YADKIN FINANCIAL Corp - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - YADKIN FINANCIAL Corp	ex32-1q12016.htm
EX-32.2 - EXHIBIT 32.2 - YADKIN FINANCIAL Corp	ex32-2q12016.htm
EX-31.2 - EXHIBIT 31.2 - YADKIN FINANCIAL Corp	ex31-2q12016.htm
EX-31.1 - EXHIBIT 31.1 - YADKIN FINANCIAL Corp	ex31-1q12016.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2016

¨ 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: 50,840,448 shares of Voting Common Stock and 654,997 shares of Non-Voting Common Stock outstanding as of May 5, 2016.

YADKIN FINANCIAL CORPORATION

TABLE OF CONTENTS



		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015	3

	Consolidated Statements of Operations for the Three Months Ended March 31, 2016 and 2015	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015	5

	Consolidated Statement of Changes in Shareholders' Equity for the Three Months Ended March 31, 2016 and 2015	6

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015	7

	Condensed Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48

Item 4.	Controls and Procedures	49

Part II.	OTHER INFORMATION	50

Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3.	Defaults Upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	51

Part I. Financial Information

Item 1. Financial Statements



YADKIN FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
As of March 31, 2016 and December 31, 2015



(Dollars in thousands, except share data)	March 31, 2016			December 31, 2015*
Assets
Cash and due from banks	$	67,923		$	60,783
Interest-earning deposits with banks	42,892			50,885
Federal funds sold	—			250
Investment securities available for sale, at fair value	1,103,444			689,132
Investment securities held to maturity	39,071			39,182
Loans held for sale	53,820			47,287
Loans	5,208,752			3,076,544
Allowance for loan losses	(10,231		)	(9,769		)
Net loans	5,198,521			3,066,775
Purchased accounts receivable	57,175			52,688
Federal Home Loan Bank stock, at cost	41,851			24,844
Premises and equipment, net	119,244			73,739
Bank-owned life insurance	141,170			78,863
Foreclosed assets	18,435			15,346
Deferred tax asset, net	79,342			55,607
Goodwill	337,711			152,152
Other intangible assets, net	32,416			13,579
Accrued interest receivable and other assets	87,995			53,032
Total assets	$	7,421,010		$	4,474,144

Liabilities
Deposits:
Non-interest demand	$	1,151,128		$	744,053
Interest-bearing demand	1,158,417			523,719
Money market and savings	1,576,974			1,024,617
Time	1,463,193			1,017,908
Total deposits	5,349,712			3,310,297
Short-term borrowings	761,243			375,500
Long-term debt	198,320			194,967
Accrued interest payable and other liabilities	127,093			30,831
Total liabilities	6,436,368			3,911,595

Shareholders’ Equity
Common stock, $1.00 par value, 75,000,000 shares authorized; 51,480,284 and 31,727,767 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively	51,480			31,727
Common stock warrants	717			717
Additional paid-in capital	904,711			492,828
Retained earnings	33,621			44,794
Accumulated other comprehensive loss	(5,887		)	(7,517		)
Total shareholders' equity	984,642			562,549
Total liabilities and shareholders' equity	$	7,421,010		$	4,474,144

See accompanying Notes to Consolidated Financial Statements.


*	Derived from the audited consolidated financial statements included in the Company's 2015 Annual Report on Form 10-K.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Ended March 31, 2016 and 2015



	Three months ended March 31,
(Dollars in thousands, except per share data)	2016		2015
Interest income
Loans	$	47,971	$	39,796
Investment securities	6,113		3,996
Federal funds sold and interest-earning deposits	103		50
Total interest income	54,187		43,842
Interest expense
Deposits	3,467		2,889
Short-term borrowings	808		289
Long-term debt	1,867		1,488
Total interest expense	6,142		4,666
Net interest income	48,045		39,176
Provision for loan losses	1,875		961
Net interest income after provision for loan losses	46,170		38,215
Non-interest income
Service charges and fees on deposit accounts	4,212		3,253
Government-guaranteed lending	3,072		2,873
Mortgage banking	1,623		1,322
Bank-owned life insurance	552		472
Gain on sales of available for sale securities	130		1
Other	1,765		918
Total non-interest income	11,354		8,839
Non-interest expense
Salaries and employee benefits	18,040		15,202
Occupancy and equipment	5,535		4,799
Data processing	2,140		1,888
FDIC deposit insurance premiums	821		714
Professional services	1,108		1,092
Foreclosed asset expenses, net	311		188
Loan, collection, and repossession expense	1,133		936
Merger and conversion costs	10,335		220
Restructuring charges	21		907
Amortization of other intangible assets	1,053		815
Other	4,307		4,197
Total non-interest expense	44,804		30,958
Income before income taxes	12,720		16,096
Income tax expense	4,920		5,846
Net income	7,800		10,250
Dividends on preferred stock	—		639
Net income available to common shareholders	$	7,800	$	9,611

Net income per common share
Basic	$	0.20	$	0.30
Diluted	0.20		0.30

Weighted average common shares outstanding
Basic	38,102,926		31,606,909
Diluted	38,194,964		31,608,928

See accompanying Notes to Consolidated Financial Statements.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
For the Three Months Ended March 31, 2016 and 2015



	Three months ended March 31,
(Dollars in thousands)	2016			2015

Net income	$	7,800		$	10,250
Other comprehensive income (loss):
Securities available for sale:
Unrealized net gains on available for sale securities	7,275			4,322
Tax effect	(2,766		)	(1,547		)
Reclassification of (gains) on sales of securities	(130		)	(1		)
Tax effect	49			—
Net of tax amount	4,428			2,774
Cash flow hedges:
Unrealized net losses on cash flow hedges	(4,596		)	(4,163		)
Tax effect	1,728			1,605
Reclassification of amounts into interest expense from termination of interest rate swaps	112			—
Tax effect	(42		)	—
Net of tax amount	(2,798		)	(2,558		)
Total other comprehensive income	1,630			216
Comprehensive income	$	9,430		$	10,466

See accompanying Notes to Consolidated Financial Statements.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
For the Three Months Ended March 31, 2016 and 2015



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

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

Balance as of December 31, 2015	—	$	—	31,726,767		$	31,727		$	717	$	492,828		$	44,794		$	(7,517	)	$	562,549
Net income	—	—		—		—			—		—			7,800			—			7,800
Other comprehensive income	—	—		—		—			—		—			—			1,630			1,630
Restricted stock grants	—	—		100,000		100			—		(100		)	—			—			—
Restricted stock forfeiture	—	—		(10,000	)	(10		)	—		10			—			—			—
Stock-based compensation	—	—		—		—			—		202			—			—			202
Stock options exercised	—	—		12,000		12			—		86			—			—			98
Acquisition of NewBridge Bancorp	—	—		19,605,374		19,605			—		411,731			—			—			431,336
Shares issued for restricted stock units	—	—		46,143		46			—		(46		)	—			—			—
Dividends paid on common stock	—	—		—		—			—		—			(18,973		)	—			(18,973		)
Balance as of March 31, 2016	—	$	—	51,480,284		$	51,480		$	717	$	904,711		$	33,621		$	(5,887	)	$	984,642

See accompanying Notes to Consolidated Financial Statements.

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YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31, 2016 and 2015



	Three months ended March 31,
(Dollars in thousands)	2016			2015
Cash flows from operating activities
Net income	$	7,800		$	10,250
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation	202			70
Provision for loan losses	1,875			961
Accretion of acquisition discount on purchased loans	(5,712		)	(6,552		)
Depreciation	1,773			1,564
Amortization of core deposit intangible	1,053			815
Amortization of acquisition premium on time deposits	(553		)	(1,033		)
Net accretion of acquisition discount on long-term debt	119			211
Gain on mortgage loan commitments	(717		)	(294		)
Gain on sales of loans held for sale	(4,242		)	(3,594		)
Originations of loans held for sale	(93,595		)	(82,441		)
Proceeds from sales of loans held for sale	104,965			73,918
Increase in cash surrender value of bank-owned life insurance	(560		)	(472		)
Deferred income taxes	7,328			5,846
Change in deferred tax valuation allowance	205			—
Gain on sales of available for sale securities	(130		)	(1		)
Net amortization of premiums on available for sale securities	1,186			1,345
Net (gain) loss on disposal of foreclosed assets	(136		)	(58		)
Valuation adjustments on foreclosed assets	—			166
Change in assets and liabilities:
Decrease in accrued interest receivable	1,014			121
Increase in other assets	(5,368		)	(6,260		)
Decrease in accrued interest payable	(1,150		)	(692		)
Increase (decrease) in other liabilities	4,396			(2,127		)
Net cash provided by (used in) operating activities	19,753			(8,257		)
Cash flows from investing activities
Purchases of investment securities available for sale	(92,570		)	—
Proceeds from maturities and repayments of investment securities available for sale	36,080			17,181
Proceeds from sales of investment securities available for sale	142,489			197
Loan originations and principal collections, net	(70,020		)	(9,897		)
Net cash received in business combinations	45,143			—
Purchases of trade accounts receivable, net	(4,487		)	(17,308		)
Purchases of premises and equipment	(264		)	(484		)
Disposals of premises and equipment	766			616
Proceeds from disposal of foreclosed assets	1,535			718
Purchases of Federal Home Loan Bank stock	4,570			(778		)
Net cash used in (provided by) investing activities	63,242			(9,755		)
Cash flows from financing activities
Net increase in deposits	49,859			(37,156		)
Net change in short-term borrowings	(104,592		)	57,500
Repayments of long-term debt obligations	(10,490		)	(25,676		)
Proceeds from exercise of stock options	98			120
Dividends paid on preferred stock	—			(639		)
Dividends paid on common stock	(18,973		)	—
Net cash used in financing activities	(84,098		)	(5,851		)
Net change in cash and cash equivalents	(1,103		)	(23,863		)
Cash and cash equivalents, beginning of period	111,918			132,365
Cash and cash equivalents, end of period	$	110,815		$	108,502

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	Three months ended March 31,
(Dollars in thousands)	2016			2015

SUPPLEMENTAL DISCLOSURES:
Cash payments for:
Interest	$	6,935		$	6,180
Income taxes	2,600			—
Noncash investing activities:
Transfers of loans to foreclosed assets	$	3,247		$	362
Change in fair value of securities available for sale, net of tax	4,428			2,774
Change in fair value of cash flow hedge, net of tax	(2,798		)	(2,558		)
Acquisition:
Assets acquired (excluding goodwill)	$	2,780,389		$	—
Liabilities assumed	2,534,612			—
Purchase price	431,336			—
Goodwill recorded	185,559			—

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 2015 Form 10-K.

In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented have been included, and all intercompany transactions have been eliminated in consolidation. Results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2016. 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.

Recently Adopted and Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to Stock Compensation. The new guidance eliminates the concept of APIC pools for stock-based awards and requires that the related excess tax benefits and tax deficiencies be classified as an operating activity in the statement of cash flows. The new guidance also allows entities to make a one-time policy election to account for forfeitures when they occur, instead of accruing compensation cost based on the number of awards expected to vest. Additionally, the new guidance changes the requirement for an award to qualify for equity classification by permitting tax withholding up to the maximum statutory tax rate instead of the minimum statutory tax rate. Cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity in the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The adoption of this guidance is not expected to be material to the consolidated financial statements.

In March 2016, the FASB issued new guidance related to Derivatives and Hedging. The new guidance clarifies the requirements for assessing whether contingent call or put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts, which is used to determine whether the embedded derivative should be separated from the host contract and accounted for separately as a derivative. An entity performing the assessment will be required to assess the embedded call or put options solely in accordance with the pre-existing four-step decision sequence. This guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

In February 2016, the FASB issued new guidance related to Leases. The new guidance requires lessees to recognize assets and liabilities related to certain operating leases on the balance sheet. The new guidance also requires additional disclosures by lessees and contains targeted changes to accounting by lessors. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

In January 2016, the FASB issued new guidance related to the Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance addresses the recognition, measurement, presentation, and disclosure of financial instruments. The guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

In September 2015, the FASB issued new guidance related to Business Combinations. 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 new guidance related to Fair Value Measurement. 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

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YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

expedient. This guidance became effective for interim and annual periods beginning after December 15, 2015. The adoption of this guidance did not have a material impact on the consolidated financial statements.

In April 2015, the FASB issued new guidance related to Debt Issuance Costs. The new guidance requires 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 this guidance. This guidance became effective for interim and annual periods beginning after December 15, 2015 and is to be applied retrospectively. As of March 31, 2016, the Company had $568 of debt issuance costs that were included in long-term debt.

In May 2014, the FASB issued new guidance related to Revenue from Contracts with Customers. This guidance provides 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. This guidance 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. This guidance is effective for periods beginning after December 15, 2017. Early adoption is permitted. The Company continues to evaluate the potential impact of this guidance on its consolidated financial statements.

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 dilutive impact of restricted stock as well as the potential dilution that could occur if dilutive common stock options and common stock warrants were exercised, resulting in the issuance of common stock that then shared in the net income of the Company.

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



	Three months ended March 31,
	2016	2015

Weighted average number of common shares	38,102,926	31,606,909
Dilutive effect of stock options, stock warrants and restricted stock	92,038	2,019
Weighted average number of common shares and dilutive potential common shares	38,194,964	31,608,928

Anti-dilutive stock options	44,078	45,538
Anti-dilutive stock warrants	—	91,178

NOTE C – MERGERS AND ACQUISITIONS

Acquisition of NewBridge Bancorp

On March 1, 2016, the Company completed its acquisition of NewBridge Bancorp (“NewBridge”), pursuant to an Agreement and Plan of Merger, dated October 12, 2015 (the “NewBridge Merger Agreement”). Pursuant to the NewBridge Merger Agreement, each share of NewBridge Class A common stock and Class B common stock was converted into the right to receive 0.50 shares of the common stock of the Company (the "NewBridge Merger"). Based on the Company's stock price at the closing date of the NewBridge Merger, purchase consideration totaled $431,336. Immediately following the merger of NewBridge into Yadkin, NewBridge Bank, a North Carolina-chartered commercial bank, merged with and into Yadkin Bank, with Yadkin Bank surviving such merger.

The NewBridge Merger was accounted for under the acquisition method of accounting with Yadkin as the legal and accounting acquirer and NewBridge as the legal and accounting acquiree. The assets and liabilities of NewBridge have been recorded at their estimated fair values and added to those of Yadkin for periods following the merger date. The Company may refine its valuations of acquired NewBridge assets and liabilities for up to one year following the merger date. The NewBridge Merger had a significant impact on all aspects of the Company's financial statements, and as a result, financial results after the NewBridge Merger may not be comparable to financial results prior to the merger.

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YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The purchase price is calculated based on the number of Yadkin shares issued multiplied by the share price as shown in the following table. The purchase price also includes cash paid to NewBridge shareholders in lieu of fractional shares as well as the value of stock-base compensation awards assumed on the merger date.



	Purchase Price Calculation

Number of shares of Yadkin common stock issued to NewBridge shareholders	19,605,374
Closing price of Yadkin common stock on February 29, 2016	$	21.65
Value of shares of Yadkin common stock issued to NewBridge shareholders			$	424,456
Cash paid in lieu of fractional shares			27
Stock-based compensation awards assumed from NewBridge:
Restricted stock			2,455
Stock options			4,398
Total purchase price			$	431,336

The following table presents the NewBridge assets acquired and liabilities assumed as of March 1, 2016 as well as the related purchase price allocation and calculation of the residual goodwill.



	As Reported by NewBridge			Initial Fair Value Adjustments				As Reported by Yadkin
Assets:
Cash and cash equivalents	$	45,143		$	—			$	45,143
Investment securities	443,535			(1,948		)	(a)	441,587
Loans	2,087,331			(26,195		)	(b)	2,061,136
Allowance for loan losses	(21,100		)	21,100			(c)	—
Loans held for sale	13,661			—				13,661
Federal Home Loan Bank stock, at cost	21,577			—				21,577
Premises and equipment, net	43,408			4,371			(d)	47,779
Bank owned life insurance	61,747			—				61,747
Foreclosed assets	1,241			—				1,241
Deferred tax asset, net	30,014			(3,490		)	(e)	26,524
Other intangibles, net	3,506			16,384			(f)	19,890
Other assets	40,375			(271		)	(g)	40,104
Total assets	2,770,438			9,951				2,780,389
Liabilities:
Deposits	1,990,247			(138		)	(h)	1,990,109
Short-term borrowings	471,800			535			(i)	472,335
Long-term debt	41,049			(9,325		)	(j)	31,724
Other liabilities	34,461			5,983			(k)	40,444
Total liabilities	2,537,557			(2,945		)		2,534,612
Net assets acquired	232,881			12,896				245,777
Purchase price								431,336
Goodwill								$	185,559	(l)

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 fair value discount of $32,589 on the loan portfolio, reversal of $3,450 in net deferred loan costs, and reversal of $9,844 in previously-existing fair value discount recognized by NewBridge in prior acquisitions. 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.

(d) Adjustment reflects fair value adjustments on acquired branch and administrative offices.

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

(f) Adjustment reflects the fair value of the acquired core deposit intangible, net of the reversal of core deposit intangible recorded by NewBridge in prior acquisitions.

(g) Adjustment reflects the impact of fair value adjustments on other assets, which include adjustments related to the elimination of accrued interest on purchased credit-impaired loans, recognition of a servicing asset related to U.S. Small Business Association ("SBA") loans, and termination of certain derivative contracts.

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

(i) Adjustments reflect the fair value adjustments for a short-term repurchase obligation and Federal Home Loan Bank ("FHLB") advances. The repurchase obligation was valued by discounting future contractual interest payments at a current market interest rate for a similar

- 11 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

instrument. For FHLB advances, the fair value was calculated by reference to the acquisition date prepayment penalty the FHLB would charge to terminate the advance.

(j) Adjustments reflect fair value adjustments for subordinated debt obligations and junior subordinated debentures related to trust preferred securities outstanding at the acquisition date.

(k) Adjustments reflect compensation obligations, reserve for unfunded commitments, benefit costs for merger-related obligations, and miscellaneous other accrued liabilities.

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

Supplemental Pro Forma Information

The table below presents supplemental pro forma information as if the NewBridge Merger had occurred at the beginning of the earliest period presented, which was January 1, 2015. 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 merger. Therefore, the pro forma financial information is not indicative of the results of operations that would have occurred had the transactions been effected on the assumed date.



	Three Months Ended March 31,
	2016		2015

Net interest income	$	63,355	$	62,129
Net income (a)	15,447		5,547
Net income available to common shareholders (a)	15,447		4,908
Basic income per common share (a)	0.30		0.10
Diluted income per common share (a)	0.30		0.10
Weighted average basic common shares outstanding	51,179,710		50,529,046
Weighted average diluted common shares outstanding	51,271,748		50,775,849

(a) For purposes of the supplemental pro forma information, merger-related expenses of $10,335 that are reflected in the Company's first quarter 2016 consolidated financial statements and $3,532 of merger-related expenses that were recorded by NewBridge prior to the merger date were reflected in the pro forma presentation for the first quarter of 2015. These pro forma merger-related expenses include $6,659 of professional fees paid for investment banking, legal and accounting services, $4,919 of personnel-related expenses, $1,414 of facility and equipment-related expenses, and $874 of other miscellaneous expenses related to the NewBridge Merger.

NOTE D – INVESTMENT SECURITIES

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



	March 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
GSE obligations	$	71,882	$	33	$	3	$	71,912
SBA-guaranteed securities	12,452		119		2		12,569
Mortgage-backed securities issued by GSEs	571,851		3,534		1,698		573,687
Municipal bonds	110,458		1,199		32		111,625
Corporate bonds	244,781		570		881		244,470
Collateralized loan obligations	50,516		—		436		50,080
Non-agency CMBS	26,382		37		—		26,419
Certificates of deposit	1,242		—		—		1,242
Equity securities	12,114		125		799		11,440
Total securities available for sale	$	1,101,678	$	5,617	$	3,851	$	1,103,444

Securities held to maturity:
Municipal bonds	$	39,071	$	1,611	$	—	$	40,682



	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
GSE obligations	$	5,980	$	3	$	1	$	5,982
SBA-guaranteed securities	12,114		74		12		12,176
Mortgage-backed securities issued by GSEs	440,654		887		5,916		435,625
Municipal bonds	55,402		504		106		55,800
Corporate bonds	123,669		551		688		123,532
Collateralized loan obligations	50,538		—		55		50,483
Non-agency RMBS	3,528		144		9		3,663
Certificates of deposit	245		—		—		245
Equity securities	2,381		33		788		1,626
Total securities available for sale	$	694,511	$	2,196	$	7,575	$	689,132

Securities held to maturity:
Municipal bonds	$	39,182	$	1,318	$	—	$	40,500

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



	Less than 12 months				12 months or more				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2016
Securities available for sale:
GSE obligations	$	60,834	$	3	$	—	$	—	$	60,834	$	3
SBA-guaranteed securities	1,503		2		—		—		1,503		2
Mortgage-backed securities issued by GSEs	108,506		620		101,252		1,078		209,758		1,698
Municipal bonds	2,158		32		—		—		2,158		32
Corporate bonds	81,744		681		8,583		200		90,327		881
Collateralized loan obligations	50,080		436		—		—		50,080		436
Equity securities	1,399		799		—		—		1,399		799
Total temporarily impaired AFS securities	$	306,224	$	2,573	$	109,835	$	1,278	$	416,059	$	3,851

December 31, 2015
Securities available for sale:
GSE obligations	$	999	$	1	$	—	$	—	$	999	$	1
SBA-guaranteed securities	5,043		12		0		0		5,043		12
Mortgage-backed securities issued by GSEs	208,620		2,453		117,144		3,463		325,764		5,916
Municipal bonds	8,995		106		—		—		8,995		106
Corporate bonds	43,110		577		3,697		111		46,807		688
Collateralized loan obligations	45,471		55		—		—		45,471		55
Non-agency RMBS	—		—		901		9		901		9
Equity securities	1,411		788		—		—		1,411		788
Total temporarily impaired AFS securities	$	313,649	$	3,992	$	121,742	$	3,583	$	435,391	$	7,575

- 12 -

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.



	March 31, 2016	December 31, 2015

Securities available for sale:
SBA-guaranteed securities	1	1
GSE obligations	17	1
Mortgage-backed securities issued by GSEs	54	83
Municipal bonds	3	9
Corporate bonds	24	15
Collateralized loan obligations	9	8
Non-agency RMBS	—	1
Equity securities	3	3
Total number of investment securities in an unrealized loss position	111	121

As of March 31, 2016, 36 securities had been in an unrealized loss position for more than a twelve month period. The Company had $200 thousand in gross unrealized losses on two corporate bonds that had been in unrealized loss positions for more than twelve months as of March 31, 2016. 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 these corporate issuers, the Company does not believe the unrealized losses on these bonds were due to credit events.

The securities in an unrealized loss position as of March 31, 2016 continue to perform and are expected to perform through maturity, and the issuers have not experienced significant adverse events that would call into question their ability to repay these debt obligations according to contractual terms. Further, because the Company does not intend to sell these investments and does not believe that it will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, unrealized losses on such securities were not considered to represent other-than-temporary impairment as of March 31, 2016.

As of March 31, 2016 and December 31, 2015, the Company held no individual investment securities with an aggregate book value greater than 10 percent of total shareholders’ equity. As of March 31, 2016 and December 31, 2015, investment securities with carrying values of $395,756 and $279,953, 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.



	March 31, 2016				December 31, 2015
	Amortized cost		Fair value		Amortized cost		Fair value
Securities available for sale:
Due within one year	$	90,454	$	90,748	$	66,591	$	67,163
Due after one year through five years	461,701		462,820		291,298		289,525
Due after five years through ten years	474,654		474,742		309,625		306,420
Due after ten years	62,755		63,694		24,616		24,398
Equity securities	12,114		11,440		2,381		1,626
	$	1,101,678	$	1,103,444	$	694,511	$	689,132
Securities held to maturity:
Due after one year through five years	$	31,300	$	32,334	$	31,421	$	32,272
Due after five years through ten years	4,061		4,265		4,072		4,229
Due after ten years	3,710		4,083		3,689		3,999
	$	39,071	$	40,682	$	39,182	$	40,500

The following table summarizes securities gains for the periods presented.



	Three months ended March 31,
	2016			2015

Gross gains on sales of securities available for sale	$	194		$	1
Gross losses on sales of securities available for sale	(64		)	—
Total securities gains	$	130		$	1

- 13 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE E – LOANS AND ALLOWANCE FOR LOAN LOSSES

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



	March 31, 2016			December 31, 2015
Commercial:
Commercial real estate	$	2,369,318		$	1,451,176
Commercial and industrial	828,063			553,121
Construction and development	380,247			345,304
Consumer:
Residential real estate	726,590			343,648
Construction and development	289,295			46,263
Home equity	538,524			277,900
Other consumer	77,927			60,244
Gross loans	5,209,964			3,077,656
Less:
Deferred loan fees	(1,212		)	(1,112		)
Allowance for loan losses	(10,231		)	(9,769		)
Net loans	$	5,198,521		$	3,066,775

As of March 31, 2016 and December 31, 2015, loans with a recorded investment of $1,834,110 and $948,433, 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 NewBridge 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.



	NewBridge Merger on March 1, 2016

Contractually required payments	$	124,808
Nonaccretable difference	(14,878		)
Cash flows expected to be collected at acquisition	109,930
Accretable yield	(13,995		)
Fair value of PCI loans at acquisition	$	95,935

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



	Three months ended March 31,
	2016			2015

Balance, beginning of period	$	22,309		$	25,181
Additions resulting from acquisitions	13,995			—
Accretion of income	(3,295		)	(3,628		)
Reclassifications from nonaccretable difference	713			1,554
Other, net	844			3,257
Balance, end of period	$	34,566		$	26,364

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 $251,286 and $160,500 as of March 31, 2016 and December 31, 2015, respectively.

- 14 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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 NewBridge 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.



	NewBridge Merger on March 1, 2016

Contractually required payments	$	2,257,195
Fair value of acquired loans at acquisition	1,965,201
Contractual cash flows not expected to be collected	26,370

Allowance for Loan Losses

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



	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Residential Real Estate			Consumer Construction			Home Equity			Other Consumer			Total

Three months ended March 31, 2016
Beginning balance	$	3,682		$	2,431		$	866		$	1,257		$	237		$	883		$	413		$	9,769
Charge-offs	(81		)	(961		)	(17		)	(160		)	—			(197		)	(217		)	(1,633		)
Recoveries	4			4			11			182			—			—			19			220
Provision for loan losses	(148		)	1,798			(67		)	(288		)	19			333			228			1,875
Ending balance	$	3,457		$	3,272		$	793		$	991		$	256		$	1,019		$	443		$	10,231

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

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



	March 31, 2016
	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	$	350	$	15	$	—	$	58	$	—	$	—	$	—	$	423
Collectively evaluated for impairment	2,706		3,246		780		800		253		823		422		9,030
Purchased credit-impaired	401		11		13		133		3		196		21		778
Total	$	3,457	$	3,272	$	793	$	991	$	256	$	1,019	$	443	$	10,231

Loans:
Ending balance:
Individually evaluated for impairment	$	8,511	$	2,302	$	234	$	1,681	$	—	$	—	$	—	$	12,728
Collectively evaluated for impairment	2,262,642		804,626		365,347		658,216		286,362		519,707		77,129		4,974,029
Purchased credit-impaired	98,165		21,135		14,666		66,693		2,933		18,817		798		223,207
Total	$	2,369,318	$	828,063	$	380,247	$	726,590	$	289,295	$	538,524	$	77,927	$	5,209,964

- 15 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	December 31, 2015
	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Residential Real Estate		Consumer Construction		Home Equity		Other Consumer		Total
Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	314	$	106	$	—	$	—	$	—	$	67	$	—	$	487
Collectively evaluated for impairment	2,976		2,309		704		837		233		542		359		7,960
Purchased credit-impaired	392		16		162		420		4		274		54		1,322
Total	$	3,682	$	2,431	$	866	$	1,257	$	237	$	883	$	413	$	9,769

Loans:
Ending balance:
Individually evaluated for impairment	$	8,449	$	2,623	$	177	$	3,550	$	417	$	337	$	—	$	15,553
Collectively evaluated for impairment	1,354,977		540,685		330,714		315,030		44,630		274,042		59,983		2,920,061
Purchased credit-impaired	87,750		9,813		14,413		25,068		1,216		3,521		261		142,042
Total	$	1,451,176	$	553,121	$	345,304	$	343,648	$	46,263	$	277,900	$	60,244	$	3,077,656

For non-PCI loans, the evaluation of the adequacy of the allowance for loan losses ("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 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.

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.

- 16 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2016
Non-PCI Loans
Commercial:
Real estate	$	2,221,438	$	28,031	$	21,684	$	—	$	2,271,153
Commercial and industrial	776,040		19,786		11,102		—		806,928
Construction and development	359,801		4,468		1,312		—		365,581
Consumer:
Residential real estate	646,162		6,655		7,080		—		659,897
Construction and development	283,260		3,102		—		—		286,362
Home equity	510,160		4,006		5,541		—		519,707
Other consumer	76,276		292		561		—		77,129
Total	$	4,873,137	$	66,340	$	47,280	$	—	$	4,986,757

PCI Loans
Commercial:
Real estate	$	32,560	$	44,941	$	20,664	$	—	$	98,165
Commercial and industrial	7,871		2,489		10,770		5		21,135
Construction and development	6,202		3,160		5,304		—		14,666
Consumer:
Residential real estate	45,124		10,711		10,858		—		66,693
Construction and development	640		273		1,992		28		2,933
Home equity	14,801		2,198		1,687		131		18,817
Other consumer	552		194		52		—		798
Total	$	107,750	$	63,966	$	51,327	$	164	$	223,207



	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2015
Non-PCI Loans
Commercial:
Real estate	$	1,308,789	$	32,525	$	22,112	$	—	$	1,363,426
Commercial and industrial	523,643		5,436		14,229		—		543,308
Construction and development	326,979		3,298		560		54		330,891
Consumer:
Residential real estate	305,046		5,682		7,852		—		318,580
Construction and development	43,274		666		1,107		—		45,047
Home equity	265,128		4,442		4,809		—		274,379
Other consumer	59,273		233		477		—		59,983
Total	$	2,832,132	$	52,282	$	51,146	$	54	$	2,935,614

PCI Loans
Commercial:
Real estate	$	40,805	$	29,889	$	17,056	$	—	$	87,750
Commercial and industrial	7,913		630		1,270		—		9,813
Construction and development	5,975		3,022		5,416		—		14,413
Consumer:
Residential real estate	11,158		7,134		6,776		—		25,068
Construction and development	314		328		574		—		1,216
Home equity	264		2,016		1,059		182		3,521
Other consumer	8		200		53		—		261
Total	$	66,437	$	43,219	$	32,204	$	182	$	142,042

- 17 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



	30-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total
March 31, 2016
Non-PCI Loans
Commercial:
Real estate	$	8,548	$	4,901	$	13,449	$	2,257,704	$	2,271,153
Commercial and industrial	7,452		7,016		14,468		792,460		806,928
Construction and development	559		872		1,431		364,150		365,581
Consumer:
Residential real estate	6,953		3,174		10,127		649,770		659,897
Construction and development	685		—		685		285,677		286,362
Home equity	6,214		1,980		8,194		511,513		519,707
Other consumer	816		365		1,181		75,948		77,129
Total	$	31,227	$	18,308	$	49,535	$	4,937,222	$	4,986,757



	30-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total
December 31, 2015
Non-PCI Loans
Commercial:
Real estate	$	3,205	$	4,503	$	7,708	$	1,355,718	$	1,363,426
Commercial and industrial	6,004		2,599		8,603		534,705		543,308
Construction and development	68		414		482		330,409		330,891
Consumer:
Residential real estate	7,625		2,876		10,501		308,079		318,580
Construction and development	1,495		946		2,441		42,606		45,047
Home equity	3,857		1,877		5,734		268,645		274,379
Other Consumer	1,015		208		1,223		58,760		59,983
Total	$	23,269	$	13,423	$	36,692	$	2,898,922	$	2,935,614

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



	March 31, 2016				December 31, 2015
	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	$	8,412	$	—	$	6,130	$	—
Commercial and industrial	8,756		50		4,126		552
Construction and development	1,062		—		468		—
Consumer:
Residential real estate	5,679		—		5,353		—
Construction and development	—		—		1,324		—
Home equity	3,641		—		3,245		—
Other consumer	431		86		548		—
Total	$	27,981	$	136	$	21,194	$	552

- 18 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



	Recorded Investment With a Recorded Allowance		Recorded Investment With no Recorded Allowance		Total		Related Allowance		Unpaid Principal Balance
March 31, 2016
Non-PCI Loans
Commercial:
Commercial real estate	$	4,781	$	3,730	$	8,511	$	350	$	9,415
Commercial and industrial	607		1,695		2,302		15		2,579
Construction and development	—		234		234		—		278
Consumer:
Residential real estate	992		689		1,681		58		2,278
Total	$	6,380	$	6,348	$	12,728	$	423	$	14,550

December 31, 2015
Non-PCI Loans
Commercial:
Commercial real estate	$	1,262	$	7,187	$	8,449	$	314	$	8,515
Commercial and industrial	531		2,092		2,623		106		2,695
Construction and development	—		177		177		—		180
Consumer:
Residential real estate	1,465		2,085		3,550		—		3,568
Construction and development	—		417		417		—		417
Home equity	20		317		337		67		359
Total	$	3,278	$	12,275	$	15,553	$	487	$	15,734

The following table provides the average balance of impaired loans for each period presented and interest income recognized during the period in which the loans were considered impaired.



	Three months ended March 31,
	2016				2015
	Average Balance		Interest Income		Average Balance		Interest Income
Non-PCI Loans
Commercial:
Commercial real estate	$	8,480	$	42	$	8,072	$	16
Commercial and industrial	2,463		4		2,613		1
Construction and development	206		—		889		—
Consumer:
Residential real estate	2,616		16		1,132		22
Home equity	169		—		390		—
Total	$	14,143	$	62	$	13,096	$	39

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.

- 19 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	March 31, 2016			December 31, 2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Commercial real estate	$	4,673	7	$	4,684	7
Commercial and industrial	884		10	795		11
Commercial construction	175		2	177		2
Residential real estate	992		2	1,594		4
Home equity	—		—	20		1
Total	$	6,724	21	$	7,270	25

The following tables provide the number and recorded investment of TDRs modified during the periods presented.



	Three months ended March 31,
	2016			2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	124	1	$	—	—
Residential real estate	—		—	398		1
Total	$	124	1	$	398	$	1

One TDR totaling $353 thousand was modified in the twelve months ended March 31, 2016 and subsequently defaulted during the three months ended March 31, 2016. No TDRs that were modified in the twelve months ended March 31, 2015 subsequently defaulted during the three months ended March 31, 2015. The Company does not generally forgive principal or unpaid interest when restructuring loans. Therefore, the recorded investment in TDRs during 2016 and 2015 did not change following the modifications.

NOTE F - PURCHASED ACCOUNTS RECEIVABLE

The Company invests in short-term trade accounts receivable, which are purchased on an exchange, using qualified intermediaries. These receivables have repayment terms of less than one year. Income from purchased accounts receivable, which is recorded in other non-interest income, totaled $168 and $119, respectively, in the three months ended March 31, 2016 and 2015.

Purchased accounts receivable include delinquent short-term receivables of $7,900 at March 31, 2016 that are due from a U.S. bioenergy company that produces ethanol, with the debt guaranteed by its Spanish parent company. The Spanish parent company commenced pre-insolvency proceedings in Spain during November, 2015. An involuntary bankruptcy petition was filed against the U.S. subsidiary in the District of Kansas on February 11, 2016. On February 24, 2016, a related U.S. subsidiary of the Spanish parent company filed a voluntary Chapter 11 bankruptcy petition in the Eastern District of Missouri, along with various affiliates, including the U.S. subsidiary, with joint administration requested. On February 29, 2016, the Kansas case for the U.S. subsidiary was converted to a voluntary Chapter 11 case, with venue transferred to the Eastern District of Missouri on March 1, 2016. On March 10, 2016, the Spanish parent company announced the basis of a debt restructuring agreement that, among other things, will give selected financial creditors of the Spanish parent a controlling stake in the company in return for a 70 percent reduction in the Spanish parent company’s outstanding debt as well as $2,000,000 in additional loans. Under governing law, the parent company needs to present a restructuring plan to a Spanish court to avoid insolvency proceedings. Any such transaction would also require approval of at least 75 percent of creditors. On March 28, 2016, creditors consented to a standstill agreement for seven months to give the company time to complete its restructuring. At this time, management lacks sufficient information to determine the extent of loss on the investment in purchased accounts receivable in the pending bankruptcy case for the U.S. subsidiary. Management similarly lacks sufficient information to determine the extent of recovery possible on the guarantee by the Spanish parent company. There was no contingency accrual related to this potential exposure as of March 31, 2016.

- 20 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE G – LOAN SERVICING

Mortgage Loan Servicing

The Company retains the servicing rights on mortgage loans sold. The unpaid principal balance of loans serviced for others was $584,440 and $563,802 as of March 31, 2016 and December 31, 2015, 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 $358 and $293, respectively, in the three months ended March 31, 2016 and 2015.

The following table summarizes MSR activity for the periods presented.



	Three months ended March 31,
	2016			2015

Balance at beginning of period before valuation allowance	$	5,027		$	4,284
Additions	367			395
Repayments	(84		)	(129		)
Amortization	(200		)	(182		)
Balance at end of period before valuation allowance	5,110			4,368
Valuation allowance at end of period	(53		)	(255		)
Balance at end of period after valuation allowance	$	5,057		$	4,113

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

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

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



	March 31, 2016			December 31, 2015

Composition of mortgage loans serviced for others:
Fixed rate loans	99.90		%	99.90		%
Adjustable rate loans	0.10		%	0.10		%
Total	100.00		%	100.00		%

Weighted average life (years)	6.07			6.60
Prepayment speed	11.3		%	9.98		%
Discount rate	9.46		%	9.66		%
Effect on fair value due to change in interest rates:
+ 0.25%	$	492		$	421
+ 0.50%	864			660
- 0.25%	(536		)	(599		)
- 0.50%	(955		)	(1,104		)

- 21 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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 $213,056 and $205,879 as of March 31, 2016 and December 31, 2015, 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 $524 and $371, respectively, in the three months ended March 31, 2016 and 2015.

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



	Three months ended March 31,
	2016			2015

Balance at beginning of period	$	4,485		$	3,081
Fair value of SBA servicing assets acquired in NewBridge Merger	16			—
Additions	597			535
Amortization	(397		)	(96		)
Balance at end of period	$	4,701		$	3,520

The fair value of the servicing asset is compared to the amortized basis when certain triggering events occur. If the amortized basis exceeds the fair value, the asset is considered impaired and is written down to fair value through a valuation allowance on the asset and a charge against SBA income. There was no valuation allowance recorded on the SBA-guaranteed loan servicing asset as of March 31, 2016 or December 31, 2015.

NOTE H – 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.

- 22 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	March 31, 2016		December 31, 2015

Lending commitments:
Commitments to extend credit	$	1,468,090	$	799,058
Commercial letters of credit	22,108		16,342
Other commitments:
Standby letters of credit issued by the FHLB on the Bank's behalf	46,000		10,000

The reserve for unfunded commitments was $1,257 and $603 as of March 31, 2016 and December 31, 2015, respectively, which was recorded in other liabilities on the consolidated balance sheets.

NOTE I – 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

The table below provides a summary of forward starting pay fixed interest rate swaps that are being used to hedge short-term FHLB advances. These interest rate swaps 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 exposure to variability in interest payments attributable to changes in the three-month LIBOR component of three-month FHLB advances. 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 interest rate swap.

Interest Rate Swap

Notional Amount

Effective Start Date

Maturity Date

Pay Fixed Rate

Receive Floating Rate

FHLB Advance Swap 1

25,000

February 5, 2016

February 5, 2021

2.703

3-Month LIBOR

FHLB Advance Swap 2

50,000

August 5, 2016

August 5, 2021

2.882

3-Month LIBOR

FHLB Advance Swap 3

25,000

October 5, 2017

October 5, 2027

2.540

3-Month LIBOR

FHLB Advance Swap 4

25,000

March 5, 2018

March 5, 2028

2.576

3-Month LIBOR

125,000

The following table provides information on a receive fixed interest rate swap that is being used to hedge certain floating rate loans. This interest rate swap is expected to be highly effective and is accounted for as a cash flow hedge with the change in fair value recognized in OCI. The purpose of this cash flow hedge is to reduce the Company's exposure to variability in interest receipts attributable to changes in one-month LIBOR, which is the index underlying the hedged floating rate loans.

Interest Rate Swap

Notional Amount

Effective Start Date

Maturity Date

Receive Fixed Rate

Pay Floating Rate

Loan Swap

40,000

October 1, 2015

October 1, 2020

1.23

1-Month LIBOR

In 2015, the Company terminated certain pay fixed interest rate swaps. For terminated interest rate swaps, the changes in fair value that were recorded in accumulated other comprehensive income ("AOCI") prior to termination will be amortized to yield over the period the hedged transactions impact earnings. The hedged transactions are currently outstanding and are expected to remain outstanding through the full original term of the interest rate swaps. The following table summarizes information regarding the terminated interest rate swaps.

- 23 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Terminated Interest Rate Swap

Notional Amount

Original Effective Start Date

Original Maturity Date

Date Terminated

Unamortized Pre-Tax Loss in AOCI as of March 31, 2016

Terminated Swap 1

25,000

April 6, 2015

April 5, 2020

March 27, 2015

Terminated Swap 2

25,000

May 5, 2015

May 5, 2020

March 27, 2015

Terminated Swap 3

25,000

June 5, 2015

June 5, 2020

March 27, 2015

Terminated Swap 4

25,000

August 5, 2015

August 5, 2020

March 27, 2015

774

Terminated Swap 5

25,000

October 1, 2014

August 31, 2017

October 7, 2015

156

Terminated Swap 6

25,000

October 16, 2014

August 16, 2018

October 7, 2015

345

150,000

1,481

Interest Rate Caps

In previous years, the Company purchased interest rate caps that are being used to hedge a floating rate subordinated term loan and certain floating rate trust preferred securities ("TRUPs"). 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 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

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.

- 24 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



		March 31, 2016				December 31, 2015
	Balance Sheet Location	Notional Amount		Fair Value		Notional Amount		Fair Value

Loans:
Receive fixed interest rate swap	Other assets	$	40,000	$	457	$	—	$	—
Receive fixed interest rate swap	Other liabilities	—		—		40,000		493

FHLB advances:
Interest rate swaps	Other liabilities	125,000		9,095		125,000		3,822

Subordinated term loan:
Interest rate cap	Other assets	7,500		29		7,500		61

TRUPs:
Interest rate caps	Other assets	43,000		197		43,000		482

Mortgage loan commitments:
Interest rate lock commitments	Other assets	56,842		1,125		30,313		408
Forward sale commitments	Other assets	—		—		52,862		106
Forward sale commitments	Other liabilities	78,238		117		—		—

Activity in AOCI related to cash flow hedges is presented in Note K. If a cash flow hedge ceases to be highly effective or is terminated, then the hedge is dedesignated, and effective changes in value that are recorded in AOCI before dedesignation are amortized to yield over the period the forecasted hedged transactions impact earnings. If the transaction is no longer probable of occurring during the forecast period or within a short period thereafter, hedge accounting is ceased and any gain or loss in AOCI is reported in earnings immediately.

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

NOTE J – 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.



	Three months ended March 31,
	2016			2015

Level 3 AFS securities at beginning of period	$	6,728		$	11,290
Purchases	—			—
Sales, calls or maturities	—			—
Changes in unrealized gains and losses	(234		)	90
Level 3 AFS securities at end of period	$	6,494		$	11,380

- 25 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

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

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



	Three months ended March 31,
	2016			2015

Interest rate lock commitments at beginning of period	$	408		$	342
Issuances	2,761			1,465
Settlements	(2,044		)	(1,171		)
Interest rate lock commitments at end of period	$	1,125		$	636

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.

- 26 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



	Total		Level 1		Level 2		Level 3
March 31, 2016
Measured at fair value on a recurring basis:
Securities available for sale:
GSE obligations	$	71,912	$	—	$	71,912	$	—
SBA-guaranteed securities	12,569		12,569		—		—
Mortgage-backed securities issued by GSE	573,687		—		573,687		—
Municipal bonds	111,625		—		110,509		1,116
Corporate bonds	244,470		2,477		236,615		5,378
Collateralized loan obligations	50,080		—		50,080		—
Non-agency CMBS	26,419		—		26,419		—
Certificates of deposit	1,242		1,242		—		—
Equity securities	11,440		11,440		—		—
SBA-guaranteed loans held for sale	27,017		—		27,017		—
SBA loans held for investment	40,630		—		40,630		—
Derivative assets	1,808		—		683		1,125
Derivative liabilities	9,212		—		9,212		—

Measured at fair value on a non-recurring basis:
Impaired loans	$	12,305	$	—	$	—	$	12,305
Foreclosed assets	18,435		—		—		18,435



	Total		Level 1		Level 2		Level 3
December 31, 2015
Measured at fair value on a recurring basis:
Securities available for sale:
GSE obligations	$	5,982	$	—	$	5,982	$	—
SBA-guaranteed securities	12,176		12,176		—		—
Mortgage-backed securities issued by GSE	435,625		—		435,625		—
Municipal bonds	55,800		—		54,692		1,108
Corporate bonds	123,532		2,485		115,427		5,620
Non-agency RMBS	4,963		—		4,963		—
Non-agency CMBS	3,663		—		3,663		—
Certificates of deposit	245		245		—		—
Equity securities	1,626		1,626		—		—
SBA-guaranteed loans held for sale	23,664		—		23,664		—
SBA loans held for investment	20,423		—		20,423		—
Derivative assets	996		—		654		342
Derivative liabilities	4,376		—		4,376		—

Measured at fair value on a non-recurring basis:
Impaired loans	$	15,066	$	—	$	—	$	15,066
Foreclosed assets	15,346		—		—		15,346

- 27 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Quantitative Information About Level 3 Fair Value Measurements

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



				Fair Value
	Valuation Technique	Unobservable Input	Range	March 31, 2016		December 31, 2015
Recurring measurements:
Investment securities	Pricing model	Illiquidity or credit factor in discount rates	1-2%	$	6,494	$	5,620

Interest rate lock commitments	Pricing model	Pull through rates	80-95%	1,125		342

Nonrecurring measurements:
Impaired loans	Discounted appraisals	Collateral discounts	15-50%	12,305		15,066
	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%	18,435		15,346

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.

- 28 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

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

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

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

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

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



	March 31, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	110,815	$	110,815	$	110,815	$	—	$	—
Investment securities available for sale	1,103,444		1,103,444		27,728		1,069,222		6,494
Investment securities held to maturity	39,071		40,682		—		40,682		—
Loans held for sale	53,820		53,820		—		53,820		—
Loans, net	5,198,521		5,254,109		—		40,630		5,213,479
Purchased accounts receivable	57,175		57,175		—		57,175		—
Federal Home Loan Bank stock	41,851		41,851		—		41,851		—
Derivative assets	1,808		1,808		—		683		1,125
Accrued interest receivable	19,812		19,812		—		19,812		—

Financial liabilities:
Deposits	5,349,712		5,354,109		—		5,354,109		—
Short-term borrowings	761,243		761,243		—		—		761,243
Long-term debt	198,320		204,279		—		—		204,279
Derivative liabilities	9,212		9,212		—		9,212		—
Accrued interest payable	2,191		2,191		—		2,191		—



	December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	111,918	$	111,918	$	111,918	$	—	$	—
Investment securities available for sale	689,132		689,132		16,532		665,872		6,728
Investment securities held to maturity	39,182		40,500		—		40,500		—
Loans held for sale	47,287		47,287		—		47,287		—
Loans, net	3,066,775		3,092,461		—		23,664		3,068,797
Purchased accounts receivable	52,688		52,688		—		52,688		—
Federal Home Loan Bank stock	24,844		24,844		—		24,844		—
Derivative assets	996		996		—		588		408
Accrued interest receivable	12,695		12,695		—		12,695		—

Financial liabilities:
Deposits	3,310,297		3,310,306		—		3,310,306		—
Short-term borrowings	375,500		375,500		—		—		375,500
Long-term debt	194,967		198,928		—		—		198,928
Derivative liabilities	4,376		4,376		—		4,376		—
Accrued interest payable	2,550		2,550		—		2,550		—

- 29 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

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



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

Balance at January 1, 2016	$	(3,321	)	$	(4,196	)	$	(7,517	)
Other comprehensive income (loss) before reclassifications	4,509			(2,868		)	1,641
Reclassification of gains on AFS securities	(81		)	—			(81		)
Reclassification of amounts into interest expense from termination of interest rate swaps	—			70			70
Net other comprehensive income (loss) during period	4,428			(2,798		)	1,630
Balance at March 31, 2016	$	1,107		$	(6,994	)	$	(5,887	)

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

- 30 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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 North-Carolina chartered commercial bank. 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-month periods ended March 31, 2016 and 2015, as well as the financial condition of the Company as of March 31, 2016 and December 31, 2015. 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 first quarter of 2016:


•	On March 1, 2016, the Company completed its previously announced acquisition of NewBridge Bancorp and currently operates as the largest community bank based in North Carolina with $7.4 billion in total assets, $5.3 billion in deposits, and $985 million in shareholders' equity.


•	Net income available to common shareholders totaled $7.8 million, or $0.20 per diluted share, in Q1 2016 compared to $0.37 per diluted share in Q4 2015 and $0.30 per diluted share in Q1 2015.


•	Net operating earnings available to common shareholders, which excludes certain non-operating income and expenses, improved to $14.8 million, or $0.39 per diluted share, in Q1 2016 from $12.6 million, or $0.40 per diluted share, in Q4 2015 and $10.3 million, or $0.33 per diluted share, in Q1 2015.


•	Annualized net operating return on average tangible common equity was 13.14 percent in Q1 2016 compared to 13.14 percent in Q4 2015 and 11.94 in Q1 2015. Annualized net operating return on average assets was 1.09 percent in Q1 2016 compared to 1.14 percent in Q4 2015 and 1.04 percent in Q1 2015.


•	Operating efficiency, the ratio of operating expenses to total operating revenues, was 58.1 percent in Q1 2016 compared to 57.5 percent in Q4 2015 and 62.1 percent in Q1 2015.


•	Asset quality improved following the acquisition of NewBridge Bancorp, as nonperforming loans to total loans declined to 0.83 percent as of March 31, 2016 from 1.06 percent as of December 31, 2015 and 1.29 percent as of March 31, 2015.

Mergers and Acquisitions

Acquisition of NewBridge Bancorp

On March 1, 2016, the Company completed its acquisition of NewBridge Bancorp (“NewBridge”), pursuant to an Agreement and Plan of Merger, dated October 12, 2015 (the “NewBridge Merger Agreement”). Pursuant to the NewBridge Merger Agreement, each share of NewBridge Class A common stock and Class B common stock was converted into the right to receive 0.50 shares of the common stock of the Company (the "NewBridge Merger"). Based on the Company's stock price at the closing date of the NewBridge Merger, purchase consideration totaled $431.3 million. Immediately following the merger of NewBridge into Yadkin, NewBridge Bank, a North Carolina-chartered commercial bank, merged with and into Yadkin Bank, with Yadkin Bank surviving such merger.

- 31 -

The Company is currently the fourth largest bank headquartered in North Carolina and ranks first by North Carolina deposit market share among community banks. The Company now operates 110 full-service banking locations in its North Carolina and South Carolina banking network and has a significant presence in all major North Carolina markets, including Charlotte, the Raleigh-Durham-Chapel Hill Triangle, the Piedmont Triad, and Wilmington. The Company plans to complete systems integration in September 2016. The NewBridge Merger added $2.1 billion in loans, $2.0 billion in deposits, and resulted in significant changes across most balance sheet categories. Additionally, since the merger was effective on March 1, 2016, the Company's results of operations for the first quarter reflect the impact of NewBridge for only one month. As a result, the Company's first quarter 2016 financial results may not be comparable to financial results in prior periods.

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) taxable-equivalent net interest income, (vii) taxable-equivalent net interest margin, (viii) core net interest income, (ix) core net interest margin, (x) adjusted allowance for loan losses to loans; and (xi) 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.



	Three months ended March 31,
(Dollars in thousands, except per share data)	2016			2015

Operating Earnings
Net income	$	7,800		$	10,250
Securities gains	(130		)	(1		)
Merger and conversion costs	10,335			220
Restructuring charges	21			907
Income tax effect of adjustments	(3,217		)	(431		)
Net operating earnings (non-GAAP)	14,809			10,945
Dividends on preferred stock	—			639
Net operating earnings available to common shareholders (Non-GAAP)	$	14,809		$	10,306

Net operating earnings per common share:
Basic (Non-GAAP)	$	0.39		$	0.33
Diluted (Non-GAAP)	0.39			0.33

Pre-Tax, Pre-Provision Operating Earnings
Net income	$	7,800		$	10,250
Provision for loan losses	1,875			961
Income tax expense	4,920			5,846
Pre-tax, pre-provision income	14,595			17,057
Securities gains	(130		)	(1		)
Merger and conversion costs	10,335			220
Restructuring charges	21			907
Pre-tax, pre-provision operating earnings (Non-GAAP)	$	24,821		$	18,183

- 32 -



	Three months ended March 31,
(Dollars in thousands, except per share data)	2016			2015

Operating Non-Interest Income
Non-interest income	$	11,354		$	8,839
Securities gains	(130		)	(1		)
Operating non-interest income (Non-GAAP)	$	11,224		$	8,838

Operating Non-Interest Expense
Non-interest expense	$	44,804		$	30,958
Merger and conversion costs	(10,335		)	(220		)
Restructuring charges	(21		)	(907		)
Operating non-interest expense (Non-GAAP)	$	34,448		$	29,831

Operating Efficiency Ratio
Efficiency ratio	75.43		%	64.48		%
Effect to adjust for securities gains	0.16			—
Effect to adjust for restructuring charges	(0.04		)	(1.89		)
Effect to adjust for merger and conversion costs	(17.43		)	(0.46		)
Operating efficiency ratio (Non-GAAP)	58.12		%	62.13		%

Taxable-Equivalent Net Interest Income
Net interest income	$	48,045		$	39,176
Taxable-equivalent adjustment	442			233
Taxable-equivalent net interest income (Non-GAAP)	$	48,487		$	39,409

Core Net Interest Income and Net Interest Margin (Annualized)
Taxable-equivalent net interest income (Non-GAAP)	$	48,487		$	39,409
Acquisition accounting amortization / accretion adjustments related to:
Loans	(3,565		)	(4,451		)
Deposits	(553		)	(1,011		)
Borrowings and debt	119			100
Income from issuer call of debt security	(165		)	—
Core net interest income (Non-GAAP)	$	44,323		$	34,047

Divided by: average interest-earning assets	$	4,812,350		$	3,690,747
Taxable-equivalent net interest margin (Non-GAAP)	4.05		%	4.33		%
Core taxable-equivalent net interest margin (Non-GAAP)	3.70			3.74

Analysis of Results of Operations

Net income available to common shareholders was $7.8 million, or $0.20 per diluted common share, in the first quarter of 2016 compared to $9.6 million, or $0.30 per diluted common share, in the first quarter of 2015. Net operating earnings available to common shareholders, which excludes certain nonrecurring income and expenses, improved to $14.8 million in the first quarter of 2016 from $10.3 million in the comparable period of 2015. Similarly, pre-tax, pre-provision operating earnings increased to $24.8 million in the first quarter of 2016 from $18.2 million in the same period of 2015.

Net Interest Income

Net interest income was $48.0 million in the first quarter of 2016, an increase from $39.2 million in the first quarter of 2015. This increase was due to the impact of earning assets acquired in the NewBridge Merger and organic loan growth. Net interest margin declined from 4.33 percent in the first quarter of 2015 to 4.05 percent in the first quarter of 2016, primarily due to lower-yielding acquired NewBridge loans. Core net interest margin, which excludes the impact of accretion income on net interest income, was 3.70 percent in the first quarter of 2016 compared to 3.74 percent in the first quarter of 2015.

Net accretion income on acquired loans totaled $3.6 million in the first quarter of 2016, which consisted of $1.1 million of net accretion on purchased credit-impaired (“PCI”) loans and $2.4 million of accretion income on purchased non-impaired loans. Net accretion income on acquired loans in the first quarter of 2015 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 $767 thousand of accelerated accretion due to principal prepayments in the first quarter of 2016 compared to $906 thousand in the first quarter of 2015.

- 33 -

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



	Three months ended March 31, 2016						Three months ended March 31, 2015
(Dollars in thousands)	Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*

Assets
Loans (1)	$	3,843,108	$	48,065	5.03	%	$	2,924,287	$	39,796	5.52	%
Investment securities (2)	905,582		6,460		2.87		706,888		4,229		2.43
Federal funds and other	63,660		103		0.65		59,572		50		0.34
Total interest-earning assets	4,812,350		54,628		4.57	%	3,690,747		44,075		4.84	%
Goodwill	216,758						152,152
Other intangibles, net	20,032						16,359
Other non-interest-earning assets	437,297						391,489
Total assets	$	5,486,437					$	4,250,747

Liabilities and Equity
Interest-bearing demand	$	741,589	303		0.16	%	$	470,919	160		0.14	%
Money market and savings	1,202,797		776		0.26		1,003,156		716		0.29
Time	1,196,072		2,387		0.80		1,089,950		2,013		0.75
Total interest-bearing deposits	3,140,458		3,466		0.44		2,564,025		2,889		0.46
Short-term borrowings	475,267		808		0.68		288,000		289		0.41
Long-term debt	252,442		1,867		2.97		150,450		1,488		4.01
Total interest-bearing liabilities	3,868,167		6,141		0.64	%	3,002,475		4,666		0.63	%
Noninterest-bearing deposits	864,192						657,702
Other liabilities	43,786						26,425
Total liabilities	4,776,145						3,686,602
Shareholders’ equity	710,292						564,145
Total liabilities and shareholders' equity	$	5,486,437					$	4,250,747

Net interest income, taxable equivalent			$	48,487					$	39,409
Interest rate spread (3)					3.93	%					4.21	%
Tax equivalent net interest margin (4)					4.05	%					4.33	%

Percentage of average interest-earning assets to average interest-bearing liabilities					124.41	%					122.92	%
* Taxable equivalent basis


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


(2)	Investment securities include investments in FHLB stock. Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a 35.0 percent federal income tax rate and a 4.0 percent state income tax rate. The taxable-equivalent adjustment was $442 thousand and $233 thousand for the 2016 and 2015 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.

- 34 -

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



	Change from Q1 2015 to Q1 2016 due to:
(Dollars in thousands)	Volume		Yield/Cost			Total Change
Interest earning assets:
Loans	$	11,720	$	(3,451	)	$	8,269
Investment securities	1,329		902			2,231
Federal funds and other interest-earning assets	3		50			53
Total interest-earning assets	13,052		(2,499		)	10,553

Interest-bearing liabilities:
Interest-bearing demand	111		32			143
Money market and savings	133		(73		)	60
Time deposits	210		164			374
Total interest-bearing deposits	454		123			577
Short-term borrowings	255		264			519
Long-term debt	827		(448		)	379
Total interest-bearing liabilities	1,536		(61		)	1,475
Change in net interest income, taxable equivalent	$	11,516	$	(2,438	)	$	9,078

Provision for Loan Losses

The following table summarizes the changes in the Company's ALLL for the quarters presented.



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

1Q 2016:
Balance at January 1, 2016	$	8,447		$	1,322		$	9,769
Net charge-offs	(1,413		)	—			(1,413		)
Provision for loan losses	2,419			(544		)	1,875
Balance at March 31, 2016	$	9,453		$	778		$	10,231

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

Provision for loan losses was $1.9 million in the first quarter of 2016 compared to $961 thousand in the first quarter of 2015. The higher provision for loan losses reflected higher provision expense on non-PCI loans, net of a provision credit on PCI loans. Provision expense on non-PCI loans increased due to higher net charge-offs and net loan growth. Net charge-offs represented an annualized 0.15 percent of average loans in the first quarter of 2016 compared to an annualized 0.09 percent of average loans in the first quarter of 2015. The current period provision credit result from improving cash flows on certain of the Company's PCI loan pools.

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

- 35 -

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

Results of the Company’s cash flow re-estimation for PCI loans in the first quarter of 2016 are summarized below.



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

Loan pools with cash flow improvement	$	(553	)	$	1,281		7.43	%	8.14	%
Loan pools with cash flow decrease	9			(330		)	19.97	%	17.49	%
Total	$	(544	)	$	951		8.83	%	9.18	%

Non-Interest Income

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



	Three months ended March 31,
(Dollars in thousands)	2016		2015

Service charges and fees on deposit accounts	$	4,212	$	3,253
Government-guaranteed lending	3,072		2,873
Mortgage banking	1,623		1,322
Bank-owned life insurance	552		472
Gains on sales of available for sale securities	130		1
Gain on sale of branch	—		—
Other	1,765		918
Total non-interest income	$	11,354	$	8,839

Non-interest income totaled $11.4 million in the first quarter of 2016, an increase from $8.8 million in the first quarter of 2015. Service charges and fees on deposit accounts increased by $959 thousand primarily due to the addition of acquired NewBridge deposit accounts. Government-guaranteed, small business lending income, which includes gains on sales of the guaranteed portion of certain SBA loans originated by the Company as well as servicing fees on previously sold SBA loans, increased by $199 thousand in the quarter. Mortgage banking income improved by $301 thousand due to higher production volumes. Mortgage production volumes were benefited by strong local housing markets, the addition of NewBridge mortgage bankers, and a favorable rate environment for refinance activity. Other non-interest income increased $847 thousand, primarily due to improved wealth and brokerage income.

Non-Interest Expense

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



	Three months ended March 31,
(Dollars in thousands)	2016		2015

Salaries and employee benefits	$	18,040	$	15,202
Occupancy and equipment	5,535		4,799
Data processing	2,140		1,888
FDIC deposit insurance premiums	821		714
Professional services	1,108		1,092
Foreclosed asset expense, net	311		188
Loan, collection, and repossession expense	1,133		936
Merger and conversion costs	10,335		220
Restructuring charges	21		907
Amortization of other intangible assets	1,053		815
Other	4,307		4,197
Total non-interest expense	$	44,804	$	30,958

- 36 -

Non-interest expense totaled $44.8 million in the first quarter of 2016, an increase from $31.0 million in the first quarter of 2015. The increase in expenses was primarily due to a $10.1 million increase in merger and conversion costs, which includes professional fees, personnel costs, and other expenses required to close the NewBridge Merger as well as costs to convert data processing, technology, signage, and branch network to the Company's integrated platform. Operating non-interest expense, which excludes merger and conversion costs and restructuring charges, increased from $29.8 million in the first quarter of 2015 to $34.4 million in the first quarter of 2016. Salaries and employee benefits, occupancy and equipment, data processing, and other non-interest expense categories all increased as a result of the NewBridge Merger, which added employees, branch and other facilities, and equipment to the Company's expense base.

Operating efficiency ratio, which excludes merger and conversion costs and restructuring charges, improved from 62.1 percent in the first quarter of 2015 to 58.1 percent in the first quarter of 2016. The Company has made significant progress towards integrating NewBridge onto its integrated platform based upon the merger plan. Additionally, execution of the branch consolidation plan (12 branch closures scheduled in Q2 and Q3 2016), closures of two significant NewBridge non-branch locations (scheduled for Q3 2016), and completion of the systems integration (scheduled for September 2016) should enable the Company to fully realize the cost savings and operational leverage that the NewBridge Merger provides. Management believes the majority of projected cost savings will be achieved by the end of Q3 2016 with remaining savings to be realized in Q4 2016 and Q1 2017.

Income Taxes

Income tax expense was $4.9 million in the first quarter of 2016 compared to $5.8 million in the first quarter of 2015. The Company's effective tax rate totaled 38.7 percent in the first quarter of 2016 compared to 36.3 percent in the first quarter of 2015. The higher effective tax rate during the first quarter of 2016 resulted from various nondeductible merger expenses related to the NewBridge Merger.

Analysis of Financial Condition

The NewBridge Merger significantly impacted each major component of the Company's balance sheet. The following table summarizes the year-to-date changes in major balance sheet components, including and excluding the acquired NewBridge balances.



(Dollars in thousands)	March 31, 2016			December 31, 2015			YTD Change			Acquired NewBridge Balances		YTD Change Excluding Acquired NewBridge Balances

Cash and cash equivalents	$	110,815		$	111,918		$	(1,103	)	$	45,143	$	(46,246	)
Investment securities	1,142,515			728,314			414,201			441,587		(27,386		)
Loans held for sale	53,820			47,287			6,533			13,661		(7,128		)
Loans	5,208,752			3,076,544			2,132,208			2,061,136		71,072
Allowance for loan losses	(10,231		)	(9,769		)	(462		)	—		(462		)
Other assets	915,339			519,850			395,489			404,421		(8,932		)
Total assets	$	7,421,010		$	4,474,144		$	2,946,866		$	2,965,948	$	(19,082	)

Deposits	$	5,349,712		$	3,310,297		$	2,039,415		$	1,990,109	$	49,306
Short-term borrowings	761,243			375,500			385,743			472,335		(86,592		)
Long-term debt	198,320			194,967			3,353			31,724		(28,371		)
Other liabilities	127,093			30,831			96,262			40,444		55,818
Total liabilities	6,436,368			3,911,595			2,524,773			2,534,612		(9,839		)
Shareholders' equity	984,642			562,549			422,093			431,335		(9,242		)
Total liabilities and shareholders' equity	$	7,421,010		$	4,474,144		$	2,946,866		$	2,965,947	$	(19,081	)

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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.

The amortized cost and fair value of the available-for-sale securities portfolio were both $1.10 billion as of March 31, 2016, compared to $694.5 million and $689.1 million, respectively, as of December 31, 2015. The amortized cost and fair value of the held-to-maturity securities portfolio was $39.1 million and $40.7 million, respectively, as of March 31, 2016 compared to $39.2 million and $40.5 million, respectively, as of December 31, 2015.

Marketable investment securities accounted for as available-for-sale are recorded at fair value with unrealized gains and losses charged to accumulated other comprehensive income. As of March 31, 2016 and December 31, 2015, the available-for-sale securities portfolio had $5.6 million and $2.2 million, respectively, of unrealized gains and $3.9 million and $7.6 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.



	March 31, 2016				December 31, 2015
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Securities available for sale:
GSE obligations	$	71,882	$	71,912	$	5,980	$	5,982
SBA-guaranteed securities	12,452		12,569		12,114		12,176
Mortgage-backed securities issued by GSEs	571,851		573,687		440,654		435,625
Municipal bonds	110,458		111,625		55,402		55,800
Corporate bonds	244,781		244,470		123,669		123,532
Collateralized loan obligations	50,516		50,080		50,538		50,483
Non-agency RMBS	—		—		3,528		3,663
Non-agency CMBS	26,382		26,419		—		—
Certificates of deposit	1,242		1,242		245		245
Equity securities	12,114		11,440		2,381		1,626
Total securities available for sale	$	1,101,678	$	1,103,444	$	694,511	$	689,132

Securities held to maturity:
Municipal bonds	$	39,071	$	40,682	$	39,182	$	40,500

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The table below summarizes the amortized cost of debt securities in the investment portfolio as of March 31, 2016, 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	$	—	—	%	$	14,015	1.38	%	$	57,897	2.18	%	$	—	—	%	$	71,912	2.02	%
SBA-guaranteed securities	—		—	%	1,330		3.20	%	11,239		2.56	%	—		—	%	12,569		2.63	%
Mortgage-backed securities	7,518		3.26	%	285,546		2.00	%	258,585		2.42	%	48,457		2.96	%	600,106		2.28	%
Municipal bonds (1)	9,792		3.72	%	46,979		2.59	%	44,241		2.81	%	10,613		6.31	%	111,625		3.13	%
Corporate bonds	72,196		2.39	%	114,950		2.86	%	52,700		4.79	%	4,624		3.44	%	244,470		3.15	%
Collateralized loan obligations	—		—	%	—		—	%	50,080		2.75	%	—		—	%	50,080		2.75	%
Certificates of deposit	1,242		0.50	%	—		—	%	—		—	%	—		—	%	1,242		0.50	%
Total debt securities available for sale	$	90,748	2.58	%	$	462,820	2.26	%	$	474,742	2.73	%	$	63,694	3.55	%	$	1,092,004	2.57	%

Securities held to maturity:
Municipal bonds (1)	$	—	—	%	$	31,300	3.84	%	$	4,061	4.11	%	$	3,710	5.78	%	$	39,071	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 March 31, 2016, the weighted average life of the Company's debt securities was 4.5 years, and the weighted average effective duration was 2.8 years.

The Company owned $41.9 million and $24.8 million of Federal Home Loan Bank ("FHLB") stock as of March 31, 2016 and December 31, 2015, 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 $5.21 billion as of March 31, 2016, which was an increase of $2.13 billion from December 31, 2015. Excluding acquired NewBridge loans, the increase in loan balances was $71.1 million in the quarter. The table below provides a summary of the Company’s loan portfolio by loan type.

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Composition of Loan Portfolio:	March 31, 2016		December 31, 2015
Commercial:
Commercial real estate	45.5	%	46.8	%
Commercial and industrial	15.9		16.2
Construction and development	7.3		12.8
Consumer:
Residential real estate	13.9		12.4
Construction and development	5.6		1.0
Home equity	10.3		9.5
Consumer	1.5		1.3
Total	100.0	%	100.0	%

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



	March 31, 2016
(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	$	111,652	$	45,046	$	18,162	$	37,725	$	16,474	$	1,333	$	6,731	$	237,123
1-5 years	1,183,309		228,667		71,998		202,690		70,756		2,221		26,559		1,786,200
After 5 years	478,356		54,975		25,807		219,580		14,329		1,692		29,169		823,908
Total	1,773,317		328,688		115,967		459,995		101,559		5,246		62,459		2,847,231
Variable Rate: (1)
1 year or less	78,171		187,970		201,252		10,781		55,577		15,622		12,522		561,895
1-5 years	382,690		233,451		54,713		25,443		111,915		94,829		1,052		904,093
After 5 years	135,140		77,954		8,315		230,371		20,244		422,827		1,894		896,745
Total	596,001		499,375		264,280		266,595		187,736		533,278		15,468		2,362,733
Total loans	$	2,369,318	$	828,063	$	380,247	$	726,590	$	289,295	$	538,524	$	77,927	$	5,209,964

(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.

Loans acquired with evidence of credit deterioration since origination are accounted for as PCI loans. Where possible, PCI loans with common risk characteristics are grouped into pools at acquisition. For PCI loan pools, the excess of the cash flows initially expected to be collected over the fair value of the loans at the acquisition date (i.e., the accretable yield) is accreted into interest income over the estimated remaining life of the PCI loans using the effective yield method, provided that the timing and the amount of future cash flows is reasonably estimable. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. The recorded investment in PCI loans as of March 31, 2016 totaled $223.2 million, of which $222.3 million were grouped into pools and $914 thousand were accounted for on an individual loan basis. The recorded investment in PCI loans as of December 31, 2015 totaled $142.0 million, of which $141.2 million were grouped into pools and $855 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.

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Nonperforming Assets

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

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

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

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

Loans, excluding pooled PCI loans, are classified as troubled debt restructurings (“TDR”) by the Company when certain modifications are made to the loan terms and concessions are granted to the borrowers due to financial difficulty experienced by those borrowers. The Company grants concessions by (1) reduction of the stated interest rate for the remaining original life of the debt or (2) extension of the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk. The Company does not generally grant concessions through forgiveness of principal or accrued interest. The Company’s policy with respect to accrual of interest on loans restructured in a TDR follows relevant supervisory guidance. That is, if a borrower has 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 0.83 percent as of March 31, 2016, compared to 1.06 percent as of December 31, 2015 and 1.29 percent as of March 31, 2015. Total nonperforming assets as a percentage of total assets was 0.83 percent as of March 31, 2016 compared to 1.07 percent as of December 31, 2015 and 1.17 percent as of March 31, 2015. 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.

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The following table summarizes the Company's nonperforming assets as of the dates presented.



(Dollars in thousands)	March 31, 2016		December 31, 2015

Nonaccrual loans
Commercial:
Commercial real estate	$	8,412	$	6,130
Commercial and industrial	8,756		4,126
Construction and development	1,062		468
Consumer:
Residential real estate	5,679		5,353
Construction and development	—		1,324
Home equity	3,641		3,245
Other consumer	431		548
Total nonaccrual loans	27,981		21,194
Accruing loans past due 90 days or more (1)	14,992		11,337
Total nonperforming loans	42,973		32,531
Foreclosed assets:
Residential real estate	3,059		1,784
All other foreclosed assets	15,376		13,562
Total nonperforming assets	$	61,408	$	47,877

Restructured loans not included above	$	5,147	$	5,609

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

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.

For non-PCI loans, the evaluation of the adequacy of 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 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.

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.

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



	March 31, 2016				December 31, 2015
(Dollars in thousands)	Amount		% of Total		Amount		% of Total

Commercial:
Commercial real estate	$	3,457	33.7	%	$	3,682	37.7	%
Commercial and industrial	3,272		32.0		2,431		24.9
Construction and development	793		7.8		866		8.9
Consumer:
Residential real estate	991		9.7		1,257		12.9
Construction and development	256		2.5		237		2.4
Home equity	1,019		10.0		883		9.0
Consumer	443		4.3		413		4.2
Total allowance for loan losses	$	10,231	100.0	%	$	9,769	100.0	%

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



	Three months ended March 31,
(Dollars in thousands)	2016			2015

ALLL, beginning of period	$	9,769		$	7,817
Charge-offs:
Commercial:
Commercial real estate	81			99
Commercial and industrial	961			369
Construction and development	17			16
Consumer:
Residential real estate	160			10
Home equity	197			135
Consumer	217			136
Total charge-offs	1,633			765
Recoveries:
Commercial:
Commercial real estate	4			5
Commercial and industrial	4			136
Construction and development	11			5
Consumer:
Residential real estate	182			24
Construction and development	—			27
Home equity	—			41
Consumer	19			33
Total recoveries	220			271
Net charge-offs	1,413			494
Provision for loan losses	1,875			961
ALLL, end of period	$	10,231		$	8,284

Net charge-offs to average loans (annualized)	0.15		%	0.07		%

The ALLL to total loans ratio was 0.20 percent as of March 31, 2016 compared to 0.32 percent as of December 31, 2015. The decline in the ALLL ratio was due to acquired NewBridge loans. At acquisition, these loans were adjusted to fair value, and the historical ALLL was eliminated. Therefore, ALLL was unchanged as a result of the NewBridge Merger, but loan balances increased significantly. Adjusted ALLL, which includes ALLL as well as net acquisition fair value adjustments for acquired loans, declined from 1.62 percent of total loans as of December 31, 2015 to 1.50 percent of total loans as of March 31, 2016. The reduction in adjusted ALLL was partially due to decreases in historical loss rates used in the ALLL model and was partially due to lower relative loss rates on the acquired NewBridge loan portfolio.

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The following non-GAAP reconciliation provides a calculation of the adjusted ALLL and the related adjusted ALLL as a percentage of total loans for the periods presented.



(Dollars in thousands)	March 31, 2016			December 31, 2015

Allowance for loan losses	$	10,231		$	9,769
Net acquisition accounting fair value discounts to loans	68,063			40,188
Adjusted allowance for loan losses	$	78,294		$	49,957

Divided by: total loans	$	5,208,752		$	3,076,544
Adjusted allowance for loan losses to loans (Non-GAAP)	1.50		%	1.62		%

Deposit Activities

Deposits are the primary source of funds for the Company's lending and investing activities. The Company provides a range of deposit services to businesses and individuals, including non-interest bearing checking accounts, interest bearing checking accounts, savings accounts, money market accounts, IRAs and CDs. These accounts generally earn interest at rates the Company establishes based on market factors and the anticipated amount and timing of funding needs. The establishment or continuity of a core deposit relationship can be a factor in loan pricing decisions. While the Company's primary focus is on establishing customer relationships to attract core deposits, at times, the Company uses brokered deposits and other wholesale deposits to supplement its funding sources. As of March 31, 2016 and December 31, 2015, brokered deposits represented 14.4 percent and 13.2 percent, respectively, of total deposits.

Total deposits as of March 31, 2016 were $5.35 billion, which was an increase of $1.99 billion from December 31, 2015. Excluding acquired NewBridge deposits, the increase in deposit balances was $49.3 million. As of March 31, 2016 and December 31, 2015, the Company had outstanding time deposits under $100 thousand of $556.0 million and $335.3 million, respectively, and time deposits over $100 thousand of $907.2 million and $682.6 million, respectively.

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



Composition of Deposit Portfolio:	March 31, 2016		December 31, 2015

Non-interest demand	21.5	%	22.5	%
Interest-bearing demand	21.7		15.8
Money market and savings	29.5		31.0
Time deposits	27.3		30.7
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 March 31,
	2016						2015
(Dollars in thousands)	Average Balance		% of Total		Average Rate		Average Balance		% of Total		Average Rate

Non-interest demand	$	864,192	21.6	%	—	%	$	657,702	20.5	%	—	%
Interest-bearing demand	741,589		18.5		0.16		470,919		14.6		0.14
Money market and savings	1,202,797		30.0		0.26		1,003,156		31.1		0.29
Time deposits	1,196,072		29.9		0.80		1,089,950		33.8		0.75
Total average deposits	$	4,004,650	100.0	%	0.35	%	$	3,221,727	100.0	%	0.36	%

The overall mix of deposits has shifted to a higher percentage of interest-bearing demand balances with reductions in the percentage of deposits held in 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 0.35 percent in the first quarter of 2016 compared to 0.36 percent in the first quarter of 2015 due to changes in deposit mix and 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, which consist of FHLB advances maturing within twelve months and a structured repurchase agreement acquired from NewBridge which matures in December 2016, increased by $385.7 million in the first quarter. However, excluding acquired NewBridge funds, short-term borrowings decreased by $86.6 million as the Company used deposit growth and cash flows from the investment portfolio to reduce its borrowed funds balances.

Long-term debt increased by $3.4 million in the first quarter. Excluding acquired NewBridge funds, long-term debt decreased by $28.4 million. Long-term debt includes FHLB advances maturing beyond one year, subordinated debt, junior subordinated debt to unconsolidated trusts ("TRUPs"), and capital lease obligations. After the NewBridge Merger, the Company began the process of extending and laddering out maturities on certain acquired FHLB advances to better balance the Company's liquidity and interest rate risk profile. All NewBridge FHLB advances at acquisition were set to mature within twelve months. The Company expects long-term FHLB advances to increase in future periods as this maturity laddering process is completed.

Shareholders’ Equity

Total shareholders’ equity was $984.6 million as of March 31, 2016, which was an increase of $422.1 million from December 31, 2015. The increase was primarily due to $431.3 million of net assets acquired in the NewBridge Merger, $7.8 million of net income earned in the quarter, and $1.6 million of net other comprehensive income, partially offset by $19.0 million of dividends paid on common stock.

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 March 31, 2016, 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 $1.21 billion, which represented 16 percent of total assets and 23 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 March 31, 2016. As of March 31, 2016, outstanding commitments for undisbursed lines of credit and letters of credit totaled $1.49 billion, standby letters of credit issued by the FHLB on the Bank's behalf totaled $46.0 million, and outstanding capital commitments to a private investment fund were $4.7 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 $5.56 billion, or 75 percent, of total assets as of March 31, 2016 compared to $3.43 billion or 77 percent of total assets as of December 31, 2015.

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Contractual Obligations

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



	March 31, 2016
(Dollars in thousands)	1 Year or Less		Over 1 to 3 Years		Over 3 to 5 Years		More Than 5 Years		Total

Time deposits	$	800,666	$	398,586	$	243,036	$	20,905	$	1,463,193
Short-term borrowings	761,243		—		—		—		761,243
Long-term debt	576		89,283		5,000		103,461		198,320
Operating leases	5,439		10,351		2,937		2,712		21,439
Total contractual obligations	$	1,567,924	$	498,220	$	250,973	$	127,078	$	2,444,195

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.

The Company's and the Bank’s capital amounts and ratios as of March 31, 2016 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	$	694,343	11.41	%	$	486,902	8.00	%	N/A		N/A
Tier 1 risk-based capital	625,796		10.28	%	365,177		6.00	%	N/A		N/A
Common equity Tier 1	603,324		9.91	%	273,883		4.50	%	N/A		N/A
Tier 1 leverage capital	625,796		12.32	%	203,260		4.00	%	N/A		N/A

Yadkin Bank
Total risk-based capital	$	683,909	11.24	%	$	486,593	8.00	%	$	608,241	10.00	%
Tier 1 risk-based capital	669,544		11.01	%	364,944		6.00	%	486,593		8.00	%
Common equity Tier 1	669,544		11.01	%	273,708		4.50	%	395,357		6.50	%
Tier 1 leverage capital	669,544		13.25	%	202,188		4.00	%	252,735		5.00	%

On April 20, 2016, the Company's Board of Directors declared a regular quarterly cash dividend of $0.10 per share of its outstanding unrestricted common stock, payable May 19, 2016, to shareholders of record as of May 12, 2016. Additionally, on February 15, 2016, the Company declared an extraordinary special cash dividend of $0.50 per share of its outstanding unrestricted common stock, which was paid on March 7, 2016 to shareholders of record as of February 29, 2016.

The Company's tangible book value per common share was $11.94 as of March 31, 2016, compared to $12.51 as of December 31, 2015. Tangible common equity to tangible assets was 8.72 percent as of March 31, 2016, compared to 9.21 percent as of December 31, 2015. 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.

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(Dollars in thousands, except per share amounts)	March 31, 2016			December 31, 2015

Total shareholders' equity	$	984,642		$	562,549
Less: Goodwill and other intangible assets, net	370,127			165,731
Tangible common equity	$	614,515		$	396,818
Common shares outstanding	51,480,284			31,726,767
Tangible book value per share	$	11.94		$	12.51

Total assets	$	7,421,010		$	4,474,144
Less: Goodwill and other intangible assets, net	370,127			165,731
Tangible assets	$	7,050,883		$	4,308,413
Tangible common equity to tangible assets	8.72		%	9.21		%

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

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.

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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 March 31, 2016.



	March 31, 2016
(Dollars in thousands)	Estimated Exposure to NII		Estimated Exposure to EVE

Immediate change in interest rates:
+ 4.0%	5.40	%	(2.46	)%
+ 3.0%	4.28		(0.90	)
+ 2.0%	2.61		0.58
+ 1.0%	0.91		1.77
No change	—		—
- 1.0%	0.16		3.07

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

Item 4. Controls and Procedures

The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(b) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of March 31, 2016. 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, 2015, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

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



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.

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Signatures

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



		YADKIN FINANCIAL CORPORATION

Date:	May 6, 2016	By:	/s/ Scott M. Custer
			Scott M. Custer
			President and Chief Executive Officer

Date:	May 6, 2016	By:	/s/ Terry S. Earley
			Terry S. Earley
			Executive Vice President and Chief Financial Officer

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