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8-K

 
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YADKIN FINANCIAL Corp 10-Q 2016

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Graphic
  7. Graphic
Document


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 June 30, 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: 51,534,635 shares of Voting Common Stock and 199,663 shares of Non-Voting Common Stock outstanding as of August 4, 2016.


YADKIN FINANCIAL CORPORATION
TABLE OF CONTENTS

 
 
 
 
Page
Part I. 
 
FINANCIAL INFORMATION 
 
 
 
 
 
 
 
Item 1.
 
Financial Statements
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015
 
 
 
 
 
 
 
 
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015
 
 
 
 
 
 
 
 
Consolidated Statement of Changes in Shareholders' Equity for the Six Months Ended June 30, 2016 and 2015
 
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
Part II.
 
OTHER INFORMATION
 
 56
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 1A.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
Item 5.
 
 
 
 
 
 
 
Item 6.
 
 
 




Part I. Financial Information

Item 1. Financial Statements
YADKIN FINANCIAL CORPORATION
 
 
CONSOLIDATED BALANCE SHEETS (Unaudited)
 
 
As of June 30, 2016 and December 31, 2015
(Dollars in thousands, except share data)
 
June 30,
2016
 
December 31, 2015*
Assets
 
 

 
 

Cash and due from banks
 
$
70,637

 
$
60,783

Interest-earning deposits with banks
 
49,744

 
50,885

Federal funds sold
 
155

 
250

Investment securities available for sale, at fair value
 
1,038,307

 
689,132

Investment securities held to maturity
 
38,959

 
39,182

Loans held for sale
 
139,513

 
47,287

Loans
 
5,268,768

 
3,076,544

Allowance for loan losses
 
(11,633
)
 
(9,769
)
Net loans
 
5,257,135

 
3,066,775

Purchased accounts receivable
 
9,657

 
52,688

Federal Home Loan Bank stock, at cost
 
45,284

 
24,844

Premises and equipment, net
 
111,245

 
73,739

Bank-owned life insurance
 
141,930

 
78,863

Other real estate
 
23,091

 
15,346

Deferred tax asset, net
 
67,829

 
55,607

Goodwill
 
338,180

 
152,152

Other intangible assets, net
 
30,745

 
13,579

Accrued interest receivable and other assets
 
92,814

 
53,032

Total assets
 
$
7,455,225

 
$
4,474,144

 
 

 


Liabilities
 
 
 
 

Deposits:
 
 

 
 

Non-interest demand
 
$
1,156,507

 
$
744,053

Interest-bearing demand
 
1,119,970

 
523,719

Money market and savings
 
1,620,217

 
1,024,617

Time
 
1,441,892

 
1,017,908

Total deposits
 
5,338,586

 
3,310,297

Short-term borrowings
 
811,383

 
375,500

Long-term debt
 
229,012

 
194,967

Accrued interest payable and other liabilities
 
73,706

 
30,831

Total liabilities
 
6,452,687

 
3,911,595

 
 
 
 
 
Shareholders’ Equity
 
 

 
 

Preferred stock, no par value, 1,000,000 shares authorized, no shares issued or outstanding
 

 

Common stock, $1.00 par value, 75,000,000 shares authorized; 51,577,575 and 31,727,767 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively
 
51,578

 
31,727

Common stock warrants
 
717

 
717

Additional paid-in capital
 
905,727

 
492,828

Retained earnings
 
45,895

 
44,794

Accumulated other comprehensive loss
 
(1,379
)
 
(7,517
)
Total shareholders' equity
 
1,002,538

 
562,549

Total liabilities and shareholders' equity
 
$
7,455,225

 
$
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.


- 3 -



YADKIN FINANCIAL CORPORATION
 
 
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
 
For the Three and Six Months Ended June 30, 2016 and 2015
 
 
Three months ended June 30,
 
Six months ended June 30,
(Dollars in thousands, except per share data)
 
2016
 
2015
 
2016
 
2015
Interest income
 
 

 
 

 
 

 
 

Loans
 
$
64,345

 
$
40,404

 
$
112,316

 
$
80,200

Investment securities
 
7,231

 
3,786

 
13,344

 
7,782

Federal funds sold and interest-earning deposits
 
81

 
45

 
184

 
95

Total interest income
 
71,657

 
44,235

 
125,844

 
88,077

Interest expense
 
 

 
 

 
 

 
 

Deposits
 
4,433

 
3,073

 
7,980

 
5,962

Short-term borrowings
 
1,360

 
331

 
2,166

 
620

Long-term debt
 
2,375

 
1,504

 
4,244

 
2,992

Total interest expense
 
8,168

 
4,908

 
14,390

 
9,574

Net interest income
 
63,489

 
39,327

 
111,454

 
78,503

Provision for loan losses
 
2,298

 
994

 
4,173

 
1,955

Net interest income after provision for loan losses
 
61,191

 
38,333

 
107,281

 
76,548

Non-interest income
 
 

 
 

 
 

 
 

Service charges and fees on deposit accounts
 
5,795

 
3,495

 
10,007

 
6,748

Government-guaranteed lending
 
2,680

 
3,677

 
5,752

 
6,550

Mortgage banking
 
3,850

 
1,633

 
5,473

 
2,955

Bank-owned life insurance
 
733

 
465

 
1,285

 
937

Gain on sales of available for sale securities
 
64

 
84

 
194

 
85

Gain on sale of trust business
 
417

 

 
417

 

Other
 
2,098

 
1,446

 
3,863

 
2,364

Total non-interest income
 
15,637

 
10,800

 
26,991

 
19,639

Non-interest expense
 
 

 
 

 
 
 
 

Salaries and employee benefits
 
22,939

 
15,391

 
40,979

 
30,593

Occupancy and equipment
 
7,315

 
4,637

 
12,850

 
9,436

Data processing
 
2,783

 
1,929

 
4,923

 
3,817

FDIC deposit insurance premiums
 
770

 
772

 
1,591

 
1,486

Professional services
 
1,547

 
1,407

 
2,655

 
2,499

Foreclosed asset expenses, net
 
137

 
445

 
448

 
633

Loan, collection, and repossession expense
 
1,004

 
850

 
2,144

 
1,786

Merger and conversion costs
 
6,531

 
(25
)
 
16,866

 
195

Restructuring charges
 
25

 
2,294

 
46

 
3,201

Amortization of other intangible assets
 
1,671

 
777

 
2,723

 
1,592

Other
 
5,483

 
3,839

 
9,704

 
8,036

Total non-interest expense
 
50,205

 
32,316

 
94,929

 
63,274

Income before income taxes
 
26,623

 
16,817

 
39,343

 
32,913

Income tax expense
 
9,219

 
6,076

 
14,140

 
11,922

Net income
 
17,404

 
10,741

 
25,203

 
20,991

Dividends on preferred stock
 

 
182

 

 
821

Net income available to common shareholders
 
$
17,404

 
$
10,559

 
$
25,203

 
$
20,170

 
 
 
 
 
 
 
 
 
Net income per common share
 
 

 
 

 
 

 
 

Basic
 
$
0.34

 
$
0.33

 
$
0.56

 
$
0.64

Diluted
 
0.34

 
0.33

 
0.56

 
0.64

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding
 
 

 
 

 
 

 
 

Basic
 
51,311,504

 
31,609,021

 
44,707,215

 
31,607,971

Diluted
 
51,490,182

 
31,610,620

 
44,836,812

 
31,609,785


See accompanying Notes to Consolidated Financial Statements.

- 4 -


YADKIN FINANCIAL CORPORATION
 
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
 
For the Three and Six Months Ended June 30, 2016 and 2015
 
Three months ended June 30,
 
Six months ended June 30,
(Dollars in thousands)
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Net income
$
17,404

 
$
10,741

 
$
25,203

 
$
20,991

Other comprehensive income (loss):
 
 
 
 
 
 
 
Securities available for sale:
 

 
 

 
 

 
 

Unrealized net gains (losses) on available for sale securities
9,267

 
(6,518
)
 
16,542

 
(2,196
)
Tax effect
(3,489
)
 
2,502

 
(6,255
)
 
954

Reclassification of gains on sales of securities
(64
)
 
(84
)
 
(194
)
 
(85
)
Tax effect
24

 
32

 
73

 
33

Net of tax amount
5,738

 
(4,068
)
 
10,166

 
(1,294
)
Cash flow hedges:
 

 
 

 
 

 
 

Unrealized net gains (losses) on cash flow hedges
(2,014
)
 
3,493

 
(6,610
)
 
(670
)
Tax effect
714

 
(1,347
)
 
2,442

 
258

Reclassification of amounts into interest expense from termination of interest rate swaps
112

 
8

 
224

 
8

Tax effect
(42
)
 
(3
)
 
(84
)
 
(3
)
Net of tax amount
(1,230
)
 
2,151

 
(4,028
)
 
(407
)
Total other comprehensive income (loss)
4,508

 
(1,917
)
 
6,138

 
(1,701
)
Comprehensive income
$
21,912

 
$
8,824

 
$
31,341

 
$
19,290

 

See accompanying Notes to Consolidated Financial Statements.

- 5 -



YADKIN FINANCIAL CORPORATION
 
 
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
 
 
For the Six Months Ended June 30, 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2014
 
28,405

 
$
28,405

 
31,599,150

 
$
31,599

 
$
717

 
$
492,014

 
$
7,311

 
$
(2,244
)
 
$
557,802

Net income
 

 

 

 

 

 

 
20,991

 

 
20,991

Other comprehensive loss
 

 

 

 

 

 

 

 
(1,701
)
 
(1,701
)
Restricted stock grants
 

 

 
103,000

 
103

 

 
(103
)
 

 

 

Stock-based compensation
 

 

 

 

 

 
130

 

 

 
130

Stock options exercised
 

 
 
 
9,871

 
10

 

 
110

 

 

 
120

Redemption of preferred stock
 
(28,405
)
 
(28,405
)
 

 

 

 

 

 

 
(28,405
)
Preferred stock dividends
 

 
 
 

 

 

 

 
(821
)
 

 
(821
)
Balance as of June 30, 2015
 

 
$

 
31,712,021

 
$
31,712

 
$
717

 
$
492,151

 
$
27,481

 
$
(3,945
)
 
$
548,116

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2015
 

 
$

 
31,726,767

 
$
31,727

 
$
717

 
$
492,828

 
$
44,794

 
$
(7,517
)
 
$
562,549

Net income
 

 

 

 

 

 

 
25,203

 

 
25,203

Other comprehensive income
 

 

 

 

 

 

 

 
6,138

 
6,138

Restricted stock grants
 

 

 
100,000

 
100

 

 
(100
)
 

 

 

Restricted stock forfeiture
 

 

 
(10,000
)
 
(10
)
 

 
10

 

 

 

Stock-based compensation
 

 

 

 

 

 
404

 

 

 
404

Stock options exercised
 

 

 
86,790

 
87

 

 
923

 

 

 
1,010

Acquisition of NewBridge Bancorp
 

 

 
19,605,374

 
19,605

 

 
411,731

 

 

 
431,336

Shares issued for restricted stock units
 

 

 
68,644

 
69

 

 
(69
)
 

 

 

Common stock dividends
 

 

 

 

 

 

 
(24,102
)
 

 
(24,102
)
Balance as of June 30, 2016
 

 
$

 
51,577,575

 
$
51,578

 
$
717

 
$
905,727

 
$
45,895

 
$
(1,379
)
 
$
1,002,538

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


See accompanying Notes to Consolidated Financial Statements.

- 6 -



YADKIN FINANCIAL CORPORATION
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
 
For the Six Months Ended June 30, 2016 and 2015
 
Six months ended June 30,
(Dollars in thousands)
2016
 
2015
Cash flows from operating activities
 
 
 
Net income
$
25,203

 
$
20,991

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 

 
 

Stock-based compensation
404

 
130

Provision for loan losses
4,173

 
1,955

Accretion of acquisition discount on purchased loans
(13,704
)
 
(13,145
)
Depreciation
4,131

 
3,109

Amortization of core deposit intangible
2,723

 
1,592

Amortization of acquisition premium on time deposits
(1,024
)
 
(1,874
)
Net accretion of acquisition discount on long-term debt
179

 
232

Gain on mortgage loan commitments
(1,200
)
 
(141
)
Gain on sales of loans held for sale
(9,012
)
 
(8,718
)
Originations of loans held for sale
(174,128
)
 
(140,721
)
Proceeds from sales of loans held for sale
146,922

 
131,022

Increase in cash surrender value of bank-owned life insurance
(1,320
)
 
(937
)
Deferred income taxes
9,711

 
11,922

Change in deferred tax valuation allowance
148

 

Gain on sales of available for sale securities
(194
)
 
(85
)
Net amortization of premiums on available for sale securities
3,310

 
2,917

Net (gain) loss on disposal of foreclosed assets
(274
)
 
(210
)
Valuation adjustments on foreclosed assets
425

 
605

Change in assets and liabilities:
 

 
 

Decrease (increase) in accrued interest receivable
1,236

 
(138
)
Increase in other assets
(6,785
)
 
(2,952
)
(Decrease) increase in accrued interest payable
(356
)
 
23

Increase in other liabilities
2,570

 
850

Net cash provided by (used in) operating activities
(6,862
)
 
6,427

Cash flows from investing activities
 

 
 

Purchases of investment securities available for sale
(189,485
)
 
(40,897
)
Proceeds from maturities and repayments of investment securities available for sale
115,844

 
40,187

Proceeds from sales of investment securities available for sale
180,616

 
19,169

Net loan (originations) principal collections
(165,987
)
 
(49,556
)
Net cash received in business combinations
45,143

 

Proceeds from (purchases of) trade accounts receivables, net
43,031

 
(25,112
)
Purchases of premises and equipment
(872
)
 
(935
)
Disposals of premises and equipment
2,262

 
692

Proceeds from disposal of foreclosed assets
1,989

 
2,731

Redemptions (purchases) of Federal Home Loan Bank stock
1,137

 
(2,477
)
Net cash provided by (used in) investing activities
33,678

 
(56,198
)
Cash flows from financing activities
 

 
 

Net increase (decrease) in deposits
39,204

 
(2,396
)
Net increase in short-term borrowings
41,548

 
37,000

Net (decrease) increase in long-term debt
(75,858
)
 
34,869

Proceeds from exercise of stock options
1,010

 
120

Repurchase of preferred stock

 
(28,405
)
Dividends paid on preferred stock

 
(821
)
Dividends paid on common stock
(24,102
)
 

Net cash provided by (used in) financing activities
(18,198
)
 
40,367

Net change in cash and cash equivalents
8,618

 
(9,404
)
Cash and cash equivalents, beginning of period
111,918

 
132,365

Cash and cash equivalents, end of period
$
120,536

 
$
122,961

 
 
 
 

- 7 -



 
Six months ended June 30,
(Dollars in thousands)
2016
 
2015
 
 
 
 
SUPPLEMENTAL DISCLOSURES:
 

 
 

Cash payments for:
 

 
 

Interest
$
14,801

 
$
11,071

Income taxes
4,100

 

Noncash investing activities:
 

 
 

Transfers of loans to held for sale
$
42,347

 
$

Transfers of loans to foreclosed assets
3,947

 
3,782

Change in fair value of securities available for sale, net of tax
10,166

 
(1,294
)
Change in fair value of cash flow hedge, net of tax
(4,028
)
 
(407
)
Acquisition:
 
 
 
Assets acquired (excluding goodwill)
$
2,780,138

 
$

Liabilities assumed
2,534,830

 

Purchase price
431,336

 

Goodwill recorded
186,028

 



See accompanying Notes to Consolidated Financial Statements.

- 8 -

YADKIN FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)



NOTE A – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 
The accompanying unaudited consolidated financial statements include the accounts of Yadkin Financial Corporation (the "Company" or "Yadkin") and its wholly-owned subsidiary, Yadkin Bank. 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 six months ended June 30, 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 June 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to Credit Losses. The new guidance replaces the incurred loss impairment methodology in current GAAP with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company is currently evaluating this guidance to determine the impact on its consolidated financial statements.

In March 2016, the 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. 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 adoption of this guidance is not expected to be material to the 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.


- 9 -

YADKIN FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)


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. All measurement period adjustments related to the March 1, 2016 acquisition of NewBridge Bancorp were recorded in the period in which the adjustment was determined.

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 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 June 30, 2016, the Company had $549 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 is currently evaluating this guidance to determine the impact 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 June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Weighted average number of common shares
51,311,504

 
31,609,021

 
44,707,215

 
31,607,971

Dilutive effect of stock options, stock warrants and restricted stock
178,678

 
1,599

 
129,597

 
1,814

Weighted average number of common shares and dilutive potential common shares
51,490,182

 
31,610,620

 
44,836,812

 
31,609,785

 
 
 
 
 
 
 
 
Anti-dilutive stock options
17,407

 
37,279

 
17,407

 
37,279

Anti-dilutive stock warrants

 
91,178

 

 
91,178

 
NOTE C – MERGERS AND ACQUISITIONS
 
Proposed Merger with F.N.B. Corporation

On July 20, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with F.N.B. Corporation, a Florida corporation (“FNB”). The Merger Agreement provides that, upon the terms and conditions set forth therein, the Company will merge with and into FNB (the “Merger”), with FNB continuing as the surviving corporation. As soon as practicable following execution of the Merger Agreement, the Company’s wholly-owned subsidiary, Yadkin Bank, will merge with and into FNB’s wholly-owned subsidiary, First National Bank of Pennsylvania ("FNB Bank"), with FNB Bank continuing as the surviving entity (the “Bank Merger”).


- 10 -

YADKIN FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)


Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, the Company’s shareholders will have the right to receive 2.16 shares of FNB common stock, par value $0.01, for each share of the Company’s common stock. Based on FNB’s closing price of $13.20 as of July 20, 2016, the day before the transaction was announced, the estimated aggregate purchase price was $1,470,000. The transaction is expected to close in the first quarter of 2017, subject to shareholder and regulatory approval and other customary closing conditions.

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.

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

 
 
 
 
 


- 11 -

YADKIN FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)


The following table presents the NewBridge assets acquired and liabilities assumed as of March 1, 2016, the initial fair value adjustments, the measurement period adjustments, the purchase price and calculation of the residual goodwill.
 
As Reported by NewBridge
 
Initial
Fair Value Adjustments
 
Measurement Period Adjustments
 
As Reported by Yadkin
 
Assets:
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
45,143

 
$

 
$

 
$
45,143

 
Investment securities
443,535

 
(1,948
)
(a)
1,109

(l)
442,696

 
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

 
Other real estate
1,241

 

 
(55
)
(m)
1,186

 
Deferred tax asset, net
30,014

 
(3,490
)
(e)
(1,166
)
(n)
25,358

 
Other intangibles, net
3,506

 
16,384

(f)

 
19,890

 
Other assets
40,375

 
(271
)
(g)
(139
)
(o)
39,965

 
Total assets
2,770,438

 
9,951

 
(251
)
 
2,780,138

 
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)
218

(p)
40,662

 
Total liabilities
2,537,557

 
(2,945
)
 
218

 
2,534,830

 
Net assets acquired
232,881

 
12,896

 
(469
)
 
245,308

 
Purchase price
 
 
 
 
 
 
431,336

 
Goodwill
 
 
 
 
 
 
$
186,028

(q)

Explanation of initial fair value adjustments and measurement period 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.
(c) Adjustment reflects the elimination of NewBridge's historical allowance for loan losses of $21,100.
(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 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) Adjustment to initial fair value of investment securities.
(m) Adjustment to initial fair value of other real estate.
(n) Deferred tax adjustment resulting from adjustments (l), (m), (o) and (p)
(o) Adjustment to initial fair value of accrued interest receivable.
(p) Adjustment to initial fair value of accrued liabilities.
(q) Goodwill represents the excess of the purchase price over the fair value of acquired net assets.


- 12 -

YADKIN FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)


Supplemental Pro Forma Information

The table below presents supplemental pro forma information as if the 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 June 30,
 
Six months ended June 30,
 
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
Net interest income
 
$
62,449

 
$
127,716

 
$
102,148

Net income (a)
 
10,798

 
36,986

 
12,378

Net income available to common shareholders (a)
 
10,616

 
36,986

 
11,557

Basic income per common share (a)
 
0.21

 
0.72

 
0.23

Diluted income per common share (a)
 
0.21

 
0.72

 
0.23

Weighted average basic common shares outstanding
 
50,531,158

 
51,235,805

 
50,530,108

Weighted average diluted common shares outstanding
 
50,777,541

 
51,365,402

 
50,776,706


(a) For purposes of the supplemental pro forma information, merger-related expenses of $16,866 that are reflected in the Company's consolidated statement of operations for the six months ended June 30, 2016 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 six months ended June 30, 2015. These pro forma merger-related expenses include $7,481 of professional fees paid for investment banking, legal and accounting services, $8,594 of personnel-related expenses, $3,046 of facility and equipment-related expenses, and $1,277 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.
 
 
June 30, 2016
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Securities available for sale:
 
 

 
 

 
 

 
 

GSE obligations
 
$
31,322

 
$
232

 
$

 
$
31,554

SBA-guaranteed securities
 
18,938

 
150

 
46

 
19,042

Mortgage-backed securities issued by GSEs
 
556,287

 
7,476

 
350

 
563,413

Municipal bonds
 
131,241

 
3,131

 
35

 
134,337

Corporate bonds
 
201,600

 
1,815

 
974

 
202,441

Collateralized loan obligations
 
50,516

 
15

 
255

 
50,276

Non-agency CMBS
 
25,334

 
180

 
17

 
25,497

Certificates of deposit
 
992

 

 

 
992

Equity securities
 
11,108

 
215

 
568

 
10,755

Total securities available for sale
 
$
1,027,338

 
$
13,214

 
$
2,245

 
$
1,038,307

 
 
 
 
 
 
 
 
 
Securities held to maturity:  
 
 
 
 
 
 
 
 
Municipal bonds
 
$
38,959

 
$
2,238

 
$

 
$
41,197

 

- 13 -

YADKIN FINANCIAL CORPORATION
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)


 
 
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
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
Securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
SBA-guaranteed securities
 
$
11,108

 
$
46

 
$

 
$

 
$
11,108

 
$
46

Mortgage-backed securities issued by GSEs
 
43,247

 
87

 
35,499

 
263

 
78,746

 
350

Municipal bonds
 
4,403

 
35

 

 

 
4,403

 
35

Corporate bonds
 
48,563

 
433

 
17,946

 
541