Yadkin Financial 10K 2016 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2016

¨ TRANSITION REPORT UNDER 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 of Incorporation)		(I.R.S. Employer Identification No.)

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)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common stock, $1.00 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes x No

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. x Yes ¨ 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 (§ 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). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	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 x No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter: $1,252,102,589.Indicate the number of shares outstanding of each of the registrant’s classes of Common Stock as of the latest practicable date: 51,789,280 shares of Voting Common Stock and 0 shares of Non-Voting Common Stock outstanding as of February 28, 2017.

YADKIN FINANCIAL CORPORATION

TABLE OF CONTENTS



		Page
Part I

Item 1.	Business	5

Item 1A.	Risk Factors	18

Item 1B.	Unresolved Staff Comments	31

Item 2.	Properties	31

Item 3.	Legal Proceedings	31

Item 4.	Mine Safety Disclosures	31

Part II

Item 5.	Market for the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	32

Item 6.	Selected Financial Data	34

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	58

Item 8.	Financial Statements and Supplementary Data	60

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	118

Item 9A.	Controls and Procedures	118

Item 9B.	Other Information	122

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	122

Item 11.	Executive Compensation	132

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	144

Item 13.	Certain Relationships and Related Transactions, and Director Independence	146

Item 14.	Principal Accountant Fees and Services	147

Part IV

Item 15.	Exhibits and Financial Statement Schedules	149

	Signatures	149

	Exhibit Index	151

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of our statements contained in this Annual Report, including, without limitation, matters discussed under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operation,” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events or the future financial performance of Yadkin Financial Corporation (the “Company”) or its wholly-owned subsidiary, Yadkin Bank (the “Bank”), and include statements about the competitiveness of the banking industry, potential regulatory obligations, our entrance and expansion into other markets, our other business strategies and other statements that are not historical facts. Forward-looking statements are not guarantees of performance or results. When we use words like “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “predict,” “estimate,” “could,” “should,” “would,” “will,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. These forward-looking statements involve risks and uncertainties and are based on our beliefs and assumptions, and on the information available to us at the time that these disclosures were prepared.

These forward-looking statements involve risks and uncertainties and may not be realized due to a variety of factors, including, but not limited to the following:


•	the impact of 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;


•	the impact of concentration on our loan portfolio by loan type, industry segment, borrower type, or location of the borrower or collateral;


•	the rate of delinquencies and amount of loans charged-off;


•	adverse changes in asset quality and resulting credit risk-related losses and expenses;


•	deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses;


•	increased funding costs due to market illiquidity, competition for funding and increased regulatory requirements with regard to funding;


•	changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments;


•	the failure of assumptions underlying the establishment of reserves for possible loan losses, which may impact the adequacy of the level of our allowance for loan losses and the amount of loan loss provisions required in future periods;


•	our ability to maintain appropriate levels of capital;


•	changes in accounting principles, policies, and guidelines applicable to bank holding companies and banking;


•	changes in the assessment of whether a deferred tax valuation allowance is necessary;


•	our ability to retain our existing customers, including our deposit relationships;


•	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;


•	changes in political and economic conditions, including the political and economic effects of economic downturns and other major developments such as the ongoing war on terrorism;


•	changes in financial market conditions, either internationally, nationally or locally in areas in which the Company conducts its operations, including, without limitation, reduced rates of business formation and growth, commercial and residential real estate development, and real estate prices;


•	the Company's ability to comply with any requirements imposed on it or the Bank by their respective regulators, and the potential negative consequences that may result;


•	the impacts of regulatory scrutiny on consumer protection and compliance led by the Consumer Finance Protection Bureau;


•	fluctuations in markets for equity, fixed-income, commercial paper and other securities, which could affect availability, market liquidity levels, and pricing;


•	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;


•	the impact of minimum capital thresholds established by the Company’s regulators as a part of their implementation of Basel III;


•	the risks of changes in interest rates or an unprecedented period of record-low interest rates on the level and composition of deposits, loan demand and the values of loan collateral, securities and interest sensitive assets and liabilities;


•	the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other

financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone and the Internet;


•	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;


•	costs or difficulties related to the integration of the banks we acquired or may acquire may be greater than expected; and,


•	the effect of any mergers, acquisitions or other transactions, to which we or our subsidiary may from time to time be a party, including the pending merger with F.N.B. Corporation.

Many of these risks are beyond our ability to control or predict, and you are cautioned not to put undue reliance on such forward-looking statements. The Company does not intend to update or reissue any forward-looking statements contained in this Annual Report on Form 10-K as a result of new information or other circumstances that may become known to the Company.

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this Cautionary Note. Our actual results may differ significantly from those we discuss in these forward-looking statements. For other factors, risks and uncertainties that could cause our actual results to differ materially from estimates and projections contained in these forward-looking statements, please read the “Risk Factors” section of this Annual Report beginning on page 21.

PART I

ITEM 1. BUSINESS

Organization

Yadkin Financial Corporation (the "Company" or "Yadkin") is a bank holding company incorporated under the laws of North Carolina on March 2, 2006. The Company is headquartered in Raleigh, North Carolina, and conducts its business primarily through its wholly-owned subsidiary, Yadkin Bank, a North Carolina-chartered commercial bank. Yadkin Bank’s primary business is providing banking, mortgage, investment and insurance services to businesses and consumers across the Carolinas. Yadkin Bank began operations in 1968.

On March 1, 2016, Yadkin completed its acquisition of NewBridge Bancorp (“NewBridge”), pursuant to an Agreement and Plan of Merger, dated October 12, 2015 (the “NewBridge Merger Agreement”), by and among, the Company, Navy Merger Sub Corp., a wholly-owned subsidiary of the Company (“Merger Sub”), and NewBridge. At closing, Merger Sub merged with and into NewBridge, with NewBridge surviving and, immediately thereafter, NewBridge merged with and into the Company (the “Integrated Mergers”), with the Company surviving. 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. Immediately following the Integrated Mergers, NewBridge Bank, a North Carolina-chartered commercial bank, merged with and into Yadkin Bank (together with the Integrated Mergers, the “NewBridge Acquisition”), with Yadkin Bank surviving such merger.

On July 20, 2016, the Company entered into an Agreement and Plan of Merger (the “FNB Merger Agreement”) with F.N.B. Corporation, a Florida corporation (“FNB”). The FNB Merger Agreement provides that, upon the terms and conditions set forth therein, the Company will merge with and into FNB (the “FNB Merger”), with FNB continuing as the surviving corporation. As soon as practicable following consummation of the Merger, 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 “FNB Bank Merger”).

Financial Information Regarding Business Segments

The Company has a single operating segment, which is providing general commercial banking and financial services to individuals and businesses located in North Carolina and South Carolina, and to customers in various states through its U.S. Small Business Administration (SBA) lending program. See the Company’s Financial Statements and accompanying Notes in Item 8.

Primary Market Area

The Company operates branches in North Carolina and South Carolina. From an operational standpoint, management has organized its branches into six regions. The table below reflects Yadkin’s branch locations, deposits, deposit market share, population, and population growth rates by region.

- 5 -



Region	Number of Branches	June 30, 2016 Deposits in Market ($000)		Deposit Market Share (%)	Percent of Franchise (%)	Total Population 2017 (Actual)	Population Change 2010-2017 (%)	Projected Population Change 2017-2022 (%)
Central Region	16	$	1,653,292	4.22	33.82	1,751,673	14.55	7.86
Northeast Region	16	402,448		8.84	8.23	320,165	2.87	3.32
Piedmont North Region	15	539,119		4.3	11.03	1,197,288	5.84	4.72
Piedmont South Region	11	640,594		18.07	13.10	165,393	1.54	2.68
Southeast Region	10	525,316		3.8	10.75	1,027,163	8.38	5.71
Southern Region	14	566,730		0.3	11.59	1,609,495	14.77	8.09
Western Region	16	561,256		10.55	11.48	590,304	2.58	3.13
Total	98	4,888,755			100.00	6,661,481	8.10	5.07
Aggregate: NC and SC						15,178,491	7.19	5.25
Aggregate: National						325,139,271	5.31	3.77

Source: SNL Financial, which derives its information from U.S. Census Bureau data

Competition

Commercial banking in North Carolina is highly competitive. The Company competes in its market areas with large regional and national banking organizations, other federally and state chartered financial institutions such as savings and loan institutions and credit unions, consumer finance companies, mortgage companies and other lenders engaged in the business of extending credit. Many competitors have broader geographic markets and higher lending limits than the Company and are also able to provide more services and make greater use of media advertising. All markets in which the Company has a banking office are also served by branches of the largest banks in North Carolina and South Carolina as well as national and international banks.

Despite the competition in its market areas, the Company believes that it has certain competitive advantages that distinguish it from its competition. The Company serves the needs of businesses, business owners, and professionals by creating mutually beneficial and deeply ingrained relationships with its customers and positively impacting its communities. In addition to offering standard banking products and services, the Company's associates build relationships with customers by understanding their personal and business challenges and goals, and providing tangible solutions. The Company offers customers modern banking services and technology with prompt, personal service and friendliness. The Company believes its approach to business builds goodwill among customers, shareholders, and the communities it serves that results in referrals from shareholders and satisfied customers. The Company also relies on traditional marketing to attract new customers. To enhance a positive image in the community, the Company supports and participates in local events, and its officers and directors serve on boards of local civic and charitable organizations.

Merger and Acquisition Strategy

The Company's growth in business, profitability, and market share has historically been enhanced by strategic mergers and acquisitions. The Company has focused on maintaining a merger and acquisition approach that involved disciplined targeting and pricing as well as extensive credit, financial, legal, information technology, and operational due diligence. The Company has also recognized the importance of successfully integrating management teams, policies and procedures, branch networks, systems, and balance sheets. The Company's merger and acquisition process is governed by its Board of Directors and is subject to shareholder and regulatory approvals.

Employees

The Company employed 1,112 full-time and 101 part-time employees as of December 31, 2016, none of which are covered by a collective bargaining agreement. The Company believes that relations with its employees are good.

- 6 -

Additional Information

The Company’s principal internet address is http://www.yadkinbank.com. The information contained on, or that can be accessed through, the Company’s website is not incorporated by reference into this Annual Report on Form 10-K. The Company has included its website address as a factual reference and does not intend it as an active link to its website. The Company provides its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and all amendments to those reports, free of charge on http://www.yadkinbank.com, as soon as reasonably practicable after they are electronically filed, or furnished to, the Securities and Exchange Commission.

SUPERVISION AND REGULATION

Bank holding companies and state commercial banks are extensively regulated under both federal and state law. The following is a brief summary of certain statutes and rules and regulations that affect or will affect the Company and the Bank. This summary contains what management believes to be the material information related to the supervision and regulation of the Company and the Bank, but is not intended to be an exhaustive description of the statutes or regulations applicable to their respective businesses. Supervision, regulation and examination of the Company and the Bank by regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company. The Company cannot predict whether or in what form any proposed statute or regulation will be adopted or the extent to which the business of the Company and the Bank may be affected by a statute or regulation. The discussion is qualified in its entirety by reference to applicable laws and regulations. Changes in such laws and regulations may have a material effect on our business and prospects.

Bank Holding Company Regulation and Structure

As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act (the “BHCA”) and to the supervision, examination and reporting requirements of the Board of Governors of the Federal Reserve System, or the Federal Reserve. The Bank has a North Carolina state charter and is subject to regulation, supervision and examination by the Federal Deposit Insurance Corporation (the “FDIC”) and the North Carolina Commissioner of Banks (the “NCCOB”).

The BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before:


•	it may acquire direct or indirect ownership or control of any voting shares of any other bank holding company if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5 percent of the voting shares of the other bank holding company;


•	it may acquire direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5 percent of the voting shares of the bank;


•	it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or


•	it may merge or consolidate with any other bank holding company.

The BHCA further provides that the Federal Reserve may not approve any transaction that would result in a monopoly or that would substantially lessen competition in the banking business, unless the public interest in meeting the needs of the communities to be served outweighs the anti-competitive effects. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks involved and the convenience and needs of the communities to be served. Consideration of financial resources generally focuses on capital adequacy, and consideration of convenience and needs issues focuses, in part, on the performance under the Community Reinvestment Act of 1977 (the “CRA”), both of which are discussed elsewhere in more detail.

Subject to various exceptions, the BHCA and the Change in Bank Control Act, together with related regulations, require Federal Reserve approval prior to any person or company acquiring “control” of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25 percent or more of any class of voting securities of a bank holding company. Control is also presumed to exist, although rebuttable, if a person or company acquires 10 percent or more, but less than 25 percent, of any class of voting securities and either:


•	the bank holding company has registered securities under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”); or


•	no other person owns a greater percentage of that class of voting securities immediately after the transaction.

The Company’s common stock is registered under Section 12 of the Exchange Act. The regulations provide a procedure for challenging rebuttable presumptions of control.

- 7 -

Historically, the activities of bank holding companies were limited to the business of banking and activities closely related or incidental to banking. Bank holding companies were generally prohibited from acquiring control of any company that was not a bank and from engaging in any business other than the business of banking or managing and controlling banks. The Gramm-Leach-Bliley Act, which took effect on March 12, 2000, dismantled many Depression-era restrictions against affiliations between banking, securities and insurance firms by permitting bank holding companies to engage in a broader range of financial activities, so long as certain safeguards are observed. Specifically, bank holding companies may elect to become “financial holding companies” that may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental to a financial activity. The election must be accompanied by a certification that all of the company’s insured depository institution subsidiaries are “well capitalized” and “well managed.” Additionally, the CRA rating of each subsidiary bank must be satisfactory or better. If, after becoming a financial holding company and undertaking activities not permissible for a bank holding company, the company fails to continue to meet any of the prerequisites for financial holding company status, the company must enter into an agreement with the Federal Reserve to comply with all applicable capital and management requirements. If the company does not return to compliance within 180 days, the Federal Reserve may order the company to divest its subsidiary banks, or the company may discontinue or divest investments in companies engaged in activities permissible only for a bank holding company that has elected to be treated as a financial holding company. The Company has not elected to be treated as a financial holding company.

The Company is required to act as a source of financial strength for the Bank and to commit resources to support the Bank. This support may be required at times when the Company might not be inclined to provide it. In addition, any capital loans made by the Company to the Bank will be repaid only after its deposits and various other obligations are repaid in full.

Bank Merger Act

Section 18(c) of the Federal Deposit Insurance Act, commonly known as the “Bank Merger Act,” requires the prior written approval of the FDIC before any bank may (i) merge or consolidate with, (ii) purchase or otherwise acquire the assets of, or (iii) assume the deposit liabilities of, another bank if the resulting institution is to be a state nonmember bank.

The Bank Merger Act prohibits the FDIC from approving any proposed merger transaction that would result in a monopoly or would further a combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States. Similarly, the Bank Merger Act prohibits the FDIC from approving a proposed merger transaction whose effect in any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade. An exception may be made in the case of a merger transaction whose effect would be to substantially lessen competition, tend to create a monopoly, or otherwise restrain trade, if the FDIC finds that the anticompetitive effects of the proposed transaction are clearly outweighed by the probable effect of the transaction in meeting the convenience and needs of the community to be served.

In every proposed merger transaction, the FDIC must also consider the financial and managerial resources and future prospects of the existing and proposed institutions, the convenience and needs of the communities to be served, and the effectiveness of each insured depository institution involved in the proposed merger transaction in combating money-laundering activities, including in overseas branches.

State Law

The Bank is subject to extensive supervision and regulation by the NCCOB. The NCCOB oversees state laws that set specific requirements for bank capital and that regulate deposits in, and loans and investments by, banks, including the amounts, types, and in some cases, rates. The NCCOB supervises and performs periodic examinations of North Carolina-chartered banks to assure compliance with state banking statutes and regulations, and banks are required to make regular reports to the NCCOB describing in detail their resources, assets, liabilities, and financial condition. Among other things, the NCCOB regulates mergers and consolidations of state-chartered banks, capital requirements for banks, loans to officers and directors, record keeping, types and amounts of loans and investments, and the establishment of branches.

The NCCOB has extensive enforcement authority over North Carolina banks. Such authority includes the ability to issue cease and desist orders and to seek civil money penalties. The NCCOB may also take possession of a North Carolina bank in various circumstances, including for a violation of its charter or of applicable laws, operating in an unsafe and unsound manner, or as a result of an impairment of its capital. The NCCOB also has authority to appoint a receiver.

- 8 -

On October 1, 2012, the North Carolina Banking Law Modernization Act became effective and many of the state banking laws to which the Bank is subject were amended, including laws impacting capital requirements, authorized activities, permissible investments, and numerous operational functions. It is not possible to predict fully the future effects that this legislation may have on the business and earnings of the Bank.

The Bank is also subject to numerous state and federal statutes and regulations that affect its businesses, activities and operations and are supervised and examined by state and federal bank regulatory agencies. The FDIC and the NCCOB regularly examine the operations of the Bank and are given the authority to approve or disapprove mergers, consolidations, the establishment of branches and similar corporate actions.

Capital Adequacy Requirements Under Basel III

The Company must comply with the Federal Reserve’s established capital adequacy standards, and the Bank is required to comply with the capital adequacy standards established by the FDIC. The Federal Reserve has promulgated two basic measures of capital adequacy for bank holding companies: a risk-based measure and a leverage measure. A bank holding company must satisfy all applicable capital standards to be considered in compliance. The Federal Reserve's current capital standards implement the international regulatory capital framework adopted by the Basel Committee on Banking Supervision in December 2010, referred to as the "Basel III Rules." The Basel III Rules apply to both depository institutions and (subject to certain exceptions not applicable to the Company) their holding companies. Although parts of the Basel III Rules apply only to large, complex financial institutions, substantial portions of the Basel III Rules apply to the Company and the Bank. Subject to a phase-in period for certain provisions, the Basel III Rules became effective on January 1, 2015.

The Basel III Rules are designed to make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies, account for off-balance-sheet exposure and minimize disincentives for holding liquid assets.

Assets and off-balance-sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance-sheet items. Under Basel III Rules, there are three categories of capital: (i) common equity Tier 1 Capital, which is common stock, retained earnings, accumulated other comprehensive income ("AOCI") as reported under GAAP, and certain minority interests in the equity accounts of consolidated subsidiaries; (ii) additional Tier 1 Capital, which is certain noncumulative perpetual preferred stock and certain minority interests in the equity accounts of consolidated subsidiaries which do not qualify for common equity Tier 1 Capital, and together with common equity Tier 1 Capital constitutes Tier 1 Capital; and (iii) Tier 2 Capital, which is subordinated debt, other preferred stock and a limited amount of loan loss reserves.

The minimum capital level requirements applicable to the Company and the Bank under the Basel III Rules are: (i) a ratio of common equity Tier 1 risk-based capital to total assets of 4.5 percent; (ii) a ratio of Tier 1 risk-based capital to total assets of 6 percent; and (iii) a ratio of total risk-based capital to total assets of 8 percent.

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

As of December 31, 2016, the Company had a common equity Tier 1 risk-based capital ratio of 10.85 percent, a Tier 1 risk-based capital ratio of 11.31 percent, and a total risk-based capital ratio of 12.49 percent.

The Basel III Rules also establish minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio of Tier 1 capital to average assets, less goodwill and certain other intangible assets, of 3 percent for bank holding companies that meet certain criteria. All other bank holding companies generally are required to maintain a minimum leverage ratio of 4 percent. The Company's Tier 1 leverage ratio as of December 31, 2016 was 9.83 percent compared with 9.42 percent as of December 31, 2015. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve has indicated that it will consider a "tangible Tier 1 Capital leverage ratio" and other indications of capital strength in evaluating proposals for expansion or new activities. The Federal Reserve has not advised the Company of any additional specific minimum leverage ratio or tangible Tier 1 capital leverage ratio applicable to it.

- 9 -

The Basel III Rules implement certain changes from prior Federal Reserve capital rules in the methods of calculating certain risk-weighted assets, which in turn affects the calculation of risk based ratios. Under the Basel III Rules, higher or more sensitive risk weights are assigned to various categories of assets, including, certain credit facilities that finance the acquisition, development or construction of real property, certain exposures or credits that are 90 days past due or on nonaccrual, foreign exposures and certain corporate exposures. In addition, the Basel III Rules include (i) alternative standards of credit worthiness consistent with the Dodd-Frank Act; (ii) greater recognition of collateral and guarantees; and (iii) revised capital treatment for derivatives and repo-style transactions.

In addition, the Basel III Rules include certain exemptions to address concerns about the regulatory burden on community banks. For example, banking organizations with less than $15 billion in consolidated assets as of December 31, 2009, are permitted to include in Tier 1 capital trust preferred securities and cumulative perpetual preferred stock issued and included in Tier 1 capital prior to May 19, 2010, on a permanent basis, without any phase out. Community banks were also allowed to elect on a one time basis in to opt-out out of the requirement to include most AOCI components in the calculation of CET1 capital and, in effect, retain the AOCI treatment under the current capital rules. Under the Basel III Rules, the Company may make a one-time, permanent election to continue to exclude accumulated other comprehensive income from capital. If the Company did not make this election, unrealized gains and losses would thereafter be included in the calculation of its regulatory capital. The Company made this election in its March 31, 2015 quarterly financial filings.

Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on taking brokered deposits and certain other restrictions on its business. As described below, the FDIC can impose substantial additional restrictions upon FDIC-insured depository institutions that fail to meet applicable capital requirements.

The Federal Deposit Insurance Act, or the FDI Act, requires the federal regulatory agencies to take “prompt corrective action” if a depository institution does not meet minimum capital requirements. The FDI Act establishes five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation.

The federal bank regulatory agencies have adopted regulations establishing relevant capital measures and relevant capital levels applicable to FDIC-insured banks. The relevant capital measures are the Total Risk-Based Capital ratio, Tier 1 Risk-Based Capital ratio and the leverage ratio. Under the regulations, a FDIC-insured bank will be:


•	“well capitalized” if it has a Total Risk-Based Capital ratio of 10 percent or greater, a Tier 1 Risk-Based Capital ratio of 6 percent or greater and a leverage ratio of 5 percent or greater and is not subject to any order or written directive by the appropriate regulatory authority to meet and maintain a specific capital level for any capital measure;


•	“adequately capitalized” if it has a Total Risk-Based Capital ratio of 8 percent or greater, a Tier 1 Risk-Based Capital ratio of 4 percent or greater and a leverage ratio of 4 percent or greater (3 percent in certain circumstances) and is not “well capitalized;”


•	“undercapitalized” if it has a Total Risk-Based Capital ratio of less than 8 percent, a Tier 1 Risk-Based Capital ratio of less than 4 percent or a leverage ratio of less than 4 percent (3 percent in certain circumstances);


•	“significantly undercapitalized” if it has a Total Risk-Based Capital ratio of less than 6 percent, a Tier 1 Risk-Based Capital ratio of less than 3 percent or a leverage ratio of less than 3 percent; and


•	“critically undercapitalized” if its tangible equity is equal to or less than 2 percent of average quarterly tangible assets.

An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. As of December 31, 2016, the Bank had capital levels that qualify as “well capitalized” under such regulations.

- 10 -

The FDI Act generally prohibits an FDIC-insured bank from making a capital distribution (including payment of a dividend) or paying any management fee to its holding company if the bank would thereafter be “undercapitalized.” “Undercapitalized” banks are subject to growth limitations and are required to submit a capital restoration plan. The federal regulators may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the bank’s capital. In addition, for a capital restoration plan to be acceptable to regulators, the bank’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of: (i) an amount equal to 5 percent of the bank’s total assets at the time it became “undercapitalized”; and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.”

“Significantly undercapitalized” insured banks may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets and the cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator. A bank that is not “well capitalized” is also subject to certain limitations relating to brokered deposits.

FDIC Insurance Assessments

The FDIC, through the Deposit Insurance Fund (“DIF”), insures the deposits of the Bank up to prescribed limits for each depositor, (currently, $250,000 per depositor). The assessment paid by each DIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the assessment rate is based on the institution’s capitalization risk category and supervisory subgroup category. An institution’s capitalization risk category is based on the FDIC’s determination of whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. The Company’s insurance assessments during 2016 and 2015 were $4.1 million and $2.9 million, respectively.

In addition, the FDIC can impose special assessments to cover shortages in the DIF. In October 2010, the FDIC adopted a new Restoration Plan for the DIF to ensure that the fund reserve ratio reaches 1.35 percent by September 30, 2020, as required by the Dodd-Frank Act. At least semi-annually, the FDIC will update its loss and income projections for the DIF and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking, if required. The Dodd-Frank Act also eliminated the requirement that the FDIC pay dividends to insured depository institutions when the reserve ratio exceeds certain thresholds. The Dodd-Frank Act requires the FDIC to offset the effect of increasing the reserve ratio on institutions with total consolidated assets of less than $10 billion, such as the Company.

As required by the Dodd-Frank Act, the FDIC also revised the deposit insurance assessment system, effective April 1, 2011, to base assessments on the average total consolidated assets of insured depository institutions during the assessment period, less the average tangible equity of the institution during the assessment period as opposed to solely bank deposits at an institution. This base assessment change necessitated that the FDIC adjust the assessment rates to ensure that the revenue collected under the new assessment system will approximately equal that under the existing assessment system.

Each of these changes may increase the rate of FDIC insurance assessments to maintain or replenish the FDIC’s DIF. This could, in turn, raise the Bank’s future deposit insurance assessment costs. On the other hand, the law changes the deposit insurance assessment base so that it will generally be equal to consolidated assets less tangible equity. This change of the assessment base from an emphasis on deposits to an emphasis on assets is generally considered likely to cause larger banking organizations to pay a disproportionately higher portion of future deposit insurance assessments, which may, correspondingly, lower the level of deposit insurance assessments that smaller community banks such as the Bank may otherwise have to pay in the future. While it is likely that the new law will increase the Company’s future deposit insurance assessment costs, the specific amount by which the new law’s combined changes will affect the Company’s deposit insurance assessment costs is hard to predict, particularly because the new law gives the FDIC enhanced discretion to set assessment rate levels.

The FDIC also collects a deposit-based assessment from insured financial institutions on behalf of the Financing Corporation, or FICO. The funds from these assessments are used to service debt issued by FICO in its capacity as a financial vehicle for the Federal Savings & Loan Insurance Corporation. The FICO assessment rate is set quarterly and will continue until the debt matures from 2017 through 2019.

- 11 -

Payment of Dividends and Other Restrictions

The Company is a legal entity separate and distinct from the Bank. While there are various legal and regulatory limitations under federal and state law governing the extent to which banks can pay dividends or otherwise supply funds to holding companies, the principal source of cash revenues for the Company is dividends from the Bank. The relevant federal and state regulatory agencies also have authority to prohibit a state bank, savings bank or bank holding company from engaging in conduct that, in the opinion of such regulatory body, constitutes an unsafe or unsound practice in conducting its business. The payment of dividends could, depending upon the financial condition of a bank, be deemed to constitute an unsafe or unsound practice in conducting its business.

Insured depository institutions, such as the Bank, are prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is defined in the applicable law and regulations).

The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earning retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve also indicated that it would be inappropriate for a holding company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the prompt corrective action regulations adopted by the Federal Reserve, the Federal Reserve may prohibit a bank holding company from paying any dividends if one or more of the holding company’s bank subsidiaries are classified as undercapitalized.

During 2015, the Company initiated a quarterly cash dividend on its unrestricted common stock.

A bank holding company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10 percent or more of its consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order or any condition imposed by, or written agreement with, the Federal Reserve.

Acquisitions

As mentioned above, under the BHCA, a bank holding company may not directly or indirectly acquire ownership or control of more than 5 percent of the voting shares or substantially all of the assets of any bank or merge or consolidate with another bank holding company without the prior approval of the Federal Reserve. Further, the Bank Merger Act requires approval from the FDIC prior to the Bank merging with or acquiring the deposits of another bank. Subject to certain reciprocity provisions, current federal law authorizes interstate acquisitions of banks and bank holding companies without geographic limitation. Generally, a bank headquartered in one state is authorized to merge with a bank headquartered in another state, as long as neither of the states has opted out of such interstate merger authority prior to such date, and subject to any state requirement that the target bank shall have been in existence and operating for a minimum period of time, not to exceed five years, and to certain deposit market-share limitations.

Interstate Banking and Branching

Effective June 1, 1997, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 amended the Federal Deposit Insurance Act and certain other statutes to permit state and national banks with different home states to merge across state lines, with approval of the appropriate federal banking agency, unless the home state of a participating bank had passed legislation prior to May 31, 1997, expressly prohibiting interstate mergers. Under the Riegle-Neal Act amendments, once a state or national bank has established branches in a state, that bank may establish and acquire additional branches at any location in the state at which any bank involved in the interstate merger transaction could have established or acquired branches under applicable federal or state law. If a state opts out of interstate branching within the specified time period, no bank in any other state may establish a branch in the state which has opted out, whether through an acquisition or de novo.

However, under the Dodd-Frank Act, the national branching requirements have been relaxed and national banks and state banks are able to establish branches in any state if that state would permit the establishment of the branch by a state bank chartered in that state.

- 12 -

The Federal Deposit Insurance Act, or FDIA, requires that the FDIC review (1) any merger or consolidation by or with an insured bank, or (2) any establishment of branches by an insured bank. Additionally, the NCCOB accepts applications for interstate merger and branching transactions, subject to certain limitations on ages of the banks to be acquired and the total amount of deposits within the state a bank or financial holding company may control. Since our primary service area is North Carolina, we do not expect that the ability to operate in other states will have any material impact on our growth strategy. We may, however, face increased competition from out-of-state banks that branch or make acquisitions in our primary markets in North Carolina.

Affiliate Transactions

The Federal Reserve Act, the FDIA and the rules adopted under these statutes restrict the extent to which we can borrow or otherwise obtain credit from, or engage in certain other transactions with, our subsidiaries. These laws regulate “covered transactions” between insured depository institutions and their subsidiaries, on the one hand, and their nondepository affiliates, on the other hand. The Dodd-Frank Act expanded the definition of affiliate to make any investment fund, including a mutual fund, for which a depository institution or its affiliates serve as investment advisor an affiliate of the depository institution. “Covered transactions” include a loan or extension of credit to a nondepository affiliate, a purchase of securities issued by such an affiliate, a purchase of assets from such an affiliate (unless otherwise exempted by the Federal Reserve Board), an acceptance of securities issued by such an affiliate as collateral for a loan, and an issuance of a guarantee, acceptance, or letter of credit for the benefit of such an affiliate. The Dodd-Frank Act extended the limitations to derivative transactions, repurchase agreements and securities lending and borrowing transactions that create credit exposure to an affiliate or an insider. The “covered transactions” that an insured depository institution and its subsidiaries are permitted to engage in with their nondepository affiliates are limited to the following amounts: (1) in the case of any one such affiliate, the aggregate amount of “covered transactions” cannot exceed ten percent of the capital stock and the surplus of the insured depository institution; and (2) in the case of all affiliates, the aggregate amount of “covered transactions” cannot exceed twenty percent of the capital stock and surplus of the insured depository institution. In addition, extensions of credit that constitute “covered transactions” must be collateralized in prescribed amounts. Further, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property or furnishing of services. Finally, when we and our subsidiaries conduct transactions internally among us, we are required to do so at arm’s length.

Loans to Directors, Executive Officers and Principal Shareholders

The authority of the Bank to extend credit to our directors, executive officers and principal shareholders, including their immediate family members, corporations and other entities that they control, is subject to substantial restrictions and requirements under Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder, as well as the Sarbanes-Oxley Act of 2002. These statutes and regulations impose specific limits on the amount of loans the Bank may make to directors and other insiders, and specified approval procedures must be followed in making loans that exceed certain amounts. In addition, all loans the Bank makes to directors and other insiders must satisfy the following requirements:


•	the loans must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not affiliated with us or the Bank;


•	the subsidiary bank must follow credit underwriting procedures at least as stringent as those applicable to comparable transactions with persons who are not affiliated with us or the Bank; and


•	the loans must not involve a greater than normal risk of non-payment or include other features not favorable to the Bank.

Furthermore, the Bank must periodically report all loans made to directors and other insiders to the bank regulators, and these loans are closely scrutinized by the regulators for compliance with Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O. Each loan to directors or other insiders must be pre-approved by the bank’s board of directors with the interested director abstaining from voting.

Community Reinvestment Act

The CRA requires federal bank regulatory agencies to encourage financial institutions to meet the credit needs of low and moderate-income borrowers in their local communities. An institution’s size and business strategy determines the type of examination that it will receive. Large, retail-oriented institutions are examined using a performance-based lending, investment and service test. Small institutions are examined using a streamlined approach. All institutions may opt to be evaluated under a strategic plan formulated with community input and pre-approved by the bank regulatory agency.

- 13 -

The CRA regulations provide for certain disclosure obligations. Each institution must post a notice advising the public of its right to comment to the institution and its regulator on the institution’s CRA performance and to review the institution’s CRA public file. Each lending institution must maintain for public inspection a file that includes a listing of branch locations and services, a summary of lending activity, a map of its communities and any written comments from the public on its performance in meeting community credit needs. The CRA requires public disclosure of a financial institution’s written CRA evaluations. This requirement promotes enforcement of CRA principles by providing the public with the status of a particular institution’s community reinvestment record.

The Gramm-Leach-Bliley Act made various changes to the CRA. Among other changes, CRA agreements with private parties must be disclosed, and annual CRA reports must be made available to a bank’s primary federal regulator. A bank holding company will not be permitted to become a financial holding company and no new activities authorized under the Gramm-Leach-Bliley Act may be commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries received less than a satisfactory CRA rating in its latest examination. The Bank received a “Satisfactory” rating in its last CRA examination which was conducted during March 2015.

Consumer Laws and Regulations

We are also subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. While the following list is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, The Fair and Accurate Credit Transactions Act, The Real Estate Settlement Procedures Act and the Fair Housing Act, among others. These laws and regulations, among other things, prohibit discrimination on the basis of race, gender or other designated characteristics and mandate various disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers. These and other laws also limit finance charges or other fees or charges earned in our activities. We must comply with the applicable provisions of these consumer protection laws and regulations as part of our ongoing customer relations.

Consumer Financial Protection Bureau

The Dodd-Frank Act creates a new, independent federal agency called the Consumer Financial Protection Bureau (“CFPB”), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-Leach-Bliley Act and certain other statutes. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions are subject to rules promulgated by the CFPB but continue to be examined and supervised by federal banking regulators for consumer compliance purposes. The CFPB has authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products. The Dodd-Frank Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal level and, in certain circumstances, permits the state attorney general to enforce compliance with both the state and federal laws and regulations.

The CFPB has already finalized rules relating to, among other things, remittance transfers under the Electronic Fund Transfer Act, which requires companies to provide consumers with certain disclosures before the consumer pays for a remittance transfer. These new rules became effective in October 2013. The CFPB has also amended certain rules under Regulation C relating to home mortgage disclosure to reflect a change in the asset-size exemption threshold for depository institutions based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers. In addition, on January 10, 2013, the CFPB released its final “Ability-to-Repay/Qualified Mortgage” rules, which amend the Truth in Lending Act (Regulation Z). Regulation Z currently prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer’s ability to repay the loan. The final rule implements sections 1411 and 1412 of the Dodd-Frank Act, which generally require creditors to make a reasonable, good faith determination of a consumer’s ability to repay any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan) and establishes certain protections from liability under this requirement for “qualified mortgages.” The final rule also implements section 1414 of the Dodd-Frank Act, which limits prepayment penalties. Finally, the final rule requires creditors to retain evidence of compliance with the rule for three years after a covered loan is consummated. This rule became effective January 10, 2014.

- 14 -

Technology Risk Management and Consumer Privacy

State and federal banking regulators have issued various policy statements emphasizing the importance of technology risk management and supervision in evaluating the safety and soundness of depository institutions with respect to banks that contract with outside vendors to provide data processing and core banking functions. The use of technology-related products, services, delivery channels and processes exposes a bank to various risks, particularly operational, privacy, security, strategic, reputation and compliance risk. Banks are generally expected to prudently manage technology-related risks as part of their comprehensive risk management policies by identifying, measuring, monitoring and controlling risks associated with the use of technology.

Under Section 501 of the Gramm-Leach-Bliley Act, the federal banking agencies have established appropriate standards for financial institutions regarding the implementation of safeguards to ensure the security and confidentiality of customer records and information, protection against any anticipated threats or hazards to the security or integrity of such records and protection against unauthorized access to or use of such records or information in a way that could result in substantial harm or inconvenience to a customer. Among other matters, the rules require each bank to implement a comprehensive written information security program that includes administrative, technical and physical safeguards relating to customer information.

Under the Gramm-Leach-Bliley Act, a financial institution must also provide its customers with a notice of privacy policies and practices. Section 502 prohibits a financial institution from disclosing nonpublic personal information about a customer to nonaffiliated third parties unless the institution satisfies various notice and opt-out requirements and the customer has not elected to opt out of the disclosure. Under Section 504, the agencies are authorized to issue regulations as necessary to implement notice requirements and restrictions on a financial institution’s ability to disclose nonpublic personal information about customers to nonaffiliated third parties. Under the final rule the regulators adopted, all banks must develop initial and annual privacy notices which describe in general terms the bank’s information sharing practices. Banks that share nonpublic personal information about customers with nonaffiliated third parties must also provide customers with an opt-out notice and a reasonable period of time for the customer to opt out of any such disclosure (with certain exceptions). Limitations are placed on the extent to which a bank can disclose an account number or access code for credit card, deposit or transaction accounts to any nonaffiliated third party for use in marketing.

UDAP and UDAAP

Recently, banking regulatory agencies have increasingly used a general consumer protection statute to address “unethical” or otherwise “bad” business practices that may not necessarily fall directly under the purview of a specific banking or consumer finance law. The law of choice for enforcement against such business practices has been Section 5 of the Federal Trade Commission Act, referred to as the FTC Act, which is the primary federal law that prohibits unfair or deceptive acts or practices, referred to as UDAP, and unfair methods of competition in or affecting commerce. “Unjustified consumer injury” is the principal focus of the FTC Act. Prior to the Dodd-Frank Act, there was little formal guidance to provide insight to the parameters for compliance with UDAP laws and regulations. However, UDAP laws and regulations have been expanded under the Dodd-Frank Act to apply to “unfair, deceptive or abusive acts or practices,” referred to as UDAAP, which have been delegated to the CFPB for supervision. The CFPB has published its first Supervision and Examination Manual that addresses compliance with and the examination of UDAAP

Monitoring and Reporting Suspicious Activity

Under the Bank Secrecy Act, or BSA, we are required to monitor and report unusual or suspicious account activity that might signify money laundering, tax evasion or other criminal activities, as well as transactions involving the transfer or withdrawal of amounts in excess of prescribed limits. Several anti-money laundering laws, including provisions in Title III of the USA PATRIOT Act of 2001, have been enacted up to the present to amend the BSA. Under the USA PATRIOT Act, financial institutions are subject to prohibitions against specified financial transactions and account relationships as well as enhanced due diligence and “know your customer” standards in their dealings with financial institutions and foreign customers. For example, the enhanced due diligence policies, procedures and controls generally require financial institutions to take reasonable steps:


•	to conduct enhanced scrutiny of account relationships to guard against money laundering and report any suspicious transaction;


•	to ascertain the identity of the nominal and beneficial owners of, and the source of funds deposited into, each account as needed to guard against money laundering and report any suspicious transactions;


•	to ascertain for any foreign bank, the shares of which are not publicly traded, the identity of the owners of the foreign bank, and the nature and extent of the ownership interest of each such owner; and


•	to ascertain whether any foreign bank provides correspondent accounts to other foreign banks and, if so, the identity of those foreign banks and related due diligence information.

- 15 -

Under the USA PATRIOT Act, financial institutions are also required to establish anti-money laundering programs. The USA PATRIOT Act sets forth minimum standards for these programs, including:


•	the development of internal policies, procedures, and controls;


•	the designation of a compliance officer;


•	an ongoing employee training program; and


•	an independent audit function to test the programs.

In addition, under the USA PATRIOT Act, the Secretary of the U.S. Department of the Treasury, or Treasury, has adopted rules addressing a number of related issues, including increasing the cooperation and information sharing between financial institutions, regulators, and law enforcement authorities regarding individuals, entities and organizations engaged in, or reasonably suspected based on credible evidence of engaging in, terrorist acts or money laundering activities. Any financial institution complying with these rules will not be deemed to violate the privacy provisions of the Gramm-Leach-Bliley Act that are discussed above. Finally, under the regulations of the Office of Foreign Asset Control, or OFAC, we are required to monitor and block transactions with certain “specially designated nationals” who OFAC has determined pose a risk to U.S. national security.

The Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, mandates for public companies such as the Company, a variety of reforms intended to address corporate and accounting fraud and provides for the establishment of the Public Company Accounting Oversight Board, or the PCAOB, which enforces auditing, quality control and independence standards for firms that audit SEC-reporting companies. Sarbanes-Oxley imposes higher standards for auditor independence and restricts the provision of consulting services by auditing firms to companies they audit and requires that certain audit partners be rotated periodically. The law also requires chief executive officers and chief financial officers, or their equivalents, to certify the accuracy of periodic reports filed with the SEC, subject to civil and criminal penalties if they knowingly or willfully violate this certification requirement, and increases the oversight and authority of audit committees of publicly traded companies.

Fiscal and Monetary Policy

Banking is a business which depends on interest rate differentials for success. In general, the difference between the interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitutes the major portion of a bank’s earnings. Thus, the earnings and growth of the Company and the Bank will be subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The Federal Reserve regulates the supply of money through various means, including open market dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve and the reserve requirements on deposits. The nature and timing of any changes in such policies and their effect on the Company and the Bank cannot be predicted.

Current and future legislation and the policies established by federal and state regulatory authorities will affect the future operations of the Company and the Bank. Banking legislation and regulations may limit the Company’s and the Bank’s growth and the return to their investors by restricting certain of their activities.

In addition, capital requirements could be changed and have the effect of restricting the activities of the Company and the Bank, or requiring additional capital to be maintained. We cannot predict with certainty what changes, if any, will be made to existing federal and state legislation and regulations or the effect that such changes may have on the business of the Company or the Bank.

Real Estate Lending Evaluations

The federal regulators have adopted uniform standards for evaluations of loans secured by real estate or made to finance improvements to real estate. Banks are required to establish and maintain written internal real estate lending policies consistent with safe and sound banking practices and appropriate to the size of the institution and the nature and scope of its operations. The regulations establish loan to value ratio limitations on real estate loans. The Bank’s loan policies establish limits on loan to value ratios that are equal to or less than those established in such regulations.

- 16 -

Commercial Real Estate Concentrations

The Company’s lending operations may be subject to enhanced scrutiny by federal banking regulators based on its concentration of commercial real estate loans. On December 6, 2006, the federal banking regulators issued final guidance to remind financial institutions of the risk posed by commercial real estate, or CRE, lending concentrations. CRE loans generally include land development, construction loans, and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property. The guidance prescribes the following standards for its examiners to help identify institutions that are potentially exposed to significant CRE risk and may warrant greater supervisory scrutiny:


•	total reported loans for construction, land development and other land, or C&D, represent 100 percent or more of the institution’s total capital; or


•	total CRE loans represent 300 percent or more of the institution’s total capital, and the outstanding balance of the institution’s CRE loan portfolio has increased by 50 percent or more.

As of December 31, 2016, the Bank’s C&D concentration as a percentage of risk based capital totaled 99.2 percent and the Bank’s CRE concentration as a percentage of risk based capital totaled 276.6 percent.

Limitations on Incentive Compensation

In June 2010, the Federal Reserve Board and FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

The Federal Reserve Board will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

In addition, Section 956 of the Dodd-Frank Act required certain regulators (including the FDIC, SEC and Federal Reserve Board) to adopt requirements or guidelines prohibiting excessive compensation. On April 14, 2011, these regulators published a joint proposed rulemaking to implement Section 956 of the Dodd-Frank Act for depository institutions, their holding companies and various other financial institutions with $1 billion or more in assets. The proposed rule would (i) prohibit incentive-based compensation arrangements for covered persons that would encourage inappropriate risks by providing excess compensation; (ii) prohibit incentive-based compensation arrangements for covered persons that would expose the institution to inappropriate risks by providing compensation that could lead to a material financial loss; (iii) require policies and procedures for incentive-based compensation arrangements that are commensurate with the size and complexity of the institutions; and (iv) require annual reports on incentive compensation structures to the institution’s appropriate federal regulator. The comment period to the proposed rule ended on March 31, 2011. As of the date of this document, the final rule has not yet been published by these regulators.

In addition, the Dodd-Frank Act requires publicly traded companies to give shareholders a non-binding vote on executive compensation at their first annual meeting taking place six months after the date of enactment and at least every three years thereafter and on so-called “golden parachute” payments in connection with approvals of mergers and acquisitions unless previously voted on by shareholders. The new legislation also authorizes the SEC to promulgate rules that would allow shareholders to nominate their own candidates using a company’s proxy materials. Additionally, the Dodd-Frank Act directs the federal banking regulators to promulgate rules prohibiting excessive compensation paid to executives of depository institutions and their holding companies with assets in excess of $1.0 billion, regardless of whether the company is publicly traded or not. The Dodd-Frank Act gives the SEC authority to prohibit broker discretionary voting on elections of directors and executive compensation matters.

- 17 -

Economic Environment

The policies of regulatory authorities, including the monetary policy of the Federal Reserve, have a significant effect on the operating results of bank holding companies and their subsidiaries. Among the means available to the Federal Reserve to affect the money supply are open market operations in U.S. government securities, changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid on deposits.

The Federal Reserve’s monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The nature of future monetary policies and the effect of these policies on the business and earnings of the Company and the Bank cannot be predicted.

Regulatory Reform and Legislation

From time to time, various legislative and regulatory initiatives are introduced in Congress and state legislatures, as well as by regulatory agencies. Such initiatives may include proposals to expand or contract the powers of bank holding companies and depository institutions or proposals to substantially change the financial institution regulatory system. Such legislation could change banking statutes and the operating environment of the Company in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. The Company cannot predict whether any such legislation will be enacted, and, if enacted, the effect that it, or any implementing regulations, would have on the financial condition or results of operations of the Company. A change in statutes, regulations or regulatory policies applicable to the Company or our subsidiaries could have a material effect on the Company’s business, financial condition and results of operations.

ITEM 1A. RISK FACTORS

An investment in our securities involves certain risks. If any of the following risks or other risks, which have not been identified or which we may believe are immaterial or unlikely, actually occur, our business, financial condition or results of operations could be materially adversely affected. In such case, the trading price of our securities could decline, and you may lose all or part of your investment. The risks identified below and this Form 10-K contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us as described below and elsewhere in this Form 10-K.

Risks Related to Our Business

Our financial information reflects the application of the acquisition method of accounting. Any change in the assumptions used in such methodology could have an adverse effect on our results of operations.

As a result of various prior bank and bank holding company acquisitions, our financial results are heavily influenced by the application of the acquisition method of accounting. The acquisition method of accounting requires management to make assumptions regarding the assets purchased and liabilities assumed to determine their fair value. Management’s assumptions or valuations may not be accurate. In addition, the balances of nonperforming assets were significantly reduced by the adjustments to fair value recorded in conjunction with the various acquisitions. If our fair value assumptions were incorrect or the regulatory agencies to whom we report require us to change or modify our assumptions, such change or modification could have a material adverse effect on our financial condition or results of operations or our previously reported results. Since our strategy includes additional acquisitions, we expect we would be further subject to such risk on a going forward basis.

- 18 -

Within our loan and purchased accounts receivable portfolios, we may experience increased delinquencies and credit losses, which could have a material adverse effect on our capital, financial condition, and results of operations.

Like other lenders, we face the risk that our customers will not repay their loans or other receivables. A customer’s failure to repay us is usually preceded by missed monthly payments. In some instances, however, a customer may declare bankruptcy prior to missing payments, and, following a borrower filing bankruptcy, a lender’s recovery of the credit extended is often limited. Since many of our loans are secured by collateral, we may attempt to foreclose the collateral when and if customers default on their loans. However, the value of the collateral may not equal the amount of the unpaid loan, and we may be unsuccessful in recovering the remaining balance from our customers. The resolution of nonperforming assets, including the initiation of foreclosure proceedings, requires significant commitments of time from management and our directors, which can be detrimental to the performance of their other responsibilities, and will expose us to additional legal and other costs and potential delays. Elevated levels of loan delinquencies and bankruptcies in our market area and among our customers can be indicative of future charge-offs and may require us to increase our allowance for loan and lease losses (“ALLL”) or valuation allowances. Higher charge-off rates, delays in the foreclosure process or in obtaining judgments against defaulting borrowers, and increases in our ALLL for loans or valuation allowances for purchased accounts receivable may hurt our overall financial performance.

The effects of economic instability on the performance of financial institutions in our geographic area, actions taken by our competitors to address economic instability, and the public perception of and confidence in the economy generally, and the banking industry specifically, could negatively impact our performance and operations.

All financial institutions are subject to similar risks resulting from economic instability, such as increased charge-offs and levels of past due loans and nonperforming assets. As troubled institutions in our market area continue to recognize and dispose of problem assets, excessive inventories of residential homes and lots may negatively affect home values and increase the time it takes us or our borrowers to sell existing inventory. The perception that troubled banking institutions (and smaller banking institutions that are not “in trouble”) are risky institutions for purposes of regulatory compliance or safeguarding deposits may cause depositors to move their funds to larger institutions that are perceived to be less risky. If our depositors should move their funds based on events at other financial institutions, our operating results would suffer.

Our loan portfolio mix could result in increased credit risk in a challenging economy.

Our loan portfolio is concentrated in commercial real estate and commercial business loans. These types of loans generally are viewed as having more risk of default than residential real estate loans or certain other types of loans or investments. In fact, the FDIC has issued pronouncements alerting banks of its concern about heavy loan concentrations in certain types of commercial real estate loans, including acquisition, construction and development loans, and also by geographic segment. Because our loan portfolio contains commercial real estate and commercial business loans with relatively large balances, the deterioration of one or a few of these loans may cause a significant increase in our nonperforming loans. An increase in nonperforming loans could result in a loss of earnings from these loans, an increase in the provision for loan losses, or an increase in loan charge-offs, any of which could have a material adverse impact on our results of operations and financial condition.

The current economic environment and any deterioration or downturn in the economies or real estate values in the markets we serve could have a material adverse effect on both borrowers’ ability to repay their loans and the value of the real property securing such loans. Our ability to recover on defaulted loans would then be diminished, and we would be more likely to suffer losses on defaulted loans. Any of these developments could materially adversely affect our business, financial condition, results of operations and prospects.

Our loan portfolio has and will continue to be affected by the on-going correction in real estate markets, including reduced levels of home sales and declines in the performance of loans.

There continues to be a general real estate slowdown in some of our market areas, reflecting declining prices and excess inventories. As a result, home builders and commercial developers have shown signs of financial deterioration for prolonged periods before recovery. A soft residential housing market, increased delinquency rates, and a weakened secondary credit market have affected the overall mortgage industry and have impacted in the past and could in the future adversely affect our Builder Finance Division. In addition, many banking institutions, including our Bank, have experienced declines in the performance of other loans, including construction, land development and land loans and commercial loans. We make credit and reserve decisions based on the current conditions of borrowers or projects combined with our expectations for the future. If conditions are worse than forecasted, we could experience higher charge-offs and delinquencies beyond that which is provided in the allowance for loan losses. As such, our earnings could be adversely affected through higher than anticipated provisions for loan losses.

- 19 -

SBA lending is an important part of our business. Our SBA lending program is dependent upon the federal government, and we have specific risks associated with originating SBA loans.

Our SBA lending program is dependent upon the federal government. As an SBA Preferred Lender, we enable our clients to obtain SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including revocation of the lender’s Preferred Lender status. If we lose our status as a Preferred Lender, we may lose our customers to lenders who are SBA Preferred Lenders, and as a result we would experience a material adverse effect to our financial results. Any changes to the SBA program, including changes to the level of guarantee provided by the federal government on SBA loans, may also have an adverse effect on our business.

We generally sell the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales have resulted in our earning premium income and/or have created a stream of future servicing income. There can be no assurance that we will be able to continue originating these loans, that a secondary market will exist or that we will continue to realize premiums upon the sale of the guaranteed portion of these loans. When we sell the guaranteed portion of our SBA 7(a) loans, we incur credit risk on the non-guaranteed portion of the loans. We share pro-rata with the SBA in any recoveries. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us, which could materially adversely affect our results of operations. In certain situations, we may elect to repurchase previously sold portions of SBA 7(a) loans that are delinquent, which may result in higher levels of nonperforming loans.

If our ALLL is not sufficient to cover actual loan losses, our earnings could decrease.

Our success depends to a significant extent upon the quality of our assets, particularly loans. In originating loans, there is a substantial likelihood that we will experience credit losses. The risk of loss will vary with, among other things, general economic conditions, including the current economic environment and real estate market, the type of loan, the creditworthiness of the borrower over the term of the loan, and, in the case of a collateralized loan, the quality of the collateral for the loan.

Our loan customers may not repay their loans according to the terms of these loans, and the collateral securing the payment of these loans may be insufficient to assure repayment. As a result, we may experience significant loan losses, which could have a material adverse effect on our operating results. Our management makes various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We maintain an ALLL in an attempt to cover any loan losses that may occur. In determining the size of the ALLL, we rely on an analysis of our loan portfolio based on historical loss experience, volume and types of loans, trends in classification, volume and trends in delinquencies and non-accruals, national and local economic conditions, and other pertinent information.

If our assumptions are wrong, our current allowance may not be sufficient to cover future loan losses, and we may need to make adjustments to allow for different economic conditions or adverse developments in our loan portfolio. Material additions to our allowance would materially decrease our net income. We expect our ALLL to continue to fluctuate; however, given current and future market conditions, we can make no assurance that our allowance will be adequate to cover future loan losses.

In addition, federal and state regulators periodically review our ALLL and may require us to increase our provision for loan losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in our allowance for loan losses or loan charge-offs as required by these regulators could have a negative effect on our operating results.

The amount of other real estate owned (“OREO”) may increase significantly, resulting in additional losses, and costs and expenses that will negatively affect our operations.

As the amount of OREO increases, our losses, and the costs and expenses to maintain the real estate, likewise increase. The amount of OREO we hold may increase due to various economic conditions or other factors. Any additional increase in losses and maintenance costs and expenses due to OREO may have material adverse effects on our business, financial condition, and results of operations. Such effects may be particularly pronounced in a market of reduced real estate values and excess inventory, which may make the disposition of OREO properties more difficult, increase maintenance costs and expenses, and may reduce our ultimate realization from any OREO sales. In addition, at acquisition of the OREO we are required to reflect the fair market value in our financial statements. If the OREO declines in value subsequent to its acquisition, we are required to recognize a loss. As a result, declines in the value of our OREO have a negative effect on our results of operations and financial condition.

- 20 -

Our use of appraisals in deciding whether to make a loan on or secured by real property or how to value such a loan in the future may not accurately describe the net value of the real property collateral that we can realize.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made, and, as real estate values in our market area have experienced changes in value in relatively short periods of time, especially given heightened economic uncertainty, this estimate might not accurately describe the net value of the real property collateral after the loan has been closed. If the appraisal does not accurately reflect the amount that may be obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property. In addition, we rely on appraisals and other valuation techniques to establish the value of our OREO and to determine certain loan impairments. If these valuations are inaccurate, our consolidated financial statements may not reflect the correct value of OREO, and our ALLL may not reflect accurate loan impairments. The valuation of the property may negatively impact the continuing value of such loan and could materially adversely affect our results of operations and financial condition.

The fair value of our investment securities can fluctuate due to factors outside of our control.

As of December 31, 2016, the fair value of our investment securities portfolio was $1.03 billion. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, monetary policy changes by the Federal Reserve, and changes in market interest rates and continued instability in the capital markets. Any of these factors, among others, could cause other-than-temporary impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could materially and adversely affect our business, results of operations, financial condition and prospects. The process for determining whether impairment of a security is other-than-temporary usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

Combining the two companies may be more difficult, costly or time consuming than expected.

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

The FNB Merger is subject to certain closing conditions that, if not satisfied or waived, will result in the FNB Merger not being completed. Termination of the FNB Merger Agreement could negatively impact Yadkin.

The FNB Merger is subject to customary conditions to closing. If any condition to the FNB Merger is not satisfied or waived, to the extent permitted by law, including the absence of any materially burdensome condition in the regulatory approvals, the FNB Merger may not be completed. In addition, either FNB or Yadkin may terminate the FNB Merger Agreement under certain circumstances even if the FNB Merger is adopted by the Yadkin shareholders, including but not limited to, if the FNB Merger has not been completed on or before May 31, 2017.

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

- 21 -

terminated, the market price of Yadkin’s common stock could decline to the extent that the current market prices reflect a market assumption that the FNB Merger will be completed.

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

The FNB Merger Agreement restricts Yadkin from operating its business other than in the ordinary course and prohibits Yadkin from taking specified actions without FNB’s consent until the FNB Merger occurs. These restrictions may prevent Yadkin from pursuing attractive business opportunities that may arise prior to the completion of the FNB Merger. In addition, uncertainty about the effect of the FNB Merger on employees and customers may have an adverse effect on Yadkin. These uncertainties may impair Yadkin’s ability to attract, retain and motivate key personnel until the FNB Merger is completed, and could cause customers and others that deal with Yadkin to seek to change existing business relationships with Yadkin. Retention of certain employees by Yadkin may be challenging while the FNB Merger is pending, as certain employees may experience uncertainty about their future roles with Yadkin. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Yadkin, Yadkin’s business could be harmed.

The uncertainty caused by the pending FNB Merger could cause Yadkin’s clients and business associates to seek to change their existing business relationships with Yadkin. These uncertainties may impair Yadkin’s ability to attract, retain and grow Yadkin’s client base until the FNB Merger is complete.

The market value of the merger consideration that Yadkin shareholders will receive as a result of the FNB Merger may fluctuate.

If the FNB Merger is completed, each share of the Yadkin common stock will be converted into the right to receive 2.16 shares of FNB common stock, and cash in lieu of any fractional shares. The market value of the merger consideration may vary from the closing price of FNB common stock on the date the FNB Merger was announced, on the date that the proxy statement/prospectus was mailed to the Yadkin shareholders, on the date of the special meeting of the Yadkin shareholders, on the date the FNB Merger is consummated and thereafter. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in the respective businesses, operations and prospects, and the regulatory situation of FNB and Yadkin. Many of these factors are beyond the control of Yadkin. Any change in the market price of FNB common stock prior to completion of the FNB Merger will affect the amount of and the market value of the merger consideration that Yadkin shareholders will receive upon completion of the FNB Merger. Accordingly, at the time of the special meeting, the Yadkin shareholders were not able to calculate the amount or the market value of the merger consideration they would receive upon completion of the FNB Merger.

Further, the results of operations of the combined company following the FNB Merger and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of FNB and Yadkin.

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

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

The FNB Merger Agreement limits Yadkin’s ability to pursue an alternative acquisition proposal and could require Yadkin to pay a termination fee of $45 million under certain circumstances relating to alternative acquisition proposals.

The FNB Merger Agreement prohibits Yadkin from soliciting, initiating or knowingly encouraging certain alternative acquisition proposals with any third party, subject to exceptions set forth in the FNB Merger Agreement. The FNB Merger Agreement also provides for the payment by Yadkin to FNB of a termination fee in the amount of $45 million (and, in some cases, FNB’s documented out-of-pocket expenses incurred in connection with the FNB Merger) in the event that Yadkin or FNB terminates the FNB Merger Agreement for certain specified reasons. These provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Yadkin from considering or proposing such an acquisition.

Damage resulting from Hurricane Matthew could have a negative impact on the Company's credit risk.

- 22 -

Many communities in Southern and Eastern North Carolina suffered significant damage resulting from Hurricane Matthew. At this time, it is unclear to what extent Yadkin customers have been affected by uninsured business interruption, property destruction and other related losses, and how those events may affect each customer's ability to meet its debt service obligations.

Changes in the interest rate environment could reduce our net interest income, which could reduce our profitability.

As a financial institution, our earnings significantly depend on our net interest income, which is the difference between the interest income that we earn on interest-earning assets, such as investment securities and loans, and the interest expense that we pay on interest-bearing liabilities, such as deposits and borrowings. Therefore, any change in general market interest rates, including changes in federal fiscal and monetary policies, affects us more than non-financial institutions and can have a significant effect on our net interest income and total income. The Federal Reserve raised short-term interest rates in December 2015 from near-zero interest rates. Our assets and liabilities may react differently to changes in overall market rates or conditions because there may be mismatches between the repricing or maturity characteristics of the assets and liabilities. As a result, an increase or decrease in market interest rates could have material adverse effects on our net interest margin and results of operations.

We face strong competition from larger, more established competitors.

The banking industry is highly competitive, and we experience strong competition from many other financial institutions, including some of the largest commercial banks in the United States. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds, and other financial institutions that operate in our primary market areas and elsewhere. We expect competition to continue to intensify due to financial institution consolidation.

We compete with these institutions both in attracting deposits and in making loans, primarily on the basis of the interest rates we pay and yield on these products. In addition, we have to attract our customer base from other existing financial institutions and from new residents. Many of our competitors are well-established, much larger financial institutions. While we believe we can and do successfully compete with these other financial institutions in our markets, we may face a competitive disadvantage as a result of our smaller size and lack of geographic diversification. Further, should we fail to maintain an adequate volume of loans and deposits in accordance with our business strategy, it could have an adverse effect on our profitability in the future.

As a community bank, we have different lending risks than larger banks.

Our ability to diversify our economic risks is limited by our own local markets and economies. We lend primarily to individuals and to small- to medium-sized businesses, which may expose us to greater lending risks than those of banks lending to larger, better-capitalized businesses with longer operating histories. Small- and medium-sized businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If general economic conditions negatively impact this economic sector in the markets in which we operate, our results of operations and financial condition may be adversely affected.

We manage our credit exposure through careful monitoring of loan applicants and loan concentrations in particular industries, and through loan approval and review procedures. We have established an evaluation process designed to determine the adequacy of our allowance for loan losses. While this evaluation process uses historical and other objective information, the classification of loans and the establishment of loan losses is an estimate based on experience, judgment and expectations regarding our borrowers, and the economies in which we and our borrowers operate, as well as the judgment of our regulators. We cannot assure you that our loan loss reserves will be sufficient to absorb future loan losses or prevent a material adverse effect on our business, profitability or financial condition.

The stock market can be volatile, and fluctuations in our operating results and other factors, could cause our stock price to decline.

The stock market has experienced, and may continue to experience, fluctuations that significantly impact the market prices of securities issued by many companies. Market fluctuations could adversely affect our stock price. These fluctuations have often been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, loss of investor confidence, interest rate changes, or international currency fluctuations, may negatively affect the market price of our common stock. Moreover, our operating results may fluctuate and vary from period to period due to the risk factors set forth herein. As a result, period-to-period comparisons should not be relied upon as an indication of future performance. Our stock price could fluctuate significantly in response to our quarterly or annual results, annual projections and the impact of these risk factors on our operating results or financial position.

- 23 -

Hurricanes, excessive rainfall, droughts or other adverse weather events could negatively affect our local economies or disrupt our operations, which could have an adverse effect on our business or results of operations.

The economy of the coastal regions of North Carolina and South Carolina are affected, from time to time, by adverse weather events, particularly hurricanes. Our market area includes the Outer Banks and other portions of coastal North Carolina. Agricultural interests are highly sensitive to excessive rainfall or droughts. We cannot predict whether, or to what extent damage caused by future weather conditions will affect our operations, our customers, or the economies in our banking markets. Weather events could cause a disruption in our day-to-day business activities in branches located in coastal communities, a decline in loan originations, destruction or decline in the value of properties securing our loans, or an increase in the risks of delinquencies, foreclosures, and loan losses. Even if a hurricane does not cause any physical damage in our market area, a turbulent hurricane season could significantly affect the market value of all coastal property.

We are subject to liquidity risk in our operations.

Liquidity risk is the possibility of being unable, at a reasonable cost and within acceptable risk tolerances, to pay obligations as they come due, to capitalize on growth opportunities as they arise, or to pay regular dividends because of an inability to liquidate assets or obtain adequate funding on a timely basis. Liquidity is required to fund various obligations, including credit obligations to borrowers, mortgage originations, withdrawals by depositors, repayment of debt, dividends to shareholders, operating expenses, and capital expenditures. Liquidity is derived primarily from retail deposit growth and retention, principal and interest payments on loans and investment securities, net cash provided from operations, and access to other funding sources. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally affect our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a severe disruption in the financial markets or negative views and expectations about the prospects for the financial services industry as a whole, given the recent turmoil faced by banking organizations in the domestic and worldwide credit markets. Our access to borrowed funds could become limited in the future, and we may be required to pay above market rates for additional borrowed funds, if we are able to obtain them at all, which may adversely affect our results of operations.

A failure in or breach of our operational or security systems, or those of our third party service providers, including cyber attacks, could disrupt our business, result in unintentional disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and cause losses.

As a financial institution, our operations rely heavily on the secure data processing, storage and transmission of confidential and other information on our computer systems and networks. Any failure, interruption or breach in security or operational integrity of these systems could result in failures or disruptions in our online banking system, customer relationship management, general ledger, deposit and loan servicing and other systems. The security and integrity of our systems could be threatened by a variety of interruptions or information security breaches, including those caused by computer hacking, cyber attacks, electronic fraudulent activity, or attempted theft of financial assets. We cannot assure you that any such failures, interruptions, or security breaches will not occur, or if they do occur, that they will be quickly detected and adequately addressed. While we have certain protective policies and procedures in place, the nature and sophistication of the threats continue to evolve. We may be required to expend significant additional resources in the future to modify and enhance our protective measures.

Additionally, we face the risk of operational disruption, failure, termination, or capacity constraints on the part of any of the third parties that facilitate our business activities, including exchanges, clearing agents, clearing houses, or other financial intermediaries. We also face risks related to cyber-attacks and other security breaches in connection with card transactions that typically involve the transmission of sensitive information regarding our customers through various third parties. Such parties could also be the source of an attack on, or breach of, our operational systems. Any failures, interruptions or security breaches in our information systems could damage our reputation, result in a loss of customer business, result in a violation of privacy or other laws, or expose us to civil litigation, regulatory fines or losses not covered by insurance.

- 24 -

Our business is dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party providers. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could materially adversely affect our business, financial condition, results of operations and prospects.

Deterioration in the soundness of our counterparties could adversely affect us.

Our ability to engage in routine funding transactions could be adversely affected by the actions and stability of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships, and we routinely execute transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, and other institutional clients. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could create a market-wide liquidity crisis similar to that experienced in late 2008 and early 2009 and could lead to losses or defaults by us or by other institutions. There is no assurance that the failure of our counterparties would not materially adversely affect our results of operations.

We rely heavily on our management team and the unexpected loss of any of those personnel could adversely affect our operations; we depend on our ability to attract and retain key personnel.

We are a customer-focused and relationship-driven organization. We expect our future growth to be driven in a large part by the relationships maintained with our customers by our chief executive officer and other senior officers. The unexpected loss of any of our key employees could have an adverse effect on our business and possibly result in reduced revenues and earnings. The implementation of our business strategy will also require us to continue to attract, hire, motivate, and retain skilled personnel to develop new customer relationships as well as new financial products and services. Many experienced banking professionals employed by our competitors are covered by agreements not to compete or solicit their existing customers if they were to leave their current employment. These agreements make the recruitment of these professionals more difficult. The market for these people is competitive, and we cannot assure you that we will be successful in attracting, hiring, motivating or retaining them.

We have identified a material weakness in our internal control over financial reporting which could result in errors in our reported results or disclosures that are not complete or accurate.

In reviewing the accounting for the allowance for loan losses, management has determined that, as of the date of this filing, we have a control deficiency resulting in a material weakness in the Company’s internal control over financial reporting. In addition, our independent registered public accounting firm, Dixon Hughes Goodman LLP, has expressed an adverse opinion on our internal control over financial reporting because of the material weakness. There is a reasonable possibility that our material weakness could lead to a material misstatement of the Company’s annual or interim financial statements not being prevented or detected in a timely manner.

Our material weakness relates specifically to the Company’s internal control processes lacking adequate precision in the estimation of the allowance for loan loss. If we are unable to remedy the material weakness, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the SEC, could be adversely effected. The occurrence of or failure to remediate the material weakness may adversely affect our reputation and business and the market price of our common stock and any other securities we may issues. See “Controls and Procedures” for more information.

- 25 -

Our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud.

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by the Company in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or omission. Additionally, controls can be circumvented by individual acts, by collusion by two or more people and/or by override of the established controls. Accordingly, because of the inherent limitations in our control systems and in human nature, misstatements due to error or fraud may occur and not be detected.

We are subject to environmental liability risk associated with lending activities.

A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

Changes in accounting standards and management’s selection of accounting methods, including assumptions and estimates, could materially impact our financial statements.

From time to time the SEC and the Financial Accounting Standards Board change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in changes to previously reported financial results, or a cumulative charge to retained earnings. In addition, management is required to use certain assumptions and estimates in preparing our financial statements, including determining the fair value of certain assets and liabilities, among other items. If the assumptions or estimates are incorrect, we may experience unexpected material consequences.

We may be required to repurchase mortgage loans sold into the secondary market.

We have entered into agreements to sell mortgage loans into the secondary market. These agreements typically require that we repurchase the loan in the event of a default. If we are required to repurchase a large number of mortgage loans from secondary market investors, our financial condition and results of operations could be adversely affected.

Deterioration in the fiscal position of the U.S. federal government and downgrades in U.S. Treasury and federal agency securities could adversely affect us and our subsidiary’s banking operations.

The long-term outlook for the fiscal position of the U.S. federal government is uncertain, as illustrated by the 2011 downgrade by certain rating agencies of the credit rating of the U.S. government and federal agencies. In addition to causing economic and financial market disruptions, any future downgrade, failure to raise the U.S. statutory debt limit, or deterioration in the fiscal outlook of the U.S. federal government, could, among other things, materially adversely affect the market value of the U.S. and other government and governmental agency securities that we hold, the availability of those securities as collateral for borrowing, and our ability to access capital markets on favorable terms. In particular, such circumstances could increase interest rates and disrupt payment systems, money markets, and long-term or short-term fixed income markets, adversely affecting the cost and availability of funding, which could negatively affect our profitability. Also, the adverse consequences could extend to those to whom we extend credit and could adversely affect their ability to repay their loans. Any of these developments could materially adversely affect our business, financial condition, results of operations, and prospects.

We may be adversely affected by changes in U.S. tax and other laws and regulations.

- 26 -

The United States Congress and the President's Administration have indicated an interest in reforming the internal revenue code. Possible approaches include lowering the corporate income tax rate and limiting or eliminating various other deductions, tax credits and other tax preferences. It is not possible at this time to determine what changes may be made and to quantify either the one-time impacts from the re-measurement of deferred tax assets and liabilities that might result from tax reform or the ongoing impact reform proposals might have on income tax expense.

If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely change their recommendations regarding our stock or if our operating results do not meet their expectations, the price of our stock could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If there is limited or no securities or industry analyst coverage of us, the market price for our stock would be negatively impacted. Moreover, if any of the analysts who elect to cover us downgrade our common stock, provide more favorable relative recommendations about our competitors or if our operating results or prospects do not meet their expectations, the market price of our common stock may decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Sales or issuances of shares of our common stock could adversely affect the market price of our common stock.

Sales of substantial amounts of shares of our common stock in the public market or the perception that such sales might occur could adversely affect the market price of our common stock. We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of common stock for sale will have on the market price prevailing from time to time. The market price of our common stock could decline as a result of an equity offering, including the issuance of a large block of shares of our common stock in connection with acquisitions, or the perception that such sales could occur.

Risks Related to Our Regulatory Environment

We are subject to extensive regulation that could limit or restrict our activities.

We operate in a highly regulated industry and are subject to examination, supervision, and comprehensive regulation by various regulatory agencies. Our compliance with these regulations is costly and restricts certain of our activities, including the declaration and payment of cash dividends to shareholders, mergers and acquisitions, investments, loans and interest rates charged, interest rates paid on deposits, and locations of offices. We are also subject to capitalization guidelines established by our regulators, which require us to maintain adequate capital to support our growth and operations. Should we fail to comply with these regulatory requirements, federal and state regulators could impose additional restrictions on the activities of the Company and the Bank, which could materially affect our growth strategy and operating results in the future.

The laws and regulations applicable to the banking industry have recently changed and may continue to change, and we cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies, our cost of compliance could adversely affect our ability to operate profitably.

The implications of the Dodd-Frank Act, or its implementing regulations, on our business remain somewhat uncertain at this time, but it may adversely affect our business, results of operations, and the underlying value of our securities. The full effect of this legislation will not be reasonably certain until implementing regulations are promulgated, which could take several years in some cases.

Some or all of the changes, including the new rulemaking authority granted to the CFPB, may result in greater reporting requirements, assessment fees, operational restrictions, capital requirements, and other regulatory burdens for either, or both, the Bank and the Company, and many of our non-bank competitors may remain free from such limitations. This disparity could adversely affect our ability to attract and maintain depositors, to offer competitive products and services, and to expand our business.

Congress may consider additional proposals to change substantially the financial institution regulatory system and to expand or contract the powers of banking institutions and bank holding companies. Such legislation may change existing banking statutes and regulations, as well as our current operating environment significantly. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand our permissible activities, or affect the competitive balance among banks, savings

- 27 -

associations, credit unions, and other financial institutions. We cannot predict whether new legislation will be enacted and, if enacted, the effect that it, or any regulations, would have on our business, financial condition, or results of operations.

Our financial condition and results of operations are affected by credit policies of monetary authorities, particularly the Federal Reserve. Actions by monetary and fiscal authorities, including the Federal Reserve, could have an adverse effect on our deposit levels, loan demand, or business and earnings.

Rulemaking changes implemented by the CFPB will result in higher regulatory and compliance costs related to originating and servicing mortgages and may adversely affect our results of operations.

The CFPB has issued a number of significant rules which will impact nearly every aspect of the residential mortgage business. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The final rules require banks to, among other things: (i) develop and implement procedures to ensure compliance with a new “reasonable ability to repay” test and identify whether a loan meets a new definition for a “qualified mortgage;” (ii) implement new or revised disclosures, policies and procedures for servicing mortgages including, but not limited to, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower’s principal residence; (iii) comply with additional restrictions on mortgage loan originator compensation; and (iv) comply with new disclosure requirements and standards for appraisals and escrow accounts maintained for “higher priced mortgage loans.”

Our compliance with the CFPB rules, and its accompanying enforcement by our federal and state regulators, will create operational and strategic challenges for us, as we originate a significant volume of mortgages. Additional rules affecting the residential mortgage business are expected. Achieving full compliance will result in increased regulatory and compliance costs.

We may be required to raise additional capital in the future, including through new increased minimum capital thresholds established by our regulators as part of their implementation of Basel III, but that capital may not be available when it is needed and could be dilutive to our existing shareholders, which could adversely affect our financial condition and results of operations.

On July 2, 2013, the Federal Reserve Board, and on July 9, 2013, the FDIC, adopted a final rule that implements the Basel III changes to the international regulatory capital framework, referred to as the “Basel III Rules.”

The Basel III rules also establish minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio of Tier 1 capital to average assets, less goodwill and certain other intangible assets, of 3 percent for bank holding companies that meet specified criteria. All other bank holding companies generally are required to maintain a minimum leverage ratio of 4 percent. The Company’s Tier 1 leverage ratio as of December 31, 2016 was 9.83 percent compared to 9.42 percent at December 31, 2015. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the Federal Reserve has indicated that it will consider a “tangible Tier 1 Capital leverage ratio” and other indications of capital strength in evaluating proposals for expansion or new activities. The Federal Reserve has not advised the Company of any additional specific minimum leverage ratio or tangible Tier 1 capital leverage ratio applicable to it.

- 28 -

Certain Basel III Rules became effective January 1, 2015. The conservation buffer phase in period began in 2016 and will be fully implemented on January 1, 2019. Certain calculations under the Basel III Rules will also have phase-in periods.

The FDIC Deposit Insurance assessments that we are required to pay may continue to materially increase in the future, which would have an adverse effect on our earnings.

As a member institution of the FDIC, we are assessed a quarterly deposit insurance premium. Failed banks nationwide have significantly depleted the insurance fund and reduced the ratio of reserves to insured deposits. As a result, we may be required to pay significantly higher premiums or additional special assessments that could adversely affect our earnings.

On October 19, 2010, the FDIC adopted a Deposit Insurance Fund (“DIF”) Restoration Plan, which requires the DIF to attain a 1.35 percent reserve ratio by September 30, 2020. In addition, the FDIC modified the method by which assessments are determined and, effective April 1, 2011, adjusted assessment rates, which will range from 2.5 to 45 basis points (annualized), subject to adjustments for unsecured debt and, in the case of small institutions outside the lowest risk category and certain large and highly complex institutions, brokered deposits. Further increased FDIC assessment premiums, due to our risk classification, emergency assessments, or implementation of the modified DIF reserve ratio, could adversely impact our earnings.

Our ability to pay cash dividends on our securities is limited and we may be unable to pay future dividends.

We make no assurances that we will pay any dividends on our securities in the future. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, future prospects, regulatory restrictions, and other factors that our board of directors may deem relevant. The holders of our capital stock are entitled to receive dividends when, and if, declared by our board of directors out of funds legally available for that purpose. As part of our consideration to pay cash dividends, we intend to retain adequate funds from future earnings to support the development and growth of our business. In addition, our ability to pay dividends is restricted by federal policies and regulations. It is the current policy of the Federal Reserve that bank holding companies should pay cash dividends on capital stock only out of net income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. Further, our principal source of funds to pay dividends is cash dividends that we receive from the Bank, which, in turn, will be highly dependent upon the Bank’s historical and projected results of operations, liquidity, cash flows and financial condition, as well as various legal and regulatory prohibitions and other restrictions on the ability of the Bank to pay dividends, extend credit or otherwise transfer funds to the Company.

- 29 -

Anti-takeover provisions could adversely affect our shareholders.

Provisions of North Carolina law, our Amended and Restated Certificate of Incorporation, as amended (our “Certificate of Incorporation”) and our Amended and Restated Bylaws (our “Bylaws”) could make it more difficult for a third party to acquire control of us or have the effect of discouraging a third party from attempting to acquire control of us. For example, our Certificate of Incorporation authorizes our board of directors to issue preferred stock in one or more series, which could be issued as a defensive measure in response to a takeover proposal. There are substantial regulatory limitations on changes of control of bank holding companies. With certain limited exceptions, federal regulations prohibit a person or Company or a group of persons deemed to be “acting in concert” from, directly or indirectly, acquiring more than 10 percent (5 percent if the acquirer is a bank holding Company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our Company without prior notice or application to, and the approval of, the Federal Reserve Board. These provisions could make it more difficult for a third party to acquire us even if an acquisition might be in the best interest of our shareholders.

The value of our goodwill and other intangible assets may decline in the future.

As of December 31, 2016, we had $367.1 million of goodwill and other intangible assets. A significant decline in our financial condition, a significant adverse change in the business climate, slower growth rates or a significant and sustained decline in the price of our common stock may necessitate taking charges in the future related to the impairment of our goodwill and other intangible assets. If we were to conclude that a future write-down of goodwill and other intangible assets is necessary, we would record the appropriate charge, which could have a material adverse effect on our financial condition and results of operations.

- 30 -

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company leases office space for its corporate headquarters in Raleigh, North Carolina. As of December 31, 2016, the Company operated 98 banking offices in North Carolina and South Carolina. The Company owns many of the buildings and leases other facilities from third parties. The Company also leases office space for its corporate headquarters in Raleigh, North Carolina. Management believes that the premises occupied by the Company are well located, are suitably equipped to serve as financial services facilities, and are adequately covered by insurance.

Net book value of the Company’s real property used for business purposes as well as furniture, fixtures, and equipment was $104.0 million as of December 31, 2016. Additional information relating to premises, equipment and lease commitments is set forth in Note G "Premises and Equipment" and Note L "Leases" in the "Notes to Consolidated Financial Statements" in this report.

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company is a party, or of which any of its property is the subject other than routine litigation that is incidental to its business.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

- 31 -

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's voting common stock is traded on the NYSE under the symbol "YDKN". There were 51,789,280 shares of Voting Common Stock outstanding as of February 28, 2017, owned by 7,626 shareholders of record. The following table provides the quarterly high and low trading prices and closing sales prices for the last two years.



	High		Low		Last		Cash Dividends Declared
2016
First Quarter	$	25.17	$	19.93	$	23.33	$	0.60
Second Quarter	28.23		22.66		24.82		0.10
Third Quarter	26.45		24.32		26.11		0.10
Fourth Quarter	35.18		25.83		34.15		0.10

2015
First Quarter	$	20.64	$	18.00	$	20.3	$	—
Second Quarter	21.90		19.11		20.95		—
Third Quarter	23.00		18.80		21.49		0.10
Fourth Quarter	27.23		20.89		25.17		0.10

The Company's ability to pay dividends is primarily dependent on earnings from operations, the adequacy of capital, the availability of liquid assets for distribution, and other factors determined relevant by the Company's Board of Directors. The Company's ability to generate liquid assets for distribution is dependent on the ability of the Bank to pay dividends to the Company. In addition, the payment of dividends by bank holding companies is subject to legal and regulatory limitations. For more information regarding regulatory restrictions, see "Supervision and Regulation - Payment of Dividends and Other Restrictions" section in Item 1 of this report and Management's Discussion and Analysis of Financial Condition and Results of Operations.

Since the third quarter of 2015, the Company has declared and paid a quarterly cash dividend of $0.10 per share of its outstanding unrestricted common stock.

On February 15, 2016, the Company declared an extraordinary special cash dividend of $0.50 per share of its outstanding unrestricted common stock. The dividend was paid on March 7, 2016 to shareholders of record as of February 29, 2016.

On January 24, 2017, the Company declared a quarterly cash dividend of $0.10 per share of its outstanding unrestricted common stock. The dividend was paid on February 16, 2017 to shareholders of record as of February 9, 2017.

The Company maintains certain employee and director benefit plans under which equity securities of the Company may be awarded. See Note R "Employee and Director Benefit Plans" in Item 8 of this report.

- 32 -

Stock Performance Graph

The following graph compares the cumulative total shareholder return on Yadkin’s common stock since the last trading day of 2011 with the cumulative return for the same period of: (i) the Russell 2000 Index and (ii) the SNL Southeast Bank Index. The graph assumes an investment of $100 on the last trading day of 2011 in the Yadkin’s common stock and in each index and that all dividends, if any, were reinvested.



		Period Ending
Index	12/31/2011	12/31/2012	12/31/2013	12/31/2014	12/31/2015	12/31/2016
Yadkin Financial Corporation	100.00	182.61	352.8	406.83	525.67	743.87
Russell 2000	100.00	166.11	225.1	253.52	249.57	331.30
SNL Southeast Bank	100.00	116.35	161.52	169.43	161.95	196.45

- 33 -

ITEM 6. SELECTED FINANCIAL DATA

The table below summarizes financial data for the periods presented.



(Dollars in thousands, except per share data)	As of and for the Year Ended December 31,
	2016			2015			2014			2013			2012
Summary of Operations
Interest income	$	268,833		$	178,703		$	134,548		$	79,090		$	48,092
Interest expense	31,726			19,553			13,980			8,653			6,804
Net interest income	237,107			159,150			120,568			70,437			41,288
Provision for loan losses	10,642			6,245			3,413			5,469			5,354
Net interest income after the provision for loan losses	226,465			152,905			117,155			64,968			35,934
Non-interest income	56,548			40,403			28,917			24,789			11,983
Non-interest expense	195,775			122,686			118,954			81,870			50,345
Income (loss) before income taxes	87,238			70,622			27,118			7,887			(2,428		)
Income tax expense (benefit)	32,070			25,995			5,413			2,014			(3,216		)
Net income	55,168			44,627			21,705			5,873			788
Dividends on preferred stock	—			822			1,269			—			—
Net income attributable to non-controlling interests	—			—			2,466			3,601			1,935
Net income (loss) available to common shareholders	$	55,168		$	43,805		$	17,970		$	2,272		$	(1,147	)
Per Common Share
Net income (loss), basic	$	1.15		$	1.39		$	0.88		$	0.25		$	(0.12	)
Net income (loss), diluted	1.14			1.38			0.88			0.25			(0.12		)
Dividends on common stock	0.90			0.20			—			—			—
Book value	19.61			17.73			17.65			15.27			15.40
Tangible book value	12.51			12.51			11.65			12.83			12.59
Weighted average shares outstanding:
Basic	48,137,433			31,610,733			20,500,519			9,219,406			9,219,406
Diluted	48,237,217			31,695,808			20,505,142			9,219,406			9,219,406
Common shares outstanding	51,725,827			31,726,767			31,599,150			9,219,406			9,219,406
Balance Sheet Data
Total assets	$	7,215,630		$	4,474,144		$	4,268,034		$	2,122,713		$	1,089,808
Cash and cash equivalents	124,413			111,918			132,365			100,780			50,513
Investment securities (1)	1,029,348			728,314			712,041			404,888			136,491
Loans (2)	5,236,286			3,123,831			2,918,471			1,401,496			784,648
Allowance for loan losses	13,990			9,769			7,817			7,043			3,998
Deposits	5,219,470			3,310,297			3,247,364			1,672,231			870,962
Long-term debt	159,424			194,967			180,164			72,941			19,864
Shareholders’ equity	1,014,231			562,549			557,802			238,059			180,722
Selected Performance Ratios
Return on average assets	0.80		%	1.04		%	0.69		%	0.33		%	0.07		%
Return on average shareholders’ equity	5.93			7.98			5.59			2.61			0.43
Net interest margin	3.95			4.28			4.44			4.44			4.44
Efficiency ratio (3)	66.67			61.48			79.58			85.97			94.51
Asset Quality Ratios
Net charge-offs to average loans	0.13			0.14			0.12			0.20			0.33
Allowance for loan losses to loans	0.27			0.32			0.27			0.51			0.52
Nonperforming loans to loans	0.95			1.06			0.92			1.52			1.93
Nonperforming assets to total assets	1.16			1.07			0.93			1.49			1.89
Capital Ratios
Common equity Tier 1 (4)	10.85		%	10.55		%	NR			NR			NR
Total risk-based capital	12.41			11.99		%	12.18		%	12.70		%	14.96		%
Tier 1 risk-based capital	12.14			11.64			11.82			11.85			13.66
Tier 1 leverage	10.57			10.34			10.13			10.16			11.45
Tangible common equity to tangible assets	9.45			9.21			8.98			9.85			14.33


(1)	Investment securities include available-for-sale and held-to-maturity securities.


(2)	Loans include loans held for sale.


(3)	Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income.


(4)	Yadkin became subject to new Basel III regulatory capital rules in Q1 2015. The common equity Tier 1 ratio was not reported in prior periods.

- 34 -

ITEM 7. 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’s primary business is providing banking, mortgage, investment and insurance services to businesses and consumers across the Carolinas.

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 “FNB Merger Agreement”) with F.N.B. Corporation, a Florida corporation (“FNB”). The FNB Merger Agreement provides that the Company will merge with and into FNB (the “FNB Merger”), with FNB continuing as the surviving corporation. As soon as practicable following execution of the FNB 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 “FNB Bank Merger”).

Subject to the terms and conditions of the FNB Merger Agreement, at the effective time of the FNB 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 $1.47 billion. Shareholders of both FNB and Yadkin have approved the merger, and all regulatory approvals have been received. The transaction is expected to close in the first quarter of 2017, subject to 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 $431.3 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.

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 98 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 previously announced systems integration (originally scheduled for September 2016), will now be completed following the FNB Merger. The NewBridge Merger added $2.1 billion in loans, $2.0 billion in deposits, and resulted in significant changes across most balance sheet categories. The NewBridge Merger, which was effective on March 1, 2016, had a material impact on Company's results of operations. As a result, the Company's 2016 financial results may not be comparable to financial results in prior periods.

- 35 -

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

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

Immediately following the 2014 Mergers, VantageSouth Bank, the wholly owned banking subsidiary of VantageSouth, merged with and into Yadkin Bank.

The 2014 Mergers were accounted for as a reverse merger using the acquisition method of accounting primarily due to the relative voting interests in the Company upon completion of the 2014 Mergers. As a result, Piedmont and its consolidated subsidiaries represent the accounting acquirer, and Yadkin represents the accounting acquiree. Therefore, the historical financial results of the Company prior to the 2014 Mergers reflect the historical balances of Piedmont, and the financial results of the Company after the 2014 Mergers reflect the combined organization. In addition, the assets and liabilities of Yadkin as of the date of the 2014 Mergers have been recorded at estimated fair value and added to those of Piedmont. The 2014 Mergers had a significant impact on all aspects of the Company's financial statements, and as a result, financial results after the 2014 Mergers may not be comparable to financial results prior to the 2014 Mergers.

Executive Summary

The following is a summary of the Company’s 2016 financial highlights:


•	Net income available to common shareholders totaled $55.2 million, or $1.14 per diluted share, in 2016 compared to $1.38 per diluted share in 2015.


•	Annualized return on assets was 0.80 percent in 2016 compared to 1.04 percent in 2015.


•	Annualized return on average equity was 5.93 percent in 2016 compared to 7.98 percent in 2015.


•	Efficiency ratio, the ratio of expenses to total revenues, was 66.67 percent in 2016, compared to 61.48 percent in 2015.


•	Book value per share grew to $19.61 as of December 31, 2016, from $17.73 per share as of December 31, 2015.

The following is a summary of the Company’s operating highlights (non-GAAP basis) in 2016:


•	Net operating income available to common shareholders, which excludes certain non-operating items, improved to $77.3 million, or $1.60 per diluted share, in 2016 from $47.4 million, or $1.49 per share, in 2015.


•	Operating return on tangible common equity improved to 13.85 percent percent in 2016 from 12.58 percent in 2015.


•	Operating return on average assets was 1.12 percent in 2016 and 2015.


•	Operating efficiency ratio improved to 56.8 percent in 2016 from 59.2 percent in 2015.


•	Tangible book value per share was $12.51 as of December 31, 2016, unchanged from December 31, 2015.

- 36 -

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) operating non-interest income; (iii) operating non-interest expense; (iv) operating efficiency ratio; (v) adjusted allowance for loan losses to loans; and (vi) tangible common equity, in its analysis of the Company's performance. 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.



	Year ended December 31,
(Dollars in thousands)	2016			2015			2014

Operating Earnings
Net income (GAAP)	$	55,168		$	44,627		$	21,705
Securities losses (gains)	564			—			(126		)
Gain on sale of trust business	(417		)	—			—
Gain on sales of branches	—			(88		)	(415		)
Merger and conversion costs	28,486			1,102			22,136
Impairment of purchased accounts receivable	2,927			—			—
Restructuring charges	46			3,533			1,142
Income tax effect of adjustments	(10,025		)	(1,637		)	(7,553		)
DTA valuation allowance reversal	—			—			(4,706		)
DTA revaluation from reduction in state income tax rates	552			651			—
Net operating earnings (non-GAAP)	77,301			48,188			32,183
Dividends on preferred stock	—			(822		)	(1,269		)
Net income attributable to non-controlling interests	—			—			(2,466		)
Allocation of adjustments to non-controlling interests	—			—			(1,231		)
Net operating earnings available to common shareholders (non-GAAP)	$	77,301		$	47,366		$	27,217

Net operating earnings per common share:
Basic (non-GAAP)	$	1.61		$	1.50		$	1.33
Diluted (non-GAAP)	1.60			1.49			1.33

Operating Non-Interest Income
Non-interest income (GAAP)	$	56,548		$	40,403		$	28,917
Securities gains	564			—			(126		)
Gain on sales of branches	—			(88		)	(415		)
Gain on sale of trust business	(417		)	—			—
Operating non-interest income (non-GAAP)	$	56,695		$	40,315		$	28,376

Operating Non-Interest Expense
Non-interest expense (GAAP)	$	195,775		$	122,686		$	118,954
Merger and conversion costs	(28,486		)	(1,102		)	(22,136		)
Impairment of purchased accounts receivable	(2,927		)	—			—
Restructuring charges	(46		)	(3,533		)	(1,142		)
Operating non-interest expense (non-GAAP)	$	164,316		$	118,051		$	95,676

- 37 -



	Year ended December 31,
(Dollars in thousands)	2016			2015			2014
Operating Efficiency Ratio
Efficiency ratio (GAAP)	66.67		%	61.48		%	79.58		%
Effect to adjust for securities gains (losses)	(0.13		)	—			0.06
Effect to adjust for gain on sale of trust business	0.09			—			—
Effect to adjust for gain on sales of branches	—			0.03			0.22
Effect to adjust for merger and conversion costs	(9.68		)	(0.56		)	(14.85		)
Effect to adjust for impairment of purchased accounts receivable	(1.00		)	—			—
Effect to adjust for restructuring charges	(0.02		)	(1.77		)	(0.77		)
Operating efficiency ratio (non-GAAP)	55.93		%	59.18		%	64.24		%

Taxable-Equivalent Net Interest Income
Net interest income (GAAP)	$	237,107		$	159,150		$	120,568
Taxable-equivalent adjustment	2,288			1,274			321
Taxable-equivalent net interest income (non-GAAP)	$	239,395		$	160,424		$	120,889

Core Net Interest Income and Net Interest Margin (Annualized)
Taxable-equivalent net interest income (non-GAAP)	$	239,395		$	160,424		$	120,889
Acquisition accounting amortization / accretion adjustments related to:
Loans	(15,611		)	(14,860		)	(15,186		)
Deposits	(1,600		)	(3,109		)	(3,105		)
Borrowings and debt	396			557			91
Income from issuer call of debt security	(165		)	(742		)	—
Core net interest income (non-GAAP)	$	222,415		$	142,270		$	102,689

Divided by: average interest-earning assets	$	6,063,061		$	3,748,533		$	2,730,575
Core taxable-equivalent net interest margin (non-GAAP)	3.67		%	3.80		%	3.76		%

Analysis of Results of Operations

Net Income

2016 compared to 2015

Net income was $55.2 million in 2016, which was a significant increase from $44.6 million in 2015. Net income available to common shareholders improved to $55.2 million, or $1.14 per diluted common share, in 2016 from $43.8 million, or $1.38 per diluted common share, in 2015. Net operating earnings, which excludes certain nonrecurring income and expenses, improved to $77.3 million in 2016 from $48.2 million in 2015.

Two commonly used measures of bank profitability are return on average assets (net income as a percentage of average total assets)and return on average shareholders' equity (net income as a percentage of average shareholders' equity). Return on average assets was 0.80 percent in 2016 compared to 1.04 percent in 2015. Return on average shareholders' equity was 5.93 percent in 2016 compared to 7.98 percent in 2015.

2015 compared to 2014

Net income was $44.6 million in 2015, which was a significant increase from $21.7 million in 2014. Net income available to common shareholders was $43.8 million, or $1.39 per common share, in 2015 compared to $18.0 million, or $0.88 per common share, in 2014. Net income in 2015 was significantly influenced by the 2014 Mergers. Net operating earnings, which excludes certain nonrecurring income and expenses, totaled $48.2 million in 2015, compared to $32.2 million in 2014. Return on average assets was 1.04 percent in 2015, compared to 1.21 percent in 2014. Return on average shareholders' equity was 7.98 percent in 2015, compared to 9.63 percent in 2014.

- 38 -

Net Interest Income

2016 compared to 2015

Net interest income improved to $237.1 million in 2016 from $159.2 million in 2015. The increase in net interest income was the result of a significant increase in earning assets primarily from the NewBridge Merger and from organic business activity. Average earning assets increased from $3.75 billion in 2015 to $6.06 billion in 2016. Over this period, average loan balances increased by $1.97 billion, and average investment securities increased by $338.1 million. In addition, average interest-bearing deposits increased by $1.33 billion.

Taxable-equivalent net interest margin was 3.95 percent in 2016, compared to 4.28 percent in 2015. Net interest margin was negatively affected by a decline in the yield on earning assets from 4.80 percent in 2015 to 4.47 percent in 2016, and a slight increase in the cost of interest-bearing liabilities, which increased from 0.65 percent in 2015 to 0.66 percent in 2016.

Net accretion income on acquired loans totaled $17.7 million in 2016, which consisted of $4.2 million of net accretion on purchased credit-impaired loans and $13.5 million of accretion income on purchased non-impaired loans. Net accretion income on acquired loans in 2015 totaled $14.4 million, which included $3.5 million of net accretion on purchased credit impaired ("PCI") loans and $10.9 million of accretion income on purchased non-impaired loans. The increase in net accretion income in 2016 resulted from accretion of fair value discounts recorded on loans acquired in the NewBridge Merger.

2015 compared to 2014

Net interest income totaled $159.2 million in 2015, compared to $120.6 million in 2014. Average earning assets totaled $3.75 billion in 2015, which was a significant increase from $2.73 billion in 2014. The increase in average earning assets was the result of assets acquired in the 2014 Mergers.

Taxable-equivalent net interest margin was 4.28 percent in 2015, compared to 4.43 percent in 2014 due to lower loan yields. The average yield on loans decreased from 5.79 percent in 2014 to 5.42 percent in 2015, resulting from the origination of new loans at lower market rates. The average yield on investment securities increased from 2.15 percent in 2014 to 2.53 percent in 2015. The average cost of interest-bearing liabilities increased from 0.61 percent in 2014 to 0.65 percent in 2015.

- 39 -

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



	2016						2015						2014
(Dollars in thousands)	Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*		Average Balance		Interest*		Yield/Cost*

Assets
Loans (1)	$	4,955,769	$	242,738	4.90	%	$	2,982,292	$	161,777	5.42	%	$	2,118,695	$	122,613	5.79	%
Investment securities (2)	1,050,344		27,999		2.67		712,210		18,004		2.53		562,190		12,112		2.15
Federal funds and other	56,948		384		0.67		54,031		196		0.36		49,690		144		0.29
Total interest-earning assets	6,063,061		271,121		4.47	%	3,748,533		179,977		4.80	%	2,730,575		134,869		4.94	%
Goodwill	307,974						152,152						89,203
Other intangibles, net	27,645						15,182						11,525
Non-interest-earning assets	489,875						393,972						301,876
Total assets	$	6,888,555					$	4,309,839					$	3,133,179

Liabilities and Equity
Interest-bearing demand	$	1,027,047	1,892		0.18	%	$	483,406	$	583	0.12	%	408,580		641		0.16	%
Money market and savings	1,507,941		4,697		0.31		998,747		2,779		0.28		719,637		1,924		0.27
Time	1,347,050		10,980		0.82		1,067,551		8,647		0.81		872,040		5,839		0.67
Total interest-bearing deposits	3,882,038		17,569		0.45		2,549,704		12,009		0.47		2,000,257		8,404		0.42	%
Short-term borrowings	685,810		5,503		0.80		321,393		1,546		0.48		172,700		406		0.24
Long-term debt	234,458		8,654		3.69		148,836		5,998		4.03		123,199		5,170		4.20
Total interest-bearing liabilities	4,802,306		31,726		0.66	%	3,019,933		19,553		0.65	%	2,296,156		13,980		0.61	%
Noninterest-bearing deposits	1,096,376						702,899						431,816
Other liabilities	58,954						27,858						16,925
Total liabilities	5,957,636						3,750,690						2,744,897
Shareholders’ equity	930,919						559,149						388,282
Total liabilities and shareholders’ equity	$	6,888,555					$	4,309,839					$	3,133,179

Net interest income, taxable equivalent			$	239,395					$	160,424					$	120,889
Interest rate spread (3)					3.81	%					4.15	%					4.33	%
Tax equivalent net interest margin (4)					3.95	%					4.28	%					4.43	%

Percentage of average interest-earning assets to average interest-bearing liabilities					126.25	%					124.13	%					118.92	%
* Taxable equivalent basis


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


(2)	Yields related to investment securities exempt from income taxes are stated on a taxable-equivalent basis assuming a federal income tax rate of 35.0 percent. The taxable-equivalent adjustment was $2.3 million, $1.3 million and $321 thousand for 2016, 2015 and 2014, 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.

- 40 -

Changes in interest income and interest expense can result from variances in both volume and rates. The following table presents the relative impact on taxable-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 2015 to 2016 due to:
(Dollars in thousands)	Volume		Yield/Cost			Total Change
Interest earning assets:
Loans	$	97,927	$	(16,966	)	$	80,961
Investment securities	8,938		1,057			9,995
Federal funds and other interest-earning assets	12		176			188
Total interest-earning assets	106,877		(15,733		)	91,144

Interest-bearing liabilities:
Interest-bearing demand	909		400			1,309
Money market and savings	1,569		349			1,918
Time deposits	2,228		105			2,333
Total interest-bearing deposits	4,706		854			5,560
Short-term borrowings	2,495		1,462			3,957
Long-term debt	3,199		(543		)	2,656
Total interest-bearing liabilities	10,400		1,773			12,173
Change in net interest income, taxable equivalent	$	96,477	$	(17,506	)	$	78,971

Provision for Loan Losses

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



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

2016:
Balance at January 1, 2016	$	8,447		$	1,322		$	9,769
Net charge-offs	(6,417		)	(5		)	(6,422		)
Provision for loan losses	10,882			(239		)	10,643
Balance at December 31, 2016	$	12,912		$	1,078		$	13,990

2015:
Balance at January 1, 2015	$	6,519		$	1,298		$	7,817
Net charge-offs	(4,293		)	—			(4,293		)
Provision for loan losses	6,221			24			6,245
Balance at December 31, 2015	$	8,447		$	1,322		$	9,769

2014:
Balance at January 1, 2014	$	4,682		$	2,361		$	7,043
Net charge-offs	(2,626		)	(13		)	(2,639		)
Provision for loan losses	4,463			(1,050		)	3,413
Balance at December 31, 2014	$	6,519		$	1,298		$	7,817

2016 compared to 2015

Provision for loan losses was $10.6 million during 2016, compared to $6.2 million in 2015. The $4.4 million increase in provision for loan losses was due to increased net charge-offs and continuing accretion of fair value discounts. Non-PCI loan provision expense increased $4.7 million during 2016, due to higher net charge-offs and organic loan growth. The PCI-loan provision credit was $239 thousand during 2016, compared to provision expense of $24 thousand in 2015.

The ALLL was $14.0 million, or 0.27 percent of total loans, as of December 31, 2016 compared to $9.8 million, or 0.32 percent of total loans, as of December 31, 2015. The reduction in ALLL as a percent of total loans was primarily due to the impact of the NewBridge Merger since acquired loans are recorded at fair value with no ALLL. Adjusted ALLL, which combines the ALLL and net acquisition accounting fair value adjustments for acquired loans, represented 1.23 percent of total loans as of December 31, 2016 compared to 1.62 percent as of December 31, 2015. Annualized net charge-offs were 0.13 percent of average loans in 2016, compared to 0.14 percent of average loans in 2015.

- 41 -

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. 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.

The Company's quarterly PCI cash flow re-estimations resulted in provision expense of $239 thousand in 2016, compared to provision credit of $24 thousand in 2015. The ALLL related to PCI loans as of December 31, 2016 was $1.1 million. Of this amount, $767 thousand was related to commercial real estate loan pools, $232 thousand was related to commercial and industrial loan pools, $51 thousand was related to a residential real estate loan pool, and $1 thousand was related to a consumer loan pool.

2015 compared to 2014

Provision for loan losses was $6.2 million in 2015 compared to $3.4 million in 2014. The 2014 provision for loan losses included $4.4 million in provision expense on non-PCI loans and a $1.1 million provision credit on PCI loan pools. The ALLL related to PCI loans as of December 31, 2015 was $1.3 million. Of this amount, $412 thousand was related to a commercial real estate loan pool, $379 thousand was related to a residential real estate loan pool, $283 thousand was related to a home equity loan pool, $143 thousand was related to a commercial and industrial loan pool,and $88 thousand was related to a consumer loan pool.

Non-Interest Income

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



	Year ended December 31,
(Dollars in thousands)	2016			2015		2014

Service charges and fees on deposit accounts	$	21,310		$	13,750	$	9,574
Government-guaranteed lending	11,501			12,729		9,450
Mortgage banking	11,449			6,257		3,370
Bank-owned life insurance	4,071			1,873		1,784
(Loss) gain on sales of available for sale securities	(564		)	—		126
Gain on sales of branches	—			88		415
Gain on sale of trust business	417			—		—
Other	8,364			5,706		4,198
Total non-interest income	$	56,548		$	40,403	$	28,917

2016 compared to 2015

Non-interest income totaled $56.5 million in 2016, which was a $16.1 million increase from $40.4 million in 2015. Operating non-interest income, which excludes securities gains, gains recorded on the sale of trust business and branch sale gains, totaled $56.7 million in 2016 compared to $40.3 million in 2015. Service charges and fees on deposit accounts increased by $7.6 million primarily due to the addition of NewBridge deposit accounts. Mortgage banking income increased by $5.2 million due to higher production volumes. Bank-owned life insurance increased $2.2 million in 2016, primarily due to death benefits resulting from deceased participants. 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, declined by $1.2 million due to change in the mix of SBA loans originated. Other non-interest income increased $2.7 million during 2016 due to higher loan-related fee income and improved trust and brokerage income.

- 42 -

2015 compared to 2014

Non-interest income totaled $40.4 million in 2015 compared to $28.9 million in 2014. Service charges and fees on deposit accounts totaled $13.8 million during 2015, compared to $9.6 million during 2014. 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, totaled $12.7 million in 2015, compared to $9.5 million in 2014. Mortgage banking income generated $6.3 million and $3.4 million during 2015 and 2014, respectively. Growth in each of these areas primarily resulted from the impact of the 2014 Mergers.

Non-Interest Expense

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



	Year ended December 31,
(Dollars in thousands)	2016		2015		2014

Salaries and employee benefits	$	86,024	$	60,898	$	51,342
Occupancy and equipment	26,411		18,799		15,075
Data processing	10,328		7,599		5,235
FDIC deposit insurance premiums	4,062		2,892		2,091
Professional services	5,487		4,556		3,943
Foreclosed asset expense, net	1,749		1,276		671
Loan, collection, and repossession expense	4,057		3,643		3,075
Merger and conversion costs	28,486		1,102		22,136
Impairment of purchased accounts receivable	2,927		—		—
Restructuring charges	46		3,533		1,142
Amortization of other intangible assets	5,939		3,098		2,157
Other	20,259		15,290		12,087
Total non-interest expense	$	195,775	$	122,686	$	118,954

2016 compared to 2015

Non-interest expense totaled $195.8 million in 2016 compared to $122.7 million in 2015. Operating non-interest expense, which excludes merger and conversion costs and restructuring charges, totaled $164.3 million in 2016 compared to $118.1 million in 2015. The $73.1 million increase in non-interest expense was due to general increases in various operating expenses resulting from the NewBridge Merger, including a $25.1 million increase in salaries and employee benefits, a $7.6 million increase in occupancy and equipment expense, and a $2.7 million increase in data processing expense. The impact of these increases in various operating expenses was accompanied by a $27.4 million increase in merger and conversion costs, which, included professional fees, severance, and other expenses incidental to the NewBridge Merger and incurred in anticipation of the FNB Merger. Also contributing to higher non-interest expense was a purchased accounts receivables impairment of $2.9 million recorded in 2016.

The Company's operating efficiency ratio improved from 59.2 percent in 2015 to 55.9 percent in 2016 primarily due to the significant scale and operating leverage resulting from the Company's growth.

2015 compared to 2014

Non-interest expense totaled $122.7 million in 2015 compared to $119.0 million in 2014. Higher salaries and employee benefits, occupancy and equipment, data processing, and other non-interest expense categories in 2015 were partially offset by lower merger and conversion costs.

The Company's operating efficiency ratio, which excludes non-recurring merger and conversion costs and restructuring charges, improved from 64.2 percent in 2014 to 59.2 percent in 2015 resulting from increased scale and operating leverage provided by the mergers.

- 43 -

Income Taxes

2016 compared to 2015

Income tax expense was $32.1 million in 2016 compared to $26.0 million in 2015. The Company's effective tax rate was 36.8 percent in both periods.

Based on the Company's analysis of positive and negative evidence regarding future realization of its deferred tax assets, which included an evaluation of historical and forecasted pre-tax earnings, net operating loss carryforward periods, asset quality trends, capital levels, and potential tax planning strategies, the Company determined that there was sufficient positive evidence to indicate that it would realize the net deferred tax asset of $58.2 million as of December 31, 2016.

2015 compared to 2014

Income tax expense was $26.0 million in 2015, compared to $5.4 million in 2014, which included the reversal of a $4.7 million valuation allowance.

Analysis of Financial Condition

During 2016, 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)	December 31, 2016			December 31, 2015			YTD Change			Acquired NewBridge Balances		YTD Change Excluding Acquired NewBridge Balances

Cash and cash equivalents	$	124,413		$	111,918		$	12,495		$	45,143	$	(32,648	)
Investment securities	1,029,348			728,314			301,034			442,696		(141,662		)
Loans held for sale	76,876			47,287			29,589			13,661		15,928
Loans	5,159,410			3,076,544			2,082,866			2,061,136		21,730
Allowance for loan losses	(13,990		)	(9,769		)	(4,221		)	—		(4,221		)
Other assets	839,573			519,850			319,723			403,530		(83,807		)
Total assets	$	7,215,630		$	4,474,144		$	2,741,486		$	2,966,166	$	(224,680	)

Deposits	$	5,219,470		$	3,310,297		$	1,909,173		$	1,990,109	$	(80,936	)
Short-term borrowings	764,600			375,500			389,100			472,335		(83,235		)
Long-term debt	159,424			194,967			(35,543		)	31,724		(67,267		)
Other liabilities	57,905			30,831			27,074			40,662		(13,588		)
Total liabilities	6,201,399			3,911,595			2,289,804			2,534,830		(245,026		)
Shareholders' equity	1,014,231			562,549			451,682			431,336		20,346
Total liabilities and shareholders' equity	$	7,215,630		$	4,474,144		$	2,741,486		$	2,966,166	$	(224,680	)

- 44 -

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 was $1.01 billion and $990.6 million, respectively, as of December 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 $38.7 million and $39.5 million, respectively, as of December 31, 2016, compared to $39.2 million and $40.5 million, respectively, as of December 31, 2015.

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

Marketable investment securities accounted for as available for sale are recorded at fair value with unrealized gains and losses charged to accumulated other comprehensive income. As of December 31, 2016 and 2015, the available-for-sale securities portfolio had $1.7 million and $2.2 million, respectively, of unrealized gains and $17.9 million and $7.5 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.



	December 31, 2016				December 31, 2015				December 31, 2014
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value

Securities available for sale:
GSE obligations	$	17,597	$	17,501	$	5,980	$	5,982	$	14,914	$	14,944
SBA-guaranteed securities	28,189		27,561		12,114		12,176		60,408		60,120
Mortgage-backed securities issued by GSEs	608,320		597,010		440,654		435,625		428,076		425,283
Municipal bonds	128,931		125,547		55,402		55,800		39,907		40,258
Corporate bonds	153,744		153,215		123,669		123,532		118,799		119,912
Collateralized loan obligations	45,466		45,466		50,538		50,483		—		—
Non-agency RMBS	15,471		15,394		3,528		3,663		4,961		4,963
Non-agency CMBS	—		—		—		—		3,576		3,578
Other debt securities	245		245		245		245		498		498
Marketable equity securities	8,929		8,674		2,381		1,626		3,017		2,865
Total securities available for sale	$	1,006,892	$	990,613	$	694,511	$	689,132	$	674,156	$	672,421

Securities held to maturity:
Municipal bonds	$	38,735	$	39,460	$	39,182	$	40,500	$	39,620	$	40,586
Total securities held to maturity	$	38,735	$	39,460	$	39,182	$	40,500	$	39,620	$	40,586

Securities in an unrealized loss position as of December 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 December 31, 2016.

- 45 -

The following table summarizes the amortized cost of debt securities in the investment portfolio as of December 31, 2016, segregated by major category with ranges of maturitiesand average yields.



	1 Year or Less				Over 1 to 5 Years				Over 5 to 10 Years				More than 10 Years				Total
(Dollars in thousands)	Amount		Yield⁽²⁾		Amount		Yield⁽²⁾		Amount		Yield⁽²⁾		Amount		Yield⁽²⁾		Amount		Yield⁽²⁾

Securities available for sale:
GSE obligations	$	6,006	1.10	%	$	7,184	1.55	%	$	4,311	2.26	%	$	—	—	%	$	17,501	1.57	%
SBA-guaranteed securities	—		—		3,509		2.71		24,052		2.21		—		—		27,561		2.27
Mortgage-backed securities⁽¹⁾	2,314		1.39		452,384		1.90		112,386		2.29		45,320		2.77		612,404		2.03
Corporate bonds	12,973		3.35		101,589		3.27		34,005		3.81		4,648		3.79		153,215		3.41
Collateralized loan obligations	—		—		—		—		45,466		2.75		—		—		45,466		2.75
Municipal bonds	7,584		4.33		46,043		2.66		66,699		2.98		5,221		5.75		125,547		3.06
Other debt securities	245		0.50		—		—		—		—		—		—		245		0.50
Total debt securities available for sale	$	29,122	2.96	%	$	610,709	2.18	%	$	286,919	2.70	%	$	55,189	3.14	%	$	981,939	2.41	%

Securities held to maturity:
Municipal bonds	$	1,006	3.45	%	$	29,928	3.86	%	$	4,028	4.11	%	$	3,773	5.79	%	$	38,735	4.06	%


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


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

As of December 31, 2016, the weighted average life of the Company's debt securities was 5.5 years, and the weighted average effective duration was 3.7 years.

The Company also owned $41.2 million and $24.8 million of FHLB stock as of December 31, 2016 and 2015, respectively. The investment in 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.

The Company's loan policies, guidelines, and procedures establish the basic guidelines governing its lending operations. They address the types of loans sought, target markets, underwriting, collateral requirements, term, interest rate, yield considerations and compliance with laws and regulations. The loan policies are reviewed and approved annually by the Board of Directors of the Bank. The following summary provides an overview of the Company's current lending practices:

- 46 -

Commercial and Industrial (C&I) Loans. C&I loans are typically for working capital, equipment, and business expansion. C&I loans are generally secured by accounts receivable, inventory, equipment and owner-occupied real estate. With few exceptions, the Company requires personal guarantees from the principal business owners. Commercial loans are generally originated with one to seven year maturities for working capital and equipment loans and five to seven year maturities with 15- to 25-year amortizations for owner-occupied real estate. C&I loans totaled $723.3 million as of December 31, 2016.

Commercial Real Estate Loans. Commercial real estate loans are secured principally by leased apartments, retail centers, and commercial office and industrial buildings, acquired by the borrower for both investment and owner-occupied purposes. The Company generally requires the personal guaranty of the principal business owners on all such loans. The real estate collateral is a secondary source of repayment. Commercial real estate loans are generally originated with three-to-seven year maturities with up to 25-year amortizations. Owner-occupied commercial real estate loans totaled $1.09 billion, and non-owner-occupied commercial real estate loans totaled $1.38 billion as of December 31, 2016.

Construction Loans. Commercial construction loans are generally originated with one to five year maturities and may have an amortization feature that could extend up to 25 years once the properties are stabilized. The Company's primary focus on one-to-four family residential construction loans is to borrowers who are the primary end users or to builders in situations in which the home is pre-sold to the end user and the loan is repaid when the end user secures a permanent mortgage. These loans are generally originated with maturities up to 18 months in length. Construction loans to home builders for speculative residential homes are not a focus for the Company. In many cases, home builders do require a speculative component to their lending facilities; however, credit exposure is controlled through the covenants relating to the home builder's speculative-to-sold ratio. Any loans made in this product would be to well-established home builders with an excellent track record who are focused on delivering commodity-style housing. Through its Builder Finance division, the Company lends to home builders in its markets who have demonstrated a favorable record of performance and profitable operations. The Company's loan policies require personal guarantees of the principal business owners. Commercial construction loans and one-to-four family residential construction loans to home builders totaled $463.6 million as of December 31, 2016.

Consumer Loans, Home Equity Lines of Credit and Residential Real Estate Loans. Consumer loans include automobile loans, boat and recreational vehicle financing, home equity and home improvement loans, and miscellaneous secured and unsecured personal loans. Residential real estate loans are made for purchasing and refinancing one-to-four family properties. The Company also offers construction-to-permanent loans for one-to-four family properties. These loans are generally sold to investors when construction is complete and the loan converts to permanent financing. The Company offers fixed and variable rate options on consumer loans but generally limits the maximum term to five to seven years for non-real estate secured loans. Residential real estate loans, home equity loans and lines of credit, and other consumer loans totaled $642.7 million, $523.5 million, and $61.5 million, respectively, as of December 31, 2016. Construction loans to consumers totaled $271.2 million as of December 31, 2016.

Residential Mortgage Loans. The Company provides customers access to long-term conventional real estate loans through its mortgage loan department. The loans are funded by the Company and are primarily sold to national investors/servicers.

Government-Guaranteed Loans. The Company provides loans guaranteed by the SBA for the purchase of businesses, business startups, business expansion, equipment, and working capital. All SBA loans are underwritten and documented as prescribed by the SBA. SBA loans are generally fully amortizing and have maturity dates and amortizations of up to 25 years. SBA loans held for investment totaled $237.7 million as of December 31, 2016 and were primarily classified as commercial and industrial and commercial real estate loans. SBA loans held for sale to investors totaled $37.4 million as of December 31, 2016.

Loan Approvals. The Company's loan policies and procedures establish the basic guidelines governing lending operations. Generally, the guidelines address the type of loans sought, target markets, underwriting and collateral requirements, terms, interest rate and yield considerations and compliance with laws and regulations. All loans and credit lines are subject to approval procedures and exposure limits. Bankers are assigned to work with specific credit administration officers, and applicable loans must be approved by the designated credit administration officer prior to origination. The Bank's Chief Credit Officer has authority to approve up to $15 million in total credit exposure. Exposures between $15 million and $25 million must be approved by the Bank's Chief’s Credit Officer and Chief Executive Officer with subsequent disclosure provided to the Board of Directors. Loans with exposures greater than $25 million and all Reg O loans require approval of the Board of Directors. Lending policies are reviewed and approved at least annually by the Board of Directors. These approved lending authorities are well within the legal lending limit, which totaled $111.4 million as of December 31, 2016.

- 47 -

Loan Review. Responsibility for loan review resides with the Loan Review Officer. To supplement internal loan review resources, the Company has engaged an independent third-party loan review group. Together, the Loan Review Officer and the independent third-party loan review group form our combined internal loan review function. The Company's combined internal loan review function reports to the Audit Committee of the Board of Directors, and the Audit Committee approves the annual loan review plan.

Asset Quality. The Company considers asset quality to be of primary importance. It is the responsibility of each banker and credit administration officer to assign an appropriate risk grade to every loan originated, reviewed and renewed. The loan review function evaluates compliance with established underwriting and risk grading standards and provides a report detailing the conclusions of all internal and external reviews to the Board of Directors and senior management. The Company's loan policies require management to address any criticisms raised during the loan review and to take appropriate actions where warranted. The Company also employs a special assets group which is responsible for maximizing the collection of amounts owed to the Company related to problem assets. In addition to developing workout and repayment plans with borrowers, as appropriate, the special assets group takes appropriate legal action to file claims and judgments to recover amounts owed to the Company.

Loan Commitments. In the ordinary course of business, the Company enters into various types of transactions that include commitments to extend credit. The Company applies the same credit standards to these commitments that it utilizes in all of its lending activities and has included these commitments in its lending risk evaluations. 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. See Note P "Commitments and Contingencies" in the “Notes to Consolidated Financial Statements” for more information.

Loans, net of deferred loan fees, totaled $5.16 billion as of December 31, 2016, which was an increase of $2.08 billion since December 31, 2015. This increase in loan balances was the net result of the NBBC Merger and organic loan production. The following table summarizes the loan portfolio composition by category as of December 31 for the years presented.



	2016					2015					2014					2013					2012
(Dollars in thousands)	Amount			% of Total Loans		Amount			% of Total Loans		Amount			% of Total Loans		Amount			% of Total Loans		Amount			% of Total Loans

Commercial real estate	$	2,475,144		48.0	%	$	1,451,176		47.1	%	$	1,355,536		46.7	%	$	670,293		48.1	%	$	393,218		51.2	%
Residential real estate and home equity	1,166,162			22.6		621,548			20.2		636,911			22.0	%	285,768			20.5	%	189,758			24.7	%
Commercial and industrial	723,257			14.0		553,121			18.0		468,848			16.2	%	230,614			16.6	%	98,701			12.8	%
Construction and development	734,770			14.2		391,567			12.7		400,868			13.8	%	198,314			14.2	%	82,304			10.7	%
Consumer	61,464			1.2		60,244			2.0		36,874			1.3	%	8,332			0.6	%	4,325			0.6	%
Total loans	5,160,797			100.0	%	3,077,656			100.0	%	2,899,037			100.0	%	1,393,321			100.0	%	768,306			100.0	%
Less: deferred loan fees	(1,387		)			(1,112		)			(771		)			(488		)			(97		)
Total loans, net	$	5,159,410				$	3,076,544				$	2,898,266				$	1,392,833				$	768,209

- 48 -

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



	December 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	$	167,680	$	36,404	$	22,267	$	42,315	$	12,393	$	2,809	$	5,677	$	289,545
1-5 years	1,162,052		196,940		94,046		174,100		76,519		1,202		24,937		1,729,796
After 5 years	521,763		59,874		35,123		178,979		15,079		1,304		23,234		835,356
Total	1,851,495		293,218		151,436		395,394		103,991		5,315		53,848		2,854,697
Variable Rate: (1)
1 year or less	76,566		156,728		223,024		12,181		46,979		19,412		4,954		539,844
1-5 years	365,351		196,461		80,858		22,575		89,223		103,638		1,021		859,127
After 5 years	181,732		76,850		8,276		212,511		30,983		395,136		1,641		907,129
Total	623,649		430,039		312,158		247,267		167,185		518,186		7,616		2,306,100
Total loans	$	2,475,144	$	723,257	$	463,594	$	642,661	$	271,176	$	523,501	$	61,464	$	5,160,797


(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 December 31, 2016 totaled $172.2 million, of which $171.2 million were grouped into pools and $958 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 $141.3 million were grouped into pools and $712 thousand were accounted for on an individual loan basis.

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

Nonperforming Assets

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

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

- 49 -

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 0.95 percent as of December 31, 2016 compared to 1.06 percent as of December 31, 2015. Nonperforming assets as a percentage of total assets as of December 31, 2016 totaled 1.16 percent compared to 1.07 percent as of December 31, 2015. Acquired PCI loans that are included in loan pools are reclassified at acquisition to accrual status and are not included as nonperforming unless they are 90 days or greater past due.

The following table summarizes the Company's nonperforming assets as of December 31 for the periods presented.



(Dollars in thousands)	2016		2015		2014		2013		2012

Nonaccrual loans:
Commercial real estate	$	15,326	$	6,130	$	5,685	$	4,747	$	1,763
Construction and development	945		1,792		1,946		3,285		553
Commercial and industrial	12,648		4,126		4,594		2,154		64
Residential real estate and home equity	10,564		8,598		5,476		4,378		3,392
Consumer	304		548		248		164		223
Total nonaccrual loans	39,787		21,194		17,949		14,728		5,995
Accruing loans past due 90 days or more (1)	9,010		11,337		8,810		6,420		8,819
Total nonperforming loans	48,797		32,531		26,759		21,148		14,814
Nonperforming purchased accounts receivable	4,980		—		—		—		—
Foreclosed assets
Residential real estate	2,185		1,784		2,016		1,626		758
All other foreclosed assets	27,925		13,562		10,875		8,892		5,079
Total nonperforming assets	$	83,887	$	47,877	$	39,650	$	31,666	$	20,651

Restructured loans not included above	$	5,725	$	5,609	$	4,424	$	534	$	104

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

- 50 -

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

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

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

The following table presents the allocation of the ALLL as of December 31 for the periods presented.



	2016				2015				2014
(Dollars in thousands)	Amount		% of Total		Amount		% of Total		Amount		% of Total

Commercial real estate	$	5,690	0.11	%	$	3,682	0.12	%	$	2,796	0.10	%
Construction and development	1,910		0.04		1,103		0.04		1,885		0.07
Commercial and industrial	3,961		0.08		2,431		0.08		1,274		0.04
Residential real estate and home equity	2,031		0.04		2,140		0.07		1,783		0.06
Consumer	398		0.01		413		0.01		79		—
Total ALLL	$	13,990	0.27	%	$	9,769	0.32	%	$	7,817	0.27	%

- 51 -

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



(Dollars in thousands)	2016			2015			2014			2013			2012

ALLL at beginning of period	$	9,769		$	7,817		$	7,043		$	3,998		$	1,081
Charge-offs:
Commercial real estate	(416		)	(1,096		)	(366		)	(20		)	—
Construction and development	(178		)	(331		)	(367		)	(723		)	(415		)
Commercial and industrial	(4,313		)	(2,337		)	(1,034		)	(483		)	(250		)
Residential real estate and home equity	(1,411		)	(1,452		)	(1,020		)	(1,230		)	(1,937		)
Consumer	(874		)	(407		)	(354		)	(265		)	(147		)
Total charge-offs	(7,192		)	(5,623		)	(3,141		)	(2,721		)	(2,749		)
Recoveries:
Commercial real estate	108			58			46			26			—
Construction and development	245			746			69			47			125
Commercial and industrial	245			27			88			23			19
Residential real estate and home equity	313			348			254			185			159
Consumer	62			151			45			16			9
Total recoveries	973			1,330			502			297			312
Net charge-offs	(6,219		)	(4,293		)	(2,639		)	(2,424		)	(2,437		)
Provision for loan losses	10,642			6,245			3,413			5,469			5,354
ALLL at end of period	$	14,192		$	9,769		$	7,817		$	7,043		$	3,998

Net charge-offs to average loans	0.13		%	0.14		%	0.12		%	0.20		%	0.33		%

The ALLL to total loans ratio was 0.27 percent as of December 31, 2016, compared to 0.32 percent as of December 31, 2015, the decline reflecting the impact of the NewBridge loans, which were recorded at fair value with no ALLL. The adjusted ALLL, which includes the ALLL as well as net acquisition fair value adjustments for acquired loans, declined from 1.62 percent as of December 31, 2015 to 1.23 percent as of December 31, 2016. The reduction in adjusted ALLL resulted primarily from lower historical loss rates used in the ALLL model and continued accretion of acquisition accounting fair value adjustments. The following non-GAAP reconciliation provides a calculation of the adjusted ALLL and the related adjusted ALLL as a percentage of total loans for the periods presented.



	December 31,
(Dollars in thousands)	2016			2015

Allowance for loan losses	$	13,990		$	9,769
Net acquisition accounting fair value discounts to loans	49,634			40,188
Adjusted allowance for loan losses (non-GAAP)	63,624			49,957
Loans	5,159,410			3,076,544
Adjusted allowance for loan losses to loans (non-GAAP)	1.23		%	1.62		%

Net acquisition accounting fair value discounts to loans includes $33.0 million and $16.7 million in credit and non-credit discounts, respectively, as of December 31, 2016 compared to $28.2 million and $12.0 million, respectively, at December 31, 2015.

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 December 31, 2016, brokered deposits represented approximately 12.2 percent of total deposits.

Total deposits as of December 31, 2016 were $5.22 billion, which was an increase of $1.91 billion from December 31, 2015. As of December 31, 2016 and 2015, the Company had outstanding time deposits under $100 thousand of $405.6 million and $335.3 million, respectively, and time deposits over $100 thousand of $916.7 million and $682.6 million, respectively.

- 52 -

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



	December 31,
Composition of Deposit Portfolio:	2016		2015

Non-interest demand	22.3	%	22.5	%
Interest-bearing demand	22.1		15.8
Money market and savings	30.3		31.0
Time deposits	25.3		30.7
Total	100.0	%	100.0	%

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



	2016						2015
(Dollars in thousands)	Average Balance		% of Total		Average Rate		Average Balance		% of Total		Average Rate

Non-interest demand	$	1,096,376	22.02	%	—	%	$	702,899	21.61	%	—	%
Interest-bearing demand	1,027,047		20.63		0.18		483,406		14.86		0.12
Money market and savings	1,507,941		30.29		0.31		998,747		30.71		0.28
Time deposits	1,347,050		27.06		0.82		1,067,551		32.82		0.81
Total average deposits	$	4,978,414	100.00	%	0.35	%	$	3,252,603	100.00	%	0.37	%

The overall mix of average deposits continues to shift to a higher percentage of non-interest demand deposits, with reductions in the percentage of deposits held in interest-bearing demand and time deposit accounts. The Company believes its deposit product offerings are properly structured to attract and retain core low-cost deposit relationships. The average cost of interest-bearing deposits was 0.45 percent in 2016 compared to 0.47 percent in 2015 due to higher average rates for time deposits.

The following table summarizes the maturities of time deposits $100 thousand or more as of December 31, 2016.



(Dollars in thousands)	December 31, 2016

Remaining maturity:
Three months or less	$	187,479
Three to six months	151,415
Six to 12 months	202,044
More than 12 months	375,796
Total	$	916,734

Borrowings and Long-Term Debt

The Company uses short-term borrowings and long-term debt to provide both funding and, to a lesser extent, regulatory capital. Short-term borrowings totaled $764.6 million and $375.5 million as of December 31, 2016 and 2015, respectively, and consisted of FHLB advances maturing within twelve months. The balance of short-term FHLB advances increased during 2016 following the NewBridge Merger and to fund loan growth and investment purchases.

Long-term debt totaled $159.4 million and $195.0 million as of December 31, 2016 and 2015, respectively. The following table summarizes components of long-term debt.

- 53 -



	December 31,
(Dollars in thousands)	2016		2015

Long-term debt:
FHLB advances maturing beyond one year	$	51,356	$	118,942
Subordinated term loan due 2018	7,279		7,166
Subordinated notes due 2023	38,050		38,050
Subordinated notes due 2024	16,061		—
Junior subordinated debt to unconsolidated trusts:
Maturing October 7, 2033	5,885		5,701
Maturing December 15, 2033	6,997		6,853
Maturing September 30, 2035	15,371		—
Maturing December 15, 2037	12,904		12,503
Capital lease obligations and other debt	5,521		5,752
Total long-term debt	$	159,424	$	194,967

Shareholders’ Equity

Total shareholders’ equity was $1.01 billion as of December 31, 2016, an increase of $451.7 million from December 31, 2015. This increase was primarily due to $431.3 million resulting from the NewBridge Merger and $55.2 million in net income for the year, partially offset by $6.2 million other comprehensive loss, and $34.4 million in common stock dividends declared in 2016.

Liquidity

Effective liquidity management involves the cost-effective integration of funding the needs and requirements of depositors and borrowers, funding loan commitments, paying operating expenses, and ensuring 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, and available borrowings from the FHLB, the Federal Reserve Bank, and various federal funds lines from correspondent banks are the primary sources of liquidity for the Bank. 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, 2017. 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. The primary uses of liquidity at the holding company are common stock dividends, debt payments on its subordinated debt and TRUPs, and operating expenses.

As of December 31, 2016, the Company's liquid assets (which include cash and due from banks, interest-earning deposits with banks, federal funds sold and investment securities available for sale) totaled $1.12 billion, which represented 15 percent of total assets and 21 percent of total deposits. Supplementing this on-balance sheet liquidity, the Company has available off-balance sheet liquidity in the form of lines of credit from various correspondent banks which totaled $578.3 million as of December 31, 2016. As of December 31, 2016, outstanding commitments for undisbursed lines of credit and letters of credit totaled $1.48 billion, and standby letters of credit issued by the FHLB on the Bank's behalf totaled $31.0 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 $5.60 billion, or 78 percent, of total assets as of December 31, 2016 compared with $3.59 billion, or 80 percent, of total assets as of December 31, 2015.

- 54 -

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.



	December 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	$	780,937	$	418,083	$	121,637	$	1,704	$	1,322,361
Short-term borrowings	764,600		—		—		—		764,600
Long-term debt	—		52,902		8,505		98,017		159,424
Operating leases	5,546		7,781		2,875		3,382		19,584
Total contractual obligations	$	1,551,083	$	478,766	$	133,017	$	103,103	$	2,265,969

The Company's significant commitments and obligations are summarized in the accompanying table. Not all of the commitments presented in this table will be used; thus the actual cash requirements are likely to be significantly less than the amounts reported.



(Dollars in thousands)	December 31, 2016

Commitments to extend credit	$	1,454,630
Financial standby letters of credit	22,625
Standby letters of credit issued by the FHLB on the Bank's behalf	31,000
Total commitments	$	1,508,255

For further information regarding the Company's off-balance sheet commitments, see Note P "Commitments and Contingencies" in the "Notes to Consolidated Financial Statements."

Capital

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

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

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

- 55 -

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

The Company's and the Bank’s capital amounts and ratios as of December 31, 2016 are presented in the table below.



	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	$	746,250	12.49	%	$	477,799	8.00	%	N/A		N/A
Tier 1 risk-based capital	675,634		11.31	%	358,349		6.00	%	N/A		N/A
Common equity tier 1	648,105		10.85	%	268,762		4.50	%	N/A		N/A
Tier 1 leverage capital	675,634		9.83	%	274,969		4.00	%	N/A		N/A

Yadkin Bank
Total risk-based capital	$	742,418	12.41	%	$	478,498	8.00	%	$	598,122	10.00	%
Tier 1 risk-based capital	725,913		12.14	%	358,873		6.00	%	478,498		8.00	%
Common equity tier 1	725,913		12.14	%	269,155		4.50	%	388,780		6.50	%
Tier 1 leverage capital	725,913		10.57	%	274,822		4.00	%	343,528		5.00	%

In the second quarter of 2015, the Company redeemed $28.4 million of outstanding preferred stock that had originally been issued to the U.S. Treasury in connection with its TARP Capital Purchase Program.

Since the third quarter of 2015, the Company has declared and paid a quarterly cash dividend of $0.10 per share of its outstanding unrestricted common stock. Additionally, the Company declared and paid an extraordinary special cash dividend of $0.50 per share of its outstanding unrestricted common stock during the first quarter of 2016.

The Company's tangible book value per common share was $12.51 as of December 31, 2016 and December 31, 2015. Tangible common equity to tangible assets was 9.45 percent as of December 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, both of which are non-GAAP financial metrics.



	December 31,
(Dollars in thousands)	2016			2015

Total shareholders' equity	$	1,014,231		$	562,549
Less: goodwill	339,538			152,152
Less: other intangible assets, net	27,529			13,579
Tangible common equity (Non-GAAP)	$	647,164		$	396,818
Common shares outstanding	51,725,827			31,726,767
Tangible book value per common share (Non-GAAP)	$	12.51		$	12.51

Total assets	$	7,215,630		$	4,474,144
Less: goodwill	339,538			152,152
Less: other intangible assets, net	27,529			13,579
Tangible assets	$	6,848,563		$	4,308,413
Tangible common equity to tangible assets (Non-GAAP)	9.45		%	9.21		%

- 56 -

Quarterly Financial Information

The table below presents condensed unaudited information relating to quarterly periods in 2016 and 2015.



	2016								2015
(Dollars in thousands)	Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Summary of Operations:
Interest income	$	70,290	$	72,699	$	71,657	$	54,187	$	46,322	$	44,304	$	44,235	$	43,842
Interest expense	8,708		8,708		8,168		6,142		4,980		4,999		4,908		4,666
Net interest income	61,582		63,991		63,489		48,045		41,342		39,305		39,327		39,176
Provision for loan losses	3,472		2,997		2,298		1,875		2,714		1,576		994		961
Net interest income after provision for loan losses	58,110		60,994		61,191		46,170		38,628		37,729		38,333		38,215
Non-interest income	12,768		16,789		15,637		11,354		9,966		10,798		10,800		8,839
Non-interest expense	49,708		51,058		50,205		44,804		30,564		28,848		32,316		30,958
Income before taxes	21,170		26,725		26,623		12,720		18,030		19,679		16,817		16,096
Income tax expense	7,492		10,439		9,219		4,920		6,182		7,891		6,076		5,846
Net income	13,678		16,286		17,404		7,800		11,848		11,788		10,741		10,250
Dividends on preferred stock	—		—		—		—		—		—		183		639
Net income to common shareholders	$	13,678	$	16,286	$	17,404	$	7,800	$	11,848	$	11,788	$	10,558	$	9,611
Net income per common share:
Basic	$	0.27	$	0.32	$	0.34	$	0.20	$	0.37	$	0.37	$	0.33	$	0.30
Diluted	0.26		0.32		0.34		0.20		0.37		0.37		0.33		0.30

Net income was $13.7 million or $0.26 per diluted share in the fourth quarter of 2016, compared to $11.8 million or $0.37 per diluted share in the fourth quarter of 2015. Net operating earnings, which excludes securities gains (losses), merger and conversion costs, restructuring charges, an impairment charge on purchased accounts receivables and a 2015 gain on sale of branches, totaled $17.0 million in fourth quarter of 2016 compared to $7.6 million in the fourth quarter of 2015.

Net interest income was $61.6 million in the fourth quarter of 2016 compared to $41.3 million in the fourth quarter of 2015. The increase in net interest income was the result of a significant increase in earning assets resulting from the NewBridge Merger as well as organic business activity. Average earning assets increased from $3.85 billion in the fourth quarter of 2015 to $6.39 billion in the fourth quarter of 2016. Over this period, average loan balances increased by $2.22 billion, primarily due to the NewBridge Merger. Average interest-bearing deposits increased by $1.56 billion. Net interest margin slipped from 4.29 percent in the fourth quarter of 2015 to 3.86 percent in the fourth quarter of 2016 due to lower loan and investment yields and higher funding costs.

Net accretion income on acquired loans totaled $4.6 million in the fourth quarter of 2016, which consisted of $1.3 million of net accretion on PCI loans and $3.3 million of accretion income on purchased non-impaired loans. Net accretion income on acquired loans in the fourth quarter of 2015 totaled $3.0 million, which included $791 thousand of net accretion on PCI loans and $2.2 million of accretion income on purchased non-impaired loans. Accretion income on purchased non-impaired loans included $1.8 million of accelerated accretion due to principal prepayments in the fourth quarter of 2016, unchanged from the fourth quarter of 2015.

Provision for loan losses was $3.5 million in the fourth quarter of 2016 compared to $2.7 million in the fourth quarter of 2015. The higher provision for loan losses was primarily due to accretion of fair value discounts on acquired loans. Annualized net loan charge-offs were 0.12 percent of average loans in the fourth quarter of 2016 compared to 0.25 percent in the fourth quarter of 2015. The following table summarizes the changes in the ALLL in the fourth quarters of 2016 and 2015.



(Dollars in thousands)	Non-PCI Loans			PCI Loans			Total
Q4 2016:
Balance at October 1, 2016	$	11,510		$	632		$	12,142
Net charge-offs	(1,624		)	—			(1,624		)
Provision for loan losses	3,026			446			3,472
Balance at December 31, 2016	$	12,912		$	1,078		$	13,990

Q4 2015:
Balance at October 1, 2015	$	7,602		$	1,398		$	9,000
Net charge-offs	(1,945		)	—			(1,945		)
Provision for loan losses	2,790			(76		)	2,714
Balance at December 31, 2015	$	8,447		$	1,322		$	9,769

- 57 -

Non-interest income totaled $12.8 million in the fourth quarter of 2016, an increase from $10.0 million in the fourth quarter of 2015. Service charges on deposit accounts increased $2.0 million in the fourth quarter of 2016, when compared to the fourth quarter of 2015, the increase resulting from the NewBridge Merger. Mortgage banking income increased $751 thousand in the fourth quarter of 2016, when compared to the fourth quarter of 2015.

Non-interest expense totaled $49.7 million in the fourth quarter of 2016, compared to $30.6 million in the fourth quarter of 2015. The growth in expenses resulted from higher operating expenses following the NewBridge Merger and merger expenses incurred for both the NewBridge Merger and the pending FNB Merger, as well as an impairment charge recorded on purchased accounts receivables. The Company's operating efficiency ratio, which excludes merger and conversion costs, impairment of purchased accounts receivables, restructuring charges, gains on the sales of branches and securities transactions, increased from 57.46 percent in the fourth quarter of 2015 to 60.27 percent in the fourth quarter of 2016.

The Company’s income tax expense was $7.5 million in the fourth quarter of 2016, compared to $6.2 million in the fourth quarter of 2015, primarily resulting from higher pre-tax earnings.

Critical Accounting Policies

The Company has identified accounting policies that are the most critical to fully understand and evaluate its reported financial results and require management's most difficult, subjective or complex judgments. Management has reviewed the following critical accounting policies and related disclosures with the Audit Committee of the Board of Directors.

•Allowance for loan losses,

•Fair values for acquired assets and assumed liabilities,

•Cash flow estimates on purchased credit-impaired loans,

•Valuation of foreclosed assets,

•Valuation of deferred tax assets, and

•Evaluation of investment securities for other-than-temporary impairment.

For a full description of these critical accounting policies, see Note B "Summary of Significant Accounting Policies" in the "Notes to Consolidated Financial Statements."

Recent Accounting Pronouncements

For recently issued accounting pronouncements that may affect the Company, see Note B "Summary of Significant Accounting Policies" in the "Notes to Consolidated Financial Statements."

ITEM 7A. 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 also utilizes derivative financial instruments, as necessary, to manage its interest rate risk. The Company's overall interest rate risk position is maintained within a series of policies approved by the Board of Directors and guidelines established and monitored by the Bank’s Asset/Liability Committee (“ALCO”).

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

- 58 -

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

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 December 31, 2016.



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

Immediate change in interest rates:
+ 4.0%	7.34	%	(2.16	)%
+ 3.0%	5.74		(0.88	)
+ 2.0%	3.78		0.33
+ 1.0%	1.69		1.46
No change	—		—
- 1.0%	(0.88	)	3.63

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 affect 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.

- 59 -

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED FINANCIAL STATEMENTS

YADKIN FINANCIAL CORPORATION AND SUBSIDIARY

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS



		Page No.

Report of Independent Registered Public Accounting Firm		61

Consolidated Balance Sheets as of December 31, 2016 and 2015		62

Consolidated Statements of Operations for the Years Ended December 31, 2016, 2015 and 2014		63

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015 and 2014		64

Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2016, 2015 and 2014		65

Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014		66

Notes to Consolidated Financial Statements		68

- 60 -

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Yadkin Financial Corporation

We have audited the accompanying consolidated balance sheets of Yadkin Financial Corporation (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Yadkin Financial Corporation as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2017, expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Dixon Hughes Goodman LLP

Raleigh, North Carolina

March 1, 2017

- 61 -



YADKIN FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of December 31, 2016 and 2015



(Dollars in thousands, except share data)	December 31, 2016			December 31, 2015
Assets
Cash and due from banks	$	90,566		$	60,783
Interest-earning deposits with banks	33,262			50,885
Federal funds sold	585			250
Investment securities available for sale, at fair value	990,613			689,132
Investment securities held to maturity	38,735			39,182
Loans held for sale	76,876			47,287
Loans	5,159,410			3,076,544
Allowance for loan losses	(13,990		)	(9,769		)
Net loans	5,145,420			3,066,775
Purchased accounts receivable	4,980			52,688
Federal Home Loan Bank stock, at cost	41,225			24,844
Premises and equipment, net	103,954			73,739
Bank-owned life insurance	134,884			78,863
Other real estate	30,110			15,346
Deferred tax asset, net	58,229			55,607
Goodwill	339,538			152,152
Other intangible assets, net	27,529			13,579
Accrued interest receivable and other assets	99,124			53,032
Total assets	$	7,215,630		$	4,474,144

Liabilities
Deposits:
Non-interest demand	$	1,163,157		$	744,053
Interest-bearing demand	1,154,114			523,719
Money market and savings	1,579,838			1,024,617
Time	1,322,361			1,017,908
Total deposits	5,219,470			3,310,297
Short-term borrowings	764,600			375,500
Long-term debt	159,424			194,967
Accrued interest payable and other liabilities	57,905			30,831
Total liabilities	6,201,399			3,911,595

Shareholders’ Equity
Preferred stock, no par value, 1,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $1.00 par value, 75,000,000 shares authorized; 51,725,827 and 31,726,767 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively	51,726			31,727
Common stock warrants	717			717
Additional paid-in capital	909,912			492,828
Retained earnings	65,549			44,794
Accumulated other comprehensive loss	(13,673		)	(7,517		)
Total shareholders' equity	1,014,231			562,549
Total liabilities and shareholders' equity	$	7,215,630		$	4,474,144

See accompanying Notes to Consolidated Financial Statements.

- 62 -



YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2016, 2015 and 2014



	Year ended December 31,
(Dollars in thousands, except per share data)	2016			2015		2014
Interest income
Loans	$	242,230		$	161,525	$	122,613
Investment securities	26,219			16,982		11,791
Federal funds sold and interest-earning deposits	384			196		144
Total interest income	268,833			178,703		134,548
Interest expense
Deposits	17,569			12,009		8,404
Short-term borrowings	5,503			1,546		406
Long-term debt	8,654			5,998		5,170
Total interest expense	31,726			19,553		13,980
Net interest income	237,107			159,150		120,568
Provision for loan losses	10,642			6,245		3,413
Net interest income after provision for loan losses	226,465			152,905		117,155
Non-interest income
Service charges and fees on deposit accounts	21,310			13,750		9,574
Government-guaranteed lending	11,501			12,729		9,450
Mortgage banking	11,449			6,257		3,370
Bank-owned life insurance	4,071			1,873		1,784
Gain (loss) on sales of available for sale securities	(564		)	—		126
Gains on sales of branches	—			88		415
Gain on sale of trust business	417			—		—
Other	8,364			5,706		4,198
Total non-interest income	56,548			40,403		28,917
Non-interest expense
Salaries and employee benefits	86,024			60,898		51,342
Occupancy and equipment	26,411			18,799		15,075
Data processing	10,328			7,599		5,235
FDIC deposit insurance premiums	4,062			2,892		2,091
Professional services	5,487			4,556		3,943
Foreclosed asset expenses, net	1,749			1,276		671
Loan, collection, and repossession expense	4,057			3,643		3,075
Merger and conversion costs	28,486			1,102		22,136
Impairment of purchased accounts receivable	2,927			—		—
Restructuring charges	46			3,533		1,142
Amortization of other intangible assets	5,939			3,098		2,157
Other	20,259			15,290		12,087
Total non-interest expense	195,775			122,686		118,954
Income before income taxes	87,238			70,622		27,118
Income tax expense	32,070			25,995		5,413
Net income	55,168			44,627		21,705
Dividends on preferred stock	—			822		1,269
Net income attributable to non-controlling interests	—			—		2,466
Net income available to common shareholders	$	55,168		$	43,805	$	17,970

Net income per common share
Basic	$	1.15		$	1.39	$	0.88
Diluted	1.14			1.38		0.88

Weighted average common shares outstanding
Basic	48,137,433			31,610,733		20,500,519
Diluted	48,237,217			31,695,808		20,505,142

See accompanying Notes to Consolidated Financial Statements.

- 63 -



YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31, 2016, 2015 and 2014



	Year ended December 31,
(Dollars in thousands)	2016			2015			2014

Net income	$	55,168		$	44,627		$	21,705
Other comprehensive income (loss):
Securities available for sale:
Unrealized holding gains (losses) on available for sale securities	(11,519		)	(3,644		)	9,054
Tax effect	4,331			1,391			(3,609		)
Reclassification of gains (losses) on sales of securities recognized in earnings	564			—			(126		)
Tax effect	(212		)	—			50
Net of tax amount	(6,836		)	(2,253		)	5,369
Cash flow hedges:
Unrealized gains (losses) on cash flow hedges	271			(5,207		)	(6,062		)
Tax effect	(199		)	2,088			2,623
Reclassification of amounts into interest expense from termination of interest rate swaps	452			161			—
Tax effect	(170		)	(62		)	—
Net of tax amount	354			(3,020		)	(3,439		)
Pension obligation:
Change in pension obligation	507			—			—
Tax effect	(181		)	—			—
Net of tax amount	326			—			—
Total other comprehensive income (loss)	(6,156		)	(5,273		)	1,930
Comprehensive income	$	49,012		$	39,354		$	23,635

See accompanying Notes to Consolidated Financial Statements.

- 64 -



YADKIN FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Years Ended December 31, 2016, 2015 and 2014



	Preferred Stock					Common Stock					Common Stock Warrants		Additional Paid-in Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Shareholders' Equity Before Non-Controlling Interests			Non-Controlling Interests			Total Shareholders' Equity
(Dollars in thousands)	Shares		Amount			Shares		Amount			Common Stock Warrants		Additional Paid-in Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Shareholders' Equity Before Non-Controlling Interests			Non-Controlling Interests			Total Shareholders' Equity
Balance as of January 1, 2014	—		$	—		9,219,406		$	9,219		$	—	$	144,964		$	(10,659	)	$	(2,725	)	$	140,799		$	97,260		$	238,059
Net income	—		—			—		—			—		—			19,239			—			19,239			2,466			21,705
Other comprehensive income	—		—			—		—			—		—			—			864			864			1,065			1,929
Stock-based compensation	—		—			—		—			—		830			—			—			830			111			941
Subsidiary stock options exercised	—		—			—		—			—		—			—			—			—			139			139
Stock options exercised	—		—			555		—			—		5			—			—			5			—			5
Issuance of subsidiary common stock	—		—			—		—			—		1,301			—			97			1,398			43,068			44,466
Repurchase of subsidiary preferred stock	—		—			—		—			—		—			—			—			—			(42,849		)	(42,849		)
Repurchase of subsidiary common stock warrants	—		—			—		—			—		—			—			—			—			(2,552		)	(2,552		)
Dividends on subsidiary preferred stock	—		—			—		—			—		—			—			—			—			(314		)	(314		)
Reverse merger with Piedmont Community Bank Holdings, Inc. and VantageSouth Bancshares, Inc.	28,405		28,405			22,431,701		22,432			717		355,557			—			(480		)	406,631			(98,394		)	308,237
Distribution to legacy Piedmont Community Bank Holdings, Inc. shareholders	—		—			—		—			—		(9,809		)	—			—			(9,809		)	—			(9,809		)
Restricted stock, canceled for tax withholding	—		—			(52,512	)	(52		)	—		(834		)	—			—			(886		)	—			(886		)
Preferred stock dividends	—		—			—		—			—		—			(1,269		)	—			(1,269		)	—			(1,269		)
Balance as of December 31, 2014	28,405		28,405			31,599,150		31,599			717		492,014			7,311			(2,244		)	557,802			—			557,802
Net income	—		—			—		—			—		—			44,627			—			44,627			—			44,627
Other comprehensive loss	—		—			—		—			—		—			—			(5,273		)	(5,273		)	—			(5,273		)
Stock-based compensation	—		—			—		—			—		596			—			—			596			—			596
Stock options exercised	—		—			22,737		23			—		323			—			—			346			—			346
Restricted stock grants	—		—			105,000		105			—		(105		)	—			—			—			—			—
Restricted stock retirements	—		—			(120	)	—			—		—			—			—			—			—			—
Redemption of preferred stock	(28,405	)	(28,405		)	—		—			—		—			—			—			(28,405		)	—			(28,405		)
Preferred stock dividends	—		—			—		—			—		—			(822		)	—			(822		)	—			(822		)
Common stock dividends	—		—			—		—			—		—			(6,322		)	—			(6,322		)	—			(6,322		)
Balance as of December 31, 2015	—		—			31,726,767		31,727			717		492,828			44,794			(7,517		)	562,549			—			562,549
Net income	—		—			—		—			—		—			55,168			—			55,168			—			55,168
Other comprehensive loss	—		—			—		—			—		—			—			(6,156		)	(6,156		)	—			(6,156		)
Restricted stock grants	—		—			100,000		100			—		(100		)	—			—			—			—			—
Restricted stock forfeiture	—		—			(36,811	)	(37		)	—		37			—			—			—			—			—
Stock-based compensation	—		—			—		—			—		3,296			—			—			3,296			—			3,296
Stock options exercised	—		—			258,553		259			—		2,192			—			—			2,451			—			2,451
Acquisition of NewBridge Bancorp, Inc.	—		—			19,605,374		19,605			—		411,731			—			—			431,336			—			431,336
Shares issued for restricted stock units	—		—			71,944		72			—		(72		)	—			—			—			—			—
Common stock dividends	—		—			—		—			—		—			(34,413		)	—			(34,413		)	—			(34,413		)
Balance as of December 31, 2016	—		$	—		51,725,827		$	51,726		$	717	$	909,912		$	65,549		$	(13,673	)	$	1,014,231		$	—		$	1,014,231

See accompanying Notes to Consolidated Financial Statements.

- 65 -

YADKIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2016, 2015 and 2014



	Year ended December 31,
(Dollars in thousands)	2016			2015			2014
Cash flows from operating activities
Net income	$	55,168		$	44,627		$	21,705
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	3,296			596			941
Provision for loan losses	10,642			6,245			3,413
Accretion of acquisition discount on purchased loans	(28,242		)	(21,078		)	(27,888		)
Depreciation	8,756			6,155			4,683
Amortization of core deposit intangible	5,939			3,098			2,157
Amortization of acquisition premium on time deposits	(1,600		)	(3,109		)	(3,381		)
Net accretion of acquisition discount on borrowings	396			557			704
Gains on sales of branches	—			(88		)	(415		)
Gain (loss) on mortgage loan commitments	(20		)	(66		)	13
Gain on sales of loans held for sale	(23,233		)	(17,906		)	(12,335		)
Originations of loans held for sale	(540,898		)	(401,808		)	(320,448		)
Proceeds from sales of loans held for sale	590,550			392,632			336,937
Increase in cash surrender value of bank-owned life insurance	5,726			(1,873		)	(1,536		)
Deferred income taxes	24,635			20,706			9,905
Change in deferred tax asset valuation allowance	(296		)	(126		)	(4,797		)
Gain (loss) on sales of available for sale securities	564			—			(126		)
Net amortization of premiums on available for sale securities	7,737			5,170			4,260
Net gain on disposal of foreclosed assets	414			(146		)	(28		)
Valuation adjustments on foreclosed assets	(1,285		)	605			497
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable	310			(652		)	(820		)
Increase in other assets	(5,085		)	(13,811		)	(7,120		)
Increase (decrease) in accrued interest payable	(328		)	(138		)	139
Increase (decrease) in other liabilities	(12,752		)	(1,235		)	7,709
Net cash provided by operating activities	100,394			18,355			14,169
Cash flows from investing activities
Purchases of investment securities available for sale	(307,551		)	(214,369		)	(210,340		)
Purchases of investment securities held to maturity	—			—			(18,713		)
Proceeds from maturities and repayments of investment securities available for sale	247,919			102,155			55,661
Proceeds from call of investment securities held to maturity	—			—			500
Proceeds from sales of investment securities available for sale	182,037			87,123			128,162
Loan originations and principal collections, net	(63,967		)	(160,260		)	(121,090		)
Proceeds from sales of loans	7,308			5,294			2,076
Purchases of loans	—			(24,807		)	—
Net cash received in business combinations	45,143			—			36,116
Net cash paid in branch sale	—			(21,235		)	(10,837		)
Purchases of interest rate caps	—			—			(1,278		)
Purchases of trade accounts receivable, net	47,708			(7,867		)	(26,096		)
Purchases of premises and equipment	(2,774		)	(4,615		)	(7,004		)
Disposals of premises and equipment	5,391			4,394			3,954
Proceeds from disposal of foreclosed assets	7,887			6,327			6,458
Purchases of Federal Home Loan Bank stock	5,196			(5,345		)	(6,792		)
Purchase of bank-owned life insurance	—			—			(15,000		)
Investment in tax credit fund	—			(6,778		)	—
Net cash provided by (used in) investing activities	174,297			(239,983		)	(184,223		)

- 66 -

YADKIN FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2016, 2015 and 2014



	Year ended December 31,
(Dollars in thousands)	2016			2015			2014
Cash flows from financing activities
Net increase (decrease) in deposits	$	(79,336	)	$	97,138		79,780
Proceeds from (repayments of) short-term borrowings, net	(196,235		)	34,500			33,621
Proceeds from issuance of long-term debt, net	45,337			104,746			101,308
Proceeds from exercise of stock options	2,451			346			143
Proceeds from issuance of subsidiary common stock, net of issuance costs	—			—			44,466
Repurchase of subsidiary preferred stock	—			—			(42,849		)
Repurchase of subsidiary common stock warrants	—			—			(2,552		)
Distribution to legacy shareholders of Piedmont Community Bank Holdings, Inc.	—			—			(9,809		)
Cancellation of restricted stock for tax withholding	—			—			(872		)
Cancellation and payout of fractional shares issued in merger	—			—			(14		)
Repurchase of preferred stock	—			(28,405		)	—
Dividends paid on subsidiary preferred stock	—			—			(314		)
Dividends paid on preferred stock	—			(822		)	(1,269		)
Dividends paid on common stock	(34,413		)	(6,322		)	—
Net cash provided by (used in) financing activities	(262,196		)	201,181			201,639
Net change in cash and cash equivalents	12,495			(20,447		)	31,585
Cash and cash equivalents, beginning of period	111,918			132,365			100,780
Cash and cash equivalents, end of period	$	124,413		$	111,918		$	132,365

SUPPLEMENTAL DISCLOSURES:
Cash payments for:
Interest	$	32,467		$	22,243		$	15,785
Income taxes	10,600			2,925			240
Noncash investing activities:
Transfers of loans to foreclosed assets	$	14,403		$	9,193		$	9,300
Change in fair value of securities available for sale, net of tax	(6,836		)	(2,253		)	5,369
Change in fair value of cash flow hedge, net of tax	354			(3,020		)	(3,439		)
Change pension obligation, net of tax	326			—			—
Acquisition:
Assets acquired (excluding goodwill)	$	2,778,780		$	—		$	1,803,903
Liabilities assumed	2,534,830			—			1,621,565
Other equity interests acquired	—			—			29,122
Purchase price	431,336			—			279,115
Goodwill recorded	187,386			—			125,899

See accompanying Notes to Consolidated Financial Statements.

- 67 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE A – ORGANIZATION AND 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, which was formed in 2006, conducts its business operations primarily through its wholly-owned subsidiary, Yadkin Bank, a North Carolina chartered community bank providing financial services in 98 branches across North Carolina and upstate South Carolina. Yadkin Bank, which was incorporated in 1968, provides banking, mortgage, investment, and insurance services to businesses and consumers across the Carolinas.

Refer to Note C for information regarding the pending merger with F.N.B. Corporation.

The Company also has interests in Yadkin Valley Statutory Trust I, American Community Bank Capital Trust, and Crescent Financial Capital Trust I (the “Trusts”). The Trusts were formed for the sole purpose of issuing trust preferred securities and are not consolidated with the financial statements of the Company. The proceeds from such issuances were loaned to the Company in exchange for subordinated debentures, which are the sole assets of the Trusts. The Company’s obligations under the subordinated debentures constitutes full and unconditional guarantees by the Company of the obligations under the trust preferred securities.

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

The 2014 Mergers were accounted for as a reverse merger using the acquisition method of accounting primarily due to the relative voting interests in the Company upon completion of the 2014 Mergers. As a result, Piedmont and its consolidated subsidiaries represented the accounting acquirer, and Yadkin represented the accounting acquiree. Historical financial results of the Company prior to the 2014 Mergers reflect the historical balances of Piedmont. Financial results of the Company following the 2014 Mergers reflect balances of the combined organization. As required under the acquisition method of accounting, the assets and liabilities of Yadkin as of the date of the 2014 Mergers were recorded at estimated fair value and added to those of Piedmont. The 2014 Mergers had a significant impact on all aspects of the Company's financial statements, and as a result, financial results after the 2014 Mergers may not be comparable to financial results prior to the 2014 Mergers.

Basis of Presentation

The accompanying consolidated financial statements include the accounts and transactions of the Company and Yadkin Bank. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates and Assumptions

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

- 68 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Combinations

Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method of accounting, acquired assets and assumed liabilities are included with the acquirer's accounts as of the date of acquisition at estimated fair value, with any excess of purchase price over the fair value of the net assets acquired (including identifiable core deposit intangibles) capitalized as goodwill. In the event that the fair value of the net assets acquired exceeds the purchase price, an acquisition gain is recorded for the difference in consolidated statements of operations for the period in which the acquisition occurred. The core deposit intangible asset is recognized as an asset apart from goodwill when it arises from contractual or other legal rights or if it is capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented or exchanged. In addition, acquisition-related costs and restructuring costs are recognized as period expenses as incurred.

Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest-earning deposits with banks and federal funds sold. Cash and cash equivalents have maturities of three months or less. Accordingly, the carrying amount of such instruments is considered a reasonable estimate of fair value.

Investment Securities

The Company classifies marketable investment securities as held to maturity, available for sale, or trading. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. Debt securities are classified as held to maturity where the Company has both the intent and ability to hold the securities to maturity. These securities are reported at amortized cost. Investment securities available for sale are carried at fair value and consist of debt and equity securities not classified as trading or held to maturity. Unrealized holding gains and losses on available for sale securities are reported as a net amount in other comprehensive income, net of related tax effects. Gains and losses on the sale of available for sale securities are determined using the specific identification method recorded on a trade date basis.

Each held to maturity and available for sale security in a loss position is evaluated for other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as (1) the length of time and the extent to which the fair value has been below amortized cost, (2) changes in the earnings performance, credit rating, asset quality, or business prospects of the issuer, (3) the ability of the issuer to make principal and interest payments, (4) changes in the regulatory, economic, or technological environment of the issuer, and (5) changes in the general market condition of either the geographic area or industry in which the issuer operates.

Regardless of these factors, if the Company has developed a plan to sell the security or it is likely that the Company will be forced to sell the security in the near future, then the impairment is considered other-than-temporary and the carrying value of the security is permanently written down to the current fair value with the difference between the new carrying value and the amortized cost charged to earnings. If the Company does not intend to sell the security and it is not more likely than not that it will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the other-than-temporary impairment is separated into the following: (1) the amount representing the credit loss and (2) the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings, and the amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of applicable taxes.

Loans

Loans that the Company has the intent and ability to hold for the foreseeable future, or until maturity, are reported at their outstanding principal adjusted for any charge-offs, deferred fees or costs on originated loans and unamortized premiums or discounts on acquired loans. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment to the yield of the related loan. Interest on loans is recorded based on the principal amount outstanding. The accrual of interest on impaired loans, for all classes, is discontinued when the future collectability of the recorded loan balance is in doubt. When the future collectability of the recorded loan balance is not in doubt, interest income may be recognized on the cash basis. Generally, loans are placed on nonaccrual when they are past due 90 days or more. When a loan is placed in nonaccrual status, all unpaid accrued interest is reversed and subsequent collections of interest and principal payments are generally applied as a reduction to the principal outstanding. Should the credit quality of a nonaccrual loan improve, the loan can be returned to an accrual status after demonstrating consistent payment history for at least 6 months.

- 69 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

A loan is classified as a troubled debt restructuring (“TDR”) when certain modifications are made to the loan terms and concessions are granted to the borrowers due to financial difficulty experienced by those borrowers. In the past, the Company has granted 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 a period of performance under the modified terms has been established. Lastly, if the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status. These loans are closely monitored, and the Company ceases accruing interest on them if the borrowers may not continue performing based on the restructured note terms.

The Company's loan policies, guidelines, and procedures establish the basic guidelines governing its lending operations. They address the types of loans sought, target markets, underwriting, collateral requirements, term, interest rate, yield considerations and compliance with laws and regulations. The loan policies are reviewed and approved annually by the Board of Directors of the Bank. The summary below provides an overview of the primary types of loans the Company provides, or classes of loans, including a discussion of relevant underwriting guidelines and risk characteristics.

Commercial and Industrial Loans. These loans are typically for working capital, equipment, and business expansion. Commercial and industrial loans are generally secured by accounts receivable, inventory, equipment and owner-occupied real estate. With few exceptions, the Company requires personal guarantees from the principal business owners. Commercial loans are generally originated with one to seven year maturities for working capital and equipment loans and five to seven year maturities with 15 to 25 year amortizations for owner occupied real estate.

Commercial Real Estate Loans. These loans are secured principally by leased apartments, retail centers, and commercial office and industrial buildings, acquired by the borrower for both investment and owner-occupied purposes. The Company generally requires the personal guaranty of the principal business owners on all such loans. The real estate collateral is a secondary source of repayment. Commercial real estate loans are generally originated with three to seven year maturities with up to 25 year amortizations.

Construction Loans. These loans are generally originated with one to 5 year maturities and may have an amortization feature that could extend up to 25 years once the properties are stabilized. The Company's primary focus on one-to-four family residential construction loans is to borrowers who are the primary end users or to builders in situations in which the home is pre-sold to the end user and the loan is repaid when the end user secures a permanent mortgage. These loans are generally originated with maturities up to 1.5 years in length. Construction loans to home builders for speculative residential homes are not a focus for the Company. In many cases, home builders do require a speculative component to their lending facilities; however, credit exposure is controlled through the covenants relating to the home builder's speculative-to-sold ratio. Any loans made in this product would be to well-established home builders with an excellent track record who are focused on delivering commodity-style housing. Through its Builder Finance division, the Company lends to home builders in its markets who have demonstrated a favorable record of performance and profitable operations. The Company's loan policies require personal guarantees of the principal business owners.

- 70 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Purchased Credit-Impaired Loans

Loans acquired in a transfer, including business combinations, where there is evidence of credit deterioration since origination and it is probable at the date of acquisition that we will not collect all contractually required principal and interest payments, are accounted for as purchased credit-impaired (“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.

Subsequent to acquisition, estimates of cash flows expected to be collected are updated each reporting period based on updated assumptions regarding default rates, loss severities, and other factors that are reflective of current market conditions. If the Company has probable decreases in pool-level cash flows expected to be collected, the provision for loan losses is charged, resulting in an increase to the ALLL. If the Company has probable and significant increases in pool-level 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 loan pool. The impact of changes in variable interest rates is recognized prospectively as adjustments to interest income.

Non-PCI Loans

Non-PCI loans are 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 using the interest method.

Allowance for Loan Losses

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

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

- 71 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

A loan is considered individually impaired when, 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. These loans are evaluated individually for impairment if they exceed a quantitative threshold at the borrower level or have been modified in a TDR. 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. The Company evaluates loans that are classified as doubtful, substandard or special mention to determine whether or not they are individually impaired. This evaluation includes several factors, including review of the loan payment status and the borrower’s financial condition and operating results such as cash flows, operating income or loss, etc. As of of December 31, 2016, the quantitative threshold was $500, compared to $250 at December 31, 2015, the increase having resulted from balance sheet growth following the NBBC Merger.

The evaluation of the ALLL is inherently subjective, and management uses the best information available to establish this estimate. However, if factors such as economic conditions differ substantially from assumptions, or if amounts and timing of future cash flows expected to be received on impaired loans vary substantially from the estimates, future adjustments to the ALLL may be necessary. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s ALLL. Such agencies may require the Company to recognize additions to the ALLL based on their judgments about all relevant information available to them at the time of their examination. Any adjustments to original estimates are made in the period in which the factors and other considerations indicate that adjustments to the ALLL are necessary.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are classified as held for sale and are carried at the lower of cost or fair value. Upon closing, these loans are sold to mortgage loan investors under pre-arranged terms. Origination fees are recognized upon the sale and are included in non-interest income. Related to the mortgage business, the Company enters into interest rate lock commitments and commitments to sell mortgages to investors. Interest rate lock commitments are used to manage interest rate risk associated with the fixed rate loan commitments, and forward sale commitments are entered into with investors to manage the interest rate risk associated with the customer interest rate lock commitments, both of which are considered derivative financial instruments. The period of time between the issuance of a loan commitment and the closing and sale of the loan generally ranges from 10 to 60 days. Interest rate lock commitments and forward sale commitments are derivative instruments and are carried at fair value. These derivative instruments do not qualify for hedge accounting. The fair value of interest rate lock commitments is based on current secondary market pricing and is included in other assets on the balance sheet. 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. Changes in fair value for these instruments are reflected in non-interest income on the income statement. Gains and losses from sales of the mortgage loans are recognized when the Company ultimately sells the loans, and such gains and losses are also recorded in non-interest income. An asset is recorded for the value of the servicing rights and is amortized over the remaining life of the loan on the effective interest method. The servicing asset is included in other assets and the amortization of the servicing asset is included in non-interest expense. Servicing fees are recorded in non-interest income.

The Company provides loans guaranteed by the Small Business Administration (“SBA”) for the purchase of businesses, business startups, business expansion, equipment, and working capital. All SBA loans are underwritten and documented as prescribed by the SBA. SBA loans are generally fully amortizing and have maturity dates and amortizations of up to 25 years. The portion of SBA loans originated that are guaranteed and intended for sale on the secondary market are classified as held for sale and are carried at fair value. The loan participations are sold and the servicing rights are retained. At the time of the sale, an asset is recorded for the value of the servicing rights and is amortized over the remaining life of the loan on the effective interest method. The servicing asset is included in other assets and the amortization of the servicing asset is included in non-interest expense. Servicing fees are recorded in non-interest income. A gain is recorded for any premium paid in excess of the carrying value of the net assets transferred in the sale and is also included in non-interest income. The portion of SBA loans that are retained are also adjusted for a retained discount to reflect the effective interest rate on the retained unguaranteed portion of the loans. The net value of the retained loans is included in the appropriate loan classification for disclosure purposes. These loans are primarily commercial real estate or commercial and industrial.

- 72 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Federal Home Loan Bank of Atlanta Stock

As a requirement for membership, the Company has invested in common stock of the Federal Home Loan Bank of Atlanta (“FHLB”). This investment is carried at cost and is periodically evaluated for impairment.

Premises and Equipment

Land is carried at cost. Other components of premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on the straight-line method over the estimated useful lives of assets, which range from 37 to 40 years for buildings and three to ten years for furniture, software, and equipment. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Repairs and maintenance costs are charged to operations as incurred, and additions and improvements to premises and equipment are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any gains or losses are reflected in earnings.

Premises and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Assets to be disposed of are transferred to other real estate owned and are reported at the lower of the carrying amount or fair value less costs to sell.

Bank-Owned Life Insurance

The Company has purchased life insurance policies on certain current and former employees and directors. These policies are recorded in other assets at their cash surrender value, or the amount that could be realized by surrendering the policies. Income from these policies and changes in the net cash surrender value are recorded in non-interest income.

Foreclosed Assets

Foreclosed assets include repossessed assets and other real estate owned. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell upon foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed, and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and valuation adjustments are included in net expenses from foreclosed assets.

Income Taxes

Deferred income taxes are determined by application to temporary differences of the tax rate expected to be in effect when taxes will become payable or receivable. Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date. A tax position is recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. A valuation allowance is recorded for deferred tax assets if the Company determines that it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Mortgage Servicing Rights

The Company retains servicing rights on mortgage loans sold to investors ("MSR"). 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. 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 banking income.

- 73 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

SBA Servicing Asset

All sales of SBA-guaranteed loans are executed on a servicing retained basis, and the Company retains the rights and obligations to service the loans. 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. This cash flow is commonly known as a servicing spread. SBA regulations require the lender to retain a minimum 100 basis points in servicing spread for any guaranteed loan sold for a premium. The minimum servicing spread is further defined as a minimum service fee of 40 basis points and a minimum premium protection fee of 60 basis points. The servicing spread is recognized as a servicing asset to the extent the spread exceeds adequate compensation for the servicing function. Industry practice recognizes adequate compensation for servicing SBA loans as the minimum service fee of 40 basis points. The fair value of the servicing asset is measured at the discounted present value of the premium protection fee over the expected life of the related loan using appropriate discount rates and prepayment assumptions based on industry statistics. SBA servicing assets are initially recognized at fair value and amortized over the expected life of the related loans as a reduction of the servicing income recognized from the servicing spread.

Goodwill and Other Intangible Assets

Goodwill represents the purchase price in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business combinations. Goodwill has an indefinite useful life and is evaluated for impairment annually, or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. The goodwill impairment analysis is a two-step test. The first, used to identify potential impairment, involves comparing each reporting unit��s estimated fair value to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is considered not to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment. The Company performs its annual goodwill impairment test as of October 31 of each year. For 2016, the results of the first step of the goodwill impairment test provided no indication of potential impairment. Goodwill will continue to be monitored for triggering events that may indicate impairment prior to the next scheduled annual impairment test.

Intangible assets with finite lives are amortized over their estimated useful lives. Other intangible assets, which consist of core deposit intangibles, are being amortized over seven to ten-year periods using an accelerated method.

Purchased Accounts Receivable

The Company previously invested in short-term receivables, which were purchased on an exchange, using qualified intermediaries. The investments are recorded on the consolidated balance sheet, and income from purchased accounts receivables is reported in non-interest income on the consolidated statement of income. The Company suspended its purchase accounts receivable program during 2016. In the event management concludes that collection of a purchased receivable is uncertain, the receivable balance is adjusted to its estimated recoverable value through a charge to earnings. See Note F for further information regarding the Company's purchased accounts receivable.

Derivative Financial Instruments

The Company's interest rate risk management strategy incorporates the use of derivative financial instruments, specifically interest rate swaps and caps. The Company also utilizes interest rate lock commitments and forward sale commitments, which are considered derivative instruments, in its mortgage banking operations. The accounting policies for these mortgage banking derivatives are described in "Loans Held for Sale." The interest rate swaps and caps are expected to be highly effective and have been designated as cash flow hedges. Therefore, changes in fair value are recognized in other comprehensive income until the related cash flows from the hedged item are recognized in earnings. For the interest rate caps, the initial fair value of the premium paid is allocated and recognized in the same future period that the hedged forecasted transaction impacts earnings.

For cash flow hedges, ineffectiveness may be recognized to the extent that changes in value of the derivative instruments do not perfectly offset changes in the value of the hedged item. If the hedge ceases to be highly effective, hedge accounting is discontinued and changes in fair value are recognized in earnings. If a derivative instrument qualifying as a cash flow hedge is terminated or the designation removed, the realized or then unrealized gain or loss is recognized in earnings over the period in which the hedged item affects earnings. Immediate recognition in earnings is required if it is probable that the hedged cash flows will not occur.

- 74 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The Company only transacts with derivative counterparties with strong credit standings and requires liquid collateral to secure credit exposure. Due to these factors, the fair value of derivatives with derivative counterparties is primarily based on the interest rate mark of each trade.

Stock-Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors. Compensation cost is measured as the fair value of these awards on their date of grant. An option pricing model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock options awards and as the restriction period for restricted stock awards.

Compensation cost is recognized on a pro rata basis for stock warrants previously granted to certain employees, officers and directors of Piedmont. Compensation cost was measured as the fair value of these awards on their date of grant. A Monte Carlo option pricing model was utilized to estimate the fair value of Piedmont’s stock warrants issued. Compensation cost is recognized over the vesting period.

Fair Value Measurements

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company follows the fair value hierarchy which gives the highest priority to quoted prices in active markets (observable inputs) and the lowest priority to management’s assumptions (unobservable inputs). For assets and liabilities recorded at fair value, the Company’s policy is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Available-for-sale investment securities and derivatives are recorded at fair value on a recurring basis. Additionally, the Company may be required to record at fair value other assets on a nonrecurring basis, such as loans, loans held for sale, impaired loans and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Assets and liabilities measured at fair value are grouped in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. An adjustment to the pricing method used within either Level 1 or Level 2 inputs could generate a fair value measurement that effectively falls to a lower level in the hierarchy. These levels are described as follows:


•	Level 1 – Valuations for assets and liabilities traded in active exchange markets.


•	Level 2 – Valuations for assets and liabilities that can be obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company’s principal market for these securities is the secondary institutional markets, and valuations are based on observable market data in those markets.


•	Level 3 – Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The determination of where an asset or liability falls in the fair value hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures at each reporting period and based on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, management expects that changes in classifications between levels will be rare.

- 75 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Per Share Results

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

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



	Year ended December 31,
	2016	2015	2014

Weighted average number of common shares	48,137,433	31,610,733	20,500,519
Effect of dilutive stock options and warrants	99,784	85,075	4,623
Weighted average number of common shares and dilutive potential common shares	48,237,217	31,695,808	20,505,142

Anti-dilutive stock options	5,068	31,403	49,474
Anti-dilutive stock warrants	—	—	91,178

As of December 31, 2016, there were 51,725,827 shares of Voting Common Stock and no shares of Non-Voting Common Stock outstanding.

Accumulated Other Comprehensive Income (Loss)

The Company’s accumulated other comprehensive income (loss) is comprised of unrealized gains and losses on securities available for sale and unrealized gains and losses on cash flow hedges to the extent that the hedges were effective. Details on the components of accumulated other comprehensive income are outlined in Note S of the Notes to Consolidated Financial Statements.

Segment Reporting

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Management has determined that the Company has a single operating segment, which is providing general commercial banking and financial services to individuals and businesses located in North Carolina and South Carolina, and to customers in various states through its SBA lending program. The Company's various products and services are those generally offered by community banks, and the allocation of resources is based on the overall performance of the company versus individual regions, branches, products and services.

Recently Adopted and Issued Accounting Standards

In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-18: Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). The new guidance clarifies the classification within the statement of cash flows for certain transactions, including debt extinguishment costs, zero-coupon debt, contingent consideration related to business combinations, insurance proceeds, equity method distributions and beneficial interests in securitizations. The guidance also clarifies that cash flows with aspects of multiple classes of cash flows or that cannot be separated by source or use should be classified based on the activity that is likely to be the predominant source or use of cash flows for the item. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The adoption of this guidance is not expected to be material to the consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13: Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. 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

- 76 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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. Due to the pending merger with F.N.B. Corporation discussed in Note C, implementation activities are on hold.

In March 2016, the FASB issued ASU 2016-09: Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. 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 ASU 2016-06: Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments (a consensus of the Emerging Issues Task Force). 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 ASU 2016-02: Leases (Topic 842). 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. Due to the pending merger with F.N.B. Corporation discussed in Note C, implementation activities are on hold.

In January 2016, the FASB issued ASU 2016-01: Financial Instruments - Overall (Topic 825-10): 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 ASU 2015-16: Business Combinations (Topic 805): Simplifying the Accounting for Measurement Period Adjustments. The new guidance requires acquirers to recognize adjustments to provisional amounts (that are identified during the measurement period) in the reporting period in which the adjustment amounts are determined. The new guidance also requires such amounts to be disclosed in the consolidated financial statements. The Company early adopted this guidance effective September 30, 2015. The adoption of this guidance was not material to the consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03: Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 require a reporting entity to present debt issuance costs related to a recognized debt liability in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments. The amendments in ASU 2015-03 are effective for interim and annual periods beginning after December 15, 2015 and are to be applied retrospectively. As of December 31, 2016, the Company had $588 of debt issuance costs that were included in other assets. These costs were reclassified to reduce the carrying amount of the related debt liability on the effective date.

In November 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-17: Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update provide the option for acquired entities to apply pushdown accounting in their stand-alone financial statements when a change-in-control event takes place. This election may be made at each change-in-control event, and allows entities to apply pushdown accounting in a subsequent period if not applied in the period in which the change-in-control event took place. The amendments in this Update were effective upon issue on November 18, 2014, allowing entities to apply the provisions to future change-in-control events or to its most recent change-in-control event. Adoption of this Update did not have an impact on the Company’s financial position or results of operations.

- 77 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

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

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The amendments in this Update provide a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This Update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The amendments in this Update are effective for periods beginning after December 15, 2016 and early adoption is not permitted. Adoption of this Update is not expected to have a material impact on the Company’s financial position or results of operations.

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

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

NOTE 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 “FNB Merger Agreement”) with F.N.B. Corporation, a Florida corporation (“FNB”). The FNB Merger Agreement provides that, upon the terms and conditions set forth therein, the Company will merge with and into FNB (the “FNB Merger”), with FNB continuing as the surviving corporation. As soon as practicable following consummation of the FNB Merger, 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 “FNB Bank Merger”).

- 78 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Subject to the terms and conditions of the FNB Merger Agreement, at the effective time of the FNB 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 $1.47 billion. Shareholders of both FNB and Yadkin have approved the FNB Merger, and all regulatory approvals have been received. The transaction is expected to close in the first quarter of 2017, subject to 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

- 79 -

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)	265			(m)	48,044
Bank owned life insurance	61,747			—				—				61,747
Other real estate	1,241			—				(55		)	(n)	1,186
Deferred tax asset, net	30,014			(3,490		)	(e)	(2,789		)	(o)	23,735
Other intangibles, net	3,506			16,384			(f)	—				19,890
Other assets	40,375			(271		)	(g)	(139		)	(p)	39,965
Total assets	2,770,438			9,951				(1,609		)		2,778,780
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			(q)	40,662
Total liabilities	2,537,557			(2,945		)		218				2,534,830
Net assets acquired	232,881			12,896				(1,827		)		243,950
Purchase price												431,336
Goodwill												$	187,386	(r)

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.

(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 $3,506 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) Adjustments to initial fair values of premises and equipment

(n) Adjustment to initial fair value of other real estate.

(o) Deferred tax adjustment resulting from adjustments (l), (m), (n), (p) and (q) and adjustments of other merger-related deferred tax valuations.

(p) Adjustment to initial fair value of accrued interest receivable.

(q) Adjustment to initial fair value of accrued liabilities.

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

- 80 -

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.



	2016		2015

Net interest income	$	255,403	$	253,737
Net income (a)	74,272		60,512
Net income available to common shareholders (a)	74,272		59,690
Basic income per common share (a)	1.36		1.17
Diluted income per common share (a)	1.36		1.16
Weighted average basic common shares outstanding	54,666,023		51,216,107
Weighted average diluted common shares outstanding	54,765,807		51,301,182

(a) For purposes of the supplemental pro forma information, merger-related expenses of $19,315 that are reflected in the Company's consolidated statement of operations for the year ended December 31, 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 2015. These pro forma merger-related expenses include $7,807 of professional fees paid for investment banking, legal and accounting services, $8,677 of personnel-related expenses, $5,167 of facility and equipment-related expenses, and $1,196 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.



	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
GSE obligations	$	17,597	$	14	$	110	$	17,501
SBA-guaranteed securities	28,189		39		667		27,561
Mortgage-backed securities issued by GSE	608,320		486		11,796		597,010
Municipal bonds	128,931		201		3,585		125,547
Corporate bonds	153,744		740		1,269		153,215
Collateralized loan obligations	45,466		—		—		45,466
Non-agency CMBS	15,471		7		84		15,394
Other debt securities	245		—		—		245
Marketable equity securities	8,929		163		418		8,674
Total securities available for sale	$	1,006,892	$	1,650	$	17,929	$	990,613

Securities held to maturity:
Municipal bonds	$	38,735	$	725	$	—	$	39,460

- 81 -

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 GSE	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
Other debt securities	245		—		—		245
Marketable 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
December 31, 2016
Securities available for sale:
GSE obligations	$	11,496	$	110	$	—	$	—	$	11,496	$	110
SBA-guaranteed securities	25,031		667		—		—		25,031		667
Mortgage-backed securities issued by GSE	465,664		10,609		34,331		1,187		499,995		11,796
Municipal bonds	96,591		3,535		980		50		97,571		3,585
Corporate bonds	30,405		248		22,468		1,021		52,873		1,269
Non-agency RMBS	10,674		84		—		—		10,674		84
Marketable equity securities	8,293		418		—		—		8,293		418
Total temporarily impaired AFS securities	$	648,154	$	15,671	$	57,779	$	2,258	$	705,933	$	17,929

December 31, 2015
Securities available for sale:
GSE obligations	$	999	$	1	$	—	$	—	$	999	$	1
SBA-guaranteed securities	5,043		12		—		—		5,043		12
Mortgage-backed securities issued by GSE	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
Non-agency RMBS	—		—		901		9		901		9
Collateralized loan obligations	45,471		55		—		—		45,471		55
Marketable 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

Unrealized losses on investment securities available for sale as of December 31, 2016 related to 133 mortgage-backed securities issued by U.S. government-sponsored enterprises ("GSEs"), six securities guaranteed by the U.S. Small Business Administration ("SBA"), 19 investment grade corporate bonds, five marketable equity securities, four GSE obligation, and 117 municipal bonds. Unrealized losses on investment securities as of December 31, 2015 related to 83 mortgage-backed securities issued by GSEs, one SBA-guaranteed securities, 15 investment grade corporate bonds, three marketable equity securities, 1 GSE obligation, 1 non-agency residential mortgage-backed security, and nine municipal bonds. As of December 31, 2016, 19 securities had been in an unrealized loss position for more than a twelve month period. The Company had $1,021 in gross unrealized losses on corporate bonds and $50 in gross unrealized losses on municipal bonds as of December 31, 2016 that had been in an unrealized loss position for more than twelve months. These were the only securities in this position 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.

- 82 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The securities in an unrealized loss position as of December 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 December 31, 2016.

As of December 31, 2016, the Company held no individual investment securities with an aggregate book value greater than 10 percent of total shareholders’ equity. As of December 31, 2016 and 2015, investment securities with carrying values of $389,075 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.



	December 31, 2016				December 31, 2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities available for sale:
Due within one year	$	29,054	$	29,122	$	66,591	$	67,163
Due after one year through five years	618,764		610,709		291,298		289,525
Due after five years through ten years	294,137		286,919		309,625		306,420
Due after ten years	56,008		55,189		24,616		24,398
Marketable equity securities	8,929		8,674		2,381		1,626
	$	1,006,892	$	990,613	$	694,511	$	689,132
Securities held to maturity:
Due after one year through five years	$	29,928	$	30,399	$	31,421	$	32,272
Due after five years through ten years	4,028		4,076		4,072		4,229
Due after ten years	3,774		3,978		3,689		3,999
	$	37,730	$	38,453	$	39,182	$	40,500

The following table summarizes securities gains (losses) for the periods presented.



	Year ended December 31,
	2016			2015			2014

Gross gains on sales of securities available for sale	$	285		$	3		$	453
Gross losses on sales of securities available for sale	(849		)	(3		)	(327		)
Total securities (losses) gains	$	(564	)	$	—		$	126

NOTE E – LOANS AND ALLOWANCE FOR LOAN LOSSES

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



	December 31, 2016			December 31, 2015
Commercial:
Commercial real estate	$	2,475,144		$	1,451,176
Commercial and industrial	723,257			553,121
Construction and development	463,594			345,304
Consumer:
Residential real estate	642,661			343,648
Construction and development	271,176			46,263
Home equity	523,501			277,900
Other consumer	61,464			60,244
Gross loans	5,160,797			3,077,656
Less:
Deferred loan fees	(1,387		)	(1,112		)
Allowance for loan losses	(13,990		)	(9,769		)
Net loans	$	5,145,420		$	3,066,775

- 83 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

As of December 31, 2016 and 2015, loans with a recorded investment of $1,770,040 and $948,433, respectively, were pledged to secure borrowings or available lines of credit with correspondent banks.

The Company has deposit relationships and has granted loans to certain directors and executive officers of the Company and their related interests. Such loans are made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other borrowers and, in management’s opinion, do not involve more than the normal risk of collectability. All loans to directors and executive officers or their related interests are submitted to the Board of Directors for approval. A summary of contractual obligations due from directors and executive officers, and their related interests, follows.



	Year ended December 31,
	2016			2015			2014

Loans to directors and officers at beginning of period	$	4,256		$	7,399		$	26,437
Additions for new directors	5,356			—			5,850
Reductions for retirement of directors	—			—			(24,835		)
New advances to directors and officers	—			—			1,092
Payoffs and principal reductions	(1,032		)	(3,143		)	(1,145		)
Loans to directors and officers at end of period	$	8,580		$	4,256		$	7,399
Commitments to directors and officers at December 31	$	8,580		$	1,027		$	2,024

The Company completed various sales of loans held for investment to investors during 2016, 2015 and 2014. The proceeds from these loan sales totaled $7,308, $5,294 and $2,076 in 2016, 2015 and 2014, respectively. There was no gain or loss recorded on these loan sales.

Purchased Credit-Impaired Loans

Loans for which it is probable at acquisition that all contractually required payments will not be collected are considered PCI loans. The following table relates to acquired 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.



	Year ended December 31,
	2016			2015			2014

Balance, beginning of period	$	22,309		$	25,181		$	25,349
Loans purchased	13,995			—			8,604
Accretion of income	(14,783		)	(13,333		)	(13,764		)
Reclassifications from nonaccretable difference	7,584			5,749			4,091
Other, net	4,862			4,712			901
Balance, end of period	$	33,967		$	22,309		$	25,181

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 $194,439 and $160,500 as of December 31, 2016 and 2015, respectively.

Purchased Non-impaired Loans

- 84 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



	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
Year ended December 31, 2016
Beginning balance	$	3,682		$	2,431		$	866		$	1,257		$	237	$	883		$	413		$	9,769
Charge-offs	(416		)	(4,313		)	(178		)	(517		)	—		(894		)	(874		)	(7,192		)
Recoveries	108			245			42			280			1		33			62			771
Provision for loan losses	2,316			5,598			840			28			102		961			797			10,642
Ending balance	$	5,690		$	3,961		$	1,570		$	1,048		$	340	$	983		$	398		$	13,990

Year ended December 31, 2015
Beginning balance	$	2,796		$	1,274		$	1,691		$	1,237		$	194	$	546		$	79		$	7,817
Charge-offs	(1,096		)	(2,337		)	(331		)	(509		)	—		(943		)	(407		)	(5,623		)
Recoveries	58			746			—			161			27		187			151			1,330
Provision for loan losses	1,924			2,748			(494		)	368			16		1,093			590			6,245
Ending balance	$	3,682		$	2,431		$	866		$	1,257		$	237	$	883		$	413		$	9,769

Year ended December 31, 2014
Beginning balance	$	2,419		$	805		$	1,400		$	1,673		$	187	$	476		$	83		$	7,043
Charge-offs	(366		)	(1,034		)	(367		)	(591		)	—		(429		)	(354		)	(3,141		)
Recoveries	46			88			69			131			—		123			45			502
Provision for loan losses	697			1,415			589			24			7		376			305			3,413
Ending balance	$	2,796		$	1,274		$	1,691		$	1,237		$	194	$	546		$	79		$	7,817

- 85 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



	December 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	$	651	$	65	$	—	$	52	$	—	$	—	$	—	$	768
Collectively evaluated for impairment	4,264		3,685		1,568		930		340		959		398		12,144
Purchased credit-impaired	775		211		2		66		—		24		—		1,078
Total	$	5,690	$	3,961	$	1,570	$	1,048	$	340	$	983	$	398	$	13,990

Loans:
Ending balance:
Individually evaluated for impairment	$	18,221	$	7,982	$	174	$	884	$	—	$	—	$	—	$	27,261
Collectively evaluated for impairment	2,379,162		708,373		449,264		587,163		269,330		507,025		61,028		4,961,345
Purchased credit-impaired	77,761		6,902		14,156		54,614		1,846		16,476		436		172,191
Total	$	2,475,144	$	723,257	$	463,594	$	642,661	$	271,176	$	523,501	$	61,464	$	5,160,797



	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

- 86 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt including 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.

•

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


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

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



	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2016
Non-PCI Loans
Commercial:
Real estate	$	2,310,540	$	46,263	$	40,580	$	—	$	2,397,383
Commercial and industrial	656,351		33,055		26,949		—		716,355
Construction and development	444,594		3,905		939		—		449,438
Consumer:
Residential real estate	570,061		9,912		8,074		—		588,047
Construction and development	264,730		4,486		114		—		269,330
Home equity	494,444		5,296		7,285		—		507,025
Other consumer	60,252		310		459		7		61,028
Total	$	4,800,972	$	103,227	$	84,400	$	7	$	4,988,606

PCI Loans
Commercial:
Real estate	$	28,579	$	35,076	$	14,106	$	—	$	77,761
Commercial and industrial	1,915		416		4,568		3		6,902
Construction and development	10,289		1,376		2,491		—		14,156
Consumer:
Residential real estate	37,352		9,016		8,246		—		54,614
Construction and development	490		258		1,098		—		1,846
Home equity	11,607		2,921		1,948		—		16,476
Other consumer	325		102		9		—		436
Total	$	90,557	$	49,165	$	32,466	$	3	$	172,191

- 87 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	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

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
December 31, 2016
Non-PCI Loans
Commercial:
Real estate	$	12,088	$	7,056	$	19,144	$	2,378,239	$	2,397,383
Commercial and industrial	4,869		11,723		16,592		699,763		716,355
Construction and development	1,284		442		1,726		447,712		449,438
Consumer:
Residential real estate	8,752		2,810		11,562		576,485		588,047
Construction and development	2,693		114		2,807		266,523		269,330
Home equity	6,743		2,281		9,024		498,001		507,025
Other consumer	707		180		887		60,141		61,028
Total	$	37,136	$	24,606	$	61,742	$	4,926,864	$	4,988,606



	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

- 88 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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



	December 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	$	15,326	$	—	$	6,130	$	—
Commercial and industrial	12,648		618		4,126		552
Construction and development	831		—		468		—
Consumer:
Residential real estate	5,587		—		5,353		—
Construction and development	114		—		1,324		—
Home equity	4,977		—		3,245		—
Other consumer	304		45		548		—
Total	$	39,787	$	663	$	21,194	$	552

The following table provides information on impaired loans, which 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
December 31, 2016
Non-PCI Loans
Commercial:
Commercial real estate	$	8,866	$	9,355	$	18,221	$	651	$	18,221
Commercial and industrial	920		7,062		7,982		65		8,008
Construction and development	—		174		174		—		431
Consumer:
Residential real estate	884		—		884		52		884
Total	$	10,670	$	16,591	$	27,261	$	768	$	27,544

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

- 89 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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.



	2016				2015				2014
	Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income
Non-PCI Loans
Commercial:
Commercial real estate	$	11,409	$	176	$	7,153	$	28	$	7,399	$	75
Commercial and industrial	2,619		14		2,287		5		2,599		1
Construction and development	416		—		545		—		2,509		—
Consumer:
Residential real estate	1,112		47		2,249		83		2,616		27
Construction and development	—		—		209		—		214		—
Home equity	146		—		383		—		998		—
Other consumer	—		—		—		—		99		—
Total	$	15,702	$	237	$	12,826	$	116	$	16,434	$	103

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.



	December 31, 2016			December 31, 2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Commercial real estate	$	9,950	11	$	4,684	7
Commercial and industrial	1,673		13	795		11
Commercial construction	503		3	177		2
Residential real estate	1,415		6	1,594		4
Home equity	—		—	20		1
Total	$	13,541	33	$	7,270	25

The following tables provide the number and recorded investment of TDRs modified and defaulted during the years ended December 31, 2016 and 2015.



	TDRs Modified
	2016			2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	1,406	5	$	1,626	$	4
Commercial and industrial	—		—	283		6
Commercial construction	—		—	56		1
Home equity	—		—	20		1
Total	$	1,406	5	$	1,985	$	12

- 90 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	TDRs Defaulted
	2016			2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	—	—	$	1,441	$	2
Commercial and industrial	353		1	—		—
Residential real estate	—		—	114		1
Total	$	353	1	$	1,555	$	3

The Company does not generally forgive principal or unpaid interest as part of when restructuring loans. Therefore, the recorded investment in TDRs during 2016 and 2015 did not change following the modifications.

NOTE F - PURCHASED ACCOUNTS RECEIVABLE

Income from purchased accounts receivable, which is recorded in other non-interest income, totaled $292, $872 and $552 for the years ended December 31, 2016, 2015 and 2014, respectively. Purchased accounts receivable totaled $4,980 and $52,688, respectively, at December 31, 2016 and December 31, 2015.

As of December 31, 2016 and December 31, 2015, purchased accounts receivable includes $4,980 and $7,900, respectively, that are due from a U.S. bioenergy company that produces ethanol. The U.S bioenergy company's debt is 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 creditors 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.

Based on an assumed partial contribution from the Spanish parent company to settle the existing guarantee and projected proceeds from the bankruptcy-related liquidation of assets, management evaluated this investment and, as of December 31, 2016, recorded a $2,927 writedown on purchased accounts receivable. There was no writedown related to this potential exposure as of December 31, 2015 due to management's inability to determine the extent of loss on the investment in purchased accounts receivable in the pending bankruptcy case for the U.S. subsidiary and insufficient information to determine the extent of recovery possible on the guarantee by the Spanish parent company.

NOTE G – PREMISES AND EQUIPMENT

A summary of premises and equipment is presented in the table below.



	December 31, 2016			December 31, 2015

Land	$	31,555		$	21,444
Buildings and leasehold improvements	70,276			41,199
Furniture, software, and equipment	24,658			25,628
Less: accumulated depreciation	(22,535		)	(14,532		)
Total	$	103,954		$	73,739

Depreciation on premises and equipment, which is recorded in occupancy and equipment expense, totaled $8,756, $6,155 and $4,683 for the years ended December 31, 2016, 2015 and 2014, respectively.

- 91 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE H – LOAN SERVICING

Mortgage Loan Servicing

The Company retains the servicing rights on mortgage loans sold to its investors. The unpaid principal balance of loans serviced for investors was $782,134 and $563,802 as of December 31, 2016 and 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 $1,630, $1,272 and $538 for the years ended December 31, 2016, 2015 and 2014, respectively.

The table below summarizes MSR activity for the periods presented.



	Year ended December 31,
	2016			2015			2014

Balance at beginning of period	$	5,037		$	4,284		$	—
Fair value of acquired MSRs	—			—			4,025
Additions	3,216			1,881			688
Payoffs	(455		)	(402		)	(126		)
Amortization	(873		)	(726		)	(303		)
Balance at end of period before valuation allowance	6,925			5,037			4,284
Valuation allowance	(9		)	(10		)	(157		)
Balance at end of period after valuation allowance	$	6,916		$	5,027		$	4,127

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.



	December 31, 2016			December 31, 2015

Composition of mortgage loans serviced for others:
Fixed rate loans	99.94		%	99.90		%
Adjustable rate loans	0.06		%	0.10		%
Total	100.00		%	100.00		%

Weighted average life (years)	7.30			6.60
Prepayment speed	8.5		%	9.98		%
Discount rate	10.27		%	9.66		%
Effect on fair value due to change in interest rates:
+ 0.25%	$	185		$	421
+ 0.50%	312			660
- 0.25%	(266		)	(599		)
- 0.50%	(614		)	(1,104		)

- 92 -

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 this 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, while in reality, changes in one factor may result in changing another, which may 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 $250,946 and $205,879 as of December 31, 2016 and 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 $2,218, $1,758 and $1,063 for the years ended December 31, 2016, 2015 and 2014, respectively.

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



	Year ended December 31,
	2016			2015			2014

Balance at beginning of period	$	4,485		$	3,081		$	1,759
Additions	1,992			2,148			1,628
Amortization	(1,055		)	(744		)	(306		)
Balance at end of period before valuation allowance	5,422			4,485			3,081
Valuation allowance	(181		)	—			—
Balance at end of period after valuation allowance	$	5,241		$	4,485		$	3,081

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. Valuation allowances at period end are summarized in the preceding table.

NOTE I – GOODWILL AND OTHER INTANGIBLE ASSETS

The table below summarizes the changes in carrying amounts of goodwill and other intangibles (core deposit intangibles) for the periods presented.



			Core Deposit Intangible
	Goodwill		Gross		Accumulated Amortization			Net

Balance at December 31, 2013	$	26,254	$	7,435	$	(1,552	)	$	5,883
Goodwill and core deposit intangible resulting from the Yadkin/Piedmont Community Bank Holding/VantageSouth merger	125,898		12,951		—			12,951
Amortization expense	—		—		(2,157		)	(2,157		)
Balance at December 31, 2014	152,152		20,386		(3,709		)	16,677
Amortization expense	—		—		(3,098		)	(3,098		)
Balance at December 31, 2015	152,152		20,386		(6,807		)	13,579
Goodwill and core deposit intangible resulting from the NewBridge acquisition	187,386		19,890		—			19,890
Amortization expense	—		—		(5,940		)	(5,940		)
Balance at December 31, 2016	$	339,538	$	40,276	$	(12,747	)	$	27,529

Goodwill represents the excess of the purchase price over the fair value of acquired net assets under the acquisition method of accounting. The Company's mergers and acquisitions that have generated goodwill were nontaxable events and, as a result, there is no tax basis in the goodwill. Accordingly, none of the goodwill associated with the respective acquisitions is deductible for tax purposes.

- 93 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The value of acquired core deposit relationships was determined using the present value of the difference between a market participant's cost of obtaining alternative funds and the cost to maintain the acquired deposit base. The core deposit intangibles are amortized over a ten-year period using an accelerated method.

The table below presents estimated amortization expense for the Company's other intangible assets.



2017	$	5,921
2018	5,243
2019	4,562
2020	3,877
2021	3,170
Thereafter	4,756
	$	27,529

Goodwill is reviewed for potential impairment at least annually at the reporting unit level. The goodwill impairment test requires a two-step method to evaluate and calculate impairment. The first step requires estimation of the reporting unit’s fair value. If the fair value exceeds the carrying value, no further testing is required. If the carrying value exceeds the fair value, a second step is performed to determine whether an impairment charge must be recorded and, if so, the amount of such charge. The Company performed its annual goodwill impairment test as of October 31, 2016, and no impairment was indicated by this test. The Company has not identified any triggering events since the impairment test date that would indicate potential impairment.

Core deposit intangibles are evaluated for impairment if events and circumstances indicate a potential for impairment. Such an evaluation of other intangible assets is based on undiscounted cash flow projections. No impairment charges were recorded for other intangible assets in any of the periods presented.

NOTE J – DEPOSITS

The scheduled maturities of time deposits as of December 31, 2016 are presented below.



	Less Than $250		$250 and Greater		Total

2017	$	424,543	$	356,394	$	780,937
2018	109,632		103,124		212,756
2019	122,189		83,138		205,327
2020	69,971		15,181		85,152
2021	29,477		7,008		36,485
Thereafter	1,704		—		1,704
Total	$	757,516	$	564,845	$	1,322,361

- 94 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE K – BORROWINGS

A summary of short-term borrowings and long-term debt is presented below.



	December 31, 2016		December 31, 2015
Short-term borrowings:
FHLB advances maturing within one year	$	764,600	$	375,500

Long-term debt:
FHLB advances maturing beyond one year	$	51,356	$	118,942
Subordinated term loan due 2018	7,279		7,166
Subordinated notes due 2023	38,050		38,050
Subordinated notes due 2024	16,061		—
Junior subordinated debt to unconsolidated trusts:
Maturing October 7, 2033	5,885		5,701
Maturing December 15, 2033	6,997		6,853
Maturing September 30, 2035	15,371		—
Maturing December 15, 2037	12,904		12,503
Capital lease obligations and other debt	5,521		5,752
Total long-term debt	$	159,424	$	194,967

The Company may purchase federal funds through unsecured federal funds lines of credit with various correspondent banks, which totaled $210,000 as of December 31, 2016. These lines are intended for short-term borrowings and are subject to restrictions limiting the frequency and terms of advances. These lines of credit are payable on demand and bear interest based upon the daily federal funds rate. The Company had no outstanding balances on the lines of credit as of December 31, 2016 or 2015.

The Company may borrow funds through the Federal Reserve Bank’s discount window. These borrowings are secured by investment securities with a total collateral value of $4,903. Depending on the type of collateral, the Company may borrow between 60 and 65 percent of the collateral value pledged. The Company had no outstanding borrowings at the discount window as of December 31, 2016 or 2015.

The Company maintains a loan agreement with a correspondent bank providing for a revolving loan of up to $15,000 for the holding company. Borrowings under the holding company loan agreement accrue interest at LIBOR plus 4.00 percent. The holding company loan agreement will expire on July 1, 2017. However, the Company may extend the maturity date by twelve months so long as it is not in default under the holding company loan agreement. The obligations of the holding company loan agreement are secured by, among other things, a pledge of all of the capital stock of Yadkin Bank. The Company had no outstanding balance on the holding company loan agreement as of December 31, 2016.

FHLB Advances

The Company had $348,429 of remaining availability on its credit line with the FHLB for advances as of December 31, 2016. These advances are secured by a blanket floating lien on qualifying commercial real estate loans, multifamily loans, residential mortgage loans, and home equity lines of credit with a total lendable collateral value of $1,195,326 as of December 31, 2016.

Maturities of FHLB advances for the next five years and thereafter are as follows:



Maturity Date	Range of Contractual Rates	Rate Type	December 31, 2016		December 31, 2015

2016	0.28 - 2.21%	Fixed rate credit	$	—	$	375,500
2017	0.49 - 1.14%	Fixed rate credit	764,600		113,000
2018	0.25 - 1.01%	Fixed rate credit	46,129		648
2019	1.83%	Principal reducing credit	5,000		5,000
2020	—%		—		—
2021	—%		—		—
Thereafter	2.00%	Principal reducing credit	168		188
Totals			$	815,897	$	494,336

Merger-related fair value adjustments included in FHLB borrowings were $59 and $106, as of December 31, 2016 and 2015, respectively.

- 95 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Subordinated Term Loan Due 2018

In September 2008, the Bank entered into an unsecured subordinated term loan agreement in the amount of $7,500. The agreement requires the Bank to make quarterly payments of interest at an annual contract rate, reset quarterly, equal to three-month LIBOR plus 4.00 percent. The subordinated term loan qualifies as Tier 2 capital for regulatory capital purposes, subject to a phase out of the capital qualification five years prior to maturity. The subordinated term loan was adjusted to fair value in connection with Piedmont's acquisition of Crescent, and as of December 31, 2016 and 2015, the carrying value was $7,279 and $7,060, respectively.

The subordinated term loan agreement matures on October 18, 2018 and is currently redeemable, subject to regulatory approval.

Subordinated Notes Due 2023

In August 2013, the Company issued an aggregate of $38,050 of subordinated notes in a private placement to accredited investors. The notes bear interest, payable on the 1st of January and July of each year, at a fixed annual interest rate of 7.625 percent. The notes mature in August 2023 and qualify as Tier 2 capital for regulatory purposes, subject to a phase out of the capital qualification five years prior to maturity.

Subordinated Notes Due 2024

In March 2014, NewBridge enteraead into a Subordinated Note Purchase Agreement with 14 accredited investors under which NewBridge issued an aggregate of $15.5 million of subordinated notes to the accredited investors, including members of the NewBridge’s Board of Directors. The subordinated notes have a maturity date of March 14, 2024 and bear interest, payable on the 1st of January and July of each year, commencing July 1, 2014, at a fixed interest rate of 7.25% per year. The subordinated notes are intended to qualify as Tier II capital for regulatory purposes. The subordinated term loan was adjusted to fair value in connection with the NewBridge acquisition, and as of December 31, 2016 , the carrying value was $16,061.

Junior Subordinated Debt to Unconsolidated Trusts

In August 2003, $8,000 in trust preferred securities ("TRUPs") were issued through the Crescent Financial Capital Trust I (the "Crescent Trust"). The Crescent Trust invested the proceeds from the sale of its TRUPs in junior subordinated deferrable interest debentures issued by Crescent (assumed by VantageSouth in its acquisition of Crescent and subsequently assumed by the Company in its merger with VantageSouth). These TRUPs qualify as Tier 1 capital for regulatory capital purposes, subject to certain limitations. The TRUPs mature on October 7, 2033 and are currently redeemable, subject to regulatory approval. These TRUPs were adjusted to fair value in connection with Piedmont's acquisition of Crescent, and as of December 31, 2016 and 2015, their carrying value was $25,786 and $25,056, respectively. The TRUPs pay cash distributions quarterly at an annual contract rate, reset quarterly, equal to three-month LIBOR plus 3.10 percent.

In 2003, $10,000 in TRUPs were issued through the American Community Bank Capital Trust ("ACB Trust"). The ACB Trust invested the proceeds from the sale of its TRUPs in junior subordinated deferrable interest debentures issued by ACB (and assumed by the Company in its acquisition of ACB). These TRUPs qualify as Tier 1 capital for regulatory capital purposes, subject to certain limitations. The TRUPs mature on December 15, 2033 and are currently redeemable, subject to regulatory approval. These TRUPs were adjusted to fair value in connection with the 2014 Mergers, and as of December 31, 2016, their carrying value was $6,997. The TRUPs pay cash distributions quarterly at an annual contract rate, reset quarterly, equal to three-month LIBOR plus 2.80 percent.

In November 2007, $25,000 in TRUPs were issued through Yadkin Valley Statutory Trust I (the "Yadkin Trust"). The Yadkin Trust invested the proceeds from the sale of its TRUPs in junior subordinated deferrable interest debentures issued by Yadkin. These TRUPs qualify as Tier 1 capital for regulatory capital purposes, subject to certain limitations. The TRUPs mature on December 15, 2037 and are currently redeemable, subject to regulatory approval. These TRUPs were adjusted to fair value in connection with the 2014 Mergers, and as of December 31, 2016, their carrying value was $12,904. The TRUPs pay cash distributions quarterly at an annual contract rate, reset quarterly, equal to three-month LIBOR plus 1.32 percent.

In August 2005, $25,000 in TRUPs were issued through FNB Financial Services Capital Trust I, (the “FNB Trust,”). The FNB Trust invested the proceeds from the sale of its TRUPs in junior subordinated deferrable interest debentures issued by NewBridge (and assumed by the Company in its acquisition of NewBridge). These TRUPs qualify as Tier 1 capital for regulatory capital purposes, subject to certain limitations. The TRUPs mature on September 30, 2035 and are currently redeemable, subject to

- 96 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

regulatory approval. These TRUPs were adjusted to fair value in connection with the NewBridge Merger, and as of December 31, 2016, their carrying value was $15,371. The TRUPs pay cash distributions quarterly at an annual contract rate, reset quarterly, equal to three-month LIBOR plus 1.46 percent.

Yadkin unconditionally guarantees the trust preferred securities that were previously issued by the Crescent Trust, the ACB Trust , Yadkin Trust and the FNB Trust.

NOTE L – LEASES

Operating Leases

The Company has entered into various non-cancelable operating leases for the corporate headquarters, operations center, certain branch offices, and equipment. Future minimum lease payments under these leases for the years ending December 31 are presented below.



2017	$	5,546
2018	4,622
2019	3,160
2020	1,799
2021	1,076
Thereafter	3,382
Total	$	19,585

Certain of the leases contain renewal options for various additional terms after the expiration of the current lease term. Lease payments for the renewal period are not included in the future minimum lease table above. Rent expense for the years ended December 31, 2016, 2015 and 2014 totaled $5,582, $4,540, and $4,048, respectively.

- 97 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Capital Leases

The Company has entered into two capital leases for banking offices. Leases that meet the criteria for capitalization are recorded as assets and the related obligations are reflected as part of long-term debt. The capital lease obligations totaled $5,521 as of December 31, 2016. Future minimum lease payments under the capital leases are presented below.



2017	$	583
2018	591
2019	600
2020	608
2021	618
Thereafter	5,167
Total projected lease payments for capital leases	8,167
Imputed interest	(2,646		)
Present value of minimum lease payments	$	5,521

NOTE M – INCOME TAXES

The table below summarizes significant components of income tax expense for the periods presented.



	Year ended December 31,
	2016			2015			2014
Current tax expense:
Federal	$	7,596		$	5,415		$	305
State	135			—			—
Total current tax expense	7,731			5,415			305
Deferred tax expense:
Federal	21,128			16,653			7,924
State	3,507			4,053			1,981
Total deferred tax expense	24,635			20,706			9,905
Income tax expense before change in deferred tax asset valuation allowance	32,366			26,121			10,210
Change in deferred tax asset valuation allowance	(296		)	(126		)	(4,797		)
Income tax expense	$	32,070		$	25,995		$	5,413

Income tax expense is reconciled to the amount computed by applying the statutory federal income tax rate of 35 percent to net income before income taxes as follows.



	Year ended December 31,
	2016			2015			2014

Tax computed at statutory rate of 35%	$	30,533		$	24,718		$	9,491
Effect of state income taxes, net of federal benefit	2,367			2,635			1,287
Change in state income tax rates	(327		)	(361		)	(1,899		)
Non-taxable interest income	(1,329		)	(828		)	(437		)
Non-taxable bank-owned life insurance	(1,423		)	(655		)	(549		)
Non-deductible merger costs	1,819			94			1,006
Write-off of acquired net operating losses subject to Section 382 limitation	—			—			652
Change in deferred tax asset valuation allowance	(296		)	(126		)	(4,797		)
Other	726			518			659
Income tax expense	$	32,070		$	25,995		$	5,413

- 98 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Significant components of deferred taxes are summarized below.



	December 31, 2016			December 31, 2015
Deferred tax assets:
Net operating loss carryforward	$	35,955		$	32,638
Recognized built-in loss carryforward	5,899			5,899
Acquisition accounting fair value adjustments	—			4,998
Allowance for loan losses	5,169			3,673
Federal tax credits carryforward	7,960			4,112
Unrealized losses on securities	6,120			2,055
Unrealized losses on cash flow hedges	2,272			2,596
Stock-based compensation	2,778			1,997
Capitalized leases	1,057			1,110
Deferred compensation	4,606			1,831
Other	1,524			—
Total deferred tax assets	73,340			60,909
Valuation allowance	(763		)	(1,059		)
Net deferred tax assets	72,577			59,850
Deferred tax liabilities:
Premises and equipment	6,643			3,262
Prepaid expenses	469			680
Deferred loan origination costs	4,429			—
Acquisition accounting fair value adjustments	2,807			—
Other	—			301
Total deferred tax liabilities	14,348			4,243
Net deferred tax asset	$	58,229		$	55,607

As of December 31, 2016, the Company had net operating losses ("NOLs") available for carryforward of $96,702 that will expire, if unused, from 2023 through 2032. The Company also had recognized built-in losses in excess of annual limitations of $16,855 that will expire, if unused, from 2031 through 2035. The Company’s federal income tax returns are open and subject to examination from the 2013 tax return year and forward. The Company’s state income tax returns are open and subject to examination from the 2013 tax return year and forward.

The Company (along with its predecessors) has completed several change in control transactions under Internal Revenue Code Section 382 (“Section 382”) and the Regulations thereunder. Those transactions are summarized below in chronological order.


•	Piedmont's acquisition of a controlling interest in Legacy VantageSouth Bank on February 19, 2010


•	An ownership shift in the Piedmont capital structure on February 22, 2011


•	Piedmont's acquisition of Community Bank of Rowan on April 19, 2011


•	Piedmont's acquisition of a controlling interest in Crescent Financial Bancshares, Inc. ("Crescent") on November 18, 2011


•	Piedmont's purchase of the non-controlling interests in Legacy VantageSouth Bank on February 1, 2012 along with an ownership shift in the Piedmont capital structure (described above)


•	Crescent's acquisition of a controlling interest in ECB on April 1, 2013


•	Yadkin's merger with Piedmont and VantageSouth on July 4, 2014 (double ownership change)


•	Yadkin’s acquisition of NewBridge Bancorp on March 1, 2016


•	NewBridge’s acquisition of Patriot State Bank on January 31, 2013


•	NewBridge’s acquisition of Premier Commercial Bank on February 27, 2015

Accordingly, the Company is required to evaluate potential limitation or deferral of its ability to carryforward pre-acquisition NOLs and to determine the amount of net unrealized built-in losses (“NUBIL”), which may be subject to similar limitation or deferral. Under the Internal Revenue Code and Regulations, NUBIL recognized within five years of the change in control are subject to potential limitation. Recognized built-in losses ("RBIL") are generally limited to a carryforward period of twenty years, subject to the annual limitation and expire if not used by the end of that period.

Based on the Company’s analysis of Section 382 limitations and applicable carryforward periods for limited NOLs and RBILs, there are NOLs totaling $1,917 that will expire unused due to Section 382 limitations. The deferred taxes related to these NOLs were written off in 2014. Other than these unusable NOLs, the Company believes that all of the remaining benefits from pre-

- 99 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

acquisition NOLs and RBILs will ultimately be realized; however, that amount is subject to continuing analysis and will not be finalized until the five-year recognition period for each transaction expires.

The Company evaluates its deferred tax assets (“DTAs”) at least quarterly to determine whether a valuation allowance is necessary. In conducting this evaluation, all available evidence is considered, both positive and negative, based on the more-likely-than-not criteria that such assets will be realized. Some of the positive and negative evidence management considered in its year-end 2016 evaluation is summarized below.

Positive evidence regarding the Company's DTAs in order of significance is as follows:


•	Earnings trends and forecasts

The Company continued to improve its earnings performance in 2016, especially following the NewBridge acquisition. The Company had a three-year cumulative pre-tax income position as of December 31, 2016. Additionally, management monitors the Company’s performance against its business plan and forecast on a regular basis. Based on the business plan and forecast, which consider certain improvements to the Company’s business, management currently expects the Company's pre-tax income to fully absorb the existing DTAs. The Company has also begun to generate significant taxable income, which is important when considering the need to utilize NOLs and other tax loss carryforwards prior to expiration. In 2016, the Company generated taxable income of $35.5 million before NOLs and was able to utilize $28.4 million.


•	Robust capital levels and access to capital

The Company's tier 1 capital and total risk-based capital ratios were 9.83 percent and 12.49 percent, respectively, as of December 31, 2016. The Bank's tier 1 capital and total risk-based capital ratios were 10.57 percent and 12.41 percent, respectively, as of December 31, 2016, both of which were in excess of the regulatory definition of a "well capitalized" bank.

The Company has also recently demonstrated its ability to raise various forms of capital as needed to fund both strategic acquisitions and organic growth, including common stock, preferred stock, and subordinated debt. The Company also recently redeemed preferred stock previously issued to the U.S. Treasury as part of its TARP Capital Purchase Program and has current plans to redeem the remaining Yadkin preferred stock owned by private investors.


•	Sufficient liquidity

The Company was in compliance with all liquidity policy requirements as of December 31, 2016 and maintained high levels of off balance sheet liquidity.


•	Strong asset quality

The Company's nonperforming loan and nonperforming asset ratios changed slightly in 2016. Nonperforming loans to total loans were 0.95 percent as of December 31, 2016, compared to 1.06 percent as of December 31, 2015. Nonperforming assets to total assets were 1.16 percent as of December 31, 2016, compared to 1.07 percent as of December 31, 2015. Further, the Bank's classified asset ratio to tier 1 capital plus allowance for loan losses decreased slightly to approximately 21.0 percent as of December 31, 2016 from 22.6 percent as of December 31, 2015. The Company has developed a strong underwriting culture, and credit administrators with specific credit expertise have been designated for each line of business (i.e., commercial real estate, commercial and industrial, SBA, Builder Finance, mortgage, and consumer).


•	Sufficient carryforward period

The Company's tax loss carryforward periods were evaluated to determine whether the Company has sufficient time to execute on its business plan, considering applicable annual Section 382 limitations. Based on the Company’s analysis of each change in control, annual Section 382 limitation, dollar amounts of NOLs and RBILs, and forecasted taxable income to offset these loss carryforwards, management believes the Company has sufficient time to execute on its business plan and to utilize all of its NOLs and RBILs (with the exception of certain NOLs referred to above that will expire unused and have been written off).


•	Tax planning strategies

Reasonable tax planning strategies were considered, including conversion of non-taxable investment to taxable investment, holding investment securities in a current loss position until maturity, sale-leaseback of office buildings in an unrealized gain position, and others. Management has no current plans to execute these tax planning strategies. These tax planning strategies would only be considered for possible execution if the ultimate realization of DTAs were in question.

- 100 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Negative evidence regarding the necessity of a DTA valuation allowance is as follows:


•	Annual Section 382 limitations on acquired NOLs and RBIL

The annual Section 382 limitations on the Company's acquisitions may extend the time period necessary to utilize the related NOLs and RBIL. Therefore, the Company needs to execute on its business plan over the next several years to avoid concerns regarding its ability to realize these tax benefits.


•	Uncertain regulatory environment

The risks from an uncertain regulatory environment negatively affect nearly all financial institutions.


•	Uncertain economic and rate environment

The risks from an uncertain economic and rate environment negatively affect nearly all financial institutions. Management believes that the Company’s balance sheet is conservatively positioned from an interest rate risk perspective, and based on its interest rate risk model, management generally expects net interest income to rise and the economic value of equity to increase in a rising interest rate environment.

Prior to the 2014 Mergers, Piedmont maintained a full valuation allowance on all of its NOLs and other DTAs due to substantial doubt about its ability to realize these tax benefits since its federal tax returns could not be consolidated with VantageSouth at the time. Due to nature of Piedmont’s merger into Yadkin on July 4, 2014, however, Piedmont was consolidated into Yadkin from a federal tax perspective, and the Company is now able to use taxable income generated by Yadkin and its Bank to realize federal NOLs and other DTAs generated by Piedmont prior to the 2014 Mergers. Based on this transaction and the Company’s analysis of its ability to realize Piedmont’s DTAs, subject to applicable Section 382 limitations, management determined that it was appropriate to reverse the $4,706 valuation allowance on Piedmont’s DTAs subsequent to the 2014 Mergers. This valuation allowance reversal was recorded as a reduction to income tax expense.

As of December 31, 2016, the Company's valuation allowance totaled $763, which represented reserves due to uncertainty regarding its ability to generate taxable income of a character required to realize the benefits related to long-term capital losses carryovers and certain state NOLs. Based on the Company's DTA evaluation, which considered the weight of the positive evidence compared to the negative evidence, management concluded that sufficient taxable income will be generated in the future to realize the Company’s remaining net DTA as of December 31, 2016.

NOTE N – REGULATORY MATTERS

Yadkin Bank is required to maintain reserve and clearing balances with the Federal Reserve Bank in the form of vault cash or deposits. There was no aggregate net reserve balance maintained with the Federal Reserve Bank as of December 31, 2016 and 2015, respectively, as vault cash was sufficient to meet the reserve requirement.

Banking regulators have established various ratios to monitor capital adequacy. The primary ratios are: (1) Tier 1 capital, which includes common shareholders' equity and qualifying preferred equity, and (2) Tier 2 capital, which includes a portion of the allowance for loan losses, certain qualifying long-term debt and preferred stock which does not qualify as Tier 1 capital. Minimum capital levels are regulated by risk-based capital adequacy guidelines which require a financial institution to maintain capital as a percent of its assets and certain off-balance sheet items adjusted for predefined credit risk factors (risk-adjusted assets). A financial institution is required to maintain, at a minimum, Tier 1 capital as a percentage of risk-adjusted assets of 6.0 percent and combined Tier 1 and Tier 2 capital as a percentage of risk-adjusted assets of 8.0 percent. In addition to the risk-based guidelines, federal regulations require the Bank to maintain a minimum leverage ratio (Tier 1 capital as a percentage of tangible assets) of 4.0 percent. During the first quarter of 2015, the Company and the Bank became subject to new Basel III regulatory capital rules, which increased existing requirements and added a new requirement for Common Equity Tier 1 of 4.5 percent. As of December 31, 2016, and 2015, the Company and the Bank met all applicable capital adequacy requirements.

- 101 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The holding company and bank capital amounts and ratios are presented in the table below.



	Actual				Minimum for capital adequacy purposes				Minimum to be well capitalized under prompt corrective action provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio

December 31, 2016
Yadkin Financial Corporation:
Total Capital (to Risk-Weighted Assets)	$	746,250	12.49	%	$	477,799	8.00	%		N/A	N/A
Tier 1 Capital (to Risk-Weighted Assets)	675,634		11.31	%	$	358,349	6.00	%		N/A	N/A
Tier 1 Capital (to Average Assets)	675,634		9.83	%	$	274,969	4.00	%		N/A	N/A
Common Equity Tier 1 Capital	648,105		10.85	%	$	268,762	4.50	%		N/A	N/A

Yadkin Bank:
Total Capital (to Risk-Weighted Assets)	$	742,418	12.41	%	$	478,498	8.00	%	$	598,122	10.00	%
Tier 1 Capital (to Risk-Weighted Assets)	725,913		12.14	%	358,873		6.00	%	478,498		8.00	%
Tier 1 Capital (to Average Assets)	725,913		10.57	%	274,822		4.00	%	343,528		5.00	%
Common Equity Tier 1 Capital	725,913		12.14	%	269,155		4.50	%	388,780		6.50	%

December 31, 2015
Yadkin Financial Corporation:
Total Capital (to Risk-Weighted Assets)	$	447,320	11.96	%	$	299,164	8.00	%		N/A	N/A
Tier 1 Capital (to Risk-Weighted Assets)	396,032		10.59	%	224,373		6.00	%		N/A	N/A
Tier 1 Capital (to Average Assets)	396,032		9.42	%	168,078		4.00	%		N/A	N/A
Common Equity Tier 1 Capital	394,524		10.55	%	168,280		4.50	%		N/A	N/A

Yadkin Bank:
Total Capital (to Risk-Weighted Assets)	$	447,945	11.99	%	$	298,776	8.00	%	$	373,470	10.00	%
Tier 1 Capital (to Risk-Weighted Assets)	434,707		11.64	%	224,082		6.00	%	298,776		8.00	%
Tier 1 Capital (to Average Assets)	434,707		10.34	%	168,183		4.00	%	210,229		5.00	%
Common Equity Tier 1 Capital	434,707		11.64	%	168,061		4.50	%	242,755		6.50	%

NOTE O – 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 following table provides a summary of 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.

- 102 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



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	2.70	%	3-Month LIBOR
FHLB Advance Swap 2	50,000		August 5, 2016	August 5, 2021	2.88	%	3-Month LIBOR
FHLB Advance Swap 3	25,000		October 5, 2017	October 5, 2027	2.54	%	3-Month LIBOR
FHLB Advance Swap 4	25,000		March 5, 2018	March 5, 2028	2.58	%	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.



						Unamortized Pre-Tax Loss in AOCI as of December 31,
Status	Notional Amount		Original Effective Start Date	Original Maturity Date	Date Terminated	2016		2015

Terminated Swap 1	$	25,000	April 6, 2015	April 5, 2020	March 27, 2015	$	55	$	72
Terminated Swap 2	25,000		May 5, 2015	May 5, 2020	March 27, 2015	56		72
Terminated Swap 3	25,000		June 5, 2015	June 5, 2020	March 27, 2015	57		74
Terminated Swap 4	25,000		August 5, 2015	August 5, 2020	March 27, 2015	665		811
Terminated Swap 5	25,000		October 1, 2014	August 31, 2017	October 7, 2015	73		183
Terminated Swap 6	25,000		October 16, 2014	August 16, 2018	October 7, 2015	236		381
	$	150,000				$	1,142	$	1,593

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

- 103 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Mortgage Loan Commitments

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

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



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

Loans:
Receive fixed interest rate swap	Other liabilities	$	40,000	$	581	$	40,000	$	493

FHLB advances:
Pay fixed interest rate swaps	Other liabilities	125,000		3,582		125,000		3,822

Subordinated term loan:
Interest rate cap	Other assets	7,500		21		7,500		61

TRUPs:
Interest rate caps	Other assets	43,000		229		43,000		482

Mortgage loan commitments:
Interest rate lock commitments	Other assets	34,803		427		30,313		408
Forward sale commitments	Other assets	115,977		146		52,862		106

Activity in AOCI related to cash flow hedges is presented in Note S. 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 P – 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.

- 104 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	December 31, 2016		December 31, 2015

Lending commitments:
Commitments to extend credit	$	1,454,630	$	799,058
Financial standby letters of credit	22,625		16,342
Other commitments:
Standby letters of credit issued by the FHLB on the Bank's behalf	$	31,000	$	10,000
Capital commitments to private investment funds	—		4,751

The reserve for unfunded commitments was $1,059 and $603 as of December 31, 2016 and 2015, respectively, which was recorded in other liabilities on the consolidated balance sheets.

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

NOTE Q – FAIR VALUE MEASUREMENTS

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

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



	Year ended December 31,
	2016			2015			2014

Level 3 AFS securities at beginning of period	$	11,728		$	11,290		$	7,583
Purchases	—			10,390			4,600
Sales, calls or maturities	—			(4,120		)	(1,000		)
Transfers into Level 3	5,000			(6,000		)	—
Changes in unrealized gains and losses	(38		)	168			107
Level 3 AFS securities at end of period	$	11,690		$	11,728		$	11,290

The Company's policy is to recognize transfers between levels as of the end of a reporting period. Transfers in and out of Level 3 are shown in the preceding table. There were no transfers between Level 1 and Level 2 during 2016, 2015 or 2014.

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

- 105 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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.



	Year ended December 31,
	2016			2015			2014

Interest rate lock commitments at beginning of period	$	408		$	342		$	354
Fair value of acquired Yadkin interest rate lock commitments	—			—			231
Issuances	1,838			1,620			2,366
Settlements	(1,819		)	(1,554		)	(2,609		)
Interest rate lock commitments at end of period	$	427		$	408		$	342

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.

- 106 -

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.



Description	Total		Level 1		Level 2		Level 3

December 31, 2016
Measured at fair value on a recurring basis:
Securities available for sale:
GSE obligations	$	17,501	$	—	$	17,501	$	—
SBA-guaranteed securities	27,561		27,561		—		—
Mortgage-backed securities issued by GSE	597,010		—		597,010		—
Collateralized loan obligations	45,466		—		45,466		—
Corporate bonds	153,215		2,554		139,951		10,710
Non-agency CMBS	15,394		—		15,394		—
Municipal bonds	125,547		—		124,567		980
Other debt securities	245		245		—		—
Equity securities	8,674		8,674		—		—
SBA-guaranteed loans held for sale	37,371		—		37,371		—
SBA loans held for investment	47,756		—		47,756		—
Derivative assets	824		—		397		427
Derivative liabilities	4,162		—		4,162		—

Measured at fair value on a nonrecurring basis:
Impaired loans	$	26,493	$	—	$	—	$	26,493
Purchased accounts receivable	4,980		—		—		4,980
Foreclosed assets	30,110		—		—		30,110
Mortgage servicing rights	6,916		—		6,916		—
SBA loan servicing rights	5,241		—		5,241		—



Description	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		—
Collateralized loan obligations	50,483		—		50,483		—
Corporate bonds	123,532		2,485		110,427		10,620
Non-agency RMBS	3,663		—		3,663		—
Municipal bonds	55,800		—		54,692		1,108
Other debt securities	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		—		588		408
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

- 107 -

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.



	Valuation Technique	Unobservable Input	Range	Fair Value as of December 31, 2016		Fair Value as of December 31, 2015
Recurring measurements:
Investment securities	Pricing model	Illiquidity or credit factor in discount rates	1-2%	$	11,690	$	11,728

Interest rate lock commitments	Pricing model	Pull through rates	80-95%	427		408

Nonrecurring measurements:
Impaired loans	Discounted appraisals	Collateral discounts	15-50%	26,493		15,066
	Discounted expected cash flows	Expected loss rates	0-75%
	Discounted expected cash flows	Discount rates	2-8%
Purchased accounts receivable	Expected cash flows	Expected loss rates		4,980		—
Foreclosed assets	Discounted appraisals	Collateral discounts	15-50%	30,110		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.

- 108 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Purchased Accounts Receivable. Historically, purchased accounts receivable were initially recorded at fair value, which was the discounted purchase price, and generally had maturities between 30 and 60 days. Due to the short duration of these assets, the carrying amounts were deemed to represent a reasonable estimate of fair value. The Company discontinued the purchased accounts receivable program during 2016 and, as of December 31, 2016 , the remaining balance relates to an exposure that was found to be impaired. The December 31, 2016 carrying amount represents the estimated fair value of that receivable.

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.



	December 31, 2016
	Carrying Amount		Fair Value		Level 1		Level 2			Level 3
Financial assets:
Cash and cash equivalents	$	124,413	$	124,413	$	124,413	$	—		$	—
Investment securities available for sale	990,613		990,613		39,034		939,889			11,690
Investment securities held to maturity	38,735		39,460		—		39,460			—
Loans held for sale	76,876		76,876		—		76,876			—
Loans, net	5,145,420		5,146,856		—		23,664			5,123,192
Federal Home Loan Bank stock	41,225		41,225		—		41,225			—
Derivative assets	824		824		—		397			427
Purchased accounts receivable	4,980		4,980		—		—			4,980
Accrued interest receivable	20,516		20,516		—		20,516		��	—

Financial liabilities:
Deposits	5,219,470		5,215,071		—		5,215,071			—
Short-term borrowings	764,600		764,600		—		—			764,600
Long-term debt	159,424		172,746		—		—			172,746
Derivative liabilities	4,162		4,162		—		4,162			—
Accrued interest payable	3,013		3,013		—		3,013			—

- 109 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	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
Federal Home Loan Bank stock	24,844		24,844		—		24,844		—
Derivative assets	996		996		—		588		408
Purchased accounts receivable	52,688		52,688		—		52,688		—
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		—

NOTE R – EMPLOYEE AND DIRECTOR BENEFIT PLANS

The Yadkin Financial Corporation 2013 Equity Incentive Plan (the “2013 Incentive Plan”) authorized the issuance of incentive stock awards to certain employees, officers, and directors of the Company. As of December 31, 2016, no stock options had been granted and 205,000 restricted stock shares were awarded under the 2013 Incentive Plan. The Yadkin Valley Financial Corporation 2008 Omnibus Stock Ownership and Long Term Incentive Plan (the “2008 Stock Plan”) also authorized the issuance of awards to certain employees, officers, and directors of the Company. The awards may be issued in the form of incentive stock option grants, nonstatutory stock option grants, restricted stock awards, stock appreciation rights, and/or long term incentive compensation units. Option exercise prices are established at market value on the grant date. Vesting provisions for granted stock options and restricted stock are at the discretion of the Nominating, Compensation, and Corporate Governance Committee of the Board of Directors. Upon termination, unexercised options held by employees are forfeited and made available for future grants. The Company funds the option shares and restricted stock from authorized but unissued shares.

Stock Options

In addition to option grants pursuant to the 2008 Stock Plan, the Company has assumed outstanding stock options that had been granted under the stock option plans of acquired companies. Of the total options outstanding as of December 31, 2016, 161,013 acquired options remained exercisable at a weighted average exercise price of $16.51 per share, no options are outstanding or exercisable under the 2008 Stock Plan, and no options have been granted under the 2013 Incentive Plan. As of December 31, 2016, 9,621 shares or options remained available for future issuance under the 2008 Stock Plan, and 108,000 shares or options remained available under the 2013 Incentive Plan. There were no options granted during the year ended December 31, 2016.

A summary of stock option activity for the year ended December 31, 2016 is presented below.



	Outstanding Options			Exercisable Options
	Number	Weighted Average Option Price		Number	Weighted Average Option Price

Options outstanding at January 1, 2016	33,808	$	39.98	33,808	$	39.98
Options assumed in NewBridge Merger	418,268	12.24		418,268	12.24
Exercised	258,553	9.67		258,553	9.67
Expired	21,911	42.87		21,911	42.87
Forfeited	10,599	35.04		10,599	35.04
Options outstanding at December 31, 2016	161,013	$	16.51	161,013	$	16.51

The weighted average remaining life of options outstanding and options exercisable was 1.86 years years and 1.21 years years as of December 31, 2016 and 2015, respectively.

- 110 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The table below provides the range of exercise prices for options outstanding and exercisable as of December 31, 2016.



Range of Exercise Prices	Stock Options Outstanding	Stock Options Exercisable

$10.01 - $20.00	154,945	154,945
$20.01 - $30.00	2,419	2,419
$30.01 - $40.00	731	731
$40.01 - $50.00	2,918	2,918
	161,013	161,013

The fair market value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The risk-free interest rate is based upon a U.S. Treasury instrument with a life that is similar to the expected life of the option grant. Expected volatility is based upon the historical volatility of the Company’s stock price based upon the previous three years trading history. The expected term of the options is based upon the average life of previously issued stock options.

Compensation cost related to stock options was $0 for the years ended December 31, 2016, 2015, and 2014 . The aggregate intrinsic value of total options outstanding and exercisable options as of December 31, 2016 was $2,882. As of December 31, 2016, there was no unrecognized compensation cost related to stock options as all options had fully vested.

Restricted Stock

A summary of non-vested restricted stock award activity is included below for the periods presented.



	Shares	Weighted Average Grant Date Fair Value

Non-vested at January 1, 2016	105,000	$	20.08
Granted	100,000	24.28
Vested	80,000	34.68
Forfeited	13,000	10.24
Non-vested at December 31, 2016	112,000	$	16.46

Compensation cost related to non-vested restricted stock was $1,170, $352 and $336 for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016 and 2015, there was $1,267 and $1,641, respectively, in unrecognized compensation cost related to non-vested restricted stock.

Defined Contribution Plans

The Company sponsors profit-sharing and 401(k) plans for substantially all employees. Participants may make voluntary contributions resulting in salary deferrals in accordance with Section 401(k) of the Internal Revenue Code. The plan provides for employer contribution of up to 4 percent of pre-tax salary contributed by each participant. Employer contributions to the 401(k) plans totaled $2,246 for the year ended December 31, 2016, compared to $1,811 and $1,252 for 2015 and 2014, respectively.

Piedmont Stock Warrant Plan and Phantom Equity Plan

Certain employees, officers, and directors of Piedmont were granted warrants for Piedmont common stock from 2010 to 2013 (the "Piedmont Stock Warrant Plan"). All Piedmont stock warrants had an initial contractual term of ten years. Stock warrants issued in 2010 were granted to two of Piedmont's directors with 25 percent vesting on the grant date and 25 percent vesting on each of the first, second and third anniversaries of the grant date. Stock warrants issued from 2011 to 2013 were granted with 25 percent vesting on each of the first, second, third and fourth anniversaries of the grant date. The initial exercise price of each grant equaled the price of the respective equity offering and was to have increased at an 8 percent annual rate until a required investment return was achieved, at which time the exercise price was to adjust to the initial exercise price. The required investment return was to have been achieved when, and if, Piedmont's Board of Directors determined that the initial investors had realized a return of their capital investment in Piedmont plus a cumulative, non-compounded annual return of at least 8 percent.

- 111 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The grant date fair value of each Piedmont stock warrant award was determined with a Monte Carlo-based option pricing model. The model assumed that the stock warrants would be exercised at the mid-point of the time to achieve the performance condition and contractual term of ten years, weighted by the probability of a change in control event. There were 146,666 warrants for shares of Piedmont's common stock outstanding as of December 31, 2013. The Piedmont Stock Warrant Plan was replaced by the Piedmont Phantom Equity Plan on January 24, 2014. Due to the nature of this replacement, it was accounted for as a plan modification and not a plan cancellation.

The Piedmont Phantom Equity Plan was established on January 24, 2014. Under the plan, participants in the Piedmont Stock Warrant Plan were granted units (each, a “Unit”). The Units are subject to vesting on dates consistent with the vesting dates under the Piedmont stock warrant plan. Each participant is entitled to receive the aggregate “Unit Value” of the vested portion of his or her account, to be paid to the participant on the earlier of (i) December 31, 2018, or (ii) a “change of control” (as defined in the Piedmont Phantom Equity Plan). In general, Unit Value is determined by subtracting the per-Unit base price for a Unit from the “full” value of such Unit. The “full” value of each Unit is equal to the value of one share of Piedmont stock prior to the 2014 Mergers, adjusted to equal the per share consideration that a Piedmont stockholder received for one share of Piedmont common stock (that is, 6.28597 shares of Yadkin voting common stock plus any per share cash merger consideration). Each Unit has a per-Unit base price specific to that Unit (the initial base price), which generally will be increased by 8 percent per year, unless and until certain initial investors in Piedmont realize a return of their capital investment plus a cumulative, non-compounded annual return of 8 percent (the "Investment Hurdle"). Once the Investment Hurdle has been met, the per-Unit base price returns to its initial base price. Any amounts paid to participants will be paid in common stock of Yadkin.

On July 4, 2014, concurrent with the 2014 Mergers, Yadkin assumed the obligations represented by the Piedmont Phantom Equity Plan, and Yadkin issued 856,447 shares of Yadkin voting common stock to an irrevocable rabbi trust to assist it in meeting its obligations under the Piedmont Phantom Equity Plan and the Merger Agreement. These shares (i) are issued and outstanding shares of Yadkin voting common stock with all rights of a holder of such shares, including the right to vote and receive dividends, and (ii) are to be used by Yadkin first to make distributions and satisfy all obligations under the Piedmont Phantom Equity Plan and then to distribute any remaining shares of Yadkin voting common stock held by the rabbi trust to the holders of Piedmont common stock that participated in the 2014 Mergers.

If as of December 31, 2018 there has not been a “change of control,” the aggregate Unit Value will be distributed to the plan participants on December 31, 2018. Shares of Yadkin voting common stock that are held in the rabbi trust will be used to satisfy these distribution obligations under the Piedmont Phantom Equity Plan. The principal of the rabbi trust and any earnings thereon will be held separate and apart from other funds of Yadkin and will be used exclusively for the uses and purposes of Piedmont Phantom Equity Plan participants, Piedmont stockholders participating in the 2014 Mergers, and general creditors of Yadkin in certain circumstances. On the date on which all requisite bank regulatory approvals in connection with the FNB Merger are obtained, the Piedmont Phantom Equity Plan will be amended to allow for settlement and payment of the assets held in the rabbi trust in connection with the closing of the transactions contemplated by the FNB Merger Agreement. Under the amendment, if the regulatory approvals for the FNB Merger are obtained prior to December 31, 2018, the aggregate Unit Value will be distributed to the plan participants on the date of such regulatory approval.

There was no compensation cost recorded in non-interest expense related to the Piedmont Stock Warrant Plan and Piedmont Phantom Equity Plan for the year ended December 31, 2016, compared to $245 for the year ended December 31, 2015. There was no unrecognized compensation cost for the years ended December 31, 2016 and 2015. Employer shares held by a rabbi trust should be treated as treasury stock for earnings per share purposes and excluded from the denominator in the basic and diluted per share calculations. However, the obligation under a deferred compensation arrangement should be reflected in the denominator of the earnings per share calculation. Therefore, since the 856,447 shares of Yadkin common stock held in the rabbi trust pursuant to the Piedmont Phantom Equity Plan are payable to either participants in the plan or Piedmont stockholders participating in the 2014 Mergers, there is no net impact to the Company's earnings per share from these shares.

Pension Plans

On March 1, 2016, concurrent with the NewBridge Merger, Yadkin assumed the obligations of three defined benefit retirement plans:

•A frozen pension plan

•A frozen supplemental executive retirement plan (“SERP-A”) covering certain executive and former executive officers

•An active supplemental executive retirement plan (“SERP-B”) covering senior officers.

- 112 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The curtailed pension plan and the curtailed SERP-A provide for benefits to be paid to eligible employees at retirement based primarily upon years of service with the Company and a percentage of qualifying compensation during the employee’s final years of employment. Contributions to the pension plan are based upon the projected unit credit actuarial funding method and comply with the funding requirements of the Employee Retirement Income Security Act. Contributions prior to the curtailments were intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. Assets of the pension plan consist primarily of cash and cash equivalents, U.S. government securities, and other securities. The curtailed SERP-A is unfunded. Effective September 1, 2014, NewBridge established an unfunded SERP for senior officers to provide an annual retirement benefit for 10 years following retirement. The benefit vests ratably in proportion to years of service completed after September 1, 2014 over the projected number of years of service to retirement date, but not less than five years. The Company is accruing the service cost component of this benefit straight line over the vesting period. Assets contributed to the pension and SERP plans are held in a trust, for the benefit of employees, that is managed by or under the trusteeship of management.

The disclosures presented represent combined information for all of the employee benefit plans. The plans use a measurement date of December 31. The projected benefit obligation at December 31, 2016 was determined using the RP-2014 mortality table and the MP-2015 projection scale. The following table outlines the changes in these pension obligations, assets and funded status for the year ended December 31, 2016:



Change in benefit obligation:
Projected benefit obligation at beginning of year	$	—
Assumed in acquisition	31,656
Service cost	12
Interest cost	1,285
Actuarial (gain) loss	(6		)
Benefits paid	(1,826		)
Projected benefit obligation at end of year	31,121
Accumulated benefit obligation at end of year	31,121

Change in plan assets:
Fair value of plan assets at beginning of year	—
Assumed in acquisition	23,884
Actual return on plan assets	1,993
Employer contributions	192
Benefits paid	(1,826		)
Fair value of plan assets at end of year	24,243
Funded status at end of year:
Plan assets less projected benefit obligation – pension liability	$	(6,878	)

The amounts recognized in the consolidated balance sheets at December 31, 2016 consist of:



Other assets	$	—
Other liabilities	(6,878		)
Net asset (liability) recognized	$	(6,878	)

The following table details the amounts recognized in accumulated other comprehensive income at December 31, 2016:



Net loss	$	(502	)
Less prior service cost	—
Accumulated other comprehensive loss, excluding income taxes	$	(502	)

The following table provides amortization amounts for 2017:



Actuarial loss	$	—
Prior service cost	1
Total	$	1

The following table outlines the assumptions and components of net periodic pension cost for the three years in the period ended December 31, 2016:

- 113 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



	2016
Components of net periodic pension cost
Service	$	12
Interest	1,285
Expected return on plan assets	(1,497		)
Amortization of prior service cost	—
Amortization of net (gain) loss	—
Net periodic pension cost	$	(200	)
Weighted average assumptions
Discount rate	5.00		%
Expected return on plan assets	7.75		%
Rate of compensation increases	4.00		%

Target asset allocations are established based on periodic evaluations of risk/reward under various economic scenarios and with varying asset class allocations. The near-term and long-term impact on obligations and asset values are projected and evaluated for funding and financial accounting implications. Actual allocation and investment performance is reviewed quarterly. The current target allocation ranges, along with the actual allocation as of December 31, 2016, are included in the accompanying table.



Plan Assets	Fair Value as of December 31, 2016		Actual Allocation as of December 31, 2016	Long-Term Allocation Target
Equity securities	$	14,147	58.4%	40% - 75%
Debt securities	10,096		41.6%	25% - 60%
Total	$	24,243	100%	100%

The fair value of the Company’s pension plan assets at December 31, 2016 by asset category are reflected in the following table. The fair value hierarchy descriptions used to measure these plan assets are identified in Note B of the Notes to Consolidated Financial Statements.



	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Plan Assets at December 31, 2016
Equity securities (US issuers)	$	3,482	$	—	$	—	$	3,482
Equity mutual funds	10,626		—		—		10,626
Fixed income securities	—		2,887		—		2,887
Fixed income mutual funds	—		6,864		—		6,864
Cash and money market funds	384		—		—		384
Total plan assets	$	14,492	$	9,751	$	—	$	24,243

The Company’s policy is to amortize actuarial gains and losses over the average remaining service periods for active participants when the accumulated net gain or loss exceeds 10% of the projected benefit obligation or market value of plan assets, whichever is greater. The assumed expected return on assets considers the current level of expected returns on risk-free investments (primarily government bonds), the historical level of risk premium associated with the other asset classes in the portfolio and the expectation for future returns of each asset class. The expected return of each asset class is weighted based on the target allocation to develop the expected long-term rate of return on assets. This resulted in the selection of the 7.75% rate used in 2016.

The contributions for all plans for 2016 were approximately $192 thousand. The expected benefit payments for all plans for the next ten years are as follows:

- 114 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)



2017	$	1,825
2018	1,833
2019	1,851
2020	1,929
2021	1,956
2022 through 2026	10,122
Total	$	19,516

The Company’s December 31, 2016 consolidated balance sheet included a deferred compensation plan resulting from the NewBridge Merger. The plan allowed directors and executive officers of NewBridge to defer compensation until the participant’s death, disability or retirement. Assets related to the NewBridge deferred compensation plan are maintained in a rabbi trust. The balance in the trust at December 31, 2016 was $8.2 million.

NOTE S - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The table below summarizes the activity in AOCI 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			Unrealized Net Gains (Losses) on Pension Obligation		Total

Balance at January 1, 2014	$	(6,554	)	$	2,381		$	—	$	(4,173	)
Other comprehensive income (loss) before reclassifications	5,445			(3,440		)	—		2,005
Amounts reclassified	(76		)	—			—		(76		)
Net change in AOCI	5,369			(3,440		)	—		1,929
Balance at December 31, 2014	(1,185		)	(1,059		)	—		(2,244		)
Other comprehensive loss before reclassifications	(2,136		)	(3,236		)	—		(5,372		)
Amounts reclassified	—			99			—		99
Net change in AOCI	(2,136		)	(3,137		)	—		(5,273		)
Balance at December 31, 2015	(3,321		)	(4,196		)	—		(7,517		)
Other comprehensive income (loss) before reclassifications	(6,484		)	72			326		(6,086		)
Amounts reclassified	(352		)	282			—		(70		)
Net change in AOCI	(6,836		)	354			326		(6,156		)
Balance at December 31, 2016	$	(10,157	)	$	(3,842	)	$	326	$	(13,673	)

Amounts reclassified from AOCI are included in the consolidated statements of operations as follows.



AOCI Component	Amount Reclassified									Line Item Within Statement of Operations
	2016			2015			2014
AFS securities:
Gross reclassification	$	(564	)	$	—		$	(126	)	Gain on sales of available for sale securities
Income tax expense	212			—			50			Income tax expense (benefit)
Reclassification, net of tax	$	(352	)	$	—		$	(76	)

Cash flow hedges:
Gross reclassification	$	452		$	161		$	—		Gain on terminations of cash flow hedges
Income tax expense	(170		)	(62		)	—			Income tax expense (benefit)
Reclassification, net of tax	$	282		$	99		$	—

- 115 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

NOTE T – PARENT COMPANY FINANCIAL DATA

The tables below present the parent company condensed balance sheets, statements of operations, and statements of cash flows for the periods indicated. Yadkin Financial Corporation is the parent company for its primary operating subsidiary, Yadkin Bank.

Parent Company

Condensed Balance Sheets



	December 31, 2016		December 31, 2015
Assets:
Cash and due from banks	$	1,435	$	5,066
Investment securities available for sale	147		379
Investment in subsidiaries	1,109,634		619,144
Deferred tax asset, net	—		—
Other assets	108		2,660
Total assets	$	1,111,324	$	627,249

Liabilities and Shareholders' Equity:
Long-term debt	$	95,267	$	63,106
Accrued interest payable and other liabilities	1,826		1,594
Total liabilities	97,093		64,700
Total shareholders' equity before non-controlling interests	1,014,231		562,549
Total liabilities and shareholders' equity	$	1,111,324	$	627,249

Parent Company

Condensed Statements of Operations



	Year ended December 31,
	2016			2015		2014
Income:
Dividends from subsidiaries	$	28,086		$	40,108	$	8,058
Other income	(7		)	105		54
Total income	28,079			40,213		8,112
Expense:
Interest expense	5,168			3,754		2,331
Other expenses	2,315			1,465		837
Total expenses	7,483			5,219		3,168
Income (loss) before income taxes and equity in undistributed earnings of subsidiaries	20,596			34,994		4,944
Income tax benefit	2,586			1,744		5,647
Income (loss) before equity in undistributed earnings of subsidiaries	23,182			36,738		10,591
Equity in undistributed earnings of subsidiaries	31,986			7,889		11,114
Net income	55,168			44,627		21,705
Dividends on preferred stock	—			822		1,269
Net income attributable to non-controlling interests	—			—		2,466
Net income available to common shareholders	$	55,168		$	43,805	$	17,970

- 116 -

YADKIN FINANCIAL CORPORATION

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Parent Company

Condensed Statements of Cash Flows



	Year ended December 31,
	2016			2015			2014
Cash flows from operating activities:
Net income	$	55,168		$	44,627		$	21,705
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	(2,586		)	(1,744		)	(5,647		)
Equity in undistributed earnings of subsidiaries	(31,986		)	(7,889		)	(11,114		)
Loss on sale of assets	128			—			—
Net change in other assets	1,806			1,543			258
Net change in interest payable and other liabilities	(457		)	(524		)	(281		)
Other, net	1,446			791			419
Net cash provided by operating activities	23,519			36,804			5,340

Cash flows from investing activities:
Proceeds from sales of investment securities available for sale	244			640			13
Purchases of cash flow hedges	—			—			(1,278		)
Investment in subsidiaries	—			—			(323		)
Proceeds from repayment of investment in subsidiaries	—			—			6,014
Net cash from business combinations	4,569			—			4,388
Net cash provided by investing activities	4,813			640			8,814

Cash flows from financing activities:
Proceeds from exercise of stock options	2,451			346			5
Repurchase of common stock	—			—			(886		)
Repurchase of preferred stock	—			(28,405		)	—
Distribution to legacy shareholders of Piedmont Community Bank Holdings, Inc.	—			—			(9,810		)
Dividends paid on preferred and common stock	(34,414		)	(7,144		)	(1,269		)
Net cash used in financing activities	(31,963		)	(35,203		)	(11,960		)

Net change in cash and cash equivalents	(3,631		)	2,241			2,194
Cash and cash equivalents, beginning of period	5,066			2,825			631
Cash and cash equivalents, end of period	$	1,435		$	5,066		$	2,825

- 117 -

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the Company’s disclosure controls and procedures (as such term is defined by 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2016. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the applicable Securities and Exchange Commission rules and forms.

Changes in Internal Control Over Financial Reporting

There were no changes in the Registrant’s internal controls over financial reporting factors that could materially affect these controls during the three-month period ended December 31, 2016.

Material Weakness

In reviewing the accounting for the allowance for loan losses, our management identified a deficiency in our internal control over financial reporting that is further described below in “Management’s Annual Report on Internal Control Over Financial Reporting.” Our management has concluded that this control deficiency constitutes a material weakness in our internal control over financial reporting. Nonetheless, we have concluded that this material weakness does not require a change in the fourth quarter or full year 2016 consolidated financial results, nor does it require a restatement of or change in our consolidated financial statements for any prior annual or interim period.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Yadkin Financial Corporation (Yadkin) is responsible for establishing and maintaining adequate internal control over financial reporting. Yadkin's internal control system was designed to provide reasonable assurance to the company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

As permitted by guidance provided by the staff of the U.S. Securities and Exchange Commission, the scope of management's assessment of internal control over financial reporting as of December 31, 2016 has excluded the operations of NewBridge Bancorp ("NewBridge"), which was acquired on March 1, 2016 by the company. NewBridge represented 30 percent of consolidated revenue (interest income and non-interest income) for the year ended December 31, 2016, and 27 percent of consolidated assets as of December 31, 2016.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting. A material weakness in internal control over financial reporting is a control deficiency, or combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.

Yadkin's management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2016. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013). Based on that assessment, Yadkin's management believes

- 118 -

that, as of December 31, 2016, Yadkin's internal control over financial reporting was not effective based on those criteria, due to the material weakness described below.

In the review of accounting for the allowance for loan losses, we identified a specific deficiency being that the Company’s internal control processes lacked adequate precision in the estimation of the allowance for loan loss. Our management has concluded that this deficiency constitutes a material weakness in our internal control over financial reporting. Management and the Audit Committee have begun to assess the material weakness in order to develop plans to remediate the underlying cause of the material weakness and improve the design and operating effectiveness of internal control over financial reporting and our disclosure controls.

Yadkin's independent registered public accounting firm has issued an audit report on the company's internal control over financial reporting. This report appears on page 120.

- 119 -

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Yadkin Financial Corporation

We have audited Yadkin Financial Corporation (the Company)’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Annual Report on Internal Control Over Financial Reporting, management excluded NewBridge Bancorp (“NewBridge"), which was acquired on March 1, 2016 by the Company, from its assessment of internal control over financial reporting as of December 31, 2016. NewBridge constituted 30 percent total consolidated revenue (interest income and noninterest income) for the year ended December 31, 2016 and 27 percent of total consolidated assets as of December 31, 2016. Our audit of internal control over financial reporting of the Company also excluded NewBridge from the scope of our audit of internal control over financial reporting.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely manner. A material weakness was identified in the accounting for the allowance for loan losses. Specifically, the Company’s internal control processes lacked adequate precision in the estimation of the allowance for loan loss. The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2016 consolidated financial statements, and this report does not affect our report dated March 1, 2017 on those consolidated financial statements.

In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Yadkin Financial Corporation has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Yadkin Financial Corporation as of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016, and our report dated March 1, 2017, expressed an unqualified opinion on those consolidated financial statements.

- 120 -

/s/ Dixon Hughes Goodman LLP

Raleigh, North Carolina

March 1, 2017

- 121 -

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Overview of the Board of Directors

During 2016, the Board of Directors of the Company held seven regular meetings and held two special meetings. All directors attended at least 75% of the aggregate of (a) the total number of meetings of the Board of Directors held during the period for which he or she served as a director, and (b) the total number of meetings held by all committees of the Board of Directors of the Company on which he or she served.

The Bylaws of the Company provide for no less than five or more than 25 directors to serve on the Board of Directors for a period of one-year terms to be elected each year at the Annual Meeting of Shareholders. Following the resignations of Thierry Ho effective November 30, 2016 and Nicholas Zerbib effective January 19, 2017 (as described below under “Events Occurring After Fiscal Year End”) from the Board of Directors, the Board of Directors has 13 directors.

Set forth below are the names and other information pertaining to the Board of Directors:



Name (Age)	Director Since	Position with Yadkin and Business Experience

J. Adam Abram (61)	2014	Abram joined Yadkin Bank and Yadkin Financial Corporation as lead director in July 2014 pursuant to provisions of the Agreement and Plan of Merger by and between Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. Prior to the merger, Mr. Abram served as the Chairman of the Board of VantageSouth Bancshares, Inc. and VantageSouth Bank since November 2011, and as Chairman of Piedmont Community Bank Holdings, Inc. since he co-founded the company in 2009. Mr. Abram has served as Chairman of James River Group Holdings, Ltd. since its inception and was appointed CEO in September 2014 prior to the Company’s December 2014 initial public offering. Since 2008, Mr. Abram has served in a variety of executive roles at the Company and its wholly-owned insurance holding company subsidiary, James River Group, Inc., since its inception in 2002, most recently as director, Chairman of the Board, and Chief Executive Officer. James River Group, Inc. was publicly traded from August 2005 until December 2007. Mr. Abram brings to the Board a deep understanding of the business and prospects of Yadkin, in light of his significant role with VantageSouth and Piedmont prior to the merger. He also brings significant public company executive leadership and public company board experience to the Board.
Michael S. Albert (62)	2016	Michael Albert joined Yadkin Bank and Yadkin Financial Corporation as a director in March 2016 following the merger of NewBridge Bancorp with Yadkin Financial Corporation. Prior to the merger, he served as a director of NewBridge Bancorp and NewBridge Bank since 1995. Mr. Albert has been a partner of Entrepreneurial Resources of NC, LLC since April of 2009. From March 2007 to April 2009, he served as the Vice President-Marketing and a consultant for Stanley Benefit Services, Inc. Mr. Albert has 21 years of experience as a bank director, including serving as Chairman of the Board and Chairman of the Audit and Risk Management Committee; financial and accounting experience as a certified public accountant with a Big Four accounting firm, including experience in its bank audit practice; and experience as Chief Executive Officer of a major regional transportation company operating in multiple states. He has leadership roles in multiple community organizations and is President of the Davidson County Community College Foundation. Mr. Albert’s ability to analyze complex financial and organizational matters, as well as his banking industry expertise and management experience, enhances his contributions to Yadkin’s Board of Directors.

- 122 -



Name (Age)	Director Since	Position with Yadkin and Business Experience

David S. Brody (66)	2014	David Brody joined Yadkin Bank and Yadkin Financial Corporation as a director in July 2014 pursuant to provisions of the Agreement and Plan of Merger by and between Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. Prior to the merger, Mr. Brody served as a director of VantageSouth Bancshares, Inc., VantageSouth Bank and Piedmont Community Bank Holdings, Inc. since November 2011. Mr. Brody is the founder and managing partner of Brody Associates, a real estate development company, which position he has held for over ten years. He is past Chairman of the board of trustees of East Carolina University and past Chairman of the board of University Health Systems. He is President of The Brody Brothers Foundation. Mr. Brody was a founding board member of the Little Bank, Kinston, North Carolina, and former managing partner of Eastern Carolina Coca Cola Bottling, and Brody Brothers Dry Goods. Mr. Brody brings significant insight into many of the markets and businesses served by Yadkin Bank, particularly in eastern North Carolina. His service on the board of East Carolina University brings additional insight into a number of the communities served by Yadkin Bank.
Scott M. Custer (60)	2014	Scott Custer joined Yadkin Bank and Yadkin Financial Corporation as a director and Chief Executive Officer in July 2014 pursuant to provisions of the Agreement and Plan of Merger by and between Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. Prior to the merger, Mr. Custer served as a director and Chief Executive Officer of VantageSouth Bancshares, Inc. and VantageSouth Bank since November 2011, and as a director and Chief Executive Officer of Piedmont Community Bank Holdings, Inc. since 2010. Before joining Piedmont, Mr. Custer served as Chairman and Chief Executive Officer of RBC Bank (USA), a position he held since 2004. An active member of the community, Mr. Custer is on the boards of trustees for the College of William and Mary and William Peace University, and. serves on the board of directors of the Medical Foundation of North Carolina, Inc. Mr. Custer brings significant executive leadership and industry experience to the Board through his executive leadership positions at VantageSouth, Piedmont, and RBC Bank (USA). His community service also brings insight into a number of the communities served by Yadkin.
Harry M. Davis (69)	2004	Harry Davis has served as a director of Yadkin Financial Corporation since its inception in 2006, as Vice Chairman from 2007-2014, and as a director of its wholly owned subsidiary, Yadkin Bank, since 2004. Dr. Davis was a founding director of High Country Bank prior to its acquisition by Yadkin Bank in 2004. Dr. Davis is Professor of Finance, Appalachian State University in Boone, North Carolina and has been a consultant to the banking industry on financial statements for over twenty years. He serves as Dean of the North Carolina School of Banking and is an instructor at the North Carolina Commissioner of Banks Directors College, where he teaches banking financial principles. His knowledge of the financial principles that matter to community banks enhances his ability to contribute as a director.

- 123 -



Name (Age)	Director Since	Position with Yadkin and Business Experience

Barry Z. Dodson (68)	2016	Barry Dodson joined Yadkin Bank and Yadkin Financial Corporation as a director in March 2016 following the merger of NewBridge Bancorp with Yadkin Financial Corporation. Prior to the merger, he served as a director of NewBridge Bancorp and NewBridge Bank since 1997 and was Chairman of the Board of FNB Financial Services Corporation prior to its merger into NewBridge Bancorp. Mr. Dodson has over 40 years of experience in public accounting, is a certified public accountant and the owner of Barry Z. Dodson, CPA, PLLC. He serves as Chairman of the Golden Leaf Foundation, has served on the North Carolina Education Lottery Commission and was a member of its finance committee, and is a former director of The Moses Cone Hospital, Inc. where he served on its audit committee. Mr. Dodson brings financial expertise and 19 years of experience serving as a director of bank and community boards of directors, including various bank board committees, with particular experience serving on audit committees.
Thomas J. Hall (69)	2009	Tommy Hall joined the Board of Directors in 2009 pursuant to the merger between Yadkin Financial Corporation and American Community Bancshares, Inc. Since 2000, Mr. Hall is President of The Hall Group, Inc., a real estate holding company located in Charlotte, North Carolina. He previously served as an owner, President and Chief Financial Officer of an $800 million dollar company. His leadership experience, financial knowledge, and business experience enhance his ability to contribute as a director.
Steven J. Lerner (62)	2014	Steve Lerner joined Yadkin Bank and Yadkin Financial Corporation as a director in July 2014 pursuant to provisions of the Agreement and Plan of Merger by and between Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. Prior to the merger, Dr. Lerner served as a director of VantageSouth Bancshares, Inc. since November 2011, and as Vice Chairman of Piedmont Community Bank Holdings, Inc. since he co-founded the company in 2009. He has served as the Chairman of FGI Research, a provider of online market research services, since he founded the company in 1981. From 2000-2012, Dr. Lerner served as Chairman of Capstrat, Inc., a strategic marketing communication firm, and he was Chairman of Yankelovich, Inc., a consumer research firm, from 2000-2008. Dr. Lerner has spent the last 30 years helping small and medium sized businesses maximize their potential. He has been involved in the formation of a number of companies including Blue Hill Group, and Sterling Cellular prior to its sale in 1993. Dr. Lerner serves on the board of advisors of Bandwidth.com, a provider of next generation communications services. Dr. Lerner serves as a member of the University of North Carolina at Chapel Hill board of trustees. As a provider of marketing research services to businesses in Yadkin’s markets, Mr. Lerner brings to the Board in a deep understanding of the markets and businesses that Yadkin serves.

- 124 -



Name (Age)	Director Since	Position with Yadkin and Business Experience

Michael S. Patterson (70)	2016	Michael Patterson joined Yadkin Bank and Yadkin Financial Corporation as a director in March 2016 following the merger of NewBridge Bancorp with Yadkin Financial Corporation. Prior to the merger, he served as a director of NewBridge Bancorp and NewBridge Bank since 2002. Mr. Patterson has over 40 years of experience as a commercial banker in North Carolina. He started his banking career with First Citizens Bank in Raleigh, NC in 1969. In 1978, he joined Peoples Bank in Rocky Mount, NC as Vice President and later as Executive Vice President and Executive Officer of Peoples Bank and Peoples Bank of North Carolina, Inc. In 1989, he joined Triangle Bank in Raleigh as President and Chief Operating Officer and became CEO in 1990, and Chairman of the Board of Directors of Triangle Bank in 1996. He served in these capacities until Triangle Bank was sold to Centura Banks, Inc. in 2000. Mr. Patterson served as Executive Chairman of the Board of Directors of Centura Banks, Inc. until it was sold to Royal Bank of Canada in 2001. He then worked as a consultant to community banks primarily in the area of merger and acquisition strategies, prior to organizing CapStone Bank in 2006. He served as Chairman, President and CEO of CapStone Bank prior to its acquisition by NewBridge Bank in 2014. Mr. Patterson also has broad experience serving as a director of several industry-related organizations including the American Bankers Association, the North Carolina Bankers Association (Vice Chairman), and numerous charitable and civic organizations in the communities in which he has lived and worked. Mr. Patterson has extensive experience in the banking industry in key leadership positions and as a consultant to community banks, including merger and acquisition strategies within the financial services industry.
Mary E. Rittling (65)	2016	Mary Rittling joined Yadkin Bank and Yadkin Financial Corporation as a director in March 2016 following the merger of NewBridge Bancorp with Yadkin Financial Corporation. Prior to the merger, she served as a director of NewBridge Bancorp and NewBridge Bank since 2006. Dr. Rittling is President of the Davidson County Community College. She currently serves as a community partner and advocate in both Davidson and Davie Counties. She has been recognized in the Triad as an “Exceptional Leader” annually since 2009; she was also named as the “Outstanding Woman in Business” by the Lexington Area Chamber of Commerce in 2009. In 2012, Dr. Rittling was named the “North Carolina Community College President of the Year.” She earned a Master’s degree and a Doctorate in Education from Columbia University and also completed studies at the Harvard University Institute for New Presidents. Dr. Rittling brings particular insight to the Board’s role in oversight of risk management through her experience in strategic planning and corporate governance; ability to address complex outcomes; and extensive community and regional involvement.
Harry C. Spell (68)	2002	Harry Spell was elected to the board of directors in 2002. Prior to his retirement in 2014, Mr. Spell served as Vice President and Secretary of MoCaro Dyeing & Finishing, Inc., a textile company in Statesville, North Carolina. From 1997 to 2002, Mr. Spell served ... as a director of Main Street Bankshares Inc., which merged into Yadkin Valley Bank and Trust Company in 2002. His business and personal experience in certain of Yadkin Bank’s communities provides him with a useful appreciation of markets that we serve. He also has experience in the context of bank mergers and acquisitions from serving with Yadkin through four bank acquisitions.

- 125 -



Name (Age)	Director Since	Position with Yadkin and Business Experience

Joseph H. Towell (65)	2011	Joe Towell was elected to the board of directors and appointed Chief Executive Officer and President of Yadkin Bank and Yadkin Financial Corporation in February 2011, having served in various executive roles since May 2008. Since July 2014, pursuant to provisions of the Agreement and Plan of Merger by and between Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc., Mr. Towell serves as Chairman of the board of directors. Previously, Mr. Towell served as Portfolio Manager for leveraged loan investing with Putnam Investments in Boston, MA from 2001 to 2008, and he was employed with First Union National Bank in various roles from 1983 through 2001. He brings to the Board of Directors an understanding of Yadkin’s business and organization, as well as substantial leadership ability, banking industry expertise, and management experience.
Richard A. Urquhart, III (70)	2016	Richard Urquhart joined Yadkin Bank and Yadkin Financial Corporation as a director in March 2016 following the merger of NewBridge Bancorp with Yadkin Financial Corporation. Prior to the merger, he served as a director of NewBridge Bancorp and NewBridge Bank since 2014, and as a director of CapStone Bank and the Chairman of its audit committee prior to its merger into NewBridge Bank. Mr. Urquhart served as the Chief Operating Officer of Investors Management Corporation until December 2016 and is a certified public accountant. Mr. Urquhart is the Chief Operating Officer of Investors Management Corporation and is a certified public accountant. He is active in several community non-profits, including past Chairman of the Greater Raleigh Chamber of Commerce, a director of Boys and Girls Clubs of Wake County, and a member of the Leadership Council of Wake Education Partnership. Mr. Urquhart is a trustee of Meredith College, where he serves as Chairman of the business and finance committee. His extensive experience in accounting and finance, coupled with his strong community connections and involvement with local and regional organizations, enhances his ability to contribute as a director.

Executive Officers

Set forth below is certain biographical information regarding the current named executive officers of Yadkin, other than Scott M. Custer, President and Chief Executive Officer, whose biographical information is included with that of other members of the Board of Directors above.



Name (Age)	Officer Since	Position with Yadkin and Business Experience

Terry S. Earley (58)	2014	Terry Earley joined Yadkin Bank and Yadkin Financial Corporation as Executive Vice President and Chief Financial Officer in July 2014 pursuant to provisions of the Agreement and Plan of Merger by and between Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. Prior to the merger, Mr. Earley served as Executive Vice President and Chief Financial Officer of VantageSouth Bancshares, Inc. since February 2012, VantageSouth Bank since March 2012, and as Executive Vice President and Chief Financial Officer of Piedmont Community Bank Holdings, Inc. since 2011. Prior to that, Mr. Earley served as President and Chief Executive Officer of Rocky Mountain Bank and Rocky Mountain Capital, located in Jackson, Wyoming, in 2010, and as CFO of Bancorp of the Southeast, LLC, located in Ponte Vedra, Florida, in 2009. Mr. Earley served as Chief Financial Officer and Chief Operating Officer of RBC Bank (USA), which he joined in 1992. He holds a bachelor’s degree from the University of North Carolina at Chapel Hill in business administration.

- 126 -



Name (Age)	Officer Since	Position with Yadkin and Business Experience

Robin S. Hager (54)	2016	Robin Hager joined Yadkin Bank and Yadkin Financial Corporation as Executive Vice President and Chief Administrative Officer in March 2016 following the merger of NewBridge Bancorp with Yadkin Financial Corporation. Prior to the merger, Ms. Hager served as Senior Executive Vice President and Chief Administrative Officer of NewBridge Bancorp and NewBridge Bank since 2012, and as Chief Resource Officer since 2005. Ms. Hager previously served as Senior Vice President and head of Retail Bank Administration of FNB Southeast until FNB’s merger into NewBridge Bank. Prior to joining FNB, Ms. Hager held several leadership roles at SouthTrust Bank, including Operations Manager, Sales Manager and Retail Bank Administration. She holds a bachelor’s degree from the University of North Carolina at Greensboro in business administration and is a graduate of the American Bankers Association Stonier Graduate School of Banking.
Steven W. Jones (48)	2014	Steve Jones joined Yadkin Bank and Yadkin Financial Corporation as Executive Vice President and Chief Banking Officer in July 2014 pursuant to provisions of the Agreement and Plan of Merger by and between Yadkin Financial Corporation, VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. Prior to the merger, he served as President of VantageSouth Bank since 2010. From 2009 to 2010, Mr. Jones served as Executive Vice President and Chief Operating Officer of First American Financial Management Company, a proposed bank holding company. Prior to that, Mr. Jones spent over 10 years working at RBC Bank (USA) in a variety of leadership roles, including President (Carolinas and Virginia), President (Personal and Business Banking), Regional President (Florida Personal and Business Banking) and Regional Manager (Personal and Business Banking - Eastern Sandhills Region). He is a member of the Triangle board of the American Heart Association and currently serves on the board of trustees for East Carolina University, where he received his bachelor’s degree.
Edwin H. Shuford, III (51)	2010	Ed Shuford has served as Executive Vice President and Chief Credit Officer of Yadkin Bank and Yadkin Financial Corporation since August 2010. Over his 27 year banking career, Mr. Shuford has worked in commercial lending, agri-business lending, and credit risk with First Citizens Bank and Farm Credit. In 2003, he joined High Country Bank as a Market Executive and then as Regional Credit Officer before taking on his current role at Yadkin Bank. Additionally, Mr. Shuford maintains his credentials as a North Carolina Certified Public Accountant. He is a graduate of North Carolina State University with a degree in agri-business.

Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics (the “Code”) for all employees to resolve ethical issues in an increasingly complex business environment. The Code also applies to all directors and senior officers, including the Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”), and any other employee with any responsibility for the preparation and filing of documents with the SEC. The Code covers topics including, but not limited to, conflicts of interest, confidentiality of information, and compliance with laws and regulations. The Company will provide a printed copy of the Code to any shareholder upon written request to our Corporate Secretary at our corporate headquarters. The Code is available on the Company’s corporate website, www.yadkinbank.com, under the heading “About Us - Charters & Policies.” The Company may post amendments to or waivers of the provisions of the Code, if any, made with respect to any of our executive officers on that website. Please note, however, that the information contained on the website is not incorporated by reference in, or considered to be a part of, this annual report on Form 10-K.

Corporate Governance Guidelines

Strong corporate governance practices and the independence of our Board of Directors are a long standing priority at Yadkin. These practices provide a framework within which the Board of Directors and management can pursue our strategic objectives and ensure long-term growth for the benefit of our shareholders. Our Corporate Governance Guidelines may be viewed on our website, www.yadkinbank.com, under the heading “About Us - Charters & Policies.” In addition, a printed copy

of our Corporate Governance Guidelines will be provided to any shareholder upon written request to our Corporate Secretary. The Nominating, Compensation, and Corporate Governance Committee reviews the guidelines annually, and any changes are recommended to the Board of Directors for approval.

- 127 -

Board Leadership Structure

We are focused on the Company’s corporate governance practices and value independent board oversight as an essential component of strong corporate performance to enhance shareholder value. Our commitment to independent oversight is demonstrated by the fact that with the exception of our Chairman of the Board, our Chief Executive Officer, and one director, all of our directors are independent under the listing requirements of Rule 303A.02 of the New York Stock Exchange. In addition, all of the members of our Board of Directors’ Audit Committee and Nominating, Compensation, and Corporate Governance Committee are independent under the listing requirements of Rule 303A.02 of the New York Stock Exchange, and a majority of the members of our Risk Management Committee are also independent under those requirements.

During 2016, Mr. Towell has served as a non-management director and Chairman of the Board. Mr. Custer has served as a management director and President and Chief Executive Officer, and Mr. Abram has served as our Lead Independent Director. In his capacity as Lead Independent Director, Mr. Abram chairs meetings of the independent directors in executive session. His other responsibilities include:


•	developing the agenda for and chairing executive sessions of the independent directors and executive sessions of the non-management directors;


•	acting as liaison between the independent directors and the Chairman of the Board on matters raised in such sessions;


•	chairing Board meetings when the Chairman of the Board is not in attendance; and


•	performing such other duties as may be requested from time-to-time by the Board, the independent directors, or the Chairman of the Board.

We recognize that different board leadership structures may be appropriate for companies in different situations. We will continue to reexamine our corporate governance policies and leadership structures on an ongoing basis to ensure that they continue to meet the Company’s needs.

Risk Management

Risk oversight is the responsibility of the Board of Directors. The Board of Directors primarily administers its oversight responsibility through the Risk Management Committee and the Audit Committee, which are responsible for overseeing Yadkin’s risk management processes on behalf of the full Board of Directors. The Risk Management Committee and the Audit Committee discuss compliance matters, internal control issues, external reporting, whistleblowing, and matters raised in internal or independent audits.

The Audit Committee focuses specifically on financial reporting risk and oversight of the Company’s internal audit process. The Audit Committee reports to the Board on the performance of Yadkin’s internal audit functions and its independent auditors, reviews and discusses with management the Company’s policies and guidelines for risk assessment and management, and evaluates financial risk exposures. The Audit Committee meets with members of management, including the Chief Financial Officer, senior accounting staff, and the principal internal auditor to discuss financial matters and appoints the individual responsible for developing and executing Yadkin Bank’s internal audit plan.

The Risk Management Committee serves as a resource to management by overseeing all risk types across the entire Company. While the Company’s management is responsible for designing, implementing and maintaining a risk-management framework, the Risk Management Committee’s purpose is to enhance management’s and the Board’s understanding of Yadkin’s overall risk appetite and Company-wide risk management and effectiveness. In performing this oversight, the Risk Management Committee reviews and discusses management’s assessment of Yadkin’s aggregate risk profile and the alignment of its risk profile with the Company’s strategic plan, goals, and objectives; and reviews significant financial and other risk exposure of the Company, including its credit, market, fiduciary, liquidity, operational, interest rate, investment, funding, reputational, compliance, legal, fraud, strategic, technology, data-security and business continuity risk. The Risk Management Committee meets at least quarterly.

Additionally, the Risk Management Committee receives reports and updates from management regarding the Company’s technology operations and corporate-wide compliance with laws and regulations.

Shareholder Communications

Shareholders and other interested parties may initiate communications with the Board, the Chairman, the Lead Independent Director, the Independent Directors as a group, the Chairman of the Audit Committee, 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

- 128 -

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. And, you may send an email to our Lead Independent Director, Adam Abram, at adam.abram@yadkinbank.com, or to Richard Urquhart, Chair of the Audit Committee, at richard.urquhart@yadkinbank.com. The contact information for our directors is available on our website, www.yadkinbank.com, under the heading “About Us - Directors” and available on our investor relations website under the heading “About Us - Investor Relations - Officers & Directors.”

Director Nomination Process

Procedure for Directly Nominating Candidates. In accordance with our Bylaws, a shareholder may directly nominate persons for election as directors at an annual meeting. The Bylaws require written notice of the nomination addressed to the Corporate Secretary of Yadkin to be received at our principal executive office of 3600 Glenwood Avenue, Suite 300, Raleigh, North Carolina 27612 not less than 60 days but no more than 90 days prior to, the first anniversary of the preceding year’s annual meeting. However, if the annual meeting is advanced by more than 30 days before or delayed by more than 60 days after the one-year anniversary of the prior year’s annual meeting, notice must be provided to the Company’s Secretary no earlier than 90 days prior to the annual meeting and not later than the close of business on the later of (i) 60 days prior to the scheduled annual meeting and (ii) 10 days following the day on which the public announcement of the scheduled date of the annual meeting is first made. Additionally, the notice must include information regarding the proposed nominee and the shareholder making the nomination as specified in Article III, Section 10 of our Amended and Restated Bylaws:


•	the name and address of the shareholder who intends to make the nomination, the beneficial owner, if any, on whose behalf the nomination is made, and of the person or persons to be nominated;


•	the class and number of shares of Yadkin common stock which are owned beneficially and of record by such shareholder and such beneficial owner, and a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;


•	a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons pursuant to which the nomination or nominations are to be made by the shareholder;


•	all other information regarding each nominee proposed by such shareholder as would be required to be included in a Proxy Statement for the meeting if the nominee had been nominated by the Board; and


•	the written consent of each nominee to serve as director of the Company if so elected.

If the officer presiding at the annual meeting determines that a nomination was not made in accordance with the requirements of Article III Section 10 of our Bylaws, the nomination may be disregarded.

Procedure for Presenting Candidates to Our Nominating, Compensation, and Corporate Governance Committee. The Company’s Corporate Governance Guidelines provide specific guidelines for the Board to follow in recommending candidates for election as directors. Vacancies created by the cessation of service of a Yadkin designee are to be filled by an individual whose appointment or election is endorsed by at least a majority of the continuing Yadkin directors. However, a shareholder may nevertheless submit recommendations for candidates to the Nominating, Compensation, and Corporate Governance Committee for consideration for nomination for election to the Board of Directors as part of the slate recommended by the Board. Shareholders desiring to make such recommendations should provide the Nominating, Compensation, and Corporate Governance Committee, preferably accompanied by the information described in the preceding five bullets within the same time frames as for direct nominations, to allow the Board time for due consideration. The Nominating, Compensation, and Corporate Governance Committee has not adopted a formal policy or process for identifying or evaluating nominees, but to the extent it has a need to seek new candidates, it plans to informally solicit and consider recommendations from a variety of sources, including members of the community, customers, shareholders, and professionals in the financial services industry and in other economic sectors, when considering prospective directors. Subject to the requirements of our Bylaws as to the persons to be nominated, the Nominating, Compensation, and Corporate Governance Committee will consider director candidates recommended by shareholders on the same terms as other persons.

Director Qualifications. As provided in our Corporate Governance Guidelines, the Nominating, Compensation, and Corporate Governance Committee must find that directors possess the following qualities:


•	the highest ethics, integrity, and values;


•	an outstanding personal and professional reputation;


•	professional experience that adds to the mix of the Board as a whole;


•	the ability to exercise sound independent business judgment;

- 129 -


•	freedom from conflicts of interest;


•	demonstrated leadership skills;


•	the willingness and ability to devote the time necessary to perform the duties and responsibilities of a director; and


•	relevant expertise and experience, and the ability to offer advice and guidance to the chief executive officer based on that expertise and experience.

Our Corporate Governance Guidelines also specify that each director must be a shareholder of the Company.

In evaluating candidates, the Nominating, Compensation, and Corporate Governance Committee is to consider an appropriate balance of experience, skills, and background and should apply the criteria that it deems appropriate, including the following:


•	whether the candidate possesses the qualities described above;


•	whether the candidate possesses significant contacts within the Company’s market area and the ability to generate additional business for the Company;


•	whether the candidate qualifies as an independent director under the Company’s guidelines;


•	the extent to which the candidate contributes to the diversity of the Board in terms of background, specialized experience, age, and race;


•	the candidate’s management experience in complex organizations and experience in dealing with complex business problems;


•	the candidate’s other commitments, such as employment and other board positions;


•	whether the candidate would qualify under the Company’s guidelines for membership on the Audit Committee or the Nominating, Compensation, and Corporate Governance Committee; and


•	whether the candidate complies with any minimum qualifications or restrictions set forth in the Company’s Bylaws.

Committees of the Board of Directors

The Board of Directors of the Company maintains an Executive Committee; Audit Committee; Nominating, Compensation, and Corporate Governance Committee; and Risk Management Committee at the Company level.

Executive Committee. The Executive Committee has the ability to exercise all of the Board’s authority between board meetings, subject to certain limitations that are required by law or imposed by board resolution. The Executive Committee consists of Mr. Towell (Chairman) and Messrs. Abram, Brody, Custer, Davis, Patterson, Spell and Urquhart.

Risk Management Committee. The Risk Management Committee serves as a resource to management by overseeing risk types across the entire Company. It meets quarterly or more frequently, and coordinates the Board’s oversight and policy-making efforts to manage the Company’s risk profile, including, among other things, the Company’s credit, treasury, and liquidity management functions. For additional details, please refer to “Corporate Governance - Board Leadership Structure” and “Corporate Governance - Risk Management” above. The Risk Management Committee Charter is available on our website, www.yadkinbank.com, under the heading “About Us - Charters & Policies.” The Board of Directors primarily administers its oversight responsibility for the Company’s overall risk appetite and risk management through the Risk Management Committee. The Risk Management Committee held four meetings in 2016. The Risk Management Committee consists of Mr. Brody (Chairman), Messrs. Abram, Hall, Towell, and Ms. Rittling. Mr. Zerbib was a member of the Risk Management Committee until his resignation effective January 19, 2017.

Audit Committee. As outlined in the Audit Committee Charter, which is available on the Company’s website, www.yadkinbank.com, the Audit Committee is responsible for insuring that the Board receives objective information regarding Company policies, procedures, and activities with respect to auditing, accounting, internal accounting controls, financial reporting, and such other Company activities as the Board may direct. The Audit Committee also oversees and approves related party transactions. The Audit Committee engages a qualified firm of independent registered public accountants to conduct such audit work as is necessary for this purpose. The Audit Committee consists of Mr. Urquhart (Chairman) and Messrs. Albert and Davis. Messrs. Ho and Zerbib were members of the Audit Committee until their respective resignations effective November 30, 2016 and January 19, 2017. The Audit Committee held eight meetings during 2016. Please refer to the Audit Committee Report below. The Board of Directors has determined that Mr. Davis and Mr. Urquhart are Audit Committee financial experts, and has designated each of them as such. All of the other members of the Audit Committee satisfy the audit committee independence requirements stated in Section 303A.06 of the New York Stock Exchange, as set forth in Rule 10A-3 promulgated under the Securities Exchange Act of 1934, regarding listing standards related to audit committees.

Nominating, Compensation, and Corporate Governance Committee. The Nominating, Compensation, and Corporate Governance Committee performs the dual roles of: (i) identifying individuals qualified to become members of the Board of Directors; and (ii)

- 130 -

determining the compensation of the Board of Directors and the executive officers of the Company, and providing oversight to the employee benefit plans for the Company. The charter for the Nominating, Compensation, and Corporate Governance Committee is available on the Company’s website, www.yadkinbank.com. The Nominating, Compensation, and Corporate Governance Committee held six meetings during 2016. The Nominating, Compensation, and Corporate Governance Committee consists of Mr. Abram (Chairman) and Messrs. Hall, Lerner and Spell. Messrs. Ho and Zerbib were members of the Nominating, Compensation, and Corporate Governance Committee until their respective resignations effective November 30, 2016 and January 19, 2017. Each member of the Nominating, Compensation, and Corporate Governance Committee is an independent director as that term is defined in the rules of the New York Stock Exchange.

In its compensation role, the Nominating, Compensation, and Corporate Governance Committee has two primary responsibilities: (i) assisting the Board of Directors in carrying out its responsibilities in determining the compensation of the Company’s Board of Directors and the CEO and other executive officers; and (ii) establishing compensation policies that will attract and retain qualified personnel through an overall level of compensation that is comparable to, and competitive with, others in the industry and in particular, peer financial institutions. The Nominating, Compensation, and Corporate Governance Committee, subject to the provisions of our stock incentive plans, also has authority in its discretion to determine the employees to whom stock options and other forms of stock-based incentives shall be granted, the number of shares to be granted to each employee, and the time or times at which options and other forms of stock-based incentives should be granted. The CEO makes recommendations to the Nominating, Compensation, and Corporate Governance Committee about equity awards to the Company’s employees (other than the CEO).

The CEO reviews the performance of our executive officers (other than the CEO) and, based on that review, the CEO makes recommendations to the Nominating, Compensation, and Corporate Governance Committee about the compensation of executive officers (other than the CEO). The CEO does not participate in any deliberations or approvals by the Nominating, Compensation, and Corporate Governance Committee with respect to his own compensation. The Nominating, Compensation, and Corporate Governance Committee approves all compensation decisions involving the CEO and other executive officers.

Report of the Audit Committee

In accordance with its written charter, which is available on the Company’s website, www.yadkinbank.com, under the heading “About Us - Charters & Policies,” the Audit Committee supervises the quality and integrity of the accounting, auditing and financial reporting practices of the Company on behalf of the Board. Management has the primary responsibility for preparing the financial statements and managing the reporting process, including the system of internal controls. As required by the Audit Committee Charter, each Audit Committee member satisfies the independence and financial literacy requirements for serving on the Audit Committee, and at least two members have accounting or related financial management expertise, all as required by the rules of the New York Stock Exchange. In fulfilling its oversight responsibilities, the Audit Committee discussed and reviewed the audited financial statements in the 2016 Annual Report with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements of the Company.

The Audit Committee discussed and reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of the audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee by Statement on Auditing Standards No. 61, as amended by Statement on Auditing Standards No. 90 (Communication with Audit Committees).

In discharging its responsibility for the audit process, the Audit Committee obtained from the independent auditors a letter describing all relationships between the auditors and the Company that might bear on the auditors’ independence required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). The Audit Committee also discussed with the auditors any relationships that might impact their objectivity and independence and satisfied itself as to the auditors’ independence, and considered the compatibility of non-audit services with the auditor’s independence.

The Audit Committee reviewed with both the independent and the internal auditors their audit plans, audit scope, and identification of audit risks. The Audit Committee met with the internal auditors and the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, the overall quality of the Company’s financial reporting, and the internal audit function’s organization, responsibilities, budget and staffing.

Based on the above-mentioned review and discussions with management and the independent auditors, the Audit Committee recommended to the Board (and the Board has approved) that the Company’s audited financial statements be included in its Annual

- 131 -

Report on Form 10-K for the fiscal year ended December 31, 2016, for filing with the SEC. The Audit Committee also approved the reappointment of the independent auditors.

This report is submitted by the Audit Committee:

Richard A. Urquhart, III, Chairman

Michael S. Albert

Harry M. Davis

Events Occurring After Fiscal Year End

Nicholas Zerbib resigned from the Board of Directors effective January 19, 2017.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Compensation Philosophy and Objectives

The Nominating, Compensation, and Corporate Governance Committee believes that the most effective compensation programs strive to accomplish the following objectives:


•	aligning the interests of the employee with those of the Company’s shareholders;


•	attracting and retaining talented individuals and top performers; and


•	motivating performance toward the achievement of near-term and long-term goals.

To meet these objectives, the Nominating, Compensation, and Corporate Governance Committee endeavors to structure its compensation programs in the following manner:


•	competitive base compensation levels comparable to the median of the market, defined in terms of asset size, geographic footprint and type of bank;


•	annual incentive compensation;


•	long-term incentive compensation (long-term restricted stock) aligned with long-term financial results and strategic performance goals;


•	executive benefits and perquisites that compare favorably with those offered by similar organizations and align with long-term shareholder interests; and


•	competitive base pay and long-term incentives that provide total compensation consistent with achievement of challenging and specific financial objectives.

In designing and monitoring the administration of executive compensation programs, the Nominating, Compensation, and Corporate Governance Committee strives to maintain an appropriate balance across all of the various compensation elements, realizing that at times trade-offs among some objectives may be needed. In addition, external factors, such as the continuing economic, legislative, and regulatory changes impacting executive compensation programs, may alter the effectiveness of existing approaches to executive compensation. Such events require the Nominating, Compensation, and Corporate Governance Committee to make decisions and adjustments on an annual basis to future compensation programs to maintain the objectives of the executive compensation program.

Compensation Discussion and Analysis

In general, our executive officers’ compensation program historically uses different elements to reward different performance considerations. Base salary is provided to retain the executive and to reward the executive for basic job-related contributions to the success of the Company based on his or her knowledge, experience and talent. Base salary also reflects the position’s external value in the job market and the internal value of the assigned roles and responsibilities to the success and ongoing viability of the Company.

Annual discretionary bonuses and target incentives are provided when practicable to focus performance on the key short-term objectives defined and established on an annual basis, and aligned with the Company’s annual budget and strategic plan. The Nominating, Compensation, and Corporate Governance Committee established specific objectives for annual bonuses for 2016.

- 132 -

Long-term incentives reward executives for the longer-term success of the Company. This equity-based form of compensation rewards executives for the long-term performance of the Company by aligning executive compensation levels and improved shareholder value. As the value of the stock held by shareholders increases, the value of the equity-based long-term incentives increases. Conversely, as shareholder value declines, the value of the equity awards vesting for each executive decreases.

Benefits provided to each executive officer include broad-based employee benefits which meet basic health and welfare needs. Perquisites for our executives remain conservative and primarily serve to enhance the business development activities of our executive officers.

Process for Determining Executive Officer Compensation

Role of the Nominating, Compensation, and Corporate Governance Committee. The Nominating, Compensation, and Corporate Governance Committee sets the broad direction for the Company’s executive compensation programs. During 2016, the Nominating, Compensation, and Corporate Governance Committee was composed of Mr. Abram (Chairman), Messrs. Hall, Ho (until November 30, 2016), Lerner, Spell and Zerbib. All members of the Nominating, Compensation, and Corporate Governance Committee qualified as independent directors of the Board in accordance with the requirements of the New York Stock Exchange, current SEC regulations, and Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

The Nominating, Compensation, and Corporate Governance Committee is responsible for all compensation decisions for the Board of Directors, the CEO and the other named executive officers. The Nominating, Compensation, and Corporate Governance Committee annually reviews the levels of compensation along with the performance results on goals and objectives relating to compensation for the named executive officers. Based on this evaluation, the Nominating, Compensation, and Corporate Governance Committee makes decisions related to executive compensation programs with final approval by the independent directors of the Board.

The Nominating, Compensation, and Corporate Governance Committee has sole authority to retain or terminate a compensation consultant or other adviser as it deems appropriate. Additionally, the Nominating, Compensation, and Corporate Governance Committee annually reviews all incentive and equity-based plans, proposed benefit plans, or arrangements that may provide benefits for the executive officers.

Role of the Executive Officers. Our CEO annually reviews the performance of the other named executive officers, after which the CEO presents his conclusions and recommendations to the Nominating, Compensation, and Corporate Governance Committee for approval. The Nominating, Compensation, and Corporate Governance Committee has absolute discretion as to whether it approves the recommendations of the CEO or makes adjustments, as it deems appropriate. The CEO, CFO and other senior officers work with the Nominating, Compensation, and Corporate Governance Committee to gather and compile data that are needed for benchmarking purposes or for other analysis conducted by the Nominating, Compensation, and Corporate Governance Committee’s independent consultants and advisers.

Role of the Compensation Consultant. In making compensation decisions for 2016, the Nominating, Compensation, and Corporate Governance Committee did not utilize the services of a compensation consultant.

Benchmarking. In 2016, the Nominating, Compensation, and Corporate Governance Committee did not obtain or perform compensation benchmarking from an external compensation consultant.

Risk Considerations. The Nominating, Compensation, and Corporate Governance Committee reviews the risks and rewards associated with the Company’s compensation programs from time to time. This review assesses the material elements of executive and non-executive employee compensation and has concluded that our policies and practices do not create risk that is reasonably likely to have a material adverse effect on the Company. We believe that our compensation programs encourage and reward prudent business judgment and appropriate risk taking over the short-term and long-term.

Elements of Compensation

Total direct compensation includes cash, in the form of base salary and annual incentives, and long-term equity incentives. The Nominating, Compensation, and Corporate Governance Committee strives to be informed in its determination of the appropriate compensation mix and award levels for the named executive officers, including consideration of publicly available information and the retention of compensation consultants when deemed appropriate. The Nominating, Compensation, and

- 133 -

Corporate Governance Committee’s principles of balance between executive and shareholder interests, retention of talented executives, and fostering improved Company performance guide its compensation decisions. The elements of compensation used to compensate the named executive officers include the following:


•	base salary;


•	annual incentives;


•	long-term equity awards;


•	401(k) retirement benefits;


•	health and insurance benefits; and


•	perquisites.

Base Salary. The Company’s philosophy is to pay named executive officers a base salary that it considers to be competitive based on each employee’s experience, performance and any other unique factors or qualifications. Generally, the Company seeks to position cash compensation based on its historical practices and a desire to remain competitive in attracting and retaining executive talent. The Nominating, Compensation, and Corporate Governance Committee will determine compensation changes based on the following:


•	the terms of the executive’s employment agreement;


•	the executive’s performance;


•	the performance of the Company;


•	the performance of the individual business or corporate function for which the executive is responsible;


•	the nature and importance of the position and role within the Company;


•	the scope of the executive’s responsibility; and


•	the current compensation package in place for that executive, including the executive’s current annual salary and potential incentive awards under the Company’s annual and long-term incentive plans.

Annual Incentives. The Nominating, Compensation, and Corporate Governance Committee used several measures to evaluate 2016 performance, including earnings per share, non-performing assets/loans, return on average assets and efficiency ratio. Executive officers were awarded annual incentive bonuses based on the accomplishment of these goals and the responsibilities of their respective roles in the Company.

Long-Term Equity Awards. The Nominating, Compensation, and Corporate Governance Committee endorses the use of an equity-based component, such as restricted stock, as part of executive compensation because this aligns the executives’ long-term interests with those of the Company’s shareholders. For purposes of retention, the Nominating, Compensation, and Corporate Governance Committee believes that grants of restricted stock should be accompanied with meaningful performance and service conditions to encourage valued employees to remain with the Company.

The Yadkin Valley Financial Corporation 2008 Omnibus Stock Ownership and Long Term Incentive Plan (the “2008 Stock Plan”) authorized the issuance of awards to certain employees, officers, and directors of the Company. There are 9,621 shares available for future issuance, and no unvested restricted stock awards or vested stock options remain outstanding under the 2008 Stock Plan. The Yadkin Financial Corporation 2013 Equity Incentive Plan (the “2013 Incentive Plan”) also authorized the issuance of incentive stock awards to certain employees, officers, and directors of the Company. The 2013 Incentive Plan authorized 300,000 shares for issuance and as of December 31, 2016, 205,000 shares restricted stock awards have been granted, including 136,000 shares granted to executive officers.

The awards may be issued in the form of incentive stock option grants, nonstatutory stock option grants, restricted stock awards, stock appreciation rights, and/or long term incentive compensation units. Option exercise prices are established at market value on the grant date. Vesting provisions for granted stock options and restricted stock are at the discretion of the Nominating, Compensation, and Corporate Governance Committee of the Board of Directors. Upon termination, unexercised options held by employees are forfeited and made available for future grants. The Company funds the option shares and restricted stock from authorized but unissued shares.

The 2008 Stock Plan and 2013 Incentive Plan provide that awards may be made for 10 years from their respective effective dates of March 20, 2008 and March 21, 2013. They are administered by the Nominating, Compensation, and Corporate Governance Committee, which selects eligible employees to participate in the plan and determines the type, amount and duration of all individual awards. The Nominating, Compensation, and Corporate Governance Committee carefully considers the following factors when determining the type and amount of equity to award:

- 134 -


•	prior awards issued to the executive officer;


•	to reward the executive for the achievement of long-term performance;


•	proportion of total compensation on an annual basis consisting of equity awards; and


•	market data on the median level of equity awarded to comparable positions.

For further details on our long-term equity awards, please refer to “Grants of Plan-Based Awards for Fiscal Year 2016” following the Summary Compensation Table below.

Perquisites and Executive Benefits. The Company provided the following perquisites in 2016 to selected named executive officers:


•	company cars;


•	club memberships;


•	401(k) match; and


•	health care insurance.

For further details on our perquisites, please refer to the supplementary table following the Summary Compensation Table below.

We view certain perquisites as being beneficial to the Company, in addition to being compensatory to the executive officers. For example, the club memberships are regularly used in the general course of our business, such as for business meetings or entertaining. The company cars are used primarily for business purposes. In addition, these perquisites, at a minor expense to the Company, provide a useful benefit in our efforts to recruit, attract and retain top executive talent. We do not provide SERPs for our executives.

Total Compensation. The allocation of total compensation between base salary, annual incentives, long-term (equity) awards and other compensation is based on a variety of factors. The Nominating, Compensation, and Corporate Governance Committee considers a combination of the named executive officer’s performance, the performance of the Company and the executive’s role within the Company. Going forward, the Company expects named executive officers to earn a significant portion of their compensation in the form of performance-based, long-term restricted stock.

Securities Trading and Anti-Hedging Policy

The Board has adopted an insider trading policy. This policy expressly prohibits directors, officers or certain other employees from trading, either directly or indirectly, in securities of the Company after becoming aware of material nonpublic information related to the Company. To further ensure adherence with this policy, guidelines have been established for blackout periods and prohibiting inappropriate disclosure of material nonpublic information to external parties. The insider trading policy provides guidance as to what constitutes material information and when information becomes public for purposes of the policy. The insider trading policy includes transactions by family members and under Company plans, as well as other transactions which may be prohibited, such as short-term trading, short sales, trading in publicly-traded options, hedging transactions, and margin purchases. The policy addresses the consequences of an insider trading violation, additional trading restrictions and certain pre-clearance requirements applicable to directors and executive officers. The policy requires all persons subject to the policy, including all named executive officers, to provide written certification of their understanding of, and intent to comply with, the policy.

Tax Deductibility of Executive Officer Compensation

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million paid to a corporation’s chief executive officer and the four other most highly compensated executive officers. To date, this provision has had no effect on the Company. However, in the future, insofar as practicable, the Nominating, Compensation, and Corporate Governance Committee and the Board may take actions to better assure that the future cash and equity components of total compensation will be tax deductible, for example, by the use of shareholder-approved plans that are intended to comply with Section 162(m) of the Internal Revenue Code.

Nominating, Compensation, and Corporate Governance Committee Report

The Nominating, Compensation, and Corporate Governance Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based upon such review, the related discussions and such other matters deemed relevant and appropriate to the Nominating, Compensation, and Corporate Governance Committee, the Nominating, Compensation, and Corporate Governance Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this annual report on Form 10-K.

- 135 -

This report is submitted by the Nominating, Compensation, and Corporate Governance Committee:

J. Adam Abram, Chairman

Thomas J. Hall

Steven J. Lerner

Harry C. Spell

Summary Compensation Table

The following table summarizes the compensation of our named executive officers:


•	All persons serving as our principal executive officer during 2016;


•	All persons serving as our principal financial officer during 2016; and


•	The three other most highly compensated officers who were serving at the end of 2016.



Name and Principal Position	Year	Salary		Bonus (2)		Stock Awards (3)(4)		All Other Compensation (5)		Total

Scott M. Custer	2016	$	600,000	$	800,000	$	1,040,400	$	18,597	$	2,458,997
President and Chief Executive Officer	2015	519,231		150,000		614,400		17,854		1,301,485
	2014	250,000		410,000		—		6,865		666,865

Terry S. Earley	2016	400,000		575,000		693,600		38,569		1,707,169
Executive Vice President and	2015	363,462		125,000		204,800		35,052		728,314
Chief Financial Officer	2014	175,000		200,000		—		17,458		392,458

Robin S. Hager (1)	2016	245,833		125,000		233,925		14,402		619,380
Executive Vice President and
Chief Administrative Officer

Steven W. Jones	2016	400,000		575,000		683,600		46,320		1,714,920
Executive Vice President and	2015	363,462		125,000		204,800		43,429		736,691
Chief Banking Officer	2014	175,000		200,000		—		20,129		395,129

Edwin H. Shuford, III	2016	275,000		295,000		346,800		41,577		958,377
Executive Vice President and	2015	259,642		60,000		122,880		44,822		487,344
Chief Credit Officer	2014	248,077		115,000		—		43,890		406,967



(1)	For Ms. Hager, the amounts reflect a partial year because she was appointed Executive Vice President and Chief Administrative Officer on March 1, 2016 upon the closing of the NewBridge Acquisition.
(2)	With respect to Messrs. Custer, Earley, Jones and Shuford, amounts in this column are incentive bonuses earned in 2015 and paid in February 2016, as well as bonuses earned in 2016 and paid in December 2016.
(3)	With respect to Messrs. Custer, Earley, Jones and Shuford, amounts in this column are calculated using the date that restricted stock was 100% vested and restrictions lapsed. The closing price of our common stock on December 21, 2016 was $34.68 per share.
(4)	With respect to Ms. Hager, the amount in this column is calculated using the date that restricted stock units were 100% vested. 5,000 shares were issued on March 1, 2016, and the closing price of our common stock was $22.19 per share. 3,546 shares were issued on December 21, 2016, and the closing price of our common stock was $34.68 per share.
(5)	The Company provides each named executive officer with certain group life, health and other noncash benefits generally available to all salaried employees that are not included in this column pursuant to SEC rules. In 2016, the amounts for “All Other Compensation” are as follows:

- 136 -



Name	Automobile Provision		Club Membership Fees		Employer 401(k) Match		Medical Insurance		Total

Scott M. Custer	$	3,040	$	—	$	—	$	15,557	$	18,597
Terry S. Earley	2,687		—		13,125		22,757		38,569
Robin S. Hager	—		—		8,911		5,491		14,402
Steven W. Jones	2,463		11,518		9,923		22,416		46,320
Edwin H. Shuford, III	6,816		—		12,004		22,757		41,577

Grants of Plan-Based Awards for Fiscal Year 2016

A total of 100,000 shares of plan-based restricted stock awards were granted to employees under the 2013 Incentive Plan in 2016. Of the total, 80,000 shares were granted to named executive officers and vested 100% on December 21, 2016. 20,000 shares were granted to five other employees and will vest on the earlier of January 29, 2019 or the closing of the merger with and into FNB.

The grants to named executive officers are as follows:



Name	Grant Date		All Other Stock Awards: Number of Shares of Stock or Units		Grant Date Fair Value of Stock and Option Awards (1)

Scott M. Custer		1/29/16		30,000	$	697,200
Terry S. Earley		1/29/16		20,000		464,800
Steven W. Jones		1/29/16		20,000		464,800
Edwin H. Shuford, III		1/29/16		10,000		232,400



(1)	All amounts in this column are calculated using the grant date fair value under Accounting Standards Codification Topic 718 based on the market price as of the date of grant of common stock awarded. Assumptions used in the calculation of these amounts are included in the notes to our consolidated financial statements for the year ended December 31, 2016. The closing price of our common stock on January 29, 2016 was $23.24 per share.

Outstanding Equity Awards at 2016 Fiscal Year-End



	Option Awards						Stock Awards
Name	Number of Securities Underlying Unexercised Options Exercisable	Number of Securities Underlying Unexercised Options Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise Price		Option Expiration Date	Number of Shares or Units of Stock that Have Not Vested	Market Value of Shares or Units of Stock that Have Not Vested		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (1)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (2)

Scott M. Custer	—	—	—	$	—	—	—	$	—	30,000	$	1,027,800
Terry S. Earley	—	—	—	—		—	—	—		10,000	342,600
Steven W. Jones	—	—	—	—		—	—	—		10,000	342,600
Edwin H. Shuford, III	—	—	—	—		—	—	—		6,000	205,560



(1)	All restricted stock awards will vest 100% on the earlier of June 18, 2018 or the closing of the merger with and into FNB.
(2)	Market value is based on the closing price of our common stock on December 31, 2016 of $34.26 per share.

Equity Compensation Plans at 2016 Fiscal Year End

The following table provides information as of December 31, 2016 for all equity compensation plans of the Company (including individual arrangements) under which the Company is authorized to issue equity securities.

- 137 -



Plan Category	Number of Securities To Be Issued upon Exercise of Outstanding Options, Warrants and Rights (1)	Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in First Column) (1)

Equity compensation plans approved by security holders (2)	0	0	121,621	(3)

Equity compensation plans not approved by security holders	N/A	N/A	N/A
Total	0	0	121,621



(1)	Refers to shares of common stock.
(2)	The Company has assumed outstanding stock options that had been granted under the stock option plans of acquired companies, of which 161,013 acquired options remained exercisable at a weighted average exercise price of $16.51 per share.
(3)	Includes 9,621 shares remaining for future issuance under the 2008 Stock Plan, and 112,000 shares available under the 2013 Incentive Plan.

Pension Benefits

There were no pension benefits awarded to directors, named executive officers, or employees in 2016.

Nonqualified Deferred Compensation

The Company had no nonqualified deferred compensation for the named executive officers in 2016.

Equity Awards

On March 23, 2013, the Company adopted the 2013 Incentive Plan as an employment incentive and to encourage stock ownership. For additional discussion of the 2013 Incentive Plan, please refer to “Compensation Discussion and Analysis - Elements of Compensation - Long-Term Equity Awards” above. The Company granted and issued shares of restricted stock in 2016 to the named executive officers under the 2013 Incentive Plan. These shares were 100% vested and restrictions lapsed on December 21, 2016. The named executive officers were issued restricted stock in 2015, which have not vested, and none of the restricted stock may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of by the named executive officers. While the named executive officers have voting rights and all of the other rights of a shareholder, the named executive officers will not receive cash or stock dividends, if any, as may be declared on shares of the Company’s common stock from time to time. If a named executive officer’s employment with the Company or any subsidiary of the Company is terminated for any reason while the shares are unvested, all rights to the restricted stock will terminate, and the shares will be forfeited.

Employment Agreements - Named Executive Officers

Pursuant to the merger of VantageSouth Bancshares, Inc. and Piedmont Community Bank Holdings, Inc. with Yadkin Financial Corporation on July 4, 2014 (the “VantageSouth/Piedmont Acquisition”), each of Messrs. Custer, Earley, Jones and Shuford entered into employment agreements that superseded the terms of their prior employment agreements and, as a condition of these new employment agreements, they each waived any right to receive cash change-in-control payments to which they might otherwise have been entitled as a result of the VantageSouth/Piedmont Acquisition. Pursuant to the merger of NewBridge Bancorp, a North Carolina Corporation and Navy Merger Sub Corp., a North Carolina corporation with and a wholly-owned subsidiary of Yadkin Financial Corporation on March 1, 2016 (the “NewBridge Acquisition”), Ms. Hager entered into an employment agreement that superseded the terms of her prior Change of Control Agreement and, as a condition of her new employment agreement, she waived any right to receive change-in-control payments to which she might otherwise have been entitled as a result of the NewBridge Acquisition. Mr. DeMarcus, who has left Yadkin, and Mr. Towell, who has transitioned to a Yadkin board position, are each party to separation agreements with Yadkin. FNB has entered into a summary of terms with each of Messrs. Custer, Earley, Jones and Shuford and Ms. Hager that, in the case of Messrs. Earley and Shuford and Ms. Hager, memorialize the severance benefits due to them under their existing employment agreement and, in the case of Messrs. Custer and Jones, summarize the basic terms on which Messrs. Custer and Jones may have continuing roles with FNB.

- 138 -

Mr. Custer. Yadkin and Yadkin Bank entered into an employment agreement with Mr. Custer in order to establish his duties and compensation and to provide for his employment as Chief Executive Officer following the consummation of the VantageSouth/Piedmont Acquisition. By entering into the new agreement, Mr. Custer waived any right or entitlement to any severance payments, compensation, monies, or benefits under his prior employment agreement with Piedmont, VantageSouth, and VantageSouth Bank. The agreement provides for an initial term of employment of three years following the consummation of the VantageSouth/Piedmont Acquisition. Within ninety (90) days of the second anniversary of the consummation of the VantageSouth/Piedmont Acquisition, and, as may be necessary prior to each anniversary of the consummation of the VantageSouth/Piedmont Acquisition thereafter, the agreement provides that the parties will meet in good faith to determine whether to extend the term of the agreement for an additional one-year period beyond the then-effective expiration date. The agreement provides that, during the initial term, Mr. Custer’s base salary will be $500,000 per year. After the initial term, base salary will be reviewed by the Board of Directors of Yadkin (or a committee of the Yadkin Board of Directors delegated such authority) not less often than annually. The agreement provides that Mr. Custer’s base salary may not be decreased without his written consent, except in connection with an across-the-board salary decrease affecting all similarly situated executives of Yadkin and Yadkin Bank in the same proportion. In addition, the agreement provides that he is eligible for discretionary bonuses and for participation in all other pension, profit-sharing or retirement plans maintained for the employees of Yadkin and Yadkin Bank, as well as fringe benefits normally associated with his position as Chief Executive Officer. Under the agreement, Mr. Custer may be terminated for “cause,” as defined in the agreement, and he may otherwise be terminated by Yadkin or Yadkin Bank (subject to vested rights) or may choose to terminate his employment. The agreement provides that Mr. Custer will be entitled to certain severance benefits if he is terminated by Yadkin or Yadkin Bank without cause or if he terminates the agreement for “good reason” (as defined in the agreement), contingent upon his execution of a release of claims against Yadkin or Yadkin Bank and his adherence to certain non-compete restrictions. Yadkin has the right under the agreement to reduce any such payment of severance benefits as necessary under the Internal Revenue Code to avoid the imposition of excise taxes on Mr. Custer or the disallowance of a deduction to Yadkin. Yadkin is also required under the agreement to indemnify Mr. Custer in the event of a suit against him by reason of his current or prior service as an officer or director of Yadkin or Yadkin Bank, as well as required to purchase directors’ and officers’ liability insurance covering him for his term of employment and for six years thereafter.

Messrs. Earley and Jones. Yadkin and Yadkin Bank also entered into employment agreements with each of Messrs. Earley and Jones in order to establish their duties and compensation and to provide for their employment as Chief Financial Officer and Chief Banking Officer, respectively, following the consummation of the VantageSouth/Piedmont Acquisition. Each agreement provides for an initial term of employment of three years following the consummation of the VantageSouth/Piedmont Acquisition. Within 90 days of the second anniversary of the consummation of the VantageSouth/Piedmont Acquisition, and, as may be necessary prior to each anniversary of the consummation of the merger thereafter, each agreement provides that the parties thereto will meet in good faith to determine whether to extend the term of the agreement for an additional one-year period beyond the then-effective expiration date. During the initial term, each of Messrs. Earley’s and Jones’s base salary will be $350,000 per year. After the initial term, base salary will be reviewed by the Board of Directors of Yadkin (or a committee of the Yadkin Board of Directors delegated such authority) not less often than annually. Each agreement provides that base salary may not be decreased without the executive’s written consent, except in connection with an across-the-board salary decrease affecting all similarly situated executives of Yadkin and Yadkin Bank in the same proportion. In addition, each agreement provides that the executive is eligible for discretionary bonuses and for participation in all other pension, profit-sharing or retirement plans maintained for the employees of Yadkin and Yadkin Bank, as well as fringe benefits normally associated with the positions of Chief Financial Officer and Chief Banking Officer, respectively. Under the agreements, each of Messrs. Earley and Jones may be terminated for “cause,” as defined in each agreement, and may otherwise be terminated by Yadkin or Yadkin Bank (subject to vested rights) or may choose to terminate his employment.

Ms. Hager. Yadkin and Yadkin Bank also entered into an employment agreement with Ms. Hager on March 1, 2016 in order to establish her duties and compensation and to provide for her employment as Chief Administrative Officer following the consummation of the NewBridge Acquisition. Ms. Hager’s agreement provides for an initial term of employment of three years. Within 90 days of the second anniversary of the consummation of the NewBridge Acquisition, and, as may be necessary prior to each anniversary of the consummation of the merger thereafter, each agreement provides that the parties thereto will meet in good faith to determine whether to extend the term of the agreement for an additional one-year period beyond the then-effective expiration date. During the initial term, Ms. Hager’s base salary will be $295,000 per year. After the initial term, Ms. Hager’s base salary will be reviewed by the Board of Directors of Yadkin (or a committee of the Yadkin Board of Directors delegated such authority) not less often than annually. Ms. Hager’s agreement provides that base salary may not be decreased without her written consent, except in connection with an across-the-board salary decrease affecting all similarly situated executives of Yadkin and Yadkin Bank in the same proportion. In addition, Ms. Hager’s agreement provides that she is eligible for discretionary bonuses and for participation in all other pension, profit-sharing or retirement plans maintained for the employees of Yadkin and Yadkin Bank, as well as fringe benefits normally associated with the positions of Chief Financial Officer and Chief Banking Officer, respectively.

- 139 -

Under the agreement, Ms. Hager may be terminated for “cause,” as defined in the agreement, and may otherwise be terminated by Yadkin or Yadkin Bank (subject to vested rights) or may choose to terminate her employment.

The agreements provide that Messrs. Earley and Jones and Ms. Hager will be entitled to certain severance benefits upon termination by Yadkin or Yadkin Bank without cause or upon Messrs. Earley’s or Jones’s or Ms. Hager’s termination for “good reason” (as defined in each agreement). Each of Messrs. Earley and Jones and Ms. Hager will be entitled to additional severance benefits upon termination by Yadkin or Yadkin Bank without cause or if he terminates the agreement for “good reason” within one year after a “change in control.” For purposes of each agreement, a “change in control” generally will occur if: (i) one person (or more than one person acting as a group) acquires ownership of stock of Yadkin or Yadkin Bank that, together with the stock already held by such person(s), brings the total amount of stock owned by such person(s) above fifty percent of the total fair market value or total voting power of the stock of either Yadkin or Yadkin Bank; (ii) one person (or more than one person acting as a group) acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition) ownership of stock of Yadkin or Yadkin Bank possessing thirty percent or more of the total voting power of the stock of such corporation; (iii) a majority of the members of the Board of Directors of Yadkin or Yadkin Bank are replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority (or alternative larger portion) of the members of such Board prior to the date of the appointment or election; or (iv) the sale of all or substantially all of the assets of Yadkin or Yadkin Bank. The payment of any such severance benefits are contingent upon the executive’s execution of a release of claims against Yadkin or Yadkin Bank and his or her adherence to certain non-compete restrictions. Yadkin has the right, under each agreement, to reduce any such payment of severance benefits as necessary under the Internal Revenue Code to avoid the imposition of excise taxes on the executive or the disallowance of a deduction to Yadkin. Yadkin is also required under the agreements to indemnify each executive in the event of a suit against the executive by reason of his or her current or prior service as an officer or director of Yadkin or Yadkin Bank, as well as required to purchase directors and officers liability insurance covering the executive for his or her term of employment and for six years thereafter.

Mr. Shuford. Yadkin and Yadkin Bank also entered into amended and restated employment agreements with Mr. Shuford in order to establish his duties and compensation and to provide for his employment as Chief Credit Officer, following the consummation of the VantageSouth/Piedmont Acquisition. By entering into the new agreement, Mr. Shuford waived any right or entitlement to any severance payments, compensation, monies, or benefits under his prior employment agreement. The agreement provides for an initial term of employment of three years following the consummation of the VantageSouth/Piedmont Acquisition. Within 90 days of the second anniversary of the consummation of the VantageSouth/Piedmont Acquisition, and, as may be necessary prior to each anniversary of the consummation of the VantageSouth/Piedmont Acquisition thereafter, the agreement provides that the parties thereto will meet in good faith to determine whether to extend the term of the agreement for an additional one-year period beyond the then-effective expiration date. During the initial term, Mr. Shuford’s base salary will be $250,000 per year. After the initial term, base salary will be reviewed by the Board of Directors of Yadkin (or a committee of the Yadkin Board of Directors delegated such authority) not less often than annually. The agreement provides that base salary may not be decreased without the executive’s written consent, except in connection with an across-the-board salary decrease affecting all similarly situated executives of Yadkin and Yadkin Bank in the same proportion. In addition, the agreement provides that the executive is eligible for discretionary bonuses and for participation in all other pension, profit-sharing or retirement plans maintained for the employees of Yadkin and Yadkin Bank, as well as fringe benefits normally associated with the position of Chief Credit Officer. Under the agreement, Mr. Shuford may be terminated for “cause,” as defined in the agreement, and may otherwise be terminated by Yadkin or Yadkin Bank (subject to vested rights) or may choose to terminate his employment.

The agreement provides that Mr. Shuford will be entitled to certain severance benefits upon termination by Yadkin or Yadkin Bank without cause or upon Mr. Shuford’s termination for “good reason” (as defined in the agreements). Mr. Shuford will be entitled to additional severance benefits if he is terminated by Yadkin or Yadkin Bank without cause or if he terminates the agreement for “good reason” within one year after a “change in control.” For purposes of each agreement, a “change in control” generally will occur if: (i) one person (or more than one person acting as a group) acquires ownership of stock of Yadkin or Yadkin Bank that, together with the stock already held by such person(s), brings the total amount of stock owned by such person(s) above fifty percent of the total fair market value or total voting power of the stock of either Yadkin or Yadkin Bank; (ii) one person (or more than one person acting as a group) acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition) ownership of stock of Yadkin or Yadkin Bank possessing thirty percent or more of the total voting power of the stock of such corporation; (iii) a majority of the members of the Board of Directors of Yadkin or Yadkin Bank are replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority (or alternative larger portion) of the members of such Board prior to the date of the appointment or election; or (iv) the sale of all or substantially all of the assets of Yadkin or Yadkin Bank. The payment of any such severance benefits is contingent upon the executive’s execution of a release of claims against Yadkin or Yadkin Bank and his adherence to certain non-compete restrictions. Yadkin has the right, under each agreement, to reduce any such payment of severance benefits as necessary under the Internal Revenue Code to avoid the imposition of excise taxes on the executive or the disallowance of a deduction to Yadkin. Yadkin is also required under the agreements to

- 140 -

indemnify the executive in the event of a suit against the executive by reason of his current or prior service as an officer or director of Yadkin or Yadkin Bank, as well as required to purchase directors and officers liability insurance covering the executive for his term of employment and for six years thereafter.

Potential Payments upon Termination of Employment or Change in Control

The following table sets forth the benefits payable to each named executive officer assuming the occurrence of certain hypothetical events on December 31, 2016.



Name	Executive Voluntary Termination or Company Termination for Cause		Executive Termination for Good Reason, or Company Termination Without Cause (1)		Change in Control (2)(3)(4)		Death or Disability (5)
Scott M. Custer
Cash Severance	$	—	$	2,010,000	$	2,010,000	$	—
Accrued Cash Bonus		—		500,000		500,000		320,000
Medical Benefits		—		23,335		23,335		—
Total Value	$	—	$	2,533,335	$	2,533,335	$	320,000

Terry S. Earley
Cash Severance	$	—	$	1,125,000	$	1,681,875	$	—
Accrued Cash Bonus		—		325,000		325,000		175,000
Medical Benefits		—		34,136		34,136		—
Total Value	$	—	$	1,484,1361	$	2,041,011	$	175,000

Robin S. Hager
Cash Severance	$	—	$	744,500	$	1,113,028	$	—
Accrued Cash Bonus		—		125,000		125,000		—
Medical Benefits		—		8,237		8,237		—
Total Value	$	—	$	1,047,391	$	1,246,265	$	—

Steven W. Jones
Cash Severance	$	—	$	1,125,000	$	1,681,875	$	—
Accrued Cash Bonus		—		325,000		325,000		175,000
Medical Benefits		—		33,624		33,624		—
Total Value	$	—	$	1,483,624	$	2,040,499	$	175,000

Edwin H. Shuford
Cash Severance	$	—	$	725,000	$	1,083,875	$	—
Accrued Cash Bonus		—		175,000		175,000		175,000
Medical Benefits		—		34,136		34,136		—
Total Value	$	—	$	934,136	$	1,293,011	$	175,000

- 141 -



(1)	Each named executive officer shall receive two times current base salary plus two times the average performance bonus paid over the last three complete calendar years. Such payment shall be paid as cash severance in 52 equal installments, plus reimbursement for 18 months of COBRA premium for coverage for the named executive officer and his or her dependents. In addition, the named executive officer shall receive the cash bonus for the calendar year in which his or her termination occurs, calculated as the average of the performance bonus earned in the three complete calendar years immediately preceding, pro-rated to reflect the proportional amount of the named executive officer’s service during the calendar year.
(2)	Mr. Custer shall receive two times current base salary plus two times the average performance bonus paid over the last three complete calendar years. Such payment shall be paid as cash severance in 52 equal installments, plus reimbursement for 18 months of COBRA premium for coverage for Mr. Custer and his dependents. In addition, Mr. Custer shall receive the cash bonus for the calendar year in which his termination occurs, calculated as the average of the performance bonus earned in the three complete calendar years immediately preceding.
(3)	Messrs. Earley, Jones, Shuford and Ms. Hager shall each receive three times current base salary plus three times the average performance bonus paid over the last three complete calendar years. Such payment shall be paid as cash severance paid in a lump sum, plus a lump sum payment in an amount equal to the monthly COBRA premium for the named executive officer and his dependents for a period of one (1) year. In addition, the named executive officer shall receive the cash bonus for the calendar year in which his termination occurs, calculated as the average of the performance bonus earned in the three complete calendar years immediately preceding.
(4)	Each executive may receive additional consideration by reason of the contemplated merger between Yadkin and FNB. Such additional consideration is disclosed in greater detail in that certain definitive proxy statement relating to merger or acquisition on Form DEFM14A filed by Yadkin on October 17, 2016.
(5)	If a named executive officer was terminated on December 31, 2016 due to the named executive officer’s death or disability, the named executive officer would receive the cash bonus for the calendar year in which his or her termination occurs, calculated as the average of the annual cash bonus earned in the three complete calendar years immediately preceding.

Piedmont Phantom Equity Plan and Related Rabbi Trust

The Piedmont Phantom Equity Plan (the “PPEP”) was established by the Piedmont Community Bank Holdings, Inc. (“Piedmont”) board of directors and approved by the Piedmont shareholders on January 24, 2014 to motivate, retain and reward certain current and former employees, officers and directors of Piedmont and its affiliates and subsidiaries by giving them the opportunity to share in the appreciation of the value of the company. Because the PPEP was implemented by Piedmont prior to the VantageSouth/Piedmont Acquisition, the grants made were not included in the preceding tables and discussions. Under the PPEP, a group of key individuals were granted units (each, a “Unit”) credited to an account maintained for each participant. Some of those Units were subject to vesting on dates specific to each participant. Each participant was entitled to receive the aggregate “Unit Value” of the vested portion of his or her account, to be paid to the participant on the earlier of (i) December 31, 2018, or (ii) a “change of control” (as defined in the PPEP). The VantageSouth/Piedmont Acquisition did not constitute a “change of control” under the terms of the plan. In general, Unit Value was determined by subtracting the per-Unit base price for a Unit from the “full” value of such Unit, as defined. Initially, the “full” value of each Unit was equal to the value of one share of Piedmont common stock. When the VantageSouth/Piedmont Acquisition was completed, the “full” value of each Unit was adjusted to equal the per share consideration that a Piedmont shareholder received for one share of Piedmont common stock (that is, 6.28597 shares of Yadkin voting common stock plus any per share cash merger consideration). Each Unit had a per-Unit base price specific to that Unit (the initial base price), which is generally increased by 8% per year, unless and until certain initial investors in Piedmont realize a return of their capital investment plus a cumulative return equal to 8% per year, as further provided in the Piedmont Phantom Equity Plan (such return, the “Investment Hurdle”). Once the Investment Hurdle is met, the per-Unit base price returns to its initial base price.

Pursuant to the VantageSouth/Piedmont Acquisition, Yadkin assumed the obligations represented by the PPEP, and issued 856,447 shares of Yadkin voting common stock to an irrevocable rabbi trust to assist it in meeting its obligations under the PPEP and the VantageSouth/Piedmont Acquisition. Simultaneous with the consummation of the VantageSouth/Piedmont Acquisition, Yadkin filed with the SEC a registration statement on Form S-8 to register under the Securities Act the shares of Yadkin voting common stock held by the rabbi trust. These shares (i) are issued and outstanding shares of Yadkin voting common stock with all rights of a holder of such shares, including the right to vote and receive dividends, and (ii) are to be used by Yadkin first to make distributions and satisfy all obligations under the PPEP and then to distribute any remaining shares of Yadkin voting common stock held by the rabbi trust to the prior holders of Piedmont common stock that participated in the VantageSouth/Piedmont Acquisition. Certain of Yadkin’s named executive officers and directors, namely, Messrs. Abram, Custer, Lerner, Earley and Jones, participated in the PPEP and may receive distributions of assets by reason of such participation from the rabbi trust. If there has not been a “change of control,” then the aggregate Unit Value will be distributed to the PPEP participants on December 31, 2018. Shares of Yadkin voting common stock held in the rabbi trust will be used to satisfy these distribution obligations under the PPEP.

- 142 -

The principal of the rabbi trust and any earnings thereon are held separate and apart from other funds of Yadkin and are to be used exclusively for the uses and purposes of PPEP participants, Piedmont shareholders participating in the VantageSouth/Piedmont Acquisition, and general creditors of Yadkin in certain circumstances, including bankruptcy and insolvency. PPEP participants and their beneficiaries have no preferred claim on, or any beneficial ownership interest in, any assets of the rabbi trust. Any rights created under the PPEP, the VantageSouth/Piedmont Acquisition and the rabbi trust are unsecured contractual rights of each of the PPEP participants and Piedmont shareholders participating in the VantageSouth/Piedmont Acquisition and their beneficiaries against Yadkin. Any assets held by the rabbi trust will be subject to claims of Yadkin’s general creditors under federal and state law in certain circumstances, including bankruptcy and insolvency.

Pursuant to the VantageSouth/Piedmont Acquisition, Yadkin established a committee for the purpose of administering the PPEP, which is comprised of two former directors of Piedmont and two directors of Yadkin.

Director Compensation

Director Fees. Directors who are also employees of the Company receive no compensation for their service as directors. Effective January 1, 2016, non-employee directors receive an annual retainer fee of $48,000 ($55,000 in the case of the Chairs of the Bank’s ALCO Committee; the Audit Committee; the Bank’s Directors Loan Committee; the Bank’s Executive Committee; the Nominating, Compensation, and Corporate Governance Committee; and the Risk Management Committee; and $50,000 in the case of the Lead Independent Director of the Board.) There are no additional fees paid to any director for attending Board of Directors meetings or Board committee meetings.

Equity Compensation. The Company did not grant any equity awards to its non-employee directors during the year ended December 31, 2016 for their service on the Board.

Other. Our directors are also covered by director and officer liability insurance, and each is entitled to reimbursement for reasonable out-of-pocket expenses in connection with meeting attendance.

The following table presents a summary of all compensation earned by the Company’s directors for their service as such during the year ended December 31, 2016, other than with respect to Mr. Custer, who served as an executive officer of the Company during 2016 and whose compensation is set forth in the Summary Compensation Table above.

- 143 -

2016 Director Compensation Table



Name	Fees Earned or Paid in Cash		All Other Compensation		Total

Directors
J. Adam Abram	$	52,917	$	—	$	52,917
Michael S. Albert (1)	28,000		—		28,000
David S. Brody (2)	55,000		—		55,000
Harry M. Davis	55,000		—		55,000
Barry Z. Dodson (1)(3)	28,000		—		28,000
Thomas J. Hall	48,000		—		48,000
Thierry Ho (4)	48,000		—		48,000
Steven J. Lerner	48,000		—		48,000
Michael S. Patterson (1)(5)	28,000		—		28,000
Mary E. Rittling (1)	28,000		—		28,000
Harry C. Spell	55,000		—		55,000
Joseph H. Towell (6)	100,000		—		55,000
Richard A. Urquhart, III (1)	32,083		—		32,083
Nicolas D. Zerbib (7)	48,000		—		48,000

Former Directors
Alan N. Colner (8)	55,000		—		55,000
James A. Harrell, Jr. (8)	48,000		—		48,000
Larry S. Helms (8)	48,000		—		48,000
Dan W. Hill, III (8)	55,000		—		55,000



(1)	The 2016 Director Compensation Table reflects partial year compensation for Messrs. Albert, Dodson, Patterson, Urquhart and Ms. Rittling because they were appointed to the Company’s Board on March 1, 2016 upon the closing of the NewBridge Acquisition.
(2)	Mr. Brody’s fees were paid to Terrior, LLC.
(3)	Mr. Dodson’s wife invested $100,000 in a Subordinated Note Purchase Agreement (the “Note”) on March 14, 2014. The Note has a maturity date of March 14, 2024, and bears interest at a fixed interest rate of 7.25% per year.
(4)	Mr. Ho’s fees were paid to Lightyear Capital II, LLC. Mr. Ho resigned from the Board of directors effective November 30, 2016.
(5)	Upon the consummation of the merger of CapStone Bank and NewBridge Bank on April 1, 2014, Mr. Patterson entered into an independent contractor agreement for a term of five years at an annual fee of $150,000.
(6)	Pursuant to Mr. Towell’s June 30, 2015 severance agreement, he will receive for three years, beginning July 1, 2015, an annual amount equal to $100,000, less any compensation for his services as Chairman and Chairman of the Executive Committee of the Board of Directors of the Company, payable in quarterly installments.
(7)	Mr. Zerbib’s fees were paid to Stone Point Capital LLC. As described above under “Events Occurring After Fiscal Year End,” Mr. Zerbib resigned from the Board of Directors effective January 19, 2017.
(8)	The 2016 Director Compensation Table reflects full year compensation for Messrs. Colner, Harrell, Helms and Hill, who resigned from the Company’s Board of Directors in 2016 effective with the NewBridge Acquisition.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The following table sets forth information regarding the beneficial ownership of our common stock as of February 28, 2017 by (1) each person or entity known to us to be the beneficial owner of more than five percent of our outstanding common stock, based on the most recent Schedules 13G and 13D Reports filed with the SEC and the information contained in those filings; (2) each of our current directors; (3) each of our named executive officers; and (4) all of our present executive officers and directors as a group. Unless otherwise indicated, the address for each person included in the table is 3600 Glenwood Avenue, Suite 300, Raleigh, North Carolina 27612.

Information relating to beneficial ownership of our common stock is based upon “beneficial ownership” concepts described in the

- 144 -

rules issued under the Securities Exchange Act of 1934, as amended. Under these rules a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or “investment power,” which includes the power to dispose or to direct the disposition of the security. Under the rules, more than one person may be deemed to be a beneficial owner of the same securities. A person is also deemed to be a beneficial owner of any security as to which that person has the right to acquire beneficial ownership within sixty (60) days from March 1, 2017.



Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Shares Beneficially Owned (1)

5% Shareholder:
BlackRock, Inc. (2)	3,204,723	6.19%

Directors:
J. Adam Abram (3)	404,007	*
Michael S. Albert (4)	27,009	*
David S. Brody (3)(5)	20,942	*
Scott M. Custer (3)(6)	130,598	*
Harry M. Davis	17,141	*
Barry Z. Dodson (7)	40,869	*
Thomas J. Hall	—	*
Steven J. Lerner (8)	17,949	*
Michael S. Patterson (9)	267,922	*
Mary E. Rittling (10)	4,320	*
Harry C. Spell (11)	126,255	*
Joseph H. Towell	88,919	*
Richard A. Urquhart, III (12)	24,973	*

Named Executive Officers:
Terry S. Earley (3)(13)	31,227	*
Robin S. Hager (14)	21,014	*
Steven W. Jones (3)(15)	39,670	*
Edwin H. Shuford, III (16)	25,765	*

All Directors and Executive Officers, as a Group (17 persons) (17)	1,288,580	2.49%

*Less than 1% of outstanding shares

- 145 -



(1)	The percentage of our common stock beneficially owned was calculated based on 51,789,280 shares of common stock issued and outstanding as of February 28, 2017. The percentage treats as outstanding all shares underlying equity awards that are exercisable within 60 days after March 1, 2017 held by the Directors and Executive Officers, but not shares underlying equity awards that are exercisable by other stockholders.
(2)	The information regarding BlackRock, Inc. is based on a Schedule 13G filed with the SEC on January 30, 2017. BlackRock, Inc. has sole voting authority over 3,108,181 shares and sole dispositive power over 3,204,723 shares of common stock.
(3)	The amount of common stock beneficially owned by Messrs. Abram, Brody, Custer, Lerner, Earley and Jones does not include shares that are held by the rabbi trust under the Piedmont Phantom Equity Plan.
(4)	Includes 6,931 shares held in an IRA, 399 shares by Mr. Albert’s son, and 4,993 shares held in a deferred compensation Trust.
(5)	Includes 5,638 shares held by a Trust in which Mr. Brody is Trustee, 3,079 shares held by a limited liability company of which Mr. Brody holds a 25% interest, and 2,700 shares held by a GST Trust in which Mr. Brody is Trustee.
(6)	Includes 30,000 shares restricted stock, which vest on June 18, 2018.
(7)	Includes 1,325 shares held by Mr. Dodson’s wife, 9,901 shares held in an IRA, 2,281 shares held jointly with Mr. Dodson’s daughter, 4,288 shares held jointly with Mr. Dodson’s daughter’s Trust, 2,005 shares held by Mr. Dodson’s daughter’s IRA, and 15,315 shares held in a deferred compensation Trust.
(8)	Includes 11,429 shared held by the Lerner Family Irrevocable Trust.
(9)	Includes 27,000 shares held by Mr. Patterson’s wife, and 21 shares held in Triangle Investment Club, of which Mr. Patterson is a member.
(10)	Includes 1,700 shares held by Dr. Rittling’s husband, and 1,205 shares held in a deferred compensation Trust.
(11)	Includes 1,812 shares held as custodian for Mr. Spell’s children, and 15,975 shares held by Spell Properties.
(12)	Includes 21 shares held in Triangle Investment Club, of which Mr. Urquhart is a member, and 4,138 shares held in a deferred compensation Trust.
(13)	Includes 4,375 shares in an IRA, and 10,000 shares restricted stock which vest on June 18, 2018.
(14)	Includes 5,523 shares in Ms. Hager’s 401(k) retirement plan.
(15)	Includes 10,000 shares restricted stock which vest on June 18, 2018.
(16)	Includes 6,000 shares restricted stock which vest on June 18, 2018.
(17)	Includes all shares reflected in this table as beneficially owned by each director of the Company, and by the Messrs. Earley, Jones, Shuford and Ms. Hager, each of whom was a named executive officer of the Company for the year ended December 31, 2016.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires that all of our directors and executive officers, and persons or entities holding more than 10% of a registered class of our equity securities, file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish us copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2016, all Section 16(a) forms were filed in a timely manner, except that Mr. Brody did not report shares sold with a December 12, 2016 effective date and not reported on Form 4 until December 16, 2016.

Compensation Committee Interlocks and Insider Participation

The members of the Nominating, Compensation, and Corporate Governance Committee during fiscal 2016 are Mr. Abram (Chairman), and Messrs. Hall, Ho, Lerner, Spell and Zerbib. None of these committee members was at any time during fiscal 2016 or at any other time an officer or employee of the Company, and no member of this committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. No executive officer of the Company has served on the Board of Directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of our Nominating, Compensation, and Corporate Governance Committee during fiscal year 2016.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has had, and expects to have in the future, transactions in the ordinary course of the Company’s business with directors, executive officers and their associates. As of December 31, 2016, total loans outstanding to directors and executive officers of the Company, and their associates as a group, totaled approximately $17.2 million. All transactions with directors, executive officers and their associates were made in the ordinary course of the Company’s business, on substantially the same terms, including (in the case of loans) interest rates, collateral, and repayment terms, as those prevailing at the time for comparable

- 146 -

transactions with persons not related to the lender, and have not involved more than normal risks of collectability or presented other unfavorable features.

As required by the rules of the New York Stock Exchange, the Company conducts an appropriate review of all related person transactions for potential conflict of interest situations on an ongoing basis, and all such transactions must be approved by the Company’s Audit Committee. For purposes of this review, related person transactions include all transactions that are required to be disclosed pursuant to SEC regulations. In addition to the rules of the New York Stock Exchange and SEC regulations, the Company’s ethics policy prohibits executive officers and directors from engaging in transactions when there is a conflict with their duty to protect the Company’s interest that will lead to any personal gain or benefit.

The Company annually requires each of its directors and executive officers to complete a directors’ and officers’ questionnaire, in which responses include information about the director’s or officer’s related person relationships, and the Company uses this information to make a formal determination regarding each director’s independence under the New York Stock Exchange listing standards and applicable SEC rules. The Company’s Audit Committee, which consists entirely of independent directors, annually reviews all transactions and relationships disclosed in the directors’ and officers’ questionnaires.

In addition, Yadkin Bank is subject to the provisions of Section 23A of the Federal Reserve Act, which, among other things, places limits on the amount of loans or extensions of credit to an affiliate, a purchase of or an investment in securities issued by such an affiliate, a purchase of assets from such an affiliate (unless otherwise exempted by the Federal Reserve Board), an acceptance of securities issued by such an affiliate as collateral for a loan, and an issuance of a guarantee, acceptance, or letter of credit for the benefit of such an affiliate. Yadkin Bank is also subject to the provisions of section 23B of the Federal Reserve Act which, among other things, prohibits an institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.

There are no family relationships among any of the directors and executive officers of the Company. Additionally, there are no related person transactions that are required to be disclosed under Regulation S-K Item 404(a).

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The Company’s independent registered public accounting firm for the years ended December 31, 2016 and 2015 was Dixon Hughes Goodman LLP (“Dixon Hughes”). The Audit Committee of the Board has appointed Dixon Hughes to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2016 and to provide professional and audit-related services during 2017 until the closing of the merger of the Company with and into FNB.

The following table represents fees for professional services rendered by Dixon Hughes for the audit of the Company’s annual consolidated financial statements for the years ended December 31, 2016 and 2015 and fees billed in 2016 and 2015 for audit-related services, tax services and all other services rendered by Dixon Hughes for each of those fiscal years.



	Fiscal 2016		Fiscal 2015

Audit fees	$	659,194	$	576,100
Audit-related fees	94,857		91,075
Tax fees	143,810		94,725
All other fees	—		—
Total fees	$	897,860	$	761,900

Audit Fees. This category includes the aggregate fees billed for professional services rendered for the audits of the Company’s consolidated financial statements for fiscal years 2016 and 2015, fees for acquisition accounting audit procedures in connection with the NewBridge Acquisition, for the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q during fiscal years 2016 and 2015, and for services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for the relevant fiscal years. These fees also include consent procedures related to the Company’s registration statements filed with the SEC.

Audit-Related Fees. This category includes the aggregate fees billed in each of the last two fiscal years for assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audits or reviews

- 147 -

of the financial statements and are not reported above under “Audit Fees,” and generally consist of fees for accounting consultation, other attestation reports and audits of employee benefit plans. Fiscal year 2016 includes $24,089 related to the audits of NewBridge employee benefit plans.

Tax Fees. This category includes the aggregate fees billed in each of the last two fiscal years for professional services rendered by the independent registered public accounting firm for tax compliance consisting of assistance with federal and state income tax returns, other tax-related filings and other non-routine tax consultations. Fiscal year 2016 includes $67,775 related to the federal and state returns of NewBridge.

All Other Fees. This category includes the aggregate fees billed in each of the last two fiscal years for products and services provided by the independent registered public accounting firm that are not reported above under “Audit Fees,” “Audit-Related Fees,” or “Tax Fees.” There were no such fees in either year.

In accordance with its Audit Committee Charter, the Company’s Audit Committee must approve in advance any audit and permissible non-audit services provided by the Company’s independent auditors and the fees charged. All services rendered by Dixon Hughes during 2016 and 2015 were approved in advance by the Audit Committee.

- 148 -

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


(a)	The following documents are filed as part of this report:


(1)	Financial Statements:


(i)	Report of Independent Registered Public Accounting Firm


(ii)	Consolidated Balance Sheets as of December 31, 2016 and December 31, 2015


(iii)	Consolidated Statements of Operations for the Years Ended December 31, 2016, December 31, 2015, and December 31, 2014


(iv)	Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2016, December 31, 2015, and December 31, 2014


(v)	Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2016, December 31, 2015, and December 31, 2014


(vi)	Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, December 31, 2015, and December 31, 2014


(vii)	Notes to Consolidated Financial Statements


(2)	Financial Statement Schedules: None. Financial statement schedules have been omitted since the required information is included in our consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.


(3)	Exhibits: The exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report on Form 10-K.


(b)	Exhibits: The exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report on Form 10-K.


(c)	Separate Financial Statements and Schedules: None. Financial statement schedules have been omitted since the required information is included in our consolidated financial statements contained elsewhere in this Annual Report on Form 10-K.

Signatures

Pursuant to the requirements of Section 13 or 15 (d) 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:	March 1, 2017	By:	/s/ Scott M. Custer
			Scott M. Custer
			President and Chief Executive Officer

- 149 -

In accordance with the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



/s/ Scott M. Custer	March 1, 2017
President and Chief Executive Officer, Director (Principal Executive Officer)

/s/ Terry S. Earley	March 1, 2017
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

/s/ J. Adam Abram	March 1, 2017
J. Adam Abram, Director

/s/ Michael S. Albert	March 1, 2017
Michael S. Albert, Director

/s/ David S. Brody	March 1, 2017
David S. Brody, Director

/s/ Harry M. Davis	March 1, 2017
Harry M. Davis, Director

/s/ Barry Z. Dodson	March 1, 2017
Barry Z. Dodson, Director

/s/ Thomas J. Hall	March 1, 2017
Thomas J. Hall, Director

/s/ Steven J. Lerner	March 1, 2017
Steven J. Lerner, Director

/s/ Michael S. Patterson	March 1, 2017
Michael S. Patterson, Director

/s/ Mary E. Rittling	March 1, 2017
Mary E. Rittling, Director

/s/ Harry C. Spell	March 1, 2017
Harry C. Spell, Director

/s/ Joseph H. Towell	March 1, 2017
Joseph H. Towell, Chairman of the Board of Directors

/s/ Richard A. Urquhart, III	March 1, 2017
Richard A. Urquhart, III, Director

- 150 -

Item 6. Exhibits



Exhibit No.	Description

2.1	Agreement and Plan of Merger between F.N.B. Corporation and Yadkin Financial Corporation, dated as of July 20, 2016 (incorporated by reference to Exhibit 2.1 to Yadkin Financial Corporation's Current Report on Form 8-K filed on July 21, 2016)

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

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

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

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

3.2	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed March 1, 2016)

4.1	Form of certificate of Voting Common Stock (incorporated by reference to Exhibit 4.9 of the Registrant’s Registration Statement on Form S-8 filed with the SEC on December 4, 2014).

10.1	Confidential Severance Agreement and Release of Claims between Wm. Mark DeMarcus and Yadkin Bank dated January 31, 2016 (incorporated by reference to Exhibit 10.1 to the Registrant's Current report on Form 8-K filed with the SEC on November 6, 2015).

10.2	Severance Agreement and Release of Claims between Joseph H. Towell and Yadkin Bank dated June 29, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on July 2, 2015).

10.3	Employment Agreement by and among Yadkin Financial Corporation, Yadkin Bank, and Joseph H. Towell dated April 23, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 25, 2014).*

10.4	Employment Agreement by and among Yadkin Financial Corporation, Yadkin Bank, and Scott M. Custer dated April 23, 2014 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 25, 2014).*

10.5	Employment Agreement by and among Yadkin Financial Corporation, Yadkin Bank, and Wm. Mark DeMarcus dated April 23, 2014 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 25, 2014).*

10.6	Employment Agreement by and among Yadkin Financial Corporation, Yadkin Bank, and Terry S. Earley dated April 23, 2014 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 25, 2014).*

10.7	Employment Agreement by and among Yadkin Financial Corporation, Yadkin Bank, and Steven W. Jones dated April 23, 2014 (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 25, 2014).*

10.8	Employment Agreement by and among Yadkin Financial Corporation, Yadkin Bank, and Edwin H. Shuford dated April 23, 2014 (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 25, 2014).*

- 151 -



Exhibit No.	Description

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

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

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

10.12	Form of Phantom Equity Plan of Piedmont Community Bank Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-4 filed with the SEC on March 26, 2014).*

10.13	VSB 2006 Omnibus Stock Ownership and Long Term Incentive Plan, as Assumed by Yadkin Financial Corporation (incorporated by reference to Exhibit 99.1 of VantageSouth Bancshares, Inc.’s Registration Statement on Form S-8, filed with the SEC on August 11, 2006 (Registration Statement No. 333-136522)).*

10.14	PCCB Incentive Stock Option Plan, as Assumed by Yadkin Financial Corporation (incorporated by reference to Exhibit 99.1 of VantageSouth Bancshares, Inc.’s Registration Statement on Form S-8, filed with the SEC on September 11, 2006 (Registration Statement No. 333-137235)).*

10.15	PCCB Non-Statutory Stock Option Plan, as Assumed by Yadkin Financial Corporation (incorporated by reference to Exhibit 99.2 of VantageSouth Bancshares, Inc.’s Registration Statement on Form S-8, filed with the SEC on September 11, 2006 (Registration Statement No. 333-137235)).

10.16	VSB 2003 Incentive Stock Option Plan, as Assumed by Yadkin Financial Corporation (incorporated by reference to Exhibit 99.1 of VantageSouth Bancshares, Inc.’s Registration Statement on Form S-8, filed with the SEC on September 3, 2003 (Registration Statement No. 333-108456)).*

21	Subsidiaries of the Registrant +

23	Consent of Independent Registered Public Accounting Firm +

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	Section 1350 Certification of Chief Executive Officer +

32.2	Section 1350 Certification of Chief Financial Officer +

101.INS	XBRL Instance Document.

101.SCH	XBRL Taxonomy Extension Schema Document.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	XBRL Taxonomy Extension Label Linkbase Document.

_____________________________________________________________

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

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

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

* Indicates a management contract or compensatory plan or arrangement.

+ Filed herewith.

- 152 -

++ The XBRL-related information has been furnished electronically herewith. This exhibit, regardless of whether it is an exhibit to a document incorporated by reference into any of our filings and except to the extent specifically stated otherwise, is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

- 153 -

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Yadkin Financial (YDKN) Inactive 10-K2016 FY Annual report

Content analysis