,570			52,592		11,200
Income tax expense	7,891		621			19,813		4,806
Net income	11,788		949			32,779		6,394
Dividends on preferred stock	—		630			822		630
Net income attributable to non-controlling interests	—		—			—		2,466
Net income available to common shareholders	$	11,788	$	319		$	31,957	$	3,298

Net income per common share
Basic	$	0.37	$	0.01		$	1.01	$	0.20
Diluted	0.37		0.01			1.01		0.20

Weighted average common shares outstanding
Basic	31,608,909		31,597,659			31,608,287		16,760,777
Diluted	31,686,150		31,602,192			31,647,866		16,762,304

See accompanying Notes to Consolidated Financial Statements.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
For the Three and Nine Months Ended September 30, 2015 and 2014



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2015			2014			2015			2014

Net income	$	11,788		$	949		$	32,779		$	6,394
Other comprehensive income (loss):
Securities available for sale:
Unrealized net gains (losses) on available for sale securities	4,813			(3,360		)	2,617			4,020
Tax effect	(1,841		)	1,295			(887		)	(1,549		)
Reclassification of (gains) losses on sales of securities	—			96			(85		)	(122		)
Tax effect	—			(37		)	33			47
Net of tax amount	2,972			(2,006		)	1,678			2,396
Cash flow hedges:
Unrealized net gains (losses) on cash flow hedges	(5,156		)	423			(5,826		)	(1,800		)
Tax effect	1,980			(161		)	2,238			684
Reclassification of amounts into interest expense from termination of interest rate swaps	35			—			43			—
Tax effect	(14		)	—			(17		)	—
Net of tax amount	(3,155		)	262			(3,562		)	(1,116		)
Total other comprehensive income (loss)	(183		)	(1,744		)	(1,884		)	1,280
Comprehensive income (loss)	$	11,605		$	(795	)	$	30,895		$	7,674

See accompanying Notes to Consolidated Financial Statements.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
For the Nine Months Ended September 30, 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		$	(10,659	)	$	(2,725	)	$	140,799		$	97,260		$	238,059
Net income	—		—			—		—			—		—			3,928			—			3,928			2,466			6,394
Other comprehensive income	—		—			—		—			—		—			—			214			214			1,066			1,280
Stock-based compensation	—		—			—		—			—		685			—			—			685			111			796
Subsidiary stock options exercised	—		—			—		—			—		—			—			—			—			138			138
Issuance of subsidiary common stock	—		—			—		—			—		1,301			—			97			1,398			43,068			44,466
Dividends paid on subsidiary preferred stock	—		—			—		—			—		—			(630		)	—			(630		)	(314		)	(944		)
Repurchase of subsidiary preferred stock	—		—			—		—			—		—			—			—			—			(42,849		)	(42,849		)
Repurchase of subsidiary common stock warrants	—		—			—		—			—		—			—			—			—			(2,552		)	(2,552		)
Reverse merger with Piedmont Community Bank Holdings, Inc. and VantageSouth Bancshares, Inc.	28,405		28,405			22,431,701		22,432			717		355,557			—			(480		)	406,631			(98,394		)	308,237
Distribution to legacy Piedmont Community Bank Holdings, Inc. shareholders	—		—			—		—			—		(9,809		)	—			—			(9,809		)	—			(9,809		)
Cancellation of restricted shares for tax withholding	—		—			(52,200	)	(52		)	—		(820		)	—			—			(872		)	—			(872		)
Cancellation of fractional shares	—		—			—		—			—		(14		)	—			—			(14		)	—			(14		)
Balance as of September 30, 2014	28,405		$	28,405		31,598,907		$	31,599		$	717	$	491,864		$	(7,361	)	$	(2,894	)	$	542,330		$	—		$	542,330

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	—		—			—		—			—		—			32,779			—			32,779			—			32,779
Other comprehensive loss	—		—			—		—			—		—			—			(1,884		)	(1,884		)	—			(1,884		)
Restricted stock grants	—		—			103,000		103			—		(103		)	—			—			—			—			—
Stock-based compensation	—		—			—		—			—		366			—			—			366			—			366
Stock options exercised	—		—			9,871		10			—		110			—			—			120			—			120
Cancellation of fractional shares	—		—			(120	)	—			—		—			—			—			—			—			—
Redemption of preferred stock	(28,405	)	(28,405		)	—		—			—		—			—			—			(28,405		)	—			(28,405		)
Dividends paid on common stock	—		—			—		—			—		—			(3,159		)	—			(3,159		)	—			(3,159		)
Dividends paid on preferred stock	—		—			—		—			—		—			(822		)	—			(822		)	—			(822		)
Balance as of September 30, 2015	—		$	—		31,711,901		$	31,712		$	717	$	492,387		$	36,109		$	(4,128	)	$	556,797		$	—		$	556,797

See accompanying Notes to Consolidated Financial Statements.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, 2015 and 2014



	Nine months ended September 30,
(Dollars in thousands)	2015			2014
Cash flows from operating activities
Net income	$	32,779		$	6,394
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation	366			796
Provision for loan losses	3,531			2,570
Accretion of acquisition discount on purchased loans	(18,899		)	(19,772		)
Depreciation	4,646			2,659
Amortization of core deposit intangible	2,353			1,296
Amortization of acquisition premium on time deposits	(2,587		)	(2,525		)
Net accretion of acquisition discount on long-term debt	388			12
Gain on sale of branch	—			(415		)
(Gain) loss on mortgage loan commitments	(298		)	45
Gain on sales of loans held for sale	(13,380		)	(5,243		)
Originations of loans held for sale	(300,605		)	(133,412		)
Proceeds from sales of loans held for sale	296,228			136,161
Increase in cash surrender value of bank-owned life insurance	(1,407		)	(1,046		)
Deferred income taxes	19,740			4,806
Gain on sales of available for sale securities	(85		)	(122		)
Net amortization of premiums on available for sale securities	4,557			2,253
Net (gain) loss on disposal of foreclosed assets	(144		)	20
Valuation adjustments on foreclosed assets	605			599
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable	(431		)	(5,851		)
Increase in other assets	(12,296		)	(7,986		)
Increase (decrease) in accrued interest payable	(785		)	232
Increase in other liabilities	882			3,329
Net cash provided by (used in) operating activities	15,158			(15,200		)
Cash flows from investing activities
Purchases of investment securities available for sale	(129,623		)	(343,769		)
Purchases of investment securities held to maturity	—			(39,776		)
Proceeds from maturities and repayments of investment securities available for sale	67,770			284,085
Proceeds from call of investment securities held to maturity	—			500
Proceeds from sales of investment securities available for sale	19,169			28,549
Loan originations and principal collections, net	(70,109		)	(54,760		)
Proceeds from sales of loans	—			2,500
Net cash received in business combinations	—			36,116
Net cash paid in branch sale	—			(10,837		)
Purchases of trade accounts receivable, net	(24,562		)	(13,731		)
Purchases of premises and equipment	(1,524		)	(6,496		)
Disposals of premises and equipment	1,727			4,295
Proceeds from disposal of foreclosed assets	5,784			4,758
Purchases of Federal Home Loan Bank stock	(3,433		)	(6,613		)
Purchase of bank-owned life insurance	—			(15,000		)
Net cash used in investing activities	(134,801		)	(130,179		)

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	Nine months ended September 30,
(Dollars in thousands)	2015			2014
Cash flows from financing activities
Net increase in deposits	2,992			16,499
Net change in short-term borrowings	112,500			(118,379		)
Proceeds from issuance of long-term debt	—			249,990
Repayments of long-term debt	(18,193		)	—
Proceeds from exercise of stock options	120			138
Proceeds from issuance of subsidiary common stock, net of issuance costs	—			44,466
Repurchase of subsidiary preferred stock	—			(42,849		)
Repurchase of subsidiary common stock warrants	—			(2,552		)
Distribution to legacy shareholders of Piedmont Community Bank Holdings, Inc.	—			(9,809		)
Cancellation of restricted stock for tax withholding	—			(872		)
Cancellation and payout of fractional shares issued in merger	—			(14		)
Repurchase of preferred stock	(28,405		)	—
Dividends paid on subsidiary preferred stock	—			(314		)
Dividends paid on preferred stock	(822		)	(630		)
Dividends paid on common stock	(3,159		)	—
Net cash provided by financing activities	65,033			135,674
Net change in cash and cash equivalents	(54,610		)	(9,705		)
Cash and cash equivalents, beginning of period	132,365			100,780
Cash and cash equivalents, end of period	$	77,755		$	91,075

SUPPLEMENTAL DISCLOSURES:
Cash payments for:
Interest	$	17,557		$	10,573
Income taxes	—			—
Noncash investing activities:
Transfers of loans to foreclosed assets	$	5,147		$	4,267
Change in fair value of securities available for sale, net of tax	1,678			2,396
Change in fair value of cash flow hedge, net of tax	(3,562		)	(1,116		)

See accompanying Notes to Consolidated Financial Statements.

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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. 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 nine months ended September 30, 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 September 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-16: Business Combinations (Topic 805): Simplifying the Accounting for Measurement Period Adjustments. The new guidance requires acquirers to recognize adjustments to provisional amounts (that are identified during the measurement period) in the reporting period in which the adjustment amounts are determined. The new guidance also requires such amounts to be disclosed in the consolidated financial statements. The Company early adopted this guidance effective September 30, 2015. The adoption of this guidance was not material to the consolidated financial statements.

In May 2015, the FASB issued ASU 2015-07: Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent) (a Consensus of the Emerging Issues Task Force). The new guidance eliminates the requirement to classify in the fair value hierarchy any investments for which fair value is measured at net asset value per share using the practical expedient. This guidance is effective for interim and annual periods beginning after December 15, 2015. The adoption of this guidance is not expected to be material to the consolidated financial statements.

In April 2015, the 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 and are to be applied retrospectively. As of September 30, 2015, the Company had $607 of debt issuance costs that were included in other assets. These costs will be reclassified to reduce the carrying amount of the related debt liability on the effective date.

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YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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 de-recognize 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.

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 allowed. Yadkin continues to evaluate the potential impact of ASU No. 2014-09 on its consolidated financial statements.

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 ASU 2014-01 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.

- 10 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	Three months ended September 30,		Nine months ended September 30,
	2015	2014	2015	2014

Weighted average number of common shares	31,608,909	31,597,659	31,608,287	16,760,777
Effect of dilutive stock options and warrants	77,241	4,533	39,579	1,527
Weighted average number of common shares and dilutive potential common shares	31,686,150	31,602,192	31,647,866	16,762,304

Anti-dilutive stock options	33,695	51,247	34,695	17,270
Anti-dilutive stock warrants	91,178	91,178	91,178	30,727

- 11 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE C – MERGERS AND ACQUISITIONS

Proposed Acquisition of NewBridge Bancorp and NewBridge Bank

On October 12, 2015, the Company entered into an Agreement and Plan of Merger (the "NewBridge Merger Agreement") with NewBridge Bancorp ("NewBridge"), a bank holding company incorporated in North Carolina and headquartered in Greensboro, North Carolina, pursuant to which the Company will acquire NewBridge and NewBridge's wholly-owned subsidiary, NewBridge Bank, which will be merged with and into Yadkin Bank. For additional information regarding the proposed acquisition, see Note K.

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

On July 4, 2014, the Company completed the 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.

At the time of the Mergers, 28,405 shares of Yadkin's Series T and T-ACB Preferred Stock were assumed by the Company. 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 redeemed the Series T and T-ACB Preferred Stock in 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.

- 12 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	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

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.

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YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	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)	1,197		(p)	24,091
Goodwill	—		124,172			(f)	1,727		(n)	125,899
Other intangible assets	1,665		10,965			(g)	321		(o)	12,951
Accrued interest receivable and other assets	16,330		(2,229		)	(h)	—			14,101
Total assets	1,822,883		103,674				3,245			1,929,802
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)	3,245		(q)	11,355
Total liabilities	1,629,125		(10,805		)		3,245			1,621,565
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

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 $16,449 and the recording of a fair value discount of $47,189 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 (q).

(q) Amount reflects the adjustment of change in control obligations existing under various employment agreements that were triggered by the Mergers, an increase in reserves for unfunded letters of credit, and additional accruals for certain legal matters and other liabilities.

- 14 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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.



	Nine months ended September 30, 2014
	Nine months ended September 30, 2014

Net interest income	$	118,700

Net income	19,778

Net income available to common shareholders	17,981

Basic income per common share	0.58

Diluted income per common share	0.57

Weighted average basic common shares outstanding	31,193,728

Weighted average diluted common shares outstanding	31,296,065

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.



	September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
GSE obligations	$	19,938	$	119	$	—	$	20,057
SBA-guaranteed securities	58,133		288		245		58,176
Mortgage-backed securities issued by GSEs	399,890		2,526		2,048		400,368
Municipal bonds	49,522		613		41		50,094
Corporate bonds	130,683		839		670		130,852
Collateralized loan obligations	47,506		—		2		47,504
Non-agency RMBS	3,943		98		14		4,027
Non-agency CMBS	454		—		1		453
Other debt securities	245		—		—		245
Equity securities	2,381		19		684		1,716
Total securities available for sale	$	712,695	$	4,502	$	3,705	$	713,492

Securities held to maturity:
Municipal bonds	$	39,292	$	984	$	—	$	40,276

- 15 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	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 GSEs	428,076		1,086		3,879		425,283
Municipal bonds	39,907		355		4		40,258
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
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:
Municipal bonds	$	39,620	$	966	$	—	$	40,586

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
September 30, 2015
Securities available for sale:
SBA-guaranteed securities	$	—	$	—	$	25,388	$	245	$	25,388	$	245
Mortgage-backed securities issued by GSEs	24,267		94		120,913		1,954		145,180		2,048
Municipal bonds	1,327		41		—		—		1,327		41
Corporate bonds	47,741		559		3,708		111		51,449		670
Collateralized loan obligations	17,383		2		—		—		17,383		2
Non-agency RMBS	81		1		951		13		1,032		14
Non-agency CMBS	453		1		—		—		453		1
Equity securities	1,514		684		—		—		1,514		684
Total temporarily impaired AFS securities	$	92,766	$	1,382	$	150,960	$	2,323	$	243,726	$	3,705

December 31, 2014
Securities available for sale:
SBA-guaranteed securities	$	94	$	1	$	41,950	$	371	$	42,044	$	372
Mortgage-backed securities issued by GSEs	152,186		1,117		149,746		2,762		301,932		3,879
Municipal bonds	1,953		4		—		—		1,953		4
Corporate bonds	18,123		64		3,767		84		21,890		148
Non-agency RMBS	1,318		1		—		—		1,318		1
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

- 16 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The table below summarizes the number of investment securities in an unrealized loss position.



	September 30, 2015	December 31, 2014

Securities available for sale:
SBA-guaranteed securities	11	19
Mortgage-backed securities issued by GSEs	59	76
Municipal bonds	2	6
Corporate bonds	13	5
Collateralized loan obligations	3	—
Non-agency RMBS	2	1
Non-agency CMBS	1	—
Equity securities	3	4
Total number of AFS securities in an unrealized loss position	94	111
Securities held to maturity:
Municipal bonds	—	—
Total number of investment securities in an unrealized loss position	94	111

As of September 30, 2015, fifty-two securities had been in an unrealized loss position for more than a twelve month period. The Company had $111 thousand and $13 thousand in gross unrealized losses on one corporate bond and one non-agency RMBS, respectively, that had been in unrealized loss positions for more than twelve months as of September 30, 2015. These were the only securities in loss positions for this period of time 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 this corporate issuer, the Company does not believe the unrealized loss on this bond was due to credit events.

The securities in an unrealized loss position as of September 30, 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 September 30, 2015.

As of September 30, 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 September 30, 2015 and December 31, 2014, investment securities with carrying values of $292,624 and $314,184, respectively, were pledged to secure public deposits, borrowings and for other purposes required or permitted by law.

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.



	September 30, 2015				December 31, 2014
	Amortized cost		Fair value		Amortized cost		Fair value
Securities available for sale:
Due within one year	$	67,453	$	68,128	$	30,365	$	30,536
Due after one year through five years	337,798		339,441		294,557		295,252
Due after five years through ten years	266,568		265,783		313,733		311,313
Due after ten years	38,495		38,424		32,484		32,455
Equity securities	2,381		1,716		3,017		2,865
	$	712,695	$	713,492	$	674,156	$	672,421
Securities held to maturity:
Due after one year through five years	$	31,541	$	32,268	$	20,177	$	20,747
Due after five years through ten years	4,083		4,182		15,836		16,092
Due after ten years	3,668		3,826		3,607		3,747
	$	39,292	$	40,276	$	39,620	$	40,586

- 17 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following table summarizes securities gains for the periods presented.



	Three months ended September 30,					Nine months ended September 30,
	2015		2014			2015		2014

Gross gains on sales of securities available for sale	$	—	$	217		$	85	$	435
Gross losses on sales of securities available for sale	—		(313		)	—		(313		)
Total securities gains (losses)	$	—	$	(96	)	$	85	$	122

NOTE E – LOANS AND ALLOWANCE FOR LOAN LOSSES

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



	September 30, 2015			December 31, 2014
Commercial:
Commercial real estate	$	1,428,694		$	1,355,536
Commercial and industrial	526,658			468,848
Construction and development	317,514			370,807
Consumer:
Residential real estate	347,265			360,249
Construction and development	50,281			30,061
Home equity	274,151			276,662
Other consumer	36,196			36,874
Gross loans	2,980,759			2,899,037
Less:
Deferred loan fees	(980		)	(771		)
Allowance for loan losses	(9,000		)	(7,817		)
Net loans	$	2,970,779		$	2,890,449

As of September 30, 2015, and December 31, 2014, loans with a recorded investment of $936,883 and $828,365, respectively, were pledged to secure borrowings or available lines of credit with correspondent banks.

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.

- 18 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014

Balance, beginning of period	$	24,100		$	20,209		$	25,181		$	25,349
Loans purchased	—			8,604			—			8,604
Accretion of income	(3,246		)	(3,831		)	(10,164		)	(9,879		)
Reclassifications from nonaccretable difference	606			499			4,661			2,973
Other, net	2,100			878			3,882			(688		)
Balance, end of period	$	23,560		$	26,359		$	23,560		$	26,359

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 $179,074 and $228,956 as of September 30, 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

- 19 -

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 September 30, 2015
Beginning balance	$	3,137		$	1,960		$	665		$	1,327		$	269		$	775		$	225		$	8,358
Charge-offs	(103		)	(406		)	(134		)	(312		)	—			(475		)	(101		)	(1,531		)
Recoveries	44			429			10			57			—			9			48			597
Provision for loan losses	319			185			201			232			(15		)	593			61			1,576
Ending balance	$	3,397		$	2,168		$	742		$	1,304		$	254		$	902		$	233		$	9,000

Nine months ended September 30, 2015
Beginning balance	$	2,796		$	1,274		$	1,691		$	1,237		$	194		$	546		$	79		$	7,817
Charge-offs	(359		)	(1,377		)	(201		)	(442		)	—			(793		)	(349		)	(3,521		)
Recoveries	56			679			20			109			27			163			119			1,173
Provision for loan losses	904			1,592			(768		)	400			33			986			384			3,531
Ending balance	$	3,397		$	2,168		$	742		$	1,304		$	254		$	902		$	233		$	9,000

Three months ended September 30, 2014
Beginning balance	$	2,553		$	878		$	1,393		$	1,786		$	181		$	561		$	99		$	7,451
Charge-offs	(113		)	(170		)	(70		)	(251		)	—			(100		)	(78		)	(782		)
Recoveries	13			3			67			49			—			14			10			156
Provision for loan losses	554			188			115			(129		)	4			25			59			816
Ending balance	$	3,007		$	899		$	1,505		$	1,455		$	185		$	500		$	90		$	7,641

Nine months ended September 30, 2014
Beginning balance	$	2,419		$	805		$	1,400		$	1,673		$	187		$	476		$	83		$	7,043
Charge-offs	(355		)	(616		)	(266		)	(458		)	—			(371		)	(210		)	(2,276		)
Recoveries	18			31			69			73			—			90			23			304
Provision for loan losses	925			679			302			167			(2		)	305			194			2,570
Ending balance	$	3,007		$	899		$	1,505		$	1,455		$	185		$	500		$	90		$	7,641

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



	September 30, 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	$	209	$	138	$	58	$	132	$	—	$	—	$	—	$	537
Collectively evaluated for impairment	2,771		2,009		679		637		248		555		166		7,065
Purchased credit-impaired	417		21		5		535		6		347		67		1,398
Total	$	3,397	$	2,168	$	742	$	1,304	$	254	$	902	$	233	$	9,000

Loans:
Ending balance:
Individually evaluated for impairment	$	14,070	$	3,120	$	461	$	3,439	$	—	$	19	$	—	$	21,109
Collectively evaluated for impairment	1,319,836		509,184		298,963		316,924		48,894		270,335		35,853		2,799,989
Purchased credit-impaired	94,788		14,354		18,090		26,902		1,387		3,797		343		159,661
Total	$	1,428,694	$	526,658	$	317,514	$	347,265	$	50,281	$	274,151	$	36,196	$	2,980,759

- 20 -

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

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. For loans evaluated collectively for impairment, loans are grouped based on common risk characteristics which include loan type and risk grade. Historical loss rates are calculated based on the historical probability of default ("PD") and loss given default ("LGD") for each loan grouping. PDs represent the likelihood that a loan will default within a one year period of time, and LGDs represent the estimated magnitude of loss the Company will incur if a loan defaults. A loan is considered to be in default if it becomes 90 days or more past due, meets the criteria for nonaccrual status, or incurs a charge-off. Historical loss rates are developed with four years of trailing default and loss data. These historical loss rates are then combined with certain qualitative factors to determine the ALLL reserve rates for each loan grouping. Qualitative factors include consideration of certain internal and external factors, such as loan delinquency levels and trends, loan growth, loan portfolio composition and concentrations, local and national economic conditions, the loan review function, and other factors management deems relevant to the ALLL calculation.

In the second quarter of 2015, the Company enhanced its ALLL methodology by transitioning to the PD/LGD approach to calculating historical loss rates by loan grouping, as previously described. In prior periods, the Company calculated historical loss rates by loan type and then weighted these loss rates across its risk grade scale. Both methods use historical loss rates to calculate reserves on loans evaluated collectively for impairment, but the Company believes the enhanced PD/LGD approach provides a more precise and consistent estimate of loan losses across the risk grade scale based on actual default data. The enhanced ALLL calculation did not have a material impact on the total ALLL as of June 30, 2015, or on the provision for loan losses in the second quarter of 2015; however, the enhanced ALLL methodology did change the allocation of ALLL across certain loan classes, particularly commercial and industrial and construction loans. The Company held other significant inputs into the ALLL model consistent, such as the "lookback" period used to develop historical loss rates, the loan groupings for collective evaluation, and the application of qualitative factors. There were also no changes to the Company's evaluation of individually impaired loans.

- 21 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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.

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



	Pass		Special Mention		Substandard		Doubtful		Total
September 30, 2015
Non-PCI Loans
Commercial:
Real estate	$	1,277,936	$	32,061	$	23,909	$	—	$	1,333,906
Commercial and industrial	492,049		4,128		16,127		—		512,304
Construction and development	295,080		3,353		936		55		299,424
Consumer:
Residential real estate	307,614		5,028		7,721		—		320,363
Construction and development	47,407		744		743		—		48,894
Home equity	261,375		4,685		4,294		—		270,354
Other consumer	35,135		326		392		—		35,853
Total	$	2,716,596	$	50,325	$	54,122	$	55	$	2,821,098

PCI Loans
Commercial:
Real estate	$	43,698	$	32,909	$	18,181	$	—	$	94,788
Commercial and industrial	12,323		669		1,362		—		14,354
Construction and development	7,131		4,647		6,312		—		18,090
Consumer:
Residential real estate	12,203		7,439		7,260		—		26,902
Construction and development	350		407		630		—		1,387
Home equity	421		2,058		1,087		231		3,797
Other consumer	1		277		65		—		343
Total	$	76,127	$	48,406	$	34,897	$	231	$	159,661

- 22 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	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

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
September 30, 2015
Non-PCI Loans
Commercial:
Real estate	$	8,836	$	5,071	$	13,907	$	1,319,999	$	1,333,906
Commercial and industrial	4,503		2,299		6,802		505,502		512,304
Construction and development	128		539		667		298,757		299,424
Consumer:
Residential real estate	3,048		2,684		5,732		314,631		320,363
Construction and development	564		535		1,099		47,795		48,894
Home equity	4,992		1,253		6,245		264,109		270,354
Other consumer	663		82		745		35,108		35,853
Total	$	22,734	$	12,463	$	35,197	$	2,785,901	$	2,821,098



	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

- 23 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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.



	September 30, 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	$	14,816	$	445	$	5,685	$	—
Commercial and industrial	4,079		146		4,594		2
Construction and development	594		—		1,692		—
Consumer:
Residential real estate	4,812		—		3,755		—
Construction and development	699		—		254		—
Home equity	2,587		—		1,721		—
Other consumer	243		1		248		—
Total	$	27,830	$	592	$	17,949	$	2

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
September 30, 2015
Non-PCI Loans
Commercial:
Commercial real estate	$	702	$	13,368	$	14,070	$	209	$	14,756
Commercial and industrial	504		2,616		3,120		138		4,052
Construction and development	282		179		461		58		1,291
Consumer:
Residential real estate	1,923		1,516		3,439		132		4,812
Home equity	—		19		19		—		2,829
Total	$	3,411	$	17,698	$	21,109	$	537	$	27,740

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
Home equity	62		344		406		3		1,920
Other consumer	—		—		—		—		—
Total	$	1,472	$	8,513	$	9,985	$	390	$	15,802

- 24 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	Three months ended September 30,								Nine months ended September 30,
	2015				2014				2015				2014
	Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income
Non-PCI Loans
Commercial:
Commercial real estate	$	12,915	$	8	$	9,523	$	38	$	9,734	$	33	$	6,932	$	78
Commercial and industrial	3,113		2		918		—		2,732		3		726		—
Construction and development	320		—		1,863		—		686		—		2,111		—
Consumer:
Residential real estate	3,276		22		1,423		7		2,184		65		1,180		10
Construction and development	—		—		—		—		—		—		81		—
Home equity	20		—		418		—		213		—		420		—
Other consumer	—		—		—		—		—		—		4		—
Total	$	19,644	$	32	$	14,145	$	45	$	15,549	$	101	$	11,454	$	88

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.



	September 30, 2015			December 31, 2014
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Commercial real estate	$	4,692	6	$	4,215	7
Commercial and industrial	811		11	172		4
Commercial construction	178		2	131		2
Residential real estate	1,626		4	1,770		6
Home equity	19		1	83		2
Consumer	—		—	—		—
Total	$	7,326	24	$	6,371	21

The following tables provide the number and recorded investment of TDRs modified during the three and nine months ended September 30, 2015 and 2014.



	TDRs Modified
	Three months ended September 30, 2015			Three months ended September 30, 2014
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	255	5	$	634	2
Commercial and industrial	196		1	58		1
Commercial construction	—		—	417		1
Residential real estate	—		—	424		2
Home equity	—		—	—		—
Consumer	—		—	—		—
Total	$	451	6	$	1,533	$	6

- 25 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	TDRs Modified
	Nine months ended September 30, 2015			Nine months ended September 30, 2014
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	902	7	$	1,896	7
Commercial and industrial	196		1	62		2
Commercial construction	—		—	417		1
Residential real estate	398		1	424		2
Home equity	—		—	—		—
Consumer	—		—	—		—
Total	$	1,496	9	$	2,799	$	12

Two TDRs totaling $343 thousand that were modified in the twelve months ended September 30, 2015 subsequently defaulted during the nine months ended September 30, 2015. No TDRs that were modified in the twelve months ended September 30, 2014 subsequently defaulted during the nine months ended September 30, 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 $540,770 and $455,033 as of September 30, 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 $326 and $928, respectively, in the three and nine months ended September 30, 2015.

The following table summarizes MSR activity for the 2015 periods presented.



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014

Balance at beginning of period before valuation allowance	$	4,688		$	—		$	4,284		$	—
Acquired Yadkin MSRs at fair value	—			4,025			—			4,025
Additions	452			308			1,457			308
Repayments	(65		)	(65		)	(309		)	(65		)
Amortization	(185		)	(138		)	(542		)	(138		)
Balance at end of period before valuation allowance	4,890			4,130			4,890			4,130
Valuation allowance at end of period	(138		)	(65		)	(138		)	(65		)
Balance at end of period after valuation allowance	$	4,752		$	4,065		$	4,752		$	4,065

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.

- 26 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



	September 30, 2015			December 31, 2014

Composition of mortgage loans serviced for others:
Fixed rate loans	99.89		%	99.86		%
Adjustable rate loans	0.11		%	0.14		%
Total	100.00		%	100.00		%

Weighted average life (years)	5.78			5.77
Prepayment speed	12.54		%	12.62		%
Discount rate	9.49		%	9.60		%
Effect on fair value due to change in interest rates:
+ 0.25%	$	716		$	566
+ 0.50%	1,064			801
- 0.25%	(760		)	(668		)
- 0.50%	(962		)	(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 $204,339 and $136,093 as of September 30, 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 $473 and $295 for the three months ended September 30, 2015 and 2014, respectively, and $1,258 and $739 for the nine months ended September 30, 2015 and 2014, respectively.

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



	Three months ended September 30,					Nine months ended September 30,
	2015			2014		2015			2014

Balance at beginning of period	$	3,936		2,127		$	3,081		$	1,759
Additions	786			688		1,881			1,186
Amortization	(157		)	(73	)	(397		)	(203		)
Balance at end of period	$	4,565		2,742		$	4,565		$	2,742

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 September 30, 2015 or December 31, 2014.

- 27 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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.



	September 30, 2015		December 31, 2014

Lending commitments:
Commitments to extend credit	$	779,644	$	658,925
Commercial letters of credit	19,046		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	3,085		2,280

The reserve for unfunded commitments was $1,269 and $1,465 as of September 30, 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. The brokered money market accounts are expected to maintain at least $50,000 on deposit with the Company through the maturity of the interest rate swaps.

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. 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.

- 28 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The interest rate swaps outstanding as of September 30, 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

1,287

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

- 29 -

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.



		September 30, 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		4,797		100,000		2,249

Brokered money market deposits:
Interest rate swaps	Other liabilities	50,000		679		50,000		200

Subordinated term loan:
Interest rate cap	Other liabilities	7,500		166		7,500		128

TRUPs:
Interest rate caps	Other assets	43,000		204		43,000		1,104

Mortgage loan commitments:
Interest rate lock commitments	Other assets	36,857		640		23,274		342
Forward sale commitments	Other liabilities	63,690		108		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 generally include GSE securities and mortgage-backed securities issued by GSEs, private label mortgage-backed securities, municipal bonds, corporate debt securities, and collateralized loan obligations. Level 3 securities include one municipal bond and 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.

- 30 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	Three months ended September 30,					Nine months ended September 30,
	2015			2014		2015			2014

Level 3 AFS securities at beginning of period	$	11,403		$	6,793	$	11,290		$	7,583
Purchases	5,390			4,600		5,390			4,600
Sales, calls or maturities	—			—		—			(1,000		)
Changes in unrealized gains and losses	(215		)	30		(102		)	240
Level 3 AFS securities at end of period	$	16,578		$	11,423	$	16,578		$	11,423

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 September 30,						Nine months ended September 30,
	2015			2014			2015			2014

Interest rate lock commitments at beginning of period	$	483		$	296		$	342		$	354
Fair value of acquired Yadkin interest rate lock commitments	—			231			—			231
Issuances	1,824			906			4,609			1,529
Settlements	(1,667		)	(986		)	(4,311		)	(1,667		)
Interest rate lock commitments at end of period	$	640		$	447		$	640		$	447

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.

- 31 -

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
September 30, 2015
Measured at fair value on a recurring basis:
Securities available for sale:
GSE obligations	$	20,057	$	—	$	20,057	$	—
SBA-guaranteed securities	58,176		58,176		—		—
Mortgage-backed securities issued by GSE	400,368		—		400,368		—
Municipal bonds	50,094		—		48,995		1,099
Corporate bonds	130,852		2,525		112,848		15,479
Collateralized loan obligations	47,504		—		47,504		—
Non-agency RMBS	4,027		—		4,027		—
Non-agency CMBS	453		—		453		—
Other debt securities	245		245		—		—
Equity securities	1,716		1,716		—		—
SBA-guaranteed loans held for sale	11,036		—		11,036		—
SBA loans held for investment	17,142		—		17,142		—
Derivative assets	844		—		204		640
Derivative liabilities	5,750		—		5,750		—

Measured at fair value on a non-recurring basis:
Impaired loans	$	20,572	$	—	$	—	$	20,572
Foreclosed assets	11,793		—		—		11,793



	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		—
Municipal bonds	40,258		—		40,258		—
Corporate bonds	119,912		2,545		106,077		11,290
Non-agency RMBS	4,963		—		4,963		—
Non-agency CMBS	3,578		—		3,578		—
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

- 32 -

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	September 30, 2015		December 31, 2014
Recurring measurements:
Investment securities	Pricing model	Illiquidity or credit factor in discount rates	1-2%	$	16,578	$	11,290

Interest rate lock commitments	Pricing model	Pull through rates	80-95%	640		342

Nonrecurring measurements:
Impaired loans	Discounted appraisals	Collateral discounts	15-50%	20,572		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%	11,793		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.

- 33 -

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.



	September 30, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	77,755	$	77,755	$	77,755	$	—	$	—
Investment securities available for sale	713,492		713,492		62,662		634,252		16,578
Investment securities held to maturity	39,292		40,276		—		40,276		—
Loans held for sale	37,962		37,962		—		37,962		—
Loans, net	2,970,779		3,013,484		—		17,142		2,996,342
Purchased accounts receivable	69,383		69,383		—		69,383		—
Federal Home Loan Bank stock	22,932		22,932		—		22,932		—
Derivative assets	844		844		—		204		640
Accrued interest receivable	12,502		12,502		—		12,502		—

Financial liabilities:
Deposits	3,247,769		3,252,202		—		3,252,202		—
Short-term borrowings	395,500		395,500		—		—		395,500
Long-term debt	129,859		133,287		—		—		133,287
Derivative liabilities	5,750		5,750		—		5,750		—
Accrued interest payable	1,903		1,903		—		1,903		—



	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		—

- 34 -

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
Three Months Ended
Balance at July 1, 2015	$	(2,479	)	$	(1,466	)	$	(3,945	)
Other comprehensive income (loss) before reclassifications	2,972			(3,176		)	(204		)
Reclassification of amounts into interest expense from termination of interest rate swaps	—			21			21
Net other comprehensive income (loss) during period	2,972			(3,155		)	(183		)
Balance at September 30, 2015	$	493		$	(4,621	)	$	(4,128	)

Balance at July 1, 2014	$	(2,151	)	$	1,003		$	(1,148	)
Other comprehensive income (loss) before reclassifications	(2,065		)	262			(1,803		)
Amounts reclassified for securities gains	59			—			59
Net other comprehensive income (loss) during period	(2,006		)	262			(1,744		)
Balance at September 30, 2014	$	(4,157	)	$	1,265		$	(2,892	)

Nine Months Ended
Balance at January 1, 2015	$	(1,185	)	$	(1,059	)	(2,244		)
Other comprehensive income (loss) before reclassifications	1,730			(3,588		)	(1,858		)
Reclassification of gains on AFS securities	(52		)	—			(52		)
Reclassification of amounts into interest expense from termination of interest rate swaps	—			26			26
Net other comprehensive income (loss) during period	1,678			(3,562		)	(1,884		)
Balance at September 30, 2015	$	493		$	(4,621	)	$	(4,128	)

Balance at January 1, 2014	$	(6,553	)	$	2,381		$	(4,172	)
Other comprehensive income (loss) before reclassifications	2,471			(1,116		)	1,355
Reclassification of gains on AFS securities	(75		)	—			(75		)
Net other comprehensive income (loss) during period	2,396			(1,116		)	1,280
Balance at September 30, 2014	$	(4,157	)	$	1,265		$	(2,892	)

- 35 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE K - SUBSEQUENT EVENTS

As previously disclosed in its Current Report on Form 8-K filed on October 13, 2015, on October 12, 2015, Yadkin entered into an Agreement and Plan of Merger (the “NewBridge Merger Agreement”) with NewBridge and Navy Merger Sub Corp., a North Carolina corporation and a wholly-owned subsidiary of Yadkin (“Merger Sub”). The NewBridge Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, (i) Merger Sub will merge with and into NewBridge (the “NewBridge Merger”), with NewBridge continuing as the surviving corporation in the NewBridge Merger and as a wholly-owned subsidiary of Yadkin and (ii) immediately thereafter, NewBridge will merge with and into Yadkin (together with the NewBridge Merger, the “Integrated Mergers”), with Yadkin continuing as the surviving corporation. Immediately following the consummation of the Integrated Mergers, NewBridge’s wholly-owned subsidiary, NewBridge Bank, will merge with and into Yadkin’s wholly-owned subsidiary, Yadkin Bank (the “NewBridge Bank Merger”), with Yadkin Bank continuing as the surviving entity in the NewBridge Bank Merger. The NewBridge Merger Agreement was unanimously approved and adopted by the Board of Directors of each of Yadkin and NewBridge.

Subject to fulfillment of customary closing conditions, including obtaining required shareholder and regulatory approvals, the Integrated Mergers and NewBridge Bank Merger are expected to occur during the second quarter of 2016.

On November 3, 2015, Select Bancorp, Inc., the holding company for Select Bank & Trust, announced that it had received the necessary regulatory approvals to acquire two branches of Yadkin located in Morehead City and Leland, North Carolina. The sale of the two branches is scheduled to occur on December 11, 2015.

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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 70 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- and nine- month periods ended September 30, 2015, and 2014, as well as the financial condition of the Company as of September 30, 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.

Executive Summary

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


•	In October 2015, the Company announced an agreement to acquire NewBridge Bancorp and its wholly-owned bank subsidiary, NewBridge Bank. The NewBridge acquisition is expected to close in the second quarter of 2016, subject to shareholder and regulatory approval and customary closing conditions.


•	Net operating earnings available to common shareholders, which excludes certain non-operating items, improved to $12.5 million, or $0.40 per diluted share, in Q3 2015 from $0.36 per diluted share in Q3 2014.


•	Annualized operating return on average tangible common equity, which excludes preferred stock, goodwill, and other intangible assets from total shareholders' equity, was 13.85 percent in Q3 2015 compared to 13.62 percent in Q3 2014.


•	Annualized operating return on average assets was 1.15 percent in Q3 2015 compared to 1.17 percent in Q3 2014.


•	Operating efficiency, which represents operating expenses to operating revenues, improved to 57.3 percent in Q3 2015 from 61.2 percent in Q3 2014.


•	Deposit mix continued to improve as low cost deposits grew at a 9.5 percent annualized rate in Q3 2015 while non-interest demand deposits increased to 22.5 percent of total deposits at September 30, 2015 from 20.6 percent at September 30, 2014.


•	Annualized net loan growth was 3.2 percent in Q3 2015 as a result of new loan originations and commitments of $396 million.


•	Tangible book value per share increased to $12.31 at September 30, 2015 from $10.89 at September 30, 2014, which represents 13.0 percent growth.

Mergers and Acquisitions

Proposed Acquisition of NewBridge Bancorp

On October 12, 2015, the Company entered into the NewBridge Merger Agreement, pursuant to which the Company will acquire NewBridge. NewBridge’s wholly-owned subsidiary, NewBridge Bank, which will be merged with and into Yadkin’s wholly-owned subsidiary, Yadkin Bank.

The Company will acquire 100 percent of the outstanding shares of NewBridge in exchange for shares of Yadkin’s common stock. The exchange ratio has been fixed at 0.50 shares of Yadkin’s common stock for each share of NewBridge which equates to a deal value of $11.40 per share, or approximately $456 million in the aggregate, based on Yadkin's closing price of $22.79 as of October 12, 2015. Upon closing of the merger, Yadkin shareholders will own approximately 61.3% of the combined company and NewBridge's existing shareholders will own approximately 38.7% of the combined company.

- 37 -

As of September 30, 2015, the combined company would have total assets of $7.3 billion, deposits of $5.2 billion and loans of $5.0 billion. Yadkin will operate in all major North Carolina markets, enhancing its statewide presence in its existing footprint and expanding into the Piedmont Triad.

The transaction has been unanimously approved by the Board of Directors of each company and is expected to close in the second quarter of 2016, subject to shareholder and regulatory approval and other customary closing conditions.

NewBridge Bank is a full-service community bank with 41 branches in North Carolina and a single branch in the Charleston, South Carolina vicinity. The North Carolina branches are clustered in the Piedmont Triad area, and in the cities and surrounding communities of Raleigh, Charlotte, and Wilmington.

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 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.

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.

- 38 -



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands, except per share data)	2015			2014			2015			2014

Operating Earnings
Net income (GAAP)	$	11,788		$	949		$	32,779		$	6,394
Securities (gains) losses	—			96			(85		)	(122		)
Gain on sale of branch	—			(415		)	—			(415		)
Merger and conversion costs	104			17,270			299			20,547
Restructuring charges	50			180			3,251			1,109
Income tax effect of adjustments	(59		)	(6,075		)	(1,326		)	(6,953		)
DTA revaluation from reduction in state income tax rates	651			—			651			—
Net operating earnings (non-GAAP)	12,534			12,005			35,569			20,560
Dividends on preferred stock	—			630			822			630
Net income attributable to non-controlling interests	—			—			—			2,466
Allocation of adjustments to non-controlling interests	—			—			—			1,231
Net operating earnings available to common shareholders (Non-GAAP)	$	12,534		$	11,375		$	34,747		$	16,233

Net operating earnings per common share:
Basic (Non-GAAP)	$	0.40		$	0.36		$	1.10		$	0.97
Diluted (Non-GAAP)	0.40			0.36			1.10			0.97

Pre-Tax, Pre-Provision Operating Earnings
Net income (GAAP)	$	11,788		$	949		$	32,779		$	6,394
Provision for loan losses	1,576			816			3,531			2,570
Income tax expense	7,891			621			19,813			4,806
Pre-tax, pre-provision income	21,255			2,386			56,123			13,770
Securities (gains) losses	—			96			(85		)	(122		)
Gain on sale of branch	—			(415		)	—			(415		)
Merger and conversion costs	104			17,270			299			20,547
Restructuring charges	50			180			3,251			1,109
Pre-tax, pre-provision operating earnings (Non-GAAP)	$	21,409		$	19,517		$	59,588		$	34,889

Operating Non-Interest Income
Non-interest income (GAAP)	$	10,798		$	9,061		$	30,437		$	19,355
Securities gains	—			96			(85		)	(122		)
Gain on sale of branch	—			(415		)	—			(415		)
Operating non-interest income (Non-GAAP)	$	10,798		$	8,742		$	30,352		$	18,818

Operating Non-Interest Expense
Non-interest expense (GAAP)	$	28,848		$	48,187		$	92,122		$	85,362
Merger and conversion costs	(104		)	(17,270		)	(299		)	(20,547		)
Restructuring charges	(50		)	(180		)	(3,251		)	(1,109		)
Operating non-interest expense (Non-GAAP)	$	28,694		$	30,737		$	88,572		$	63,706

Operating Efficiency Ratio
Efficiency ratio (GAAP)	57.58		%	95.28		%	62.14		%	86.11		%
Effect to adjust for securities (gains) losses	—		%	(0.18		)%	0.04		%	0.11		%
Effect to adjust for gain on sale of branch	—		%	0.79		%	—		%	0.36		%
Effect to adjust for restructuring charges	(0.10		)%	(0.36		)%	(2.19		)%	(1.12		)%
Effect to adjust for merger and conversion costs	(0.21		)%	(34.37		)%	(0.21		)%	(20.85		)%
Operating efficiency ratio (Non-GAAP)	57.27		%	61.16		%	59.78		%	64.61		%

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Analysis of Results of Operations

Q3 2015 compared to Q3 2014

Net income available to common shareholders was $11.8 million, or $0.37 per diluted common share, in the third quarter of 2015, which was an increase from $319 thousand, or $0.01 per diluted common share, in the third quarter of 2014. Net operating earnings available to common shareholders, which excludes certain nonrecurring income and expenses, improved to $12.5 million in the third quarter of 2015 from $11.4 million in the third quarter of 2014. Similarly, pre-tax, pre-provision operating earnings increased to $21.4 million in the third quarter of 2015 from $19.5 million in the third quarter of 2014.

Year-to-Date

Net income available to common shareholders was $32.0 million, or $1.01 per diluted common share, in the first nine months of 2015 compared to $3.3 million, or $0.20 per diluted common share, in the first nine months of 2014. Net operating earnings available to common shareholders, which excludes certain nonrecurring income and expenses, improved to $34.7 million in the first nine months of 2015 from $16.2 million in the comparable period of 2014. Similarly, pre-tax, pre-provision operating earnings increased to $59.6 million in the first nine months of 2015 from $34.9 million in the same period of 2014.

As discussed in greater detail below, the improvements in the results of operations in the third quarter and first nine months of 2015, compared to the respective periods 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 benefit from elimination of duplicative functions.

Net Interest Income

Q3 2015 compared to Q3 2014

Net interest income was $39.3 million in the third quarter of 2015 compared to $41.5 million in the third quarter of 2014. The reduction in net interest income resulted from significant accretion of fair value discounts resulting from the Mergers during the third quarter of 2014, with proportionately lower amounts accreted during the third quarter of 2015. Average interest-earning assets increased from $3.53 billion in the third quarter of 2014 to $3.75 billion in the third quarter of 2015. Over this period, average loan balances increased by $190.3 million and average investment securities increased by $15.7 million. In addition, average deposits increased by $95.6 million, the net effect of strong growth among noninterest-bearing deposits and a slight reduction in time deposits, while average short-term borrowings increased $146.7 million due to incremental FHLB borrowings.

The Company's net interest margin declined from 4.68 percent in the third quarter of 2014, the quarter in which the Mergers occurred, to 4.19 percent in the third quarter of 2015. The lower current net interest margin reflects the anticipated reduction in accretion recognized on the loans that, as a result of the Mergers, were recorded at fair value. Interest rate pressure and stiff competition for loans from other financial institutions also had a negative impact on net interest margin. The aggregate yield on interest-earning assets declined from 5.12 percent in the third quarter of 2014, to 4.72 percent in the third quarter of 2015. The cost of interest-bearing liabilities increased from 0.54 percent in the third quarter of 2014 to 0.66 percent in the third quarter of 2015, primarily due to higher time deposit and FHLB borrowing costs.

Net accretion income on acquired loans totaled $3.4 million in the third quarter of 2015, which consisted of $895 thousand of net accretion on purchased credit-impaired (“PCI”) loans and $2.5 million of accretion income on purchased non-impaired loans. Net accretion income on acquired loans in the third quarter of 2014 totaled $7.2 million, which included $1.3 million of net accretion on PCI loans and $5.9 million of accretion income on purchased non-impaired loans. Accretion income on purchased non-impaired loans included $1.0 million of accelerated accretion due to principal prepayments in the third quarter of 2015 compared to $1.9 million in the third quarter of 2014.

- 40 -

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 September 30, 2015						Three months ended September 30, 2014
(Dollars in thousands)	Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*

Assets
Loans (1)	$	2,985,063	$	40,362	5.36	%	$	2,794,765	$	41,667	5.91	%
Investment securities (2)	709,914		4,209		2.35		694,239		3,907		2.23
Federal funds and other	55,246		47		0.34		44,165		38		0.34
Total interest-earning assets	3,750,223		44,618		4.72	%	3,533,169		45,612		5.12	%
Goodwill	152,152						152,152
Other intangibles, net	14,763						17,758
Other non-interest-earning assets	400,811						377,754
Total assets	$	4,317,949					$	4,080,833

Liabilities and Equity
Interest-bearing demand	$	487,173	130		0.11	%	$	481,460	156		0.13	%
Money market and savings	996,357		713		0.28		956,128		567		0.24
Time	1,056,806		2,254		0.85		1,123,293		1,651		0.58
Total interest-bearing deposits	2,540,336		3,097		0.48		2,560,881		2,374		0.37
Short-term borrowings	349,900		437		0.50		203,193		65		0.13
Long-term debt	125,846		1,465		4.62		148,650		1,510		4.03
Total interest-bearing liabilities	3,016,082		4,999		0.66	%	2,912,724		3,949		0.54	%
Noninterest-bearing deposits	718,989						602,888
Other liabilities	29,196						19,613
Total liabilities	3,764,267						3,535,225
Shareholders’ equity	553,682						545,608
Total liabilities and shareholders' equity	$	4,317,949					$	4,080,833

Net interest income, taxable equivalent			$	39,619					$	41,663
Interest rate spread (3)					4.06	%					4.58	%
Tax equivalent net interest margin (4)					4.19	%					4.68	%

Percentage of average interest-earning assets to average interest-bearing liabilities					124.34	%					121.30	%
* 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 35.0 percent. The taxable-equivalent adjustment was $314 thousand and $151 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.

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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 Q3 2014 to Q3 2015 due to:
(Dollars in thousands)	Volume			Yield/Cost			Total Change
Interest earning assets:
Loans	$	2,738		$	(4,043	)	$	(1,305	)
Investment securities	91			211			302
Federal funds and other interest-earning assets	9			—			9
Total interest-earning assets	2,838			(3,832		)	(994		)

Interest-bearing liabilities:
Interest-bearing demand	2			(28		)	(26		)
Money market and savings	27			119			146
Time deposits	(103		)	706			603
Total interest-bearing deposits	(74		)	797			723
Short-term borrowings	75			297			372
Long-term debt	(249		)	204			(45		)
Total interest-bearing liabilities	(248		)	1,298			1,050
Change in net interest income, taxable equivalent	$	3,086		$	(5,130	)	$	(2,044	)

Year-to-Date

Net interest income improved to $117.8 million in the first nine months of 2015 from $79.8 million in the first nine months of 2014. The increase in net interest income was the result of a significant increase in interest-earning assets from the Mergers and organic business activity. Average interest-earning assets increased from $2.42 billion in the first nine months of 2014 to $3.71 billion in the first nine months of 2015. Over this period, average loan balances increased by $1.10 billion, average investment securities increased by $194.2 million, and average deposits increased by $1.07 billion. Each of these increases reflects the impact of the acquired Yadkin balances for the third quarter of 2014.

The Company's net interest margin contracted from 4.42 percent in the first nine months of 2014 to 4.27 percent in the first nine months of 2015. The lower net interest margin reflected the anticipated reduction in accretion of fair value discounts related to acquired loans in quarters following the Mergers. Loan yields were also adversely affected by interest rate pressure and stiff competition for new loans from other financial institutions. The impact of the lower accretion was partially offset by an improved mix of interest-earning assets, a higher taxable-equivalent yield on investment securities, and an improved funding mix. The aggregate yield on interest-earning assets declined from 4.95 percent in the first nine months of 2014 to 4.80 percent in the first nine months of 2015. The cost of interest-bearing liabilities increased from 0.61 percent in the first nine months of 2014 to 0.65 percent in the first nine months of 2015.

Net accretion income on acquired loans totaled $12.7 million in the first nine months of 2015, which consisted of $4.0 million of net accretion on PCI loans and $8.7 million of accretion income on purchased non-impaired loans. Net accretion income on acquired loans in the first nine months of 2014 totaled $13.1 million, which included $3.3 million of net accretion on PCI loans and $9.9 million of accretion income on purchased non-impaired loans. Accretion income on purchased non-impaired loans included $3.4 million of accelerated accretion due to principal prepayments in the first nine months of 2015 compared to $3.9 million in the first nine months of 2014.

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

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	Nine months ended September 30, 2015						Nine months ended September 30, 2014
(Dollars in thousands)	Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*

Assets
Loans (1)	$	2,958,768	$	120,686	5.45	%	$	1,862,245	$	81,453	5.85	%
Investment securities (2)	700,866		12,460		2.38		506,691		7,898		2.08
Federal funds and other	54,741		142		0.35		47,887		90		0.25
Total interest-earning assets	3,714,375		133,288		4.80	%	2,416,823		89,441		4.95	%
Goodwill	152,152						55,194
Other intangibles, net	15,564						9,689
Other non-interest-earning assets	397,641						282,253
Total assets	$	4,279,732					$	2,763,959

Liabilities and Equity
Interest-bearing demand	$	477,879	448		0.13	%	$	393,317	485		0.16	%
Money market and savings	999,081		2,147		0.29		634,253		1,229		0.26
Time	1,075,072		6,464		0.80		794,864		3,976		0.67
Total interest-bearing deposits	2,552,032		9,059		0.47		1,822,434		5,690		0.42
Short-term borrowings	304,247		1,057		0.46		128,925		238		0.25
Long-term debt	152,842		4,457		3.90		121,439		3,571		3.93
Total interest-bearing liabilities	3,009,121		14,573		0.65	%	2,072,798		9,499		0.61	%
Noninterest-bearing deposits	684,516						348,624
Other liabilities	27,214						13,790
Total liabilities	3,720,851						2,435,212
Shareholders’ equity	558,881						328,747
Total liabilities and shareholders' equity	$	4,279,732					$	2,763,959

Net interest income, taxable equivalent			$	118,715					$	79,942
Interest rate spread (3)					4.15	%					4.34	%
Tax equivalent net interest margin (4)					4.27	%					4.42	%

Percentage of average interest-earning assets to average interest-bearing liabilities					123.44	%					116.60	%
* 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 35.0 percent. The taxable-equivalent adjustment was $907 thousand and $165 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.

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	Change from YTD 2014 to YTD 2015 due to:
(Dollars in thousands)	Volume		Yield/Cost			Total Change
Interest earning assets:
Loans	$	45,107	$	(5,874	)	$	39,233
Investment securities	3,327		1,235			4,562
Federal funds and other interest-earning assets	14		38			52
Total interest-earning assets	48,448		(4,601		)	43,847

Interest-bearing liabilities:
Interest-bearing demand	84		(121		)	(37		)
Money market and savings	760		158			918
Time deposits	1,599		889			2,488
Total interest-bearing deposits	2,443		926			3,369
Short-term borrowings	503		316			819
Long-term debt	915		(29		)	886
Total interest-bearing liabilities	3,861		1,213			5,074
Change in net interest income, taxable equivalent	$	44,587	$	(5,814	)	$	38,773

Provision for Loan Losses

Q3 2015 compared to Q3 2014

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

3Q 2015:
Balance at July 1, 2015	$	7,000		$	1,358		$	8,358
Net charge-offs	(934		)	—			(934		)
Provision for loan losses	1,536			40			1,576
Balance at September 30, 2015	$	7,602		$	1,398		$	9,000

3Q 2014:
Balance at July 1, 2014	$	5,369		$	2,082		$	7,451
Net charge-offs	(626		)	—			(626		)
Provision for loan losses	1,036			(220		)	816
Balance at September 30, 2014	$	5,779		$	1,862		$	7,641

Provision for loan losses was $1.6 million in the third quarter of 2015 compared to $816 thousand in the third quarter of 2014. The higher provision for loan losses reflected higher provision expense on non-PCI loans, net of lower provision expense on PCI loans. Provision expense on non-PCI loans increased due to higher net charge-offs and loan growth. Net charge-offs represented an annualized 0.12 percent of average loans in the third quarter of 2015 compared to an annualized 0.09 percent of average loans in the third quarter of 2014.

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.

- 44 -

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 third quarter of 2015 are summarized as follows.



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

Loan pools with cash flow improvement	$	(85	)	$	1,527		7.95	%	9.32	%
Loan pools with cash flow decrease	125			(274		)	7.37	%	7.16	%
Total	$	40		$	1,253		7.70	%	8.21	%

Year-to-Date

The following table summarizes the changes in the Company's ALLL for the year-to-date periods presented.



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

2015:
Balance at January 1, 2015	$	6,519		$	1,298		$	7,817
Net charge-offs	(2,348		)	—			(2,348		)
Provision for loan losses	3,431			100			3,531
Balance at September 30, 2015	$	7,602		$	1,398		$	9,000

2014:
Balance at January 1, 2014	$	4,682		$	2,361		$	7,043
Net charge-offs	(1,972		)	—			(1,972		)
Provision for loan losses	3,069			(499		)	2,570
Balance at September 30, 2014	$	5,779		$	1,862		$	7,641

Provision for loan losses was $3.5 million in the first nine months of 2015 compared to $2.6 million in the first nine months of 2014. Provision for loan losses increased for both PCI and non-PCI loans in 2015. Provision expense on non-PCI loans increased due to higher net charge-offs and loan growth. Net charge-offs totaled $2.3 million, or 0.16 percent of average loans, during the first nine months of 2015 compared to $2.0 million, or 0.21 percent of average loans, during the first nine months of 2014. The $100 thousand PCI provision expense in 2015 was due to impairment on certain commercial and residential real estate loan pools. In 2014, the Company recorded a $499 thousand credit to PCI provision expense due to reversal of previously-identified impairment on PCI loans.

Non-Interest Income

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



	Three months ended September 30,					Nine months ended September 30,
(Dollars in thousands)	2015		2014			2015		2014

Service charges and fees on deposit accounts	$	3,566	$	3,265		$	10,314	$	6,068
Government-guaranteed lending	3,009		2,072			9,559		6,533
Mortgage banking	1,731		1,520			4,686		2,368
Bank-owned life insurance	470		572			1,407		1,267
Gains (losses) on sales of available for sale securities	—		(96		)	85		122
Gain on sale of branch	—		415			—		415
Other	2,022		1,313			4,386		2,582
Total non-interest income	$	10,798	$	9,061		$	30,437	$	19,355

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Q3 2015 compared to Q3 2014

Non-interest income totaled $10.8 million in the third quarter of 2015, which was an increase from $9.1 million in the third quarter of 2014. Service charges and fees on deposit accounts increased by $301 thousand 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 U.S. Small Business Association ("SBA") loans originated by the Company as well as servicing fees on previously sold SBA loans, increased by $937 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 $211 thousand 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.

Year-to-Date

Non-interest income totaled $30.4 million in the first nine months of 2015, which was an increase from $19.4 million in the first nine months of 2014. Service charges and fees on deposit accounts increased by $4.2 million primarily due to the addition of acquired Yadkin deposit accounts. Government-guaranteed, small business lending income increased by $3.0 million compared to the first nine months of 2014. Mortgage banking income increased by $2.3 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.

Non-Interest Expense

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



	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2015		2014		2015		2014

Salaries and employee benefits	$	14,528	$	16,800	$	45,121	$	34,555
Occupancy and equipment	4,641		4,856		14,077		10,066
Data processing	1,851		1,255		5,668		3,276
FDIC deposit insurance premiums	732		700		2,218		1,455
Professional services	1,196		1,153		3,695		2,512
Foreclosed asset expense, net	277		129		910		542
Loan, collection, and repossession expense	931		1,192		2,717		2,226
Merger and conversion costs	104		17,270		299		20,547
Restructuring charges	50		180		3,251		1,109
Amortization of other intangible assets	761		845		2,353		1,296
Other	3,777		3,807		11,813		7,778
Total non-interest expense	$	28,848	$	48,187	$	92,122	$	85,362

Q3 2015 compared to Q3 2014

Non-interest expense totaled $28.8 million in the third quarter of 2015 compared to $48.2 million in the third quarter of 2014. Operating non-interest expense, which excludes merger and conversion costs and restructuring charges, declined from $30.7 million in the third quarter of 2014 to $28.7 million in the third quarter of 2015. As a result of the efficiency improvement and operating leverage resulting from the Mergers and subsequent system conversion, the Company's operating efficiency ratio improved from 61.2 percent in the third quarter of 2014 to 57.3 percent in the third quarter of 2015.

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.

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Year-to-Date

Non-interest expense totaled $92.1 million in the first nine months of 2015 compared to $85.4 million in the first nine months 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 $63.7 million in the first nine months of 2014 to $88.6 million in the first nine months of 2015. Due to the operating leverage resulting from balance sheet growth, the Company's operating efficiency ratio improved from 64.6 percent in the first nine months of 2014 to 59.8 percent in the first nine months of 2015.

Lower merger and conversion costs partially offset higher non-interest expenses in 2015. Merger and conversion costs included professional fees, severance, technology, rebranding, and branch network expenses necessary to complete the Mergers and related system conversions. Restructuring charges of $3.3 million in the first nine months of 2015 related to recognition of an obligation to a former executive officer and severance costs associated with the Company's expense reduction and branch optimization plan. These plans resulted in the elimination of certain back office positions and include the planned closing or sale of six branches during the third and fourth quarters of 2015. Restructuring charges of $1.1 million in the first nine months of 2014 related to an earlier branch optimization plan and efforts to streamline the Company's organizational structure in certain back office functions following a 2013 acquisition by VantageSouth.

Income Taxes

Q3 2015 compared to Q3 2014

Income tax expense was $7.9 million in the third quarter of 2015 compared to $621 thousand in the third quarter of 2014. The Company's effective tax rate totaled 40.1 percent in the third quarter of 2015 compared to 39.6 percent in the third quarter of 2014.

In 2013, North Carolina enacted tax reform that established statutory corporate income tax rate reductions from 6.9 percent to 6.0 percent for tax years beginning on or after January 1, 2014 and down to 5.0 percent for tax years beginning on or after January 1, 2015 followed by two additional rate reductions that are contingent upon the amount of net General Fund tax collections. Specifically, the corporate income tax rate would be reduced to 4 percent for tax years beginning on or after January 1, 2016, if tax collections in fiscal year 2014-2015 for the state exceed $20.2 billion. Based on actual revenues exceeding the target, the North Carolina corporate income tax rate will decline to 4 percent for tax years beginning on January 1, 2016. The Company revalues its deferred tax assets when an income tax rate is deemed to have been legally enacted. Therefore, the Company revalued its net deferred tax asset during the third quarter of 2015, which resulted in a $651 thousand charge to income tax expense, net of the resulting federal benefit.

Year-to-Date

The effective tax rate for the nine-month period ended September 30, 2015 was 37.7 percent compared to 42.9 percent for the nine-month period ended September 30, 2014. The higher effective tax rate in 2014 was primarily due to significant non-deductible merger expenses.

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 proper interest rate risk management; 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 state or political subdivisions, bank eligible corporate bonds, Volcker Rule-compliant collateralized loan obligations ("CLOs"), privately-issued residential and commercial mortgage-backed securities, 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 $712.7 million and $713.5 million, respectively, as of September 30, 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 $39.3 million and $40.3 million, respectively, as of September 30, 2015 compared to $39.6 million and $40.6 million, respectively, as of December 31, 2014.

The portfolio has increased year-to-date in 2015 as the Company began allocating a portion of its portfolio to purchases of Volcker Rule-compliant CLOs, all of which are AA/Aa2 rated bonds. CLOs are securitized pools of widely syndicated senior-secured, floating rate corporate loans. The Company performs extensive pre-purchase due diligence and ongoing monitoring of all its CLOs, including but not limited to, evaluation of manager expertise and performance, compliance with the Volcker Rule, security structure, tranche subordination, over-collateralization tests, weighted average risk factor, stress tests, and underlying loan concentrations, covenants, and other characteristics.

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. As of September 30, 2015 and December 31, 2014, the available-for-sale securities portfolio had $4.5 million and $2.8 million, respectively, of unrealized gains and $3.7 million and $4.6 million, respectively, of unrealized losses. Marketable investment securities accounted for as held to maturity are recorded at amortized cost.

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



	September 30, 2015				December 31, 2014
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Securities available for sale:
GSE obligations	$	19,938	$	20,057	$	14,914	$	14,944
SBA-guaranteed securities	58,133		58,176		60,408		60,120
Mortgage-backed securities issued by GSEs	399,890		400,368		428,076		425,283
Municipal bonds	49,522		50,094		39,907		40,258
Corporate bonds	130,683		130,852		118,799		119,912
Collateralized loan obligations	47,506		47,504		—		—
Non-agency RMBS	3,943		4,027		4,961		4,963
Non-agency CMBS	454		453		3,576		3,578
Other debt securities	245		245		498		498
Equity securities	2,381		1,716		3,017		2,865
Total securities available for sale	$	712,695	$	713,492	$	674,156	$	672,421

Securities held to maturity:
Municipal bonds	$	39,292	$	40,276	$	39,620	$	40,586

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The table below summarizes the amortized cost of debt securities in the investment portfolio as of September 30, 2015, segregated by major category with ranges of maturitiesand average yields. Mortgage-backed securities, and other similar securities collateralized by loan pools which are not due at a single maturity date, have been included in maturity groupings based on weighted average maturities of the underlying collateral, anticipating future prepayments.



	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	$	—	—	%	$	15,056	1.09	%	$	5,001	2.25	%	$	—	—	%	$	20,057	1.38	%
SBA-guaranteed securities	—		—	%	6,894		1.39	%	47,914		1.59	%	3,368		1.83	%	58,176		1.37	%
Mortgage-backed securities issued by GSEs	24,204		2.33	%	235,708		1.97	%	118,917		2.43	%	21,539		3.34	%	400,368		2.18	%
Municipal bonds (1)	6,382		3.24	%	32,077		1.96	%	10,859		3.08	%	776		5.97	%	50,094		3.18	%
Corporate bonds	36,844		2.63	%	49,706		2.14	%	35,507		3.81	%	8,795		2.86	%	130,852		2.95	%
Collateralized loan obligations	—		—	%	—		—	%	47,504		2.46	%	—		—	%	47,504		2.46	%
Non-agency RMBS	—		—	%	—		—	%	81		5.46	%	3,946		—	%	4,027		0.35	%
Non-agency CMBS	453		0.83	%	—		—	%	—		—	%	—		—	%	453		1.35	%
Other debt securities	245		0.50	%	—		—	%	—		—	%	—		—	%	245		0.50	%
Total debt securities available for sale	$	68,128	2.56	%	$	339,441	1.94	%	$	265,783	2.49	%	$	38,424	2.62	%	$	711,776	2.27	%

Securities held to maturity:
Municipal bonds (1)	$	—	—	%	$	31,541	3.84	%	$	4,083	4.10	%	$	3,668	5.78	%	$	39,292	4.05	%


(1)	Yields are calculated on a taxable equivalent basis using the statutory federal income tax rate of 35 percent. Yields are calculated based on the amortized cost of the securities.

As of September 30, 2015, the weighted average life of the Company's debt securities was 4.9 years, and the weighted average effective duration was 2.9 years.

The Company also owned $22.9 million and $19.5 million of Federal Home Loan Bank ("FHLB") stock as of September 30, 2015 and December 31, 2014, respectively. The FHLB 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.

Loans, net of deferred loan fees, totaled $2.98 billion as of September 30, 2015, which was an increase of $81.5 million from December 31, 2014, or a 3.8 percent annual growth rate. The table below provides a summary of the Company’s loan portfolio by loan type.

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Composition of Loan Portfolio:	September 30, 2015		December 31, 2014
Commercial:
Commercial real estate	47.9	%	46.8	%
Commercial and industrial	17.7		16.2
Construction and development	10.7		12.8
Consumer:
Residential real estate	11.7		12.4
Construction and development	1.7		1.0
Home equity	9.2		9.5
Consumer	1.2		1.3
Total	100.0	%	100.0	%

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.



	September 30, 2015						December 31, 2014
(Dollars in thousands)	UPB		Carrying Amount		% of UPB		UPB		Carrying Amount		% of UPB

Commercial:
Commercial real estate	$	1,443,814	$	1,428,694	99.0	%	$	1,374,729	$	1,355,536	98.6	%
Commercial and industrial	531,196		526,658		99.1	%	474,950		468,848		98.7	%
Construction and development	322,081		317,514		98.6	%	378,477		370,807		98.0	%
Consumer:
Residential real estate	352,278		347,265		98.6	%	366,264		360,249		98.4	%
Construction and development	50,759		50,281		99.1	%	30,661		30,061		98.0	%
Home equity	285,355		274,151		96.1	%	290,630		276,662		95.2	%
Consumer	36,992		36,196		97.8	%	38,545		36,874		95.7	%
Total	$	3,022,475	$	2,980,759	98.6	%	$	2,954,256	$	2,899,037	98.1	%

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



	September 30, 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	$	76,817	$	31,647	$	17,922	$	24,917	$	4,077	$	558	$	6,595	$	162,533
1-5 years	752,168		153,108		44,987		133,883		21,165		2,475		22,642		1,130,428
After 5 years	230,190		22,277		19,700		48,914		6,111		2,245		3,651		333,088
Total	1,059,175		207,032		82,609		207,714		31,353		5,278		32,888		1,626,049
Variable Rate: (1)
1 year or less	77,095		149,703		167,999		12,955		2,922		8,612		2,740		422,026
1-5 years	218,607		92,586		64,966		20,113		198		49,371		378		446,219
After 5 years	73,817		77,337		1,940		106,483		15,808		210,890		190		486,465
Total	369,519		319,626		234,905		139,551		18,928		268,873		3,308		1,354,710
Total loans	$	1,428,694	$	526,658	$	317,514	$	347,265	$	50,281	$	274,151	$	36,196	$	2,980,759


(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 September 30, 2015 totaled $159.7 million, of which $158.9 million were grouped into pools and $794 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 acquired loan portfolio and related acquisition accounting adjustments, the Company's current period credit metrics and ratios may not be comparable to those in prior periods or to credit metrics and ratios reported by other financial institutions. Specifically, (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.

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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 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 1.25 percent as of September 30, 2015 compared to 0.92 percent as of December 31, 2014 and 0.90 percent as of September 30, 2014. Total nonperforming assets as a percentage of total assets was 1.12 percent as of September 30, 2015 compared to 0.93 percent as of December 31, 2014 and 0.88 percent as of September 30, 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)	September 30, 2015		December 31, 2014

Nonaccrual loans	$	27,830	$	17,949
Accruing loans past due 90 days or more (1)	9,303		8,810
Foreclosed assets:
Residential real estate	1,426		2,016
All other foreclosed assets	10,367		10,875
Total nonperforming assets	$	48,926	$	39,650

Restructured loans not included above	$	2,564	$	4,424

(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.



	September 30, 2015				December 31, 2014
(Dollars in thousands)	Carrying Value		% of Loans in Category		Carrying Value		% of Loans in Category

Commercial:
Commercial real estate	$	20,195	1.41	%	$	9,268	0.68	%
Commercial and industrial	5,277		1.00		6,224		1.33
Construction and development	1,364		0.43		3,843		1.04
Consumer:
Residential real estate	6,293		1.81		4,891		1.36
Construction and development	814		1.62		372		1.24
Home equity	2,920		1.07		1,909		0.69
Consumer	270		0.75		252		0.68
Total nonperforming loans	$	37,133	1.25	%	$	26,759	0.92	%

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Allowance for Loan Losses

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.

In the second quarter of 2015, the Company enhanced its ALLL methodology by transitioning to the PD/LGD approach to calculating historical loss rates by loan grouping, as previously described. In prior periods, the Company calculated historical loss rates by loan type and then weighted these loss rates across its risk grade scale. Both methods use historical loss rates to calculate reserves on loans evaluated collectively for impairment, but the Company believes the current PD/LGD approach provides a more precise estimate of loan losses across the risk grade scale based on actual default data. The enhanced ALLL calculation did not have a material impact on the total ALLL as of June 30, 2015 or on the provision for loan losses in the second quarter of 2015. However, the enhanced ALLL methodology did change the allocation of ALLL across certain loan classes, particularly commercial and industrial and construction and development loans. The Company held other significant inputs into the ALLL model consistent, such as the "lookback" period used to develop historical loss rates, loan groupings for collective evaluation, and the application of qualitative factors.

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.



	September 30, 2015				December 31, 2014
(Dollars in thousands)	Amount		% of Total Allowance		Amount		% of Total Allowance

Commercial:
Commercial real estate	$	3,397	37.75	%	$	2,796	35.77	%
Commercial and industrial	2,168		24.09		1,274		16.30
Construction and development	742		8.24		1,691		21.63
Consumer:
Residential real estate	1,304		14.49		1,237		15.82
Construction and development	254		2.82		194		2.48
Home equity	902		10.02		546		6.98
Consumer	233		2.59		79		1.02
Total allowance for loan losses	$	9,000	100.00	%	$	7,817	100.00	%

- 53 -

In addition to the impact of the methodology enhancements on the ALLL calculation, current changes in the composition of the loan portfolio also contributed to changes in ALLL balances by loan class. Among non-PCI loans that are collectively evaluated for impairment, commercial real estate loans and commercial and industrial loans increased $92.2 million and $56.7 million, respectively, from December 31, 2014 to September 30, 2015. Commercial construction loans declined $38.6 million during the same period, as construction loans were either repaid or transferred to another loan class when the construction project ended and the permanent financing phase began. The reduction in outstanding commercial construction loans included a $2.5 million or 64.5% reduction in balances identified as nonperforming.

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



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2015			2014			2015			2014

ALLL, beginning of period	$	8,358		$	7,451		$	7,817		$	7,043
Charge-offs:
Commercial:
Commercial real estate	103			113			359			355
Commercial and industrial	406			170			1,377			616
Construction and development	134			70			201			266
Consumer:
Residential real estate	312			251			442			458
Home equity	475			100			793			371
Consumer	101			78			349			210
Total charge-offs	1,531			782			3,521			2,276
Recoveries:
Commercial:
Commercial real estate	44			13			56			18
Commercial and industrial	429			3			679			31
Construction and development	10			67			20			69
Consumer:
Residential real estate	57			49			109			73
Construction and development	—			—			27			—
Home equity	9			14			163			90
Consumer	48			10			119			23
Total recoveries	597			156			1,173			304
Net charge-offs	934			626			2,348			1,972
Provision for loan losses	1,576			816			3,531			2,570
ALLL, end of period	$	9,000		$	7,641		$	9,000		$	7,641

Net charge-offs to average loans (annualized)	0.12		%	0.09		%	0.11		%	0.14		%

The ALLL to total loans ratio was 0.30 percent as of September 30, 2015 compared to 0.28 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 1.75 percent of total loans as of September 30, 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 acquisition accounting 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)	September 30, 2015			December 31, 2014

Allowance for loan losses (GAAP)	$	9,000		$	7,817
Net acquisition accounting fair value discounts to loans	43,095			55,166
Adjusted allowance for loan losses	52,095			62,983
Loans	2,979,779			2,898,266
Adjusted allowance for loan losses to loans (Non-GAAP)	1.75		%	2.17		%

- 54 -

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 September 30, 2015, brokered deposits represented 11.1 percent of total deposits.

Total deposits as of September 30, 2015 were $3.25 billion, essentially unchanged from December 31, 2014. As of September 30, 2015 and December 31, 2014, the Company had outstanding time deposits under $100 thousand of $556.0 million and $547.5 million, respectively, and time deposits over $100 thousand of $474.9 million and $544.8 million, respectively.

The table below provides a summary of the Company’s deposit portfolio by deposit type.



Composition of Deposit Portfolio:	September 30, 2015		December 31, 2014

Non-interest demand	22.5	%	21.0	%
Interest-bearing demand	14.9		14.5
Money market and savings	30.9		30.9
Time deposits	31.7		33.6
Total	100.0	%	100.0	%

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



	Three months ended September 30,
	2015						2014
(Dollars in thousands)	Average Balance		% of Total		Average Rate		Average Balance		% of Total		Average Rate

Non-interest demand	$	718,989	22.1	%	—	%	$	602,888	19.1	%	—	%
Interest-bearing demand	487,173		14.9		0.11		481,460		15.2		0.13
Money market and savings	996,357		30.6		0.28		956,128		30.2		0.24
Time deposits	1,056,806		32.4		0.85		1,123,293		35.5		0.58
Total average deposits	$	3,259,325	100.0	%	0.38	%	$	3,163,769	100.0	%	0.30	%



	Nine months ended September 30,
	2015						2014
(Dollars in thousands)	Average Balance		% of Total		Average Rate		Average Balance		% of Total		Average Rate

Non-interest demand	$	684,516	21.1	%	—	%	$	348,624	16.1	%	—	%
Interest-bearing demand	477,879		14.8		0.13		393,317		18.1		0.16
Money market and savings	999,081		30.9		0.29		634,253		29.2		0.26
Time deposits	1,075,072		33.2		0.80		794,864		36.6		0.67
Total average deposits	$	3,236,548	100.0	%	0.37	%	$	2,171,058	100.0	%	0.35	%

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 0.38 percent in the third quarter of 2015 compared to 0.30 percent in the third quarter of 2014 due to changes in deposit mix and higher time deposit interest rates.

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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 $395.5 million and $250.5 million as of September 30, 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 year-to-date period to partially fund loan growth, investment purchases, and to compensate for the preferred stock redemption. The Company also shifted some of its maturities from long-term to short-term as the mix of loan originations and loans in the pipeline continue to be weighted towards variable rate lending.

Long-term debt totaled $129.9 million as of September 30, 2015, compared to $180.2 million as of December 31, 2014. Long-term debt included outstanding long-term FHLB advances of $54.0 million and $104.7 million as of September 30, 2015 and December 31, 2014, respectively. Long-term debt also 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 September 30, 2015, long-term debt also included a total of $24.9 million in junior subordinated debentures issued to various unconsolidated trusts that 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 $5.8 million and $6.0 million as of September 30, 2015 and December 31, 2014, respectively.

Shareholders’ Equity

Total shareholders’ equity was $556.8 million as of September 30, 2015, which was a decrease of $1.0 million from December 31, 2014. The decrease was primarily due to the preferred stock redemption of $28.4 million in the second quarter of 2015, a $1.9 million net other comprehensive loss, and $822 thousand of dividends paid on preferred stock prior to the redemption. The decrease was mostly offset by $32.8 million of year-to-date 2015 net income.

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.

Investment portfolio principal payments and maturities, loan principal payments, deposit growth, brokered deposit sources, 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 common 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, the holding company maintains 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, 2016. 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 September 30, 2015, the Company's most liquid assets (which include cash and due from banks, interest-earning deposits with banks, federal funds sold, and investment securities available for sale) totaled $791.2 million, which represented 18 percent of total assets and 24 percent of total deposits. Supplementing this on-balance sheet liquidity, the Company had available off-balance sheet liquidity in the form of secured and unsecured lines of credit from various correspondent banks which totaled $388.1 million as of September 30, 2015. As of September 30, 2015, outstanding commitments for undisbursed lines of credit and letters of credit totaled $798.7 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 $3.1 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 $3.44 billion, or 79 percent, of total assets as of September 30, 2015 compared to $3.50 billion or 82 percent of total assets as of December 31, 2014.

- 56 -

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.



	September 30, 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	$	531,347	$	263,298	$	236,270	$	—	$	1,030,915
Short-term borrowings	395,500		—		—		—		395,500
Long-term debt	—		49,163		14,004		66,692		129,859
Operating leases	3,849		6,321		3,721		4,741		18,632
Capital leases	569		1,163		1,212		6,158		9,102
Total contractual obligations	$	931,265	$	319,945	$	255,207	$	77,591	$	1,584,008

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 previous 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.

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 previous 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.

- 57 -

The Company's and the Bank’s capital amounts and ratios as of September 30, 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	$	440,124	11.98	%	$	293,874	8.00	%	N/A		N/A
Tier 1 risk-based capital	387,521		10.55	%	220,406		6.00	%	N/A		N/A
Common equity Tier 1	385,535		10.50	%	165,304		4.50	%	N/A		N/A
Tier 1 leverage capital	387,521		9.40	%	164,876		4.00	%	N/A		N/A

Yadkin Bank
Total risk-based capital	$	441,518	12.04	%	$	293,374	8.00	%	$	366,718	10.00	%
Tier 1 risk-based capital	426,966		11.64	%	220,031		6.00	%	293,374		8.00	%
Common equity Tier 1	426,966		11.64	%	165,023		4.50	%	238,367		6.50	%
Tier 1 leverage capital	426,966		10.35	%	164,974		4.00	%	206,217		5.00	%

In the second quarter of 2015, the Company redeemed $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.

On October 21, 2015, the Company's Board of Directors declared a regular quarterly cash dividend of $0.10 per share of its outstanding unrestricted common stock, payable November 19, 2015, to shareholders of record as of November 5, 2015.

The Company's tangible book value per common share was $12.31 as of September 30, 2015, which was an increase from $11.41 as of December 31, 2014. Tangible common equity to tangible assets increased to 9.30 percent as of September 30, 2015 from 8.80 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, except per share amounts)	September 30, 2015			December 31, 2014

Total shareholders' equity	$	556,797		$	557,802
Less: Preferred stock	—			28,405
Less: Goodwill and other intangible assets, net	166,476			168,829
Tangible common equity	390,321			360,568
Common shares outstanding	31,711,901			31,599,150
Tangible book value per share	$	12.31		$	11.41

Total assets	$	4,362,226		$	4,268,034
Less: Goodwill and other intangible assets, net	166,476			168,829
Tangible assets	$	4,195,750		$	4,099,205
Tangible common equity to tangible assets	9.30		%	8.80		%

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Forward-Looking Information

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

- 59 -

- 60 -

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 governed by 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. 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 measure 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 and twenty four-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 models other scenarios to evaluate potential NII at risk such as a gradual ramp in interest rates, a flattening yield curve, a steepening yield 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.

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 September 30, 2015.



	September 30, 2015
(Dollars in thousands)	Estimated Exposure to NII		Estimated Exposure to EVE

Immediate change in interest rates:
+ 4.0%	9.08	%	4.21	%
+ 3.0%	6.33		3.32
+ 2.0%	3.23		2.33
+ 1.0%	0.67		1.09
No change	—		—
- 1.0%	(0.46	)	(2.26	)

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.

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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 September 30, 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, the Company's internal controls over financial reporting.

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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 unrecorded liability with respect to such matters cannot be determined, in the opinion of management, any additional 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. Accordingly, there are or will be important factors related to the NewBridge Merger that could cause actual results to differ materially from anticipated results. We believe that these factors include, but are not limited to, the following:

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the NewBridge Merger.

Before the NewBridge Merger and the NewBridge Bank Merger may be completed, Yadkin and NewBridge must obtain approvals from the Federal Reserve Board, the FDIC and the North Carolina Commissioner of Banks. Other approvals, waivers or consents from regulators may also be required. In determining whether to grant these approvals the regulators consider a variety of factors, including the regulatory standing of each party. An adverse development in either party’s regulatory standing or these factors could result in an inability to obtain approval or delay their receipt. These regulators may impose conditions on the completion of the NewBridge Merger or the NewBridge Bank Merger or require changes to the terms of the NewBridge Merger or the NewBridge Bank Merger. Such conditions or changes could have the effect of delaying or preventing completion of the NewBridge Merger or the NewBridge Bank Merger or imposing additional costs on or limiting the revenues of the combined company following the NewBridge Merger and the NewBridge Bank Merger, any of which might have an adverse effect on the combined company following the NewBridge Merger.

Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the NewBridge Merger may not be realized.

Yadkin and NewBridge have operated and, until the completion of the NewBridge Merger, will continue to operate, independently. The success of the NewBridge Merger, including anticipated benefits and cost savings, will depend, in part, on Yadkin’s ability to successfully combine and integrate the businesses of Yadkin and NewBridge in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the NewBridge Merger. The loss of key employees could adversely affect Yadkin’s ability to successfully conduct its business, which could have an adverse effect on Yadkin’s financial results and the value of the Yadkin common stock. If Yadkin experiences difficulties with the integration process, the anticipated benefits of the NewBridge Merger may not be realized fully or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause Yadkin and/or NewBridge to lose customers or cause customers to remove their accounts from Yadkin and/or NewBridge and move their business to competing financial institutions. Integration efforts will also divert management attention and resources. In addition, the actual cost savings of the NewBridge Merger could be less than anticipated.

Termination of the NewBridge Merger Agreement could negatively impact Yadkin.

If the NewBridge Merger Agreement is terminated, there may be various consequences. For example, Yadkin’s businesses may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the NewBridge Merger, without realizing any of the anticipated benefits of completing the NewBridge Merger. Additionally, if the

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NewBridge Merger Agreement is terminated, the market price of Yadkin’s common stock could decline to the extent that the current market prices reflect a market assumption that the NewBridge Merger will be completed. If the NewBridge Merger Agreement is terminated under certain circumstances, Yadkin may be required to pay NewBridge a termination fee of $18 million plus documented out-of-pocket transaction expenses.

NewBridge and Yadkin will be subject to business uncertainties and contractual restrictions while the NewBridge Merger is pending.

Uncertainty about the effect of the NewBridge Merger on employees and customers may have an adverse effect on Yadkin. These uncertainties may impair Yadkin’s ability to attract, retain and motivate key personnel until the NewBridge Merger is completed, and could cause customers and others that deal with Yadkin to seek to change existing business relationships with Yadkin. Retention of certain employees by Yadkin may be challenging while the NewBridge Merger is pending, as certain employees may experience uncertainty about their future roles with Yadkin. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Yadkin, Yadkin’s business could be harmed.

If the NewBridge Merger is not completed, Yadkin will have incurred substantial expenses without realizing the expected benefits of the NewBridge Merger.

Yadkin has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the NewBridge Merger Agreement, including a portion of the costs and expenses of filing, printing and mailing the joint proxy statement/prospectus relating to the NewBridge Merger. If the NewBridge Merger is not completed, Yadkin would have to recognize these expenses without realizing the expected benefits of the NewBridge Merger.

These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Yadkin from considering or proposing such an acquisition.

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

Shareholders and other interested parties may initiate communications with the Board, the Chairman, the Lead Independent Director, the Independent Directors as a group or any individual director or directors by writing to our Secretary at: 3600 Glenwood Avenue, Suite 300, Raleigh, North Carolina 27612. You should indicate on the outside of the envelope the intended recipient of your communication (i.e., the full Board, the Independent Directors as a group or any individual director or directors). The Board has instructed our Secretary to review such correspondence and, at her discretion, not to forward items if she deems them to be of a commercial or frivolous nature or otherwise inappropriate for the recipient's consideration.

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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)

2.3	Agreement and Plan of Merger, dated as of October 12, 2015, by and among Yadkin Financial Corporation, Navy Merger Sub Corp. and NewBridge Bancorp. (3)

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.

(3) Incorporated by reference to corresponding exhibit to the Current Report on Form 8-K filed with the SEC on October 13, 2015.

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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:	November 6, 2015	By:	/s/ Scott M. Custer
			Scott M. Custer
			President and Chief Executive Officer

Date:	November 6, 2015	By:	/s/ Terry S. Earley
			Terry S. Earley
			Executive Vice President and Chief Financial Officer

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